Liverpool City C (08 012 171)

Contracts and business matters   Maladministration causing injustice

17 November 2009

Liverpool City Council’s failures in the tendering process for a large contract “exposed the Council to significant risks”. The Ombudsman said that the way the tenders were assessed “was not ‘fair, open and transparent’,” contrary to the Council’s own conclusion when its Internal Audit Section had investigated the complaint.

The Council awarded a contract worth £750,000 over three years for supplying and fitting playground equipment. The company that it contracted with went into administration so the Council retendered a contract worth £500,000. ‘Mr L’ (real names not given for legal reasons) submitted a tender but was unsuccessful. He complained that the contract was awarded to a company that could not possibly have met the requirements set out in the tender documents.

The Ombudsman found that the second contract was awarded to a company jointly owned by two of the directors of the company that had gone into administration, using the same name and employing many of the same people. Her investigation established that the Council officers who awarded the second contract were not experienced or properly trained, and did not properly check the information in the tenders. She listed six key failures in the Council’s handling of the process.

The Council’s own Internal Audit Section had investigated Mr L’s complaint and told him that the tender process had been transparent, fair and open. This was a particular concern to the Ombudsman as the Internal Audit Section had concluded that it could give ‘…little assurance of the controls operated’ and had also found that there was no written contract or performance bond as required by the Council’s Standing Orders. Although she found maladministration, the Ombudsman’s investigation did not find anything to suggest that the officers acted out of improper motives or were corrupt.

Mr L was caused the injustice of his tender not being fairly assessed against objective criteria after he had gone to some considerable time and trouble to prepare it. Other companies that also tendered were caused similar injustice. In addition, the maladministration in assessing the tenders exposed the Council to significant risks that were compounded by its failure to enter into a formal contract and get a performance bond.

The Ombudsman found maladministration causing injustice and the Council agreed to follow her recommendations that it should:

• pay Mr L £700 (which he has generously donated to a charity);
• pay £500 to the other companies that tendered unsuccessfully;
• commission a review of a statistically significant sample of recent tender evaluations and contract awards to assess whether there have been similar flaws;
• clarify the financial information it requires with tenders;
• codify the composition of tender evaluation panels and the training and experience that officers must have before taking part;
• codify what should happen when a tender is submitted by a company with Directors who have previously been Directors of a company that has gone into administration; and
• consider whether to state that Council officers should not be named as referees in tenders for Council work.
   

Date Updated: 20/11/09