All the below is old hat but it does show how the passage of time can be used to mitigate the impact of serious misdemeanours. The delay is caused by auditors and civil servants not by persons like myself. This report is certified to have been received by WBC in March 2015.
EXTRACTS
WIRRALBIZ Enterprise solutions(NW) ltd
.. Allegation 2( re wirralbiz) relates to a number of allegations made by an ex-employee {Nigel Hobro and James Griffiths](of a supplier) which include conflicts of interest, falsification of documentation and claiming expenditure for work not carried out as well as a number of other allegations which do not relate to ERDF.
.CORRUPTION of the Tender process
. Allegation 3 [ that the procurement process was perverted]was from a supplier to the project who has alleged that Delivery Partners had shown favouritism, towards suppliers, where they had existing contractual .interests, during the procurement processes undertaken to call off contracts from the BSU 2 Framework Agreement[Intensive Start up Scheme]. They also alleged that they had be ‘warned off’ bidding for certain contracts.
We have been liaising throughout this investigation with the three particular interested parties, the applicant (now BIS), a project partner (Wirral Council) and the whistleblower(viz Nigel Hobro). All three are likely to request details of the outcome of our investigation.
Allegation .2 (viz wirralbiz)
This proved to be the most difficult to deal with as it relates to a number allegations made by an ex-employee, most of which did not relate to the BSU2 Project. In addition to this, not all of the allegations that did relate to the BSU2 Project affected ERDF expenditure, as they .related to activity funded under the Single Pot element which was not matched against ERDF.
Fraud not possible to be proven in court of law due to backing data mislaid to invoices processed in WBC
We identified a number of anomalies with the client files held by the supplier. These ranged from signatures which did not appear authentic, dates which appear to have been altered or were not correspond to the narrative on the forms and narrative which appears to have been photocopied on to forms and some client reviews which do not appear accurate. However, due to the lack of detail on the invoices used to claim ERDF . expenditure, we were unable to identify if the above anomalies contributed to the supplier receiving expenditure from ERDF..
The majority of the anomalies appear to relate to the Post Start Support (PPS) which• is not part of the ERDF expenditure but is paid. for by Single Pot funding and therefore is .:m issue for BIS. However, the lack of detail in the inv9ices used to claim Project expenditure means it has not been possible to tie back PPS. to a particular client back to a payment made to the Supplier.
Tenuous claims for £1,400, paid, for assistance to start-up of new businesses
We also identified a number of clients where the supplier had received an ERDF payment for assisting the client as a Start-up. However, some of the evidence • provided to prove a client had started trading (needed to claim this payment) suggests that the client was trading prior to receiving support from the supplier.
Contract of 92 pages does not confirm in a litigeable fashion that £1,400 cannot be claimed for assistance to a start-up subsequent to that start-up.