Tuesday 20 December 2022 – For the Betterment of the People
When I worked at Enfield Council on S106 (2017 to 2020), as in my current role, I worked with developers making planning contributions for the benefit of local residents. In pre-Covid days when it was thought it was important we were office-based in case we didn’t do any work without being in eyeshot of our managers (how times have changed), the Neighbourhood Regeneration Team I was in sat near the Housing Tenant Engagement Team. There was a lot of work being done at the time to demolish decrepit 1960s tower blocks owned by the council, and homes to council-housing tenants, to be replaced by new and modern residential developments. The Alma Estate in Ponders End was the main focus. The financial model to pay for this was that the council commissioned a developer to build new housing blocks on the newly cleared and remediated land and were allowed to sell and rent the majority privately. A fraction were reserved for a fraction of those tenants to be rehoused in that new and modern block. In the meantime, tenants were decanted for the demolition. That’s the word they used: “decanted”. I don’t know why but that’s what I heard the Tenant Engagement Officers say. It was like the tenants were American tourists on a coach tour to Harrods, “decanted” to give the coach driver a cigarette break with strict instructions to be back on board in 45 minutes. But most never returned in this case (council housing tenants, not American tourists lost in Harrods). I don’t know where they put them as their homes were rebuilt and sold for market price by Enfield’s preferred developer, Countryside Homes. The remaining lucky chosen few were looked after relatively well to make a show that Enfield residents and the council’s long-term tenants were being considered in this profit-making deal with the private sector. As well as S106, as part of the deal, agreements were made with Countryside to provide a community chest for decanted tenants. Again, this is the actual language they used: “community chest”. I don’t know why council officers come up with this archaic language that I’m sure most people thought this was just a thing in Monopoly. I suppose, even in Monopoly, patented in 1903, it must have come from somewhere. And it makes sense that, if the objective of the game is to build properties on increasingly expensive strips of land, that the Community Chest had something to do with those developers. But, exposed at an early age to the board game, that is the only context most people have for the term “community chest” and it sounds weird to overhear it for the first time in the real world at such a late stage in my life.
Rick: “Wouldn’t it be amazing if this money was real?”
Vyvyan: “That is the single and most boring thing that
anyone could ever say whilst playing Monopoly!”
The Young Ones: Vyvyan goads Rick for such a cliché thing to say. For most of us, the mechanics of Monopoly are just a game, obviously not for real.
I also don’t really know what it
was spent on except the Tenant Liaison Manager would declare to anyone
listening, very loudly and in a similarly archaic turn of phrase, that the
community chest was for “the betterment of the people!” Perhaps unfairly to think this, but I was
amused to hear her say it in her native Huddersfield accent like it just didn’t
seem authentic, a bit like a parrot might say “pretty boy” in a squawky voice:
you find it hard to believe the parrot really means it and is not just repeating
something it heard elsewhere and doesn’t really understand the words.
Other than as a source of amusement, I didn’t give Enfield’s Tenant Liaison Manager much thought at the time until recently when I realised Hammersmith & Fulham has a very similar role, and personality in it: the Head of Property Engagement, except without the Northern accent. Working on the refurbishment rather than demolishing and rebuilding, of council housing tower blocks across the borough such as the Edward Woods Estate in Shepherd’s Bush built in 1964 and the Clem Attlee Estate in Fulham in 1956, no property deeds have been sold to a developer, but Kier has been commissioned over seven years to bring the properties up to the Government’s Decent Homes standards, with the programme focussed on “responsive repairs”; reacting to repairs as and when they are needed. With no private sales, no community chest has been agreed with Kier, but LBHF does have a social value policy and the Head of Property Engagement has consulted her tenants and asked them what they want Kier’s contributions spent on. “On the tenants” she has told me and Kier’s Social Value Coordinator many times, vociferously, admonishingly and sanctimoniously. This was the conclusion from her consultation. Kier should send in professional decorators to paint the inside of tenants' properties, put in a new kitchen in the community youth hub and provide for tenants affected by the cost-of-living crisis.
And why not? Despite working in the Economic Development Team, personally, I think this is a good focus for the social value contributions in this case. I don’t think it is sanctimonious to want to direct the contributions to the tenants affected by the works going on in their blocks and for whom Kier’s contract is trying to benefit. It’s just her tone. Bar the Huddersfield accent and using the word “betterment”, she and her counterpart at Enfield could be the same, scowling, angry and slightly frightening person. Where do councils find them?
