Corruption in Local Government procurement – Transparency International raises the alarm

We've mentioned before the excellent work of Transparency International, an organisation that campaigns throughout the world for more transparency and less corruption in public and political life, covering everything from vote-rigging to military procurement corruption.

In a new report, they turn their attention to the UK local government, which is responsible for around a quarter of all UK public sector spend, and purely in terms of “procurement” spend accounts for something around £50 Billion a year.  In their new report, Corruption in UK Local Government: The Mounting Risk they highlight what they see as an increasing danger of corruption in that sector, with procurement and procurement related risks high on their list. Indeed, of their 12 key risk areas, six are procurement related:

"We identify twelve key risk areas:

1. public procurement at needs assessment stage;

2. public procurement at bid design stage;

3. public procurement at award stage;

4. public procurement at contract implementation stage;

5. control and accountability over outsourced services;

6. the revolving door of personnel between local authorities and private companies bidding to provide services;

7. planning discretion and influence regarding ‘permissions to build’ decisions;

8. planning discretion and influence regarding ‘changes of use’ decisions;

9. failure to enforce section 106 agreements;

10. the conflict of interest where councils make planning decisions about property they own;

11. collusion in housing fraud or deliberately ineffective monitoring of housing fraud; and

12. manipulation of electoral registration"

They also identify a number of reasons why we should increasingly worry, including a decline in scrutiny from the Audit Commission and local press (either gone out of business or pretty supine), more outsourcing and legislative changes.  There is less independent auditing, and growing  “networks of cronyism” as they put it.  The abolition of the Audit Commission for example will save £250M over 5 years, but how much will it cost in corruption or indeed incompetence that goes unchallenged?

Legislation has also removed some of the protection that was afforded to whistle blowers. There is a hope that some of this scrutiny will be replaced by “armchair auditors” as politicians like to call them, but as Transparency International point out,  “the public does not by and large have the interest or capacity to monitor the conduct of local government to the depth necessary to hinder or detect fraud and corruption. Moreover, even if the public detects suspicious conduct, it does not have the investigative capacity to probe whether standards or rules have really been violated or any institution to which it can turn to make a formal objection or allegation...”

The “localism” drive is well-intentioned but again could have unintended consequences. For example , in the procurement arena, awarding contracts to a firm because they’re local rather than best VFM might become more acceptable. Then we find that the firm happens to be owned by the council leader’s brother in law...!

There is a scary case study in the report where a firm wins a contract to run a leisure institution, then itself awards contracts to a business owned by the councillor with responsibility for leisure! And of course freedom of information does not apply to the main contractor, so we can’t know whether their decision to give the councillor the work was objectively determined. So it basically stinks.

There is little doubt that there is less corruption in local government than there was 30 or 40 years ago. But it would be remarkably easy for things to start moving in the wrong direction, as readers of Private Eye will know well (Cotswold Water Park, anyone?)  So this is a timely report, (which you can download here), procurement people need to be continuously vigilant, and we’re always happy here to do our little bit if we can help to expose anything dodgy in our sphere of influence!

Voices (3)

  1. Dave Orr:

    And the Police too “Who polices police IT reports?”

    http://ukcampaign4change.com/2013/10/24/who-polices-police-it-reports/

  2. Trevor Black:

    Dave Orr raises many issues that should be taken seriously but I feel that we are losing the battle. Corruption may be the result of the law of unintended consequences that is a consistent feature of successive Governments but somehow where they blatantly ignore or don’t understand conflicts of interests, corruption will always be the end result. Transparency International should also take a look at some Government Agencies which appear to operate in isolation and do not appear to be aware of transparency and probity just as long as the budget is spent!!

  3. Dave Orr:

    Is there really less corruption in Councils than 30-40 years ago? How do we know that then??

    The drive for the “commissioning” of services (sounds so much nicer than outsourcing) will exacerbate this trend.

    “Commissioning” is essentially driven by a dogma that says “Private is always better” and usually the existing public service is first labelled as the “no change” or “status quo” option.

    This week, Somerset County Council is essentially handing out contracts in a closed session (no public or press) where around 10% of councillors in a “Cabinet” make the decision behind closed doors and with no publication of a Full Business Case.

    They are probably well intentioned and all is probably above board, but how do we know if it isn’t?

    And….the Nu Lab Blairite reform to Councils creating the Leader and Cabinet model, allows for a “cabal” to form around the Leader, with posts by patronage.

    Each Cabinet post in large Councils now attracts a good salary (“allowance”) adding further to the Leader’s power to utilise patronage and side-line healthy challenge.

    My local District Council is Taunton Deane and they are the Local Planning Authority.

    I found out that after they award some pretty large contracts (e.g. big multi-£millions re-development projects) the Constitution does not require Councillors to declare contracts awarded to them as a sub-contractor.

    Ironically, the current Leader is a builder with a local construction company.

    This loophole allows the prime contract to be awarded with constitutional safeguards to prevent award to a company where a Councillor has an ownership or shareholding interest with a “declarable pecuniary interest” having to be made.

    I got out of my armchair after this came to light and asked the Council’s solicitor and Standards Committee to review the constitution and make secondary contracts a “declarable pecuniary interest”. They duly refused my request.

    If, from my armchair, I suspect corruption, I cannot make a Freedom of Information request on the prime contractor awarded (say) the large contract to see if a Councillor has benefited from the initial contract award through sub-contracting, because although it is public money, a private company on council or government work does not fall within the scope of the Freedom of Information Act.

    We are ever closer to the American model of local government. A few people meet once every 5 years in a closed room and hand out contracts for the next 5 years!

    Meantime, the NHS Is heading down the same route and it won’t be long before “Commissioning Groups” will award contract to companies that the GPs or others have interests in.

    A simple declaration of interest and then leaving the room for the vote to award the contract will suffice to meet the inevitable “light touch” governance.

    The more it changes, the more it stays the same.

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