A review of UK local authority procurement based on auditor reports has uncovered inadequate governance and a lack of robust contract management.
Inefficiencies and poor procurement processes presented risk across a number of local authorities, according to the review by accountancy firm Grant Thornton.
Officials engaging in procurement often failed to follow correct procedures, did not have the skills to manage contracts, or did not deploy council resources efficiently and effectively.
“For one local authority, contract procedure rules were comprehensive in most areas but did not cover the evaluation of tenders and the full range of due diligence required of potential suppliers,” said the report.
“As a result, the local authority’s public realm contract was let and re-let several times between 2013 and 2022 to a dormant company – no one checked for accounts filing at Companies House during due diligence, because there were no rules or procedures prompting it.
“The local authority then lacked effective contract management arrangements for holding the contractor to account. When they took legal advice in 2022, the validity of the entire arrangement was flagged by the legal advisors as a matter of concern.”
The report identified five key areas for improvement and made accompanying recommendations:
1. Strategic planning
One authority implemented a “climate change emergency” priority into its corporate strategy, but signed off on procurement of a new diesel fleet without debate over climate impacts because their procurement strategy did not require them to be discussed.
The report emphasised being aware of corporate priorities did not necessarily mean understanding them – it suggested training for council members involved in procurement, as well as providing teams with measurable actions and indicators to ensure corporate strategies are followed.
2. Internal control
One council awarded a waste contract to an external contractor without completing a pre-contract checklist and without retaining other key tender evaluation and decision documents. A dispute over agreed levels of contamination in recycling forced the council to terminate the contract and bring it in-house at a cost above budget of £1.1m per year.
The report stated: “It is arguable that the overspends and delays and legal issues could have been avoided if member responsibilities… had been better understood at the outset.”
3. Time, technical expertise, and people
For another local authority, issues emerged when a £22m tender for a four-year contract was issued with a six-month deadline.
The rushed timescale prevented bidders from creating quality bids, and challenges were raised over the quality of information provided by suppliers. The procurement had to be delayed with significant consequences to supplier relationships, while creating potential legal troubles.
The report urged local authorities to make individual roles in contract management and procurement clear, keep track of warning signs such as high numbers of supplier breaches, and build appropriate timescales into training.
4. Commercial awareness
Knowing the market, the report emphasised, was an increasingly important aspect of council procurement. Ensuring suppliers have sustainable supply chains even in the face of inflationary pressures, without over or under-pricing, was critical. To do so, it advised councils to work collaboratively with neighbouring authorities to gauge best practice and market rates.
5. Contract management
The report emphasised the importance of maintaining records around waivers and contract breaches to ensure authorities had an accurate picture of suppliers’ work, and risks were accounted for appropriately. Supplier health checks and internal management resilience checks were vital to ensure long-term contracts could be sustained, and potential fraud identified.
It added that one local authority signed a £58m, 10-year contract for children’s services and allowed the contract to go live without a dedicated, formal contract manager having been appointed. The relationship with the supplier became so difficult that when costs were disputed, the Department for Education and the children’s minister had to get involved.
“Local authority members and officers, for the most part, already work well with the commercial partners they appoint,” the report said. “However, with so much public money at stake, there is always scope for continuous improvement and for learning from examples of procurements that did not work entirely as intended.”
Local authorities spent around £82.4bn a year on goods and services, the report said, representing more than a third of all UK government spending.
The report was based on a large number of inspections and interventions, including 53 annual auditor reports carried out by Grant Thornton.
The Local Government Association declined to comment.