The problem is, it’s not really up to the Head of Property Engagement what social value contributions the council’s suppliers make. The council has a pre-defined menu of measures from which suppliers can choose to include in their bids, each measure with a proxy financial value reflecting the social return on investment from making that contribution. The highest bidder wins, including social value contributions proposed which account for ten per-centage points of the score. Kier, the highest scoring bidder on this programme, proposed 15.1% social value. For each individual “call-off” contract for each individual piece of work, they must select measures they will deliver amounting to at least 15.1% of their price for that contract. And the council is locked in to giving every contract for the Responsive Repairs programme to Kier for the next seven years without competitively tendering any of the works.
The measures in the social value menu fall under four “Themes”: 1) employment & skills, 2) local supply chain procurement, 3) community initiatives and 4) climate change. Contributing to community initiatives such as directly to the tenants and their properties is just one of the four themes and probably the most expensive to do. Employing local residents doesn’t really cost them anything because they have to recruit labourers, admin staff and tradespeople on the contracts anyway. Procuring from the Jewson and Travis Perkins branches of Hammersmith rather than elsewhere in London doesn’t add costs. These both add to local economic development; the first two social value themes combined. And, although reducing carbon emissions and redirecting waste from landfill can be costly, operational modernisation is something developers and maintenance contractors are having to work towards anyway. However, contributing labour, expertise and straight money to do works in addition to the contract, as well as donating to community initiatives, is a direct cost to Kier with no returns. So why choose these community initiatives measures if they don’t have to just because the Head of Property Engagement engaged the tenants and promised them something it was not technically in her power to promise? And these additional costs may be passed on.
Similar to that I talked about in Our Supplier is Angry With Us above, The Guardian reported on a property owner living in an ex-council flat being charged £97,860 towards building repairs of the block by Lambeth Council. It reports,
“Leaseholders on other local authority estates, including former tenants who bought their home from the council, could face similar bill shock as councils rush to renovate poor-quality housing to meet the government’s decent home standards.
“Since council tenants are not liable for maintenance and repair costs, the bill for entire blocks is divided between any leaseholders and the local authority freeholder. Unlike residents in privately owned buildings, local authority leaseholders have no rights to decide the scope and timing of proposed works or to request comparative quotes from contractors. Local councils often sign long-term agreements with private contractors who do not have to tender for each project, leading to accusations of bribery and overcharging.”
As I mentioned in Our Supplier is Angry With Us, Hammersmith & Fulham Council’s Head of Home Ownership is worried about overcharging as well as social value contributions adding costs to much needed works that no-one can really account for exactly, leading to a “Gordian Knot” of charges that can’t be untangled should private homeowners challenge the council’s contractors’ expenses. But overcharging by contractors can be a bigger problem than just adding social value. In 2016, the Brighton and Hove Argus reported that,
“Police have told council bosses they will not investigate after contractors overcharged the council by £300,000…
“Unions and councillors have called for a criminal investigation but council officials have been advised by Sussex Police that the issue is only a civil matter.
“Council contractor Mears, who subcontracted work out to [a] plastering firm, have given a written agreement to the council to pay back the funds.
“The Argus first revealed in November that the council was investigating claims of overcharging but the scale of the scandal has now been revealed to be double the original £150,000 estimate.
“As well as the council, a number of leaseholders were also overcharged but they will have to wait until April for a refund.
“Mears has now brought in new measures including a review of charges by other sub-contractors, a new management structure including a new quality assurance manager and a new recording system including taking photographs of work for council officers to inspect.
“Councillor Mary Mears [I assume and hope of no relation], Conservative housing spokeswoman, said, ‘We have always had concerns about a lack of oversight and expertise within the council when dealing with this sort of big contractor, you need someone with private sector expertise who knows the tricks of the trade.’”
In 2013, the BBC reported that Birmingham City Council may have overpaid a contractor £19m,
“An internal document states accountants think outsourcing firm MITIE may have been charging as much as 25% more than allowed in its contract.
“The company repairs council buildings, including schools in the south of the city.
“…accountants from Ernst and Young told the council in August last year they had found what they described as "contract leakage" in relation to the agreement with MITIE…”
“Evidence of ‘mostly’ overcharging… by contractors Keepmoat Property Services was found after the… housing association hired independent auditors to investigate whistleblowers’ allegations…
“But Circle Housing's senior executive Deborah Upton said today that despite the repeated overcharging there was no evidence of fraud.
“She told the Wimbledon Guardian that the overcharging was due to contractors logging work under the wrong code due to an ‘argument’ over what those different codes, known in the industry as schedule of rates, really mean.
