Thursday, 31 October 2013

Croydon District Auditor Accepts Council Handling of Library Tendering Process

'Following my enquiries of Council officers and review of relevant information and documentation, I am not aware of any evidence that the tender process was incorrectly or inappropriately handled, or that it resulted in the unnecessary expenditure of taxpayer's money. I do not, therefore, propose to take any further action in respect of this matter under the Audit Commission Act 1998.'

This is the conclusion of Paul Grady of Grant Thornton UK LLP, which is the appointed district auditor for Croydon Council, after I wrote requesting him to review the matter.   The details of his enquiries and his conclusions have been notified to me by letter (31 October 2013), as set out below. I know that many readers will find this disappointing, but at least the officers have had to justify what happened to auditor. Hopefully it will reinforce to them and Councillors the importance of handling future tender processes correctly. And perhaps they will now adopt more open and transparent information on tenders, because if they do not they will leave themselves to have referrals to the District Auditor of every future tender.  

Dear Mr Creighton

Croydon Council - Library Services contract with John Laing Integrated Services

I write in response to your previous correspondence, dating back to 18 August 2013, in respect of the London Borough of Croydon (the Council) and its Library Services contract with John Laing Integrated Services. I would like to thank you for your patience whilst I investigated the matter comprehensively before replying to you.

I have completed my enquiries into the matters that you raised. On the basis of the information I have been provided in response to my enquiries, in my view the actions taken by the Council are not unreasonable and I am not aware of any evidence of fraud, impropriety or irregularity in the proceedings. I set out below in more detail my responses to the points that you raised in your correspondence.

Bidding process

The Council's tender exercise was a joint one with Wandsworth Council. This did not mean, however, that both Croydon and Wandsworth had to choose the same bidder following the tender, as both retained autonomy to choose their own preferred bidder and each council was awarding a separate contract. Each council was also free to choose their own contract qualification criteria, appropriate to their own needs. It was made clear to all bidders throughout the procurement that the two councils intended to award separate contracts and therefore bidders bid for each Council separately. It was only the procurement exercise that was joint – the contract award, and qualification criteria, were individual to each Council.

Croydon Council received three bids, from Greenwich Leisure Limited (GLL), John Laing Integrated Services (JLIS) and South London Libraries and Cultural Services (SLLCS).

Wandsworth Council chose GLL following the tender process. You were concerned, in your correspondence, that Croydon Council chose JLIS despite GLL having a lower bid price than JLIS. I have reviewed the relevant papers, including Part B Committee papers, and held discussions with senior management at the Council on this matter. I am informed that the Council rejected GLL as GLL's bid did not meet the minimum quality criterion set by the Council. It is probable that this was a factor in the bid being cheaper than the bid from JLIS. In the second round of bidding, the bid from GLL increased in price substantially, which enabled it to meet the quality criterion.

In your correspondence to me you were concerned that the Council treated most of the detailed information behind closed doors on the grounds of „commercial confidentiality‟. You also indicated to me that Wandsworth Council published more information about the tenders than did Croydon Council. As I am not the external auditor for Wandsworth Council, I am not privy to their internal processes or decision making, nor any other facts or salient information that may explain the reasons behind their decisions over how much of the tender information to make public. Croydon Council and Wandsworth Council are separate legal entities and Croydon Council is under no obligation to follow the approach Wandsworth has taken with regard the transparency of information received as part of the bidding process, nor is there any requirement incumbent upon them to justify why their approach may differ from another Council. I have, however, enquired further as to the reasons behind Croydon Council's approach. Officers informed me that it took the decision to handle the information it received with such commercial confidentiality following legal advice. It is not unusual in procurement exercises, where commercial data and information is discussed, for it to be treated in this way. I have seen no evidence that suggests the reasons for the discussions being held privately were for any reasons other than commercial confidentiality.

In your correspondence, you note that having submitted its bid and been declared the preferred bidder, JLIS told the Council that it had concerns about the affordability of the pension package it would take over. During this stage the JLIS position did indeed change in relation to pensions risk allocation and, in accordance with the Original Invitation to Submit Final Tenders (“ISFT”) the Council subsequently withdrew preferred bidder status on 19th February 2013 to re-commence the detailed dialogue phase. The Council invited the three bidders that had previously submitted Final Tenders to re-commence the detailed dialogue phase of the competitive dialogue process with the intention to submit further Final Tenders.

