CROYDON IN CRISIS: Our Town Hall reporter, KEN LEE, on how the risks of a multi-million-pound court case brought by road repairs contractors have been known to the local authority since at least 2019

Financial black hole: road maintenance contractors Kier are in a long-standing dispute with Croydon

The dispute between Croydon Council and the authority’s former contractors, Kier, over allegedly unpaid fees has been listed as a “risk” on the council’s accounts since 2019.

From 2011 to 2018, Kier provided highway maintenance and repair services in Croydon. But in 2018, the council awarded a new, £130million, seven-year contract to roadworks rivals FM Conway.

As Inside Croydon revealed earlier this week, Kier formally started legal proceedings at the end of August, with a claim now reputed to amount to £10million.

But in the council’s official 2019-2020 accounts, the dispute with Kier was reckoned to be a risk of little more than half as much, at £6.5million.

The accounts say that the claim was “refuted”.

By April this year, according to a report from the council’s audit and governance committee, the amount in dispute had ballooned to £8.2million.

According to the report, this is “in respect of the financial discrepancy (£8,165,967.80) [Kier] believes exists in respect of the Transforming Highways Maintenance Contract…”.

It seems probable that since that report was compiled, the value of the claim has increased further.

Under “Risk scenario: Impact”, the report stated, “The council will be liable for significant financial penalties” and “Reputational damage, media and political scrutiny”.

And, “Existing service delivery pressure significantly increased”, meaning that instead of spending money to fix the roads, the cash-strapped council will be – now is – spending money on lawyers and court cases.

“Risks escalated to Red status since last review,” the report to the committee said.

Black and white and in the red: the worrying council report which dismissed the Kier claim as ‘nonsense’

With Croydon effectively in special measures following three Section 114 notices since 2020, they sought advice from Phil Brookes – a member of the Government-appointed improvement and assurance panel, and an official who works for the Cabinet Office.

Brookes’s advice included, “This is a supplier trying to take advantage of inconsistent contract management.”

And, “The amount claimed bears no resemblance to the cost of providing the information…”.

Brookes dismissed the claim as “a nonsense”,

‘Nonsense’: Phil Brookes gave advice on the Kier claim

Croydon’s go-to firm of solicitors, Browne Jacobson, was nevertheless engaged to handle the Kier case (the council does have a legal department of its own, but they are clearly not reckoned to be up to the task for such cases).

It was Browne Jacobson who provided the legal advice over the potential for recovery of any of former council CEO Jo “Negreedy” Negrini’s £437,000 pay-off in 2020.

Steve Iles, the director of “sustainable communities” until his early retirement last month, was listed in the report as the council official responsible.

Pensioner Iles is now making his own unique contribution to the increasing costs of the case, by being hired in as a contractor to “assist” in the preparation of the council’s defence, no doubt on a generous day rate. Nice work if you can get it…

Given that the council has been paying Browne Jacobson around £1million a year in fees for their legal services – in particular on planning issues – over a two-year period following the council’s financial collapse, it seems highly likely that the Kier case will prove very costly for Croydon, even if they manage to win.

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