“She
said: ‘It's not unusual that those types of things happen at the beginning of a
contract.’
“About 18,000 repairs are completed every year by Keepmoat as
part of a £220m, five year contract which began in January 2013 for responsive
repairs across 17,000 homes in Merton and Kent.”
“They allegedly accepted holidays
and tickets to football matches in return for paying contractor Lakehouse for
repairs and upgrades as part of the borough’s £184 million Decent Homes scheme
— to install new windows, kitchens and bathrooms in council properties — that
were never carried out.”
Also in 2015, the BBC reported an Exeter City Council officer was jailed over bribes,
“Anthony Bodgin, 65, of Tiverton
abused housing schemes and took bribes from tradesmen, Exeter Crown Court
heard.
“He was bribed with tickets to Premiership football matches,
meals and golf trips, knowing he should have declared such gifts, and is
estimated to have personally gained £400,000.
“Prosecutor Roger Smart said Bodgin was paid £125,000 in
backhanders for a £2m contract with Wingrave for work to install vents into
council houses.”
I could go on.
There have been so many of these cases that, in 2020, the Government set
up a review into the risks of fraud and corruption in local government procurement. One of
the main questions of the review is, are Council Tax-payers and private owners
of flats in council housing blocks being overcharged by construction and
maintenance contractors where there is no competitive tendering for individual
projects? Can commissioning council
officers understand the costings they are presented by contractors’ quantity
surveyors and consultants? Especially
when they are also being given sweeteners?
How do we know there is no padding in the Gordian Knot that is contractor
building estimates beyond the entanglement of social value contributions that
bidders are simply instructed in Invitations To Tender (ITTs) to not charge for
but bear the brunt themselves? It might
explain why the Head of Home Ownership is so fearful of not understanding what
contractors are charging him and adding another complication of social value
contributions because the expertise simply does not exist in councils, and
governance of council officers who commission contracts is often patchy (see Neo-nihilism
in the New Year). In my time at
Enfield, consultants working for Vistry, the prime contractor for the council’s
flagship housing development in Edmonton, Meridian Water, were actually based in the Civic Centre procuring works from
Vistry. Vistry was procuring
Vistry. Enfield didn’t even pretend to
have any expertise, objectivity or oversight spending public money on building
works. Some mornings there wasn’t even a
desk available for me in my team area because of all the Vistry “consultants”
and I had to sit with the Housing Tenant Engagement
Team.
Yesterday, Kier’s Social Value
Coordinator emailed me and the Head of Property Engagement the social value
measures they propose for the £2.9m wet risers responsive repairs call-off contract
on Edward Woods Estate for which they submitted their price uncontended by any
competitors’ bids. Is £2.9m a lot? What’s a wet riser? I don’t know and not expected to know, but do
the senior managers responsible for these tower blocks know? I don’t know, but they seem uncomfortable
with untangling the costs presented by their contractors.
For contractors, it is a delicate balance between padded contract costs and landing your client in the newspaper, or worse, in court, which Mears got wrong (and MITIE, Keepmoat, Lakehouse and Wingrave) and Kier has, up until now, got right. It is also a delicate balance between pleasing the officers who may have a stake in deciding who gets these long-term contracts and the profiteering opportunities they provide and not giving too much of those padded prices for “the betterment of the people”.
Kier proposed 15.48%, a proxy amount of £448,810.70, of social value on this last call-off contract which is more than the minimum 15.1% contractually required. However, it is clear that Kier is increasingly putting more emphasis on less costly economic development measures than those for community initiatives. Whereas on previous call-offs they have decorated homes, fit out youth hubs and funded illuminations for Grenfell victims (more on this later), although, weirdly, only donated two kettles and two microwaves to four households affected by rises in the cost of living, these initiatives are becoming more parsimonious as the programme goes on. On Wet Risers, Kier has offered proxy values of £414,643.60 towards local supply chain procurement (procuring materials from local traders) and £31,583.52 from employing local labourers. That is 15.39% of the 15.48% towards economic development. The remaining 0.09% includes volunteering for CV workshops in local schools (32 staff hours), 8 weeks of work experience placements and 5 staff volunteering 10 hours each for community initiatives (read painting and decorating).
This is a huge departure from the Head
of Property Engagement’s promise to tenants that the 15.1% social value would
be spent on them. I note that the Social
Value Coordinator qualified her submission in her email with “After discussions
with the team…”, recognising that Kier might not have got the balance of charging
£2.9m for this and the sweeteners that normally go with it quite right, and
preparing to point the finger when the Head of Property Engagement protests.
