Tenders Direct Blog

Comment from the experts at Tenders Direct.

Corruption claims against Edinburgh City Council

Posted by Tim Williams on September 20, 2011

BBC Scotland is broadcasting a documentary tonight (20th September) titled ‘Scotland’s Property Scandal’  on BBC1 Scotland (Sky Channel 971) after the news at 22:35. It will also be available on the BBC iPlayer for those of you who don’t have access to BBC Scotland.

The programme investigates the evidence of possible fraud, wrong-doing and incompetence in the Property Conservation Department at Edinburgh City Council. This department is responsible for overseeing the statutory notice system, that seems unique to Edinburgh, where private buildings with multiple owners (e.g. tenements or blocks of flats), can be issued with a notice by the Council stating that the building is going to be repaired and that the cost will be passed to the owners. These repairs are commonly to roofs, or external masonry not only to make sure that they are wind and water tight, but to make sure that there is no danger to passing pedestrians from falling slates or blocks of stone.

Council surveyors arrange the work through ‘approved contractors’ and recoup the cash from owners, the local authority also receives 15% of the final bill.  The value of statutory notices issued by council surveyors has increased dramatically in recent years, from £9.2m in 2005 to more than £30m in 2010, that’s £4.5 million in fees to the Council!

The problems at the Council were first highlighted by a group of old established Edinburgh roofing companies that found that while they were included on the approved lists of contractors, they were no longer receiving any work, despite having a long history of working with the council. One of those companies approached us here at Tenders Direct and it was immediately obvious to us that there were serious problems with the way that the approved lists were being drawn up and the way in which contracts were being awarded.

The companies approached the Council with their concerns and as often happens were given the brush off. This time though the contractors were determined to pursue their claims, as there was little work available elsewhere and one by one these family firms were going out of business as the council work dried up. Eventually they managed to arrange a meeting with Mark Turley, Director of the Council’s Services for Communities, who acknowledged that there was a problem. The Council then appointed Deloitte to carry out an investigation into the running of the department and the Fraud Squad at Lothian & Borders Police is conducting a parallel investigation.

So far 15 members of staff, half the department, have been suspended pending further investigation, but the casualties in this affair may still have a long time to wait for any redress. It will take years to investigate the cases of the residents of Edinburgh who may have been overcharged and/or been subjected to sub-standard workmanship. All repairs, other than emergencies, have been halted, which means that the small family owned building and roofing contractors still don’t have enough work and are struggling to stay in business long enough until the flow of work restarts.

The senior officials and elected members of Edinburgh City Council are culpable in this affair, as they allowed a department, with a significant spend, to operate on its own, outside normal council procurement procedures. This was allowed to occur, as for some reason construction work, is considered to be different from all the other goods and services that the Council purchases.

The lessons to be learned here are that as a potential contractor if you think the procedures being followed are not transparent and above board, then complain, loudly and do not be put off easily. If you are a senior official in a public authority, listen to the complaints and take them seriously, do not just believe that your organisation is doing everything as it should. Otherwise you may end up in the unholy and very expensive mess that Edinburgh now finds itself and that’s on top of the tram fiasco!

10 Responses to “Corruption claims against Edinburgh City Council”

  1. Dear Tim

    I lodged an FOI request with City of Edinburgh Council (CEC). The questions were about procurement law.

    CEC were not very forthcoming with their answers. The request can be found here:

    https://www.whatdotheyknow.com/request/freedom_of_information_request_t_7#incoming-646073

    The salient questions are below:

    4) What were the exceptions where companies outwith the TFA could be awarded contacts during the above years? (We understand from CEC documentation that the circumstances that allow this are extremely rare, and the process to undertake such a decision can only be sanctioned by senior management).

    They answered:

    “Property Conservation did not keep a specific register of exceptions where companies out with the TFA were awarded contracts in the period 2006 – 2009. Thus it is not possible to give details of contractors out with the TFA who were awarded contracts in the period 2006 – 2009. The Council is relying on the exception in regulation 10(4)(a) of the EIRs as this information is not held. Please note that this letter constitutes a formal refusal notice under regulation 13 of the EIRs.”

    They were side-stepping the question here. Have I posed this incorrectly? Can I be more specific?

    5) Please confirm whether our contracts were sanctioned outwith the TFA? They answered yes

    6) Please confirm the job title of the senior member of staff that sanctioned the awarding of the contracts outwith the TFA?

    They answered “awarding of the contract to the Castle Group was done by Senior Conservation Officer.”

    Is this legal?

