Corruption and Incompetence – It Gets Everywhere!

The Conservative government has been criticised for some of the procurement actions of the last year or so, with allegations of mismanagement and cronyism. But the Labour Party has not been free of controversy in terms of how its politicians spend public money in local government.

Croydon council in south London has basically declared itself bankrupt, with mismanagement of a council-owned property company and bad decisions about acquisition of property investments contributing to the dire financial situation. We may come back to this as more detail emerges.

Meanwhile, Joe Anderson mayor of Liverpool, was arrested last December on suspicion of conspiracy to commit bribery and witness intimidation.  He and four others were held as part of a police investigation into the awarding of building contracts in the city. The BBC reported that a “year-long police probe, Operation Aloft, has focussed on a number of property developers”.

An inspection ordered by the Minister for Housing, Communities and Local Government reported in March and the inspector, Max Caller, found major failings “in governance and practice”. That has led to the imposition of Commissioners in the City to help the council implement the changes needed. But the report also commented on Anderson’s son David, now caught up in controversy. His firm SCC was awarded contracts by the council through what seemed to be unusual procurement routes.

Mr Caller said that a decision to award SSC a £250,000 health and safety contract on the project to dismantle Liverpool’s Churchill Way Flyovers in 2019 ‘exposed the site teams to considerable safety risks’. The company had no previous relationship with the council before the ‘urgent appointment was instructed’ as work got underway in 2019.

The report calls for more power for the procurement function in the Council, but also highlights that it needs to up its game. More criticism for circumventing official processes and policies appears to be attached to the staff in other departments such as Highways.

This is only the latest in a long line of issues around public sector construction contracts. That area of spend has historically been plagued by claims of and indeed proven corruption in local government and elsewhere.

 Why is that? Well, it is one of the biggest spend categories for local government and many organisations, and it is also relatively opaque in terms of benchmarking costs and prices. So social care, or IT hardware are also huge spend areas for councils for example; but I’d suggest it would be pretty obvious if a care firm or laptop supplier were charging unrealistically high prices to fund bribery. If a firm was charging £25 an hour for carers when the standard for other firms or other councils was £18, even the slowest auditor or councillor might notice!

But a few hundred grand added onto a multi-million pound building contract for a new school or sports centre is much harder to spot. If we’re talking the council buying land or property, then there is even less of a clear “market value”. 

These are also areas where historically, professional procurement has been less involved than in some other spend categories. The construction departments in councils have had a reputation for being powerful and something of a law unto themselves.  I remember 20 years ago a friend of mine who was MD of a firm that supplied heating equipment refusing to deal with one Yorkshire council because the corruption was so overt. Basically his firm was expected to pay a % commission to certain individuals on every order.

So a lack of professional procurement scrutiny, bespoke work and limited market price benchmarks are factors that indicate how open to corruption a spend area might be.

Back to Liverpool and there is also a link with a controversial construction project where Unite, the trade union led by Len McCluskey, is the buyer.  The project appears to have cost almost £100 million against the £57 originally forecast. The BBC reported that; “The contract to build the 170-room hotel and conference centre was awarded in 2015 to the Flanagan Group, a Liverpool company run by an associate of McCluskey, who is the union’s general secretary. Another contract on the project was given to a company owned by the son of Joe Anderson, Liverpool’s mayor.”

Yes, it’s him again …

Anyway, Unite has responded saying “Every step of the way, the production of this complex was overseen by independent surveyors and architects. Accountability was built into the process to ensure that at every stage of this development we got value for this union’s money. All this was overseen by our democratically-elected, independent 62-strong executive council”.

 Bad Buying? Or worse?  I’m not sure.