Agenda item

Report of the Chief Procurement Officer

7.1       The Committee considered an Annual Contracts Review report in accordance with its Terms of Reference.

7.2       The committee noted that a review of the Procurement Code and procurement assurance process was conducted during quarter 3 of 2016/17 and the updated code was published in January 2017.

7.3       With regards to the review of contracts let by the Council for value for money and adherence to the procurement code, the committee noted that 73 contracts commenced during the 2016/17 period.  39 contracts were below the value of £100,000 threshold and 34 over the value of £100,000. There were 12 extensions of existing contracts.  This represented a reduction compared to the previous year. In exceptional circumstances a waiver to the requirements of the Procurement Code may be obtained from the Chief Procurement Officer.  59 waivers were approved during the course of the year.  This represented a slight increase to the previous year.

7.4       The Committee was informed that the capitalEsourcing contracts register is regarded as the “single source of truth” and forms the basis for reporting on contract information across the Council. The use of a single system provides an important source of data and a complete audit trail of the Council’s activities, enabling full visibility of commercial commitments; better management of risk, identification of commercial opportunity and resource planning. 

7.5       It is the responsibility of Contract Managers to carry out the first assessment within the capitalEsourcing system, 12 months following the service commencement date, for all contracts that have a total contract value of £100,000 or above.

7.6       Of 174 active contracts over £100,000 150 (86%) were assessed and performance rated.  This was a positive increase on the number of contracts assessed and reported on during 2015/16 (63%) only 6 (3%) were assessed and rated as ‘Below Expectations’.

7.7       The Committee noted with concern that twelve of the twenty-four contracts that had not been assessed and performance rated within the system had a total value over £1.5 million each and collectively amounted to £333, 953,000.

7.8       Anthony Oliver, Chief Procurement Officer, clarified that contract performance was being assessed by contract managers just not within the system.  Procurement Services have been working with each of the service areas to ensure overall contract performance is carried out in the system. The Chief Executive had also stressed the importance of this to the Executive Management Team when quarterly contract review reports are issued to EMT.

 7.9      Mr Oliver recognised that the current methodology for recording contract performance is transactional in nature. Therefore, during 2016/17, feedback was sought from Contract Managers. The general view was that this method was too simplistic and did not provide a true representation on the overall performance of a particular contract. As such, during 2017/18, Procurement Services will be conducting a review of Contract performance with a view to piloting a contract performance score card. The approach will be focused on value and risk to provide more meaningful information and greater visibility.

7.10     The Committee noted that contracts with a value below the £100,000 threshold are classed as devolved procurements and are not recorded within capitalEsourcing.  The committee commented that that while from a monetary perspective the contracts may be comparatively small some may relate to sensitive frontline services with reputational risks for the Council if the services are not well provided.  Members asked how the Council knows that such contracts are being appropriately monitored.

7.11     Mr Oliver advised that the Procurement Code sets the mandatory rules on behalf of the Council in regards to the award, management and monitoring of contracts and is aligned with the Council’s overall governance practices.  It includes a Contract Management Framework.  Every contract manager has to undergo relevant training.  The latter is refreshed on a regular basis.  Internal audits of each service ensures that the rules and practices are being appropriately followed. Mr Oliver advised that a review was being undertaken on small value contracts.  The committee asked to see the conclusions of the review once completed.

7.12     In response to questions on the Tri-Borough Procurement Service, Mr Oliver advised that this had in effect ceased to exist.  He explained that the decision as to whether the service changed to a Bi-Borough model was dependent on the views of the Royal Borough of Kensington and Chelsea (RBKC).  His counterpart at RBKC had expressed support for this but this would need to be considered by the new leadership and senior management at the Council.

7.13     ACTIONS:

1.      Send a letter to the Chief Executive expressing concern regarding the number and value of contracts that have not been assessed and reported on within capitalEsourcing and request that he reassert the importance of this at the next relevant EMT meeting with the aim of achieving 100% compliance this financial year.  (Action for: Reuben Segal, Senior Committee and Governance Officer).

2.      Clarify why a waiver was required in relation to Microsoft Office 365 Licenses in order to directly award this contract.

3.      Clarify why the contract for Asbestos Removal and Encapsulation was rated below expectation.

4.      Provide a note on i) how many contracts the Council has running at present? ii) How does this compare to previous years? iii) What opportunities are there for amalgamating contracts to achieve savings/economies of scale and/or to bring about innovation?

(Actions for: Anthony Oliver, Chief Procurement Officer)