    8) Please confirm whether this was contrary to EU and national procurement regulations?

    They answered ” The use of the Framework was not mandatory and other compliant procurement routes could be used if deemed applicable.”

    Is this true?

    9) If this was not contrary to EU and national procurement regulations, please confirm why not?

    They answered: “As per response 8, the non-use of a Framework does not constitute a breach in national or EU procurement legislation.”

    Is this again true? If not how do I lodge a complaint?

    Many thanks

    Simon Williams

    • Tim Williams said

      Dear Simon,

      I agree I think that the City of Edinburgh Council (CEC) are side stepping the issue in their answer to Q4. You might get a more useful answer by being more specific, e.g. Why were the Shaw’s Square contracts awarded to Castle Group Scotland Ltd and Action Building Contract Ltd., when these two companies were not party to the Term Framework Agreement?

      CEC are correct in that they aren’t necessarily breaching the Public Contracts (Scotland) Regulations. Framework agreements do not usually include a guarantee of any work and a contracting authority is at liberty to award contracts outside an existing framework, although these contract awards must in turn be awarded according to the Regulations. The obvious question though is having gone to the effort of establishing a framework why did they not award the call off contracts to the companies that were party to that agreement? It seems quite probable that the action followed by the Property Conservation Department breached the Council’s own standing orders. The latest version of the contract standing orders are available here http://www.edinburgh.gov.uk/downloads/file/5173/contract_standing_orders, although these have presumably been revised since the contracts in which you are interested were awarded.

      In terms of lodging a complaint as it is an internal Council issue I would raise the matter with your councillors who for the City Centre Ward are Karen Doran, Joanna Mowat and Alasdair Rankin.

      • Dear Tim

        Thank you for your prompt reply. We have written many letters to get answers, but unfortunately CEC is stone-walling not only us but hundreds of residents.

        I understood that when a Framework Agreement existed they had to award contracts to those contractors on that. And that if any other contractors were to be considered they were obliged to terminate the Framework Agreement and create a new one?

        I shall ask Ewan Aitken whether he was aware of any breach of the contract standing orders during his tenure.

        I understood also, that under European Commission guidelines, that any procurement outwith Framework Agreements could be fined by the Commission?

        Is this why the Council is closing down on us and not answering questions?

        Best wishes and thanks for your input.

        Simon

      • Tim Williams said

        Hi Simon,

        There isn’t an obligation on the Council to use the Framework Agreement and they also aren’t obliged to terminate the agreement if they decide to award some contracts outside that agreement. But the reason for putting an agreement in place is to make sure that the work goes to contractors who have been evaluated and their pricing has been determined in a competitive environment. Also the award process is much simpler under the agreement as all of the terms and conditions, pricing, etc., has already been determined.

        The question that remains to be answered is why did the Council award contracts outside the framework agreement?

        With regard to the European Commission there is no legal obligation to use the framework and so they would not be interested in taking any action on that basis.

        I don’t know why the Council is failing to answer your questions clearly and unambiguously. It may that they are worried about the financial liability in case they are found to have been negligent and that as a result residents who had worked carried out under the statutory notice system were overcharged.

      • Hi Tim

        I very much appreciate the time you are taking to help with this issue. I think I will have to draft a new FOI for CEC.

        I believe these to be the Standing Orders that covered Stat Notices at the time: http://www.reekieleaks.org.uk/leak-cec-standing-orders/

        Speaking to David Gibbon and Gordon Murdie, the understanding is that what you are saying seems to be contrary to everything we have heard on the subject.

        David wrote ‘I wonder on what basis they argue that “With regard to the European Commission there is no legal obligation to use the framework”. I believe that CEC were under an obligation to ensure that their procurement procedures complied with EU Procurement rules. They could either do this by competitively tendering every project individually which would have been a massive administrative burden or through a compliant framework procedure. It may be that the Statutory powers available to CEC are so unusual that it isn’t absolutely clear that procurement under them fits the normal pattern of “public” procurement but I highly doubt it. The EU procurement rules are very well defined and for a programme of work on the scale of the Stat Notice work I would say it is as clear as daylight that they were required to comply.

        It needs to remembered that the works were zero rated for VAT because the contracts were funded by CEC. The contracts were not between the owners and the contractors. They were between CEC and the contractors. There was then a separate process of cost recovery. So I think it is quite clear that these were “public sector” contracts and therefore plainly subject to EU Procurement rules. Even if individual contracts were below the threshold, currently €125,000 or €193,00 (not quite sure which would apply) I’m near certain that the EU rules would aggregate the contracts.’

