City council sets up independent audit into energy decision failures

Liverpool City Council is to commission an independent audit after admitting that “various errors” had led to an increased cost in energy.

A report to the local authority’s Cabinet requested the council transfer to a new electricity supplier, Crown Commercial Services, while a search gets under way for a new longer-term electricity and gas supplier.

This is because the council’s existing energy supplier, Scottish Power, changed its position on a contract extension and was no longer supplying commercial customers.

“It means a previous Cabinet decision to extend their contract cannot be implemented,” the council said.

The move will cost the council an estimated additional £4.5m and will also impact maintained schools, and Merseyside Fire and Rescue Service, as the contract covered their supplies too. The overall impact equates to an increase in energy costs from £10.6m to £26m, the council revealed.

At the Cabinet meeting, Chief Executive Tony Reeves apologised to the Mayor and senior councillors for control failures and errors in the decision making process which meant Cabinet was not fully aware of this.

Reeves added: “A procurement delay has now led to an increased cost of estimated £4.5m to the council. As a result of this, we will commission an independent audit and a lessons learned exercise. I will ensure that the findings of both will be published to ensure transparency.”

Deputy Mayor and Cabinet member for Finance, Cllr Jane Corbett, told the meeting: “There are clear lessons to be learnt from the process to date, and it’s important that we act to ensure our control measures and processes are robust so that we never find ourselves in this position again.”

Liverpool’s Cabinet granted permission for up to £4.5m to be drawn down in reserves to cover the expected rise in costs, although the council hopes to make savings in other areas to cover the shortfall. 

The report prepared for the committee meeting said: “In order to mitigate against this control failure a training session on contract standing orders, constitution and governance processes is being arranged for staff. The establishment of a set of procedure notes pertaining to the procurement of goods and services including contract renewals. This will also include a review of existing contracts, and new contracts that will be procured in a timely manner. The energy contract management function is being transferred to the Commercial Procurement Unit.”

The report, which can be read in full here, said that the authority’s Commissioners – appointed by the Secretary of State – had “significant, and ongoing concerns about the circumstances that have led to the decisions before Cabinet…..It is a product of failures or errors in contract management, forward planning, procurement, risk management, governance, controls, and capabilities.”