Officers have informed me that this was was considered the fairest and most transparent course of action following the JLIS change of position, given there was no alternative second bidder. Of the other bids initially submitted, as noted above, GLL was not compliant with the quality standards set out in the tender specification and SLLCS had exceeded the affordability envelope.

Two of the Bidders (GLL and JLIS) submitted new bids following the Council's recommencement of the detailed dialogue phase. SLLCS did not. Both GLL and JLIS were afforded the same opportunity to revise their bids following, and being aware of, the outcome of the first bidding process. GLL took the opportunity to revise its bid both on quality, which it revised sufficiently to enable it to meet the required standard, and on price. The Council is of the view that the price increased to reflect the additional costs of meeting the required quality standards that were omitted from the original bid. In my view, this is not an unreasonable assessment.

You noted in your correspondence that JLIS' revised bid appears to have come in cheaper than GLL's, but the figures have been treated as commercially confidential. The Council has informed me that it again took the decision following legal advice to keep the commercially sensitive figures under Part B. Having reviewed the part B papers, I can confirm that under the tendering exercise JLIS was the preferred bidder. It submitted the highest scored tender, winning on both quality and price.


In your correspondence you then raised four points about which you stated that, as a taxpayer, you were 'none the wiser'. I take each of these points in turn.

Whether the Council ran the tender process with no undue preference to Laing, especially given the Council’s CCURV partnership with other parts of the Laing group

From the information I have been provided and discussions held with officers of the Council, I am not aware of any evidence of undue preference being afforded to JLIS' bid. The tendering process followed the Council's previously agreed defined tender protocols and the Council received independent legal advice from a specialist local government solicitor in relation to the procurement process throughout the project. The Council also scrutinised its own decision making on the outsourcing at each stage of the process. The Overview and Scrutiny Committee (OSC) called in the papers and reviewed the process and outcomes in the OSC on 5 December 2012 following the Corporate Services Committee meeting on 21 November 2012 where the initial outsourcing plans were decided. The OSC also called in the papers and reviewed the process and outcomes on 11 June 2013 following the re-award of the contract on 23 May 2013.

It is also worth noting that the London Boroughs of Ealing and Harrow have recently signed a five year contract with JLIS to deliver its library services.

The cost to the Council of the final contract sum compared with the original lower bid from GLL

As noted above, the original bid from GLL was not quality compliant and therefore cannot be considered to be a compliant bid price. Comparing the cost of the final contract sum to the bid price from a non-compliant tender, which did not meet specified quality standards, would not provide an accurate price comparison or analysis of value for money. Again, as noted above, the second bid which GLL submitted was quality compliant, but was priced considerably higher per annum than their first, non-compliant, bid.

Whether the Council should have allowed Laing to re-bid given the pension information is believed to have been part of the original information provided to all potential tenderers and they should have addressed the problem in their initial bid or not put in that bid

At the point JLIS withdrew from the first bid there was no alternative bidder. GLL's original bid was non-compliant on the grounds of quality and CLLCS was outside of the affordability envelope. Rather than go back to the very beginning of a brand new tender process – which would have been more costly than the approach taken – the Council decided to return to the detailed dialogue phase and invite all three bidders to bid again. This decision was taken following procurement specialist legal advice. It was also considered fairer to allow all three bidders an equal chance to re-bid, rather than exclude any one of the bidders for any specific reason for the second bid phase. In my view, this was not an unreasonable position for the Council to take, as it allowed all three original bidders the same, equal opportunity to bid a second time, after each of them had, for one reason or another, left the initial process.

Whether the re-opening of the bid and the costs of processing, given it had a cheaper bid from GLL, constitutes a waste of ratepayers money

As noted above, GLL‟s initial bid was not compliant with the quality standards and therefore cannot be considered a compliant bid.

Furthermore, the Council has calculated that that it will make additional savings, which will pay back the „lost‟ savings caused by the six month delay to the process of outsourcing and any costs involved in the rebidding stage, by the end of the first year of the contract. This is because the withdrawal by JLIS provided even greater savings to the Council: JLIS' second bid was considerably lower in price than their first bid.


Following my enquiries of Council officers and review of relevant information and documentation, I am not aware of any evidence that the tender process was incorrectly or inappropriately handled, or that it resulted in the unnecessary expenditure of taxpayer's money. I do not, therefore, propose to take any further action in respect of this matter under the Audit Commission Act 1998.

I would like to take this opportunity to thank you for you taking the time to write to me and raise your concerns with me. Should you feel there are any further matters that should be brought to my attention, please do not hesitate to write to me.

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