Grant Thornton issues report setting out lessons for procurement from auditor reports

Grant Thornton has published a report on local government procurement and contract management, which outlines lessons learnt from a review of recent auditor reports, and makes recommendations on a selection of issues.

The report ‘Local Government Procurement and Contract Management: Lessons learned from recent auditor reports’ outlines five common themes for members and officers to consider to help ‘build on existing good practice’ when conducting local authority procurement.

The report’s findings follow a review of 53 recent English local authority Annual Auditor Reports issued by Grant Thornton, as well as a selection of other recent reports, inspections and interventions by the firm and others.

The five common themes the report outlines for members and officers to consider are:

1. Strategic planning: “The procurement strategy is a lever for cascading corporate priorities down to services and capital projects delivered through commercial partners, but there is not always alignment between the two.”
2. Internal control: “Procurement can bring higher risk of fraud and corrupt practice – making strong internal control essential. Once the procurement strategy and associated policies are in place, strong internal controls are needed to ensure they are applied.”
3. Time, technical expertise and people: “Good procedures around procurement can only work effectively in practice when there is the necessary time, technical expertise and people to discharge them.”
4. Commercial awareness: “Procurement involves negotiation. To negotiate effectively, local authorities need to be just as commercially aware as the suppliers they deal with.”
5. Contract management: “Getting best value out of procurement isn’t just about contracts being signed. Once signed, the longer task of managing them begins. It is often at the contract management stage of procurement that true value is delivered.”

On strategic planning, the report notes the importance of understanding the implications of using alternative service delivery models. The report warns that legal requirements do not necessarily change “just because a different delivery model is used”.

The report used a case study of a local authority that had planned to deliver a £30m arts centre through a subsidiary to “avoid public contracts regulations”. The final cost of the project was £67.5m, and it was delivered more than a year behind the target date.

The report said: “To stay on the right side of procurement law, the local authority had to concede that its subsidiary had no obligation to deliver anything – in effect making it impossible to dispute outcomes or control the budget.”

On internal control, the report stresses the importance of re-procurement when contracts end. It notes that where contracts are ‘rolled over’ without any lawful waiver having been agreed – in advance or retrospectively – “there is in effect a breach of procurement law”.

An exception for this is when contracts and waivers are allowed by law and “waiver processes are followed before the contract is rolled over”, the report notes.

According to data gathered from the annual auditor reports, it was found that at one local authority there were 94 breaches of procurement law when contracts were rolled over in 2020-21 (£14m) and a further 203 breaches in 2021-22 (£69m). The report notes that re-procurement arrangements had not been consistently applied when contracts ended.

The report recommends that where there is non-compliance, “it should be dealt with promptly, rectified and lessons learned should be shared”. Additionally, it recommends local authorities to be mindful of procurement regulations such as “fair and open access of suppliers and their benefits”.

The report concludes by noting that the legal framework and the commercial environment within which local authority procurement takes place is complex, and therefore requires regular training, both for members and officers.

It reiterates the need for individuals involved in procurement activity to ensure they adhere to the “Nolan Principles of Public Life”, which underpin all of the report’s findings and recommendations.

Lottie Winson