But I’m not sure she will protest. Last quarter, Kier claimed £13,593 towards their social value contributions for paying for Grenfell illuminations. “This isn’t a community initiative”, I told the Social Value Coordinator, “You can’t claim it as social value. You haven’t even got the right borough; this was the clusterfuck that is Kensington & Chelsea Council. Why would Hammersmith & Fulham Council want to associate itself with it?” She explained to me, “It’s a commemoration, a show of solidarity with the Grenfell community, and Edward Woods is three of the twelve tower blocks closest to Grenfell Tower”. “Yes”, I replied, “but the only residents who won’t be able to see the illuminations are the tenants of Edward Woods on whose block you put the lights. And, in any case, the Head of Property Engagement told us in no uncertain terms that social value is to be spent on them.”
She explained to me that our
Housing Team asked for it and sent me an email trail of Housing managers
commissioning the lighting. “But these
emails are the council contracting Kier to do works”, I told her, “There’s
nothing in these emails that suggests that they asked for it to be attributed
to your social value contributions. And,
even if they did, it’s not up to them to decide what is a social value
contribution or not. The measures are
defined and it’s a stretch to call this a community initiative, especially when
you’ve got the wrong community. There’s
no way I’m going to take responsibility for verifying this and perhaps having
to explain to a councillor why I sanctioned spending money on something that
happened over the borough boundary. In
any case, I don’t really want to go up against the Head of Property Engagement
that I sanctioned spend on works that she has already promised to tenants would
be spent on them.”
“She sanctioned it”, the Social Value Coordinator told me surprisingly. She then sent me her email exchange with the Head of Property Engagement from yesterday as evidence:
“Grenfell – so was this an initiative proposed to be covered by Social Value? I have it down in the plan as a donation to local community project.
“[Social Value Coordinator]
“Kier”
The Head of Property Engagement replied:
“Hi [Social Value Coordinator]
“I’m unsure how it was funded but yes was always as far as I was aware to be SV [sic],it is a council commitment so if Kier cannot provide they will need to let H&F know how we can deliver through another contrcatror [sic].”
"…
“Kind regards
“[Head of Property Engagement]”
I was still not entirely convinced that this was the Head of Property Engagement sanctioning the contribution because it’s not very well written so, to be sure, I forwarded the email to her and asked her to confirm her decision.
As of today, she hasn’t replied to me. Now she has lost all credibility and, with it, authority over her sanctimoniousness for insisting social value must be spent on her tenants. This loss of integrity about wanting to support tenants gives Kier the freedom to choose to make most of its social value contributions from now on towards the near cost-free alternative of economic development. £13,593 well spent. For tenants, the Community Chest card reads, “Go back to Old Kent Road”.
From all of this, we need to talk about procurement governance. In my meeting with the Assistant Director on Monday to discuss how the council (I) was going to deliver social value (see Neo-nihilism in the New Year), he informed me that Corporate Procurement had drafted a “sourcing strategy” for a Key Decision Paper (a report upon which Cabinet makes a decision to approve or not and which, in the case of the former, is published on the council’s website). The aim of the strategy is to “improve how we source goods, works and services so that we secure the best outcomes for residents; secure exceptional value for money and operate as an efficient, modern, and compliant organisation… and good contract management.”
There are some worrying admissions of dodgy goings-on in this report if officers are not already doing these things, but if councillors need to be told about them to make the decision to do things properly instead…
The decision report also refers to the council’s six core values. One of them, doing things with local residents, not to them is addressed by:
“The commissioning activity which precedes procurement will require coproduction to ensure we work with residents to source the right things for them in line with our statutory requirements”
It goes on,
“The strategy… aims [to]:
- Ensure best value for what we buy
- Adopt a commercial approach to
investment and develop a commercial revenue strategy
- Secure added value when we buy, ensuring
ethical, sustainable, and inclusive development
- Plan for what we buy with residents, understanding the markets, local business, and voluntary sector context
- Implement the new regulations and change the way we buy things
- Ensure responsible transparent spending
- Manage risks around working in a high inflation economy”
I am not sure what all of this means or what it is referring to we haven’t been doing that these recommendations are deemed necessary. And I doubt most residents will when it is published. And probably not council members in the Cabinet either. The first aim is a given. In fact, it has already been given. I’m not sure why it has to be stated in the report multiple times without any explanation thus far how it might be achieved.
