'Culture of cronyism' exposed at Tower Hamlets

Paul Snell is managing editor at Supply Management
5 November 2014

An explosive report has revealed “irregular practices took place in the awarding of contracts” at the London Borough of Tower Hamlets.

But the review, ordered by local government secretary Eric Pickles, concluded the issues identified did not constitute a failure by the council to comply with its duty to provide best value in relation to contracting.

However, Pickles said additional problems uncovered by the Best Value Inspection of the local authority, carried out by PwC, including the inappropriate award of grants, “dubious” property transactions and the misuse of executive power, painted “a deeply concerning picture of: obfuscation, denial secrecy, the breakdown of democratic scrutiny and accountability, a culture of cronyism risking the corrupt spending of public funds”. 

As a result, he has proposed appointing a team of three commissioners, accountable to him, to take over certain functions of the council until 31 March 2017. In addition to producing a plan for the commissioners to address the contracting deficiencies, the borough will have to seek the written agreement of the commissioners to enter into a contract if elected members disagree with recommendations made by statutory officers.

Among the procurement issues highlighted in the report were:

• Use of waivers to avoid procurement processes on a regular, rather than exceptional, basis.

• Council members lacking confidence that staff had applied expected criteria, with staff "needing to be more demanding of members" to ensure they understand criteria have been applied.

• An earlier council internal audit report into competitive tendering found no monitoring by procurement that directorates were following purchasing policy, a late tender accepted without the appropriate authority and a lack of signed contracts. But it did say deals were being tendered in line with public procurement regulations.

• A further internal audit into below-EU threshold procurements found a lack of sourcing criteria, opaque and undocumented final supplier selection and the selection of a contractor without any market testing.

The authority has since implemented a full end-to-end review of procurement procedures to ensure they are clear, robust and coherent, the PQQ process has been automated in line with a pan-London PQQ, all orders over £25,000 are channelled to the procurement services, and a standard toolkit has been developed for deals below £25,000.

A concern highlighted by Pickles in his statement to Parliament centres on a contract for domiciliary care where “the mayor [Lutfur Rahman] allegedly annotated a list of suppliers to indicate which suppliers he did not wish to be selected”. The mayor told the review while he did not recall the specific meeting he could “say with absolute certainty that I would not have annotated any officer document listing of bidders". The PwC report determined members and the mayor had sought to influence the procurement process “at least by instructing officers to pause the process”.

In response, Tower Hamlets’ mayor Lutfur Rahman said: “We need to be clear that there was no evidence of fraud or criminal activity identified in the PwC report. All governance issues identified in the PwC report have already been highlighted by our internal processes and are being rectified accordingly.

“I believe that there is a huge disparity between the detail of PwC’s report and the level of the secretary of state’s comments. We will be responding to Mr Pickles in due course.”

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