Skanska Scandal? Council says nothing to see here
Somerset County Council (SCC) have had with Skanska since April 2017. The Leveller® understands the contract is worth around £30m a year and under it Skanska look after the highways and byways of Somerset (except the motorways and trunk roads which are contracted for nationally). The view that things are not working so well comes out loud and clear in an internal audit report prepared by SWAP, SCC’s internal auditor.
Last month in the February Leveller®, we pointed out that this audit was carried out at management’s request and SWAP therefore regards it as confidential. Ordinarily it would not be released to the public. It is not clear to us how a document that has been paid for by council taxpayers out of the public purse, can be withheld from public scrutiny.
At the February Audit Committee meeting, at the insistence of Mike Lewis, Chair of the Audit Committee the SWAP audit report was made available to the public. It made quite scary reading. However it has since become clear that this was not the full audit report. Large parts of the report were redacted because, we are told, of commercial confidentiality issues. However, The Leveller now understands that the decision on which bits to leave out was taken by SCC’s staff, not the internal auditor. To say that this is exceptional, is an understatement.
The full unredacted report is full of information that points to control failures by Somerset County Council. Remember the basic parts to a contract. Place the order, agree the price, check the work has been done, make the payment. Obviously with a long term contract, prices may be pulled from a prepared list. But that is semantics.
So are all jobs priced up in advance? This is what the auditors say “Safety defect works are not valued and quoted by the contractor prior to, but at the time of the works being completed. The compensating control of a variation order, to ensure that a cost variance is properly managed and sufficiently transparent to the client, is not commonly used.“
Does SCC check that the job is properly complete to specification before approving payment? This is what the auditors say “For the vast majority of task orders fulfilled by the contractor there is no on-site auditing to confirm the quality of works, or accuracy of the cost submitted by them for payment.“
And what about the payments to the contractor. Does SCC have controls to prevent duplicate payments? This is what the auditors said “We began by collating all the AfP data (Applications for Payment by the contractor) across the three years of the contract and analysing it for duplicates. However, it was not possible to extend the analysis to include payments, due to the number of repeat payments requests, part and interim payments, and the fact that there is an inconsistent use of comments to explain where there have been changes.“
They also said there were “Numerous examples of where there was a series of refusals to pay, but the task order is subsequently paid months later with no comments to explain the reason for the delay.“
OK so what does this mean? At the Audit Committee meeting in February a schedule was produced showing £4m of AfPs that had already been paid or were not due for payment. SCC say there is no evidence that any invoices have been paid twice. They might be right. The auditors are not so sure. They say “These issues increase the likelihood that a duplicate payment request could be missed and approved in error. The amount and scope of routine auditing of highway task orders (effectively a request for work to be done and a price for the work) is not commensurate with the total value of expenditure, or the financial risks associated with the outsourced maintenance contract.“
Overall, despite the control weaknesses identified, the disappointment seems to be with the contractor. Do you really want numerous examples of duplicate AfPs? If SCC had paid all the requests from the contractor, would millions of pounds of public money could have gone through the door for work that had not been done?
This is what SCC have to say about it. And for the record it was not The Leveller® that put the report in the public domain. Which is not to say we wouldn’t have done if we had been given the chance.
A spokesman for SCC said: “We want to be absolutely clear that there is no issue of public funds being wasted in any way. All works carried out by our contractor have been paid for appropriately – there is nothing wrong here whatsoever. What is equally clear is that this is a complex contract, it is standard for the industry and we acknowledge it is difficult for those outside the industry to understand. We also acknowledge there are times we have not managed this contract well enough. However, the key point is that it is disappointing that a national contractor each month routinely claims for payments that are not earned and that we have challenged successfully each month. It is equally regrettable that a confidential report is now public which may benefit the contractor and there is a risk that this publication will cost the tax payers of Somerset.”
There will be a much more detailed report on this in the March Leveller®