The second aim is
written in corporate jargon. It doesn’t
have innate meaning but is a reference to something else not explained here. So why write it here? This is just the way senior managers talk to each
other and, like the parrot, I am not convinced they understand the words either. My understanding (and I’m extrapolating a bit
here) is that “commercial procurement” means that there is a formal written
governance process in place for major procurements. These are the council’s Contract Standing
Orders relating to legal compliance and the council’s constitution. And they must be followed. The council already has CSOs but I suspect
they are a bit of a mess. Too often,
they are not followed. I have given
numerous instances in this diary of contract variations awarded (that is,
extensions with more money) simply because the contractor hasn’t finished the
work in the time and budget they originally proposed, contracts awarded without
a competitive tendering process, and long-term procurement frameworks that
favour a few preferred suppliers or, in the case of the Responsive Repairs
framework, just Kier.
Competitive tendering is the mechanism, and only mechanism, that drives value for money by driving competition. However, balancing raw competition with market security to ensure a consistent choice of supplies and suppliers is where commercial vehicles can complement competition and CSOs. It's a bit like the tension between pure competition to drive down prices and the objective of the EU's Common Agricultural Policy to ensure a consistent supply of food. Frameworks of preferred partners to supply different “categories” of goods, works and services provides security. Arms-length management organisations provide specialisations in disparate services provided by a local authority such as housing and recruiting professionals (for example, in the built environment sector or public health). ALMOs and frameworks can also generate an income for a council through the services they provide. The council has resources, expertise and assets and these can be rented to the highest bidders, often other councils in need of construction procurement frameworks (construction services are in high demand, especially in London), residents in need of housing and councils in need of experts and professionals. It has leisure centres, cemeteries and registrars for which it can charge fees, and parks which councils see as their personal property to rent out for music festivals. And London has got landmarks that film producers crave. This is what I am guessing is meant by “develop a commercial revenue strategy” in the report. But directors of the council with the objective of generating a commercial revenue for the council often make themselves directors of the ALMO with the objective of generating a commercial revenue for the ALMO upon which their bonuses are dependent.
It has
taken the Government to intervene to point out to councils that there can be a
conflict of interest here. The
Government’s Review into the risks of fraud and corruption in
local government procurement has a whole chapter on “Risks arising from increased
commercialisation”. It says,
“In times of growing financial pressures, councils are increasingly finding innovative ways to operate, often with a focus on income generation, and are setting up companies, working in partnerships, or in consortia. This additional layer of distance between the council and the supplier increases the risk of fraud and corruption, due to the arms-length nature of operations and reduced visibility. Councils may be relying on third party governance and management arrangements, that bring a different set of risks and costs to the organisation.
“A lack of commercial awareness within local government has also been raised as part of the review, which can lead to decisions that do not secure best value for money for councils. This lack of commercial awareness can also leave councils vulnerable to exploitation by their own staff and external parties who may use these opportunities to commit fraud or undertake corrupt activity.”
This all sounds very familiar. It goes on,
“To mitigate the risks in such situations, clear governance arrangements should be set out in advance and recorded and the conflicts of interest arising should be transparently and systematically managed. Best practice in this area should include documented terms of reference to help manage these risks.”
LBHF’s Corporate Procurement team forgot to publish a CSO for social value or draft a schedule in the template ITT and now the Invitations To Tender don’t mention that bidders should not add the cost of social value contributions to their prices. Or that it will be enforced if they do not deliver the measures promised, negating any possibility of contract management. The Head of Legal told me the social value schedule in template contracts is unenforceable. Her team wrote it. A Corporate Procurement manager told me we don’t have a culture of contract management in the council and we don’t really manage our contractors. We don’t have a list of contracts the council has procured, never mind a forward plan for what “we buy with residents, understanding the markets, local business, and voluntary sector context”. Not to mention no mention of fraud protection.[1] I can’t even get Procurement to procure the construction careers education service I need, for which I have a budget and approval and have filled out the paperwork: there is no process or service level agreement for officers to procure things. I’m not sure all this detail, the nuances of our current situation, the pitfalls highlighted, recommendations made by the Government, and the lack of an actual service, is clear in this decision report upon which Members have to make a decision.
So, to recap, when we talk about the benefits of social value to residents, we speak in Ye Olde English. When we talk about applying social value to contracts, we speak in vapid corporate jargon regurgitated with little understanding by either the author or the audience. In the meantime, councillors get senior managers to sanction vanity projects ignoring the co-production decisions made on how to spend residents’ money and light up their housing estate green. I’m not convinced people are better for it.
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