03 February 2005 | Cara Whitehouse
Scarborough Borough Council could find itself £3.1 million out of pocket after a damning audit report revealed "unfair and unlawful" contracts were awarded in its management of a major coastal protection scheme.
The Audit Commission said the scheme's management "acted either in ignorance or disregard of procurement regulations and the council's constitution" when they gave a £1.2 million contract to the High-Point Rendel (HPR) consultancy without opening the deal to competition.
A council all-party working group will hold its first meeting tonight to investigate procurement practices in the wake of the spending watchdog's report.
The council would not say if procurement heads are on the block, but confirmed that a separate appointments committee will decide on potential disciplinary action after the investigation is finished.
The "unlawful" March 2002 deal for supervising the £28.6 million Castle Headland coastal protection scheme should have been advertised in the Official Journal of the European Union (OJEU).
The Audit Commission report found this error was compounded when a "bogus" best value report was "undertaken retrospectively to justify the decision to award work to HPR rather than appraise options or seriously challenge their proposals."
It added that "the council, having failed to follow EC procurement requirements and its own constitution, and having carried out an inadequate best value evaluation exercise, risks losing grant and loan support [from the Department of Environment, Food and Rural Affairs] toward HPR's supervision work".
This is now expected to cost more than £3.1 million, as fees for the deal have spiralled to £2.4 million on top of a £700,000 bill for preliminary work by HPR.
A Defra spokesperson told SM no decision had been made on Scarborough's liability for costs.
The Castle Headland scheme has involved major engineering work to improve 2.1 kilometres of sea defences along Marine Drive in Scarborough. In 1993, the town famously lost the Holbeck Hall hotel to the sea when the cliff it stood on collapsed.