        Could you help us phrase a new FOI along these lines?:

        (1) What was CEC’s understanding of EU Procurement rules in relation to how they affected the Stat Notice works?

        (2) Did they understand EU procurement rules to apply to Stat Notice contracts under £250,000 or some other threshold?

        (3) How many contracts were let at a contract sum exceeding £250,000 or some other threshold without going through a formal tendering process?

        (4) How many contracts over £250,000 or some other threshold were let through the framework? How many were let through procurement processes that were neither by competitive tendering nor through the framework?

        (5) Why were the Shaw’s Square contracts awarded to Castle Group Scotland Ltd and Action Building Contract Ltd., when these two companies were not party to the Term Framework Agreement?

        Best wishes and many thanks for your help on behalf of not only myself but many hundreds of Edinburgh Residents.

        Simon Williams

      • Tim Williams said

        Hi Simon,

        The Public Contracts (Scotland) Regulations, which implement the European Directive in UK law, apply to Works contracts with a value greater than £4.3 million. As such, they don’t apply to the individual contracts for Shaw’s Square.

        They do apply to the term framework agreement because it’s aggregate value would be over the £4.3 million threshold.

        Even if the contracts for Shaw’s Square were covered by the Regulations there is nothing to stop the Council from awarding a contract outside of the framework agreement, provided that they are awarded in accordance with the Regulations. To repeat what I have said previously there was no obligation on CEC to award the contracts to a contractor party to the framework agreement.

        Any rules that have been broken are internal CEC rules, not European or Scottish regulations.

        Your question 5 (as above) is the key question, i.e given that they had put a framework contract in place with all the work that requires, why did they then award to companies outside that framework. The reasons could be that cheaper rates were available, disatisfaction with the quality of work of the framework contractors, unavailability of contractors, all of which would be acceptable. But there is also the possibility of corruption. I don’t know why CEC awarded outside the framework, but it’s a question that should be answered.

      • Thank you Tim

        I will post another FOI and let you know the result.

        Best wishes

        Simon Williams

  2. My experience with Edinburgh Council corruption goes from the root to the top of the tree. I was flooded out by a cannabis farm in December 2010 and have fought tooth and nail with the HMO and the Environmental Team to charge the Landlord with repairs to his property which was above my home. His property had been condemned, but that did not stop this landlord from having multiple occupants staying there. The Electricity alone was not earthed in the property,so endangered life to a further seven homes within that block. A year has passed and several phone calls and e-mails later have fallen on deaf ears. The Environmental Team had placed statutory notices on the property and this was seen to be successful when the landlord phoned and told the head of operation’s that the work had been completed two months after the flood. Yes you guessed it no other investigation took place. During the last year the overcrowding in the condemned flat.was reported by other tenants as well as myself reporting it to the head of HMO and nobody ever appeared to investigate this. We tried to get in touch with the landlord but he would hang up on us, the way around this was to contact the HMO.and the landlord would turn up within the hour and shift his tenants to another flat for a week or more. I for one cant sleep at night as this landlord has many properties of similar standards of which he pays his fees to the council,and it would seem this is enough in payment to endanger life.

    And yes repairs on the Landlords property were never carried out,its all in the phone call to the right person it would appear.

  3. Tim Williams said

    The Edinburgh Evening News (http://edinburghnews.scotsman.com/edinburgh/Four-more-staff-suspended-over.6842822.jp?articlepage=1) is today reporting that four more council employees have been suspended while the investigation into the Property Conservation Department continues.

    A Facebook group has been set-up to help Edinburgh residents who are seeking compensation (http://www.facebook.com/groups/203844162961933/).

    There’s also an event being held on Thursday night (29th September) at the Minto Hotel. It’s limited to 100 people and 88 have already registered, so if you want to go along you’d better register here quickly (http://cecstat.eventbrite.com/)!

  4. Neil Craig said

    When it is obvious and has been for months yet the council refused to act and when half the department are so obviously involved that they have to be suspended then we are not talking about a little corruption. It is not a few rotten apples it is most of the barrel. This only comes about when such corruption is endemic not just in this department but across all the bodies in council who should be noticing it. That includes everybody working there not just all the councillors.

    Beyond that we are told how much perseverance the contractors had to show and how, even now, they are likely to be squeezed out. If Edinburgh council is completely corrupt and no other part of the Scottish administration was willing to notice it then it must be endemic everywhere.

    Perhaps explains why Scottish public projects, like the Forth Bridge cost 8 times more than their building costs and why the civil service feel they can get away with the most obvious and blatant lies.

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