Inside Croydon publishes here the full May 2010 report from auditors in to Croydon Council’s transport procurement process.

This last internal review was completed just 12 months ago by auditors Deloitte. This week, the council announced it is to carry out another review.

Last year’s report was never published by the council nor posted on to Croydon Council’s website.

Despite straightforward requests made through the council’s press office, Inside Croydon was eventually forced to access the report through a Freedom of Information Act request.

Sections of the report are “redacted” – withheld – because the information “was obtained by the public authority from any other person (including another public authority) and the disclosure of the information to the public would constitute a breach of confidence”, according to the council’s “information management manager”. In this case, the redacted information had been received from credit reference agencies.

The report is long and very dry. After 2,000 words (excluding the redacted detail), it reached a one-sentence conclusion: “Although the procurement process in a number of instances was found to be compliant, there were elements of non‐compliance within the process for the selection and award of contracts.”

As a consequence, Croydon Council retendered the contract for school buses for disabled children at St Giles School. After putting out this latest tender, Croydon Council managed to award a £3.7 million contract to a company with no prior experience in that kind of service, and which lacked licences for five of seven of its vehicles, and therefore the buses were uninsured to provide such a service.

According to this week’s Private Eye, the company awarded the contract also had links with Michael Lawrence, previously a transport consultant for Croydon Council’s deputy chief executive Nathan Elvery, before going on to work for Olympic South, the transport company whose contract with Croydon had prompted the previous two internal reviews.

Here is the May 2010 report:

Internal Audit Report – March 2010
Procurement of the Passenger Transport Service
Background
The Executive Director of Resources & Customer Services advised the Deloitte Audit Contract Manager of an issue regards the recent tendering and award of the CYPL contracts for Passenger Transport Services covering Coach and Mini‐Bus and the Car & Taxi provision. Following the award of these contracts, the Consultant employed by LB Sutton engaged by LB Croydon in helping to facilitate and advise on the procurement accepted a position in September 2009 during the awarding of the contracts with one of the successful contractors under both these contracts namely, Olympic (South) Ltd.
Audit has been requested to examine the award of this contract and the input of the consultant during the procurement process. The Contracts are for an initial period of four years from January 2010, with an option to extend for a maximum of three further years and awarded to the following organisations as reported to the Corporate Services Committee 17 September 2009:
Coach and Mini Bus
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Brunswick Cars, six routes at a total cost £1,103,520 (see note 1)
•
Olympic (South) Ltd, 18 routes at a total cost £5,177,860 ‐ (revised down to 16 Routes)
•
Ruskin Private Hire, 15 routes at a total cost £4,175,440 ‐ (revised to 18 routes)
•
Sutton Community Transport, nine routes at a total cost of £2,235,160 ‐ (revised to 11 routes)
Note 1: Subsequent to seeking Committee approval, Brunswick Cars have withdrawn, resulting in five routes being reallocated and one withdrawn.
Car & Taxi
The Car & Taxi contract is a Framework Agreement consisting of thirteen companies (including Olympic (South) Ltd, who were subsequently asked to quote against approximately 350 routes. The contracts were to be awarded dependent on their value, either under Chief Officer’s powers, via the Procurement Board over £100,000 or through the Corporate Services Committee if over £500,000.
Introduction
In seeking to ascertain whether the procurement process was conducted in accordance with Council Procedure, Audit has sought relevant documentation to establish the process of reporting, selecting, evaluating and awarding the above two contracts. Most of the
expected documentation has been provided to Audit as the main bulk of the hard copies sent to and received from each organisation during the PQQ and ITT process had been passed to the Council’s Legal Service provider DMH Stallard, as they had been formulating the necessary contracts with the Organisations concerned. Information held electronically by Procurement has been examined with regard to validating and referencing the procurement process. However, there may well be additional electronic material that has not been reviewed as part of this process.
This report follows the desktop exercise of examining the documentation provided in relation to compliance with Council’s Procurement procedures Additional work has been undertaken in relation to Officers interviewing the three persons that had carried out the PQQ and ITT tender evaluation, in addition to meeting Officers from LB Sutton’s Internal Audit.
Reports to Committee/CMT/Procurement Board (procurement and award approval)
The RELEASE & DELIVER Board in December 2007 commissioned a fundamental review of how the Council organises and delivers its transport services with the view to establishing an integrated transport unit. A second report was issued in April 2008 recommending the creation of a centralised transport service and the development of new service delivery options, including a shared services approach. As noted within the April 2008 report, the review has drawn on the London Borough of Sutton’s transport experience. The success of the London Borough of Sutton’s service, both in terms of efficiency and improved customer experience, has been used to inform the Council’s strategic review. The Corporate Management Team in June 2008 agreeing to this proposal.
The Procurement Board under its Gate 1, 2 & 3 review process agreed the procurement route in October 2008 (Gate 1 – Start‐up); this approved the approach to the market via a restricted OJEU competitive tender to secure contractors to deliver passenger transport services. Gate 2 reporting is required where changes and amendments are being made and Audit is advised that no report was necessary. Under Gate 3 (contract award) the Procurement Board in August 2009 in consideration of the Corporate Services Committee and contract award reports gave the approval to proceed.
Corporate Services Committee in September 2009 recommended to the Cabinet Member for Resources and Customer Services to agree the contracts relating to the Coach and Mini Bus and the Car & Taxi Services.
Following the allocation of the Car and Taxi routes, Audit are advised that the resulting allocation of routes for some companies awarded contracts in excess of £100,000 and £500,000. As reported to the CSC in September 2009, being awarded dependent on their value required reporting either under Chief Officer’s powers, via the Procurement Board (£100,000) or through the Corporate Services Committee if over £500,000. Reports for the
awarding of contracts within these contract values have not been reported to committee for approval.
Contract Specification
The specification was produced by the Passenger Transport Services project team. The specification as drafted by the Procurement Officer and amended by the Transport and Contract Monitoring Manager was approved and signed off at the Transport Project Meeting of October 2008 by Steve Liddicott and Barbara Peacock as complete and meeting service needs of CYP&L.
Contractor Selection (advertising to gather interest)
Two OJEU Notices were published on 15 January 2009 for the Coach and Mini Bus and Car & Taxi services. Those companies showing interest were sent a Pre Qualification Questionnaire (PQQ) as part of the selection process for those companies, which would be invited to submit a tender. The award criteria being “The most economically advantageous tender in terms of the criteria as stated in the specifications, in the invitation to tender or to negotiate or in the descriptive document”.
The evaluation at the PQQ stage was based upon the applicant’s financial and technical capacity which is the method/criteria used and is viewed by the Council’s Legal section as OJEU compliant. In addition, Audit is advised that local and national advertisements were placed.
Pre Qualification Questionnaire (Evaluation)
PQQ’s were sent to those companies applying with a closing date of 20 February 2009. The PQQ evaluation was undertaken by:
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Transport and Contract Monitoring Manager
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Procurement Officer
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Passenger Transport Manager (LB Sutton) acting as consultant to LB Croydon
The basis on which each company was assessed, as stated by the Procurement Officer, was “the failure to answer questions or provide inadequate answers was recorded on a sheet. These deficiencies were then recorded, by deducting points or marks against the total available for each section of the PQQ for all organisations that submitted PQQ’s” for Coach and Mini Bus and for the Car and Taxi services. This method would be viewed as being compliant to identifying those companies achieving a quality level exceeding, in this case 70%, which would then through the Invitation to Tender (ITT) process be invited to submit a tender.
However, not all of the PQQ questions for the Car and Taxi would be relevant for ‘Sole Traders’ showing an interest or who currently were providing a Passenger Transport Service. Where PQQ’s were being completed by a Sole Trader, questions relevant to a Company who for example acts as an Employer would not be relevant to the Sole Trader. The absence of any response resulted in the scoring against some of the nine sections being lower and in some cases a zero score would be given. The four year contract terms with an approximate total value of £28m for both contracts should have required an officer from Finance and Legal as well as a Senior Officer from within CYPL being included as part of the tender evaluation panel. This would have then been compliant with best practice within Croydon Contract Handbook.
Companies were also subject to a financial evaluation of their most recent accounts. The Council use “Company Watch” and this produced three ‘extreme cautions’. A (REDACTED)
It has been ascertained that the Procurement Officer on receiving the accounts A
A (REDACTED) had not sought further advice on the accuracy of those accounts.
Departments may accept companies with extreme caution subject to risk analysis identifying the ability to meet contractual requirements being provided. A (REDACTED)
An approach to risk mitigation was detailed in a report to the Corporate Services Committee meeting held on 16 September 2009, but this was not based on the additional financial information but the trading history of the company and risk mitigation around supplier base and capacity. The Council’s procedures state that the financial appraisal is a recommendation and ‘extreme caution’ companies can be taken forward. It is noted that the Council has now changed its procedures to ensure that extreme caution companies are only taken forward with the Section 151 Officer’s approval.
Audit are advised that as part of the PQQ up to four references were being sought for each company and, although some have been located, a number of these references have been lost.
Invitation to Tender (companies accepted from PQQ process and invited to tender)
Those invited to tender were sent the Invitation to Tender letter with accompanying documents on 13 April 2009 and their submissions were required to be returned by the closing date of 22 May 2009.
It has been stated to Audit that the ITT evaluation panel, consisting of those officers that had performed the PQQ evaluation, scored all of the nine sections that were to be evaluated using the 70% quality threshold. In addition, although inviting two officers from CYPL namely, the Head of Service SEN/Learning Disabilities and the Senior Manager Admissions and Place Planning, who separately provided their score for five sections relevant to their required area of experience and receiving input from the Parents Focus Group, completing two sections relevant to their required area of experience; these additional evaluations were not considered.
The Award Criteria, as shown within an appendix of the ITT letter, was not 70% but was stated as follows:
Car & Taxi
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Framework Award Criteria 60% quality and 40% price (Quality assessment used exclusively to award procurement places)
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Call off Award Criteria 60% price and 40% quality (however, prices were used via mini competition to allocate routes to successful bidders).
Coach & Min Bus:
•
Standard Services 60% quality and 40% price
The evaluation was therefore based on companies achieving a minimum score threshold of 70% were then progressed into the contract phase. The three companies passing this score for Coach and Mini Bus are now the contracted service providers. Likewise, the thirteen companies for Car & Taxi passing the 70% score are now contracted service providers. As the evaluation did not follow the award criteria as stated in the ITT, this was non‐compliant.
Contract Award & Formalities
Consultant Appointment (letter of agreement) cannot be identified. The Procurement Officer has requested via email and phone call on 25 January 2010 for a copy of this information from LB Sutton.
LB Sutton (Audit) was contacted regarding the appointment of the consultant, meetings were held and there has been an exchange of information.
A Purchase order 40010959‐0 was issued in February 2009 to LB Sutton for £3,500 ex vat. LB Sutton invoiced on 5 March 2009 and payment has been made.
Audit are given to understand, through discussion with Paul Davies, that all contracts with the companies awarded contracts under the Coach and Mini Bus and the Car & Taxi services are signed.
Conclusion
Although the procurement process in a number of instances was found to be compliant, there were elements of non‐compliance within the process for the selection and award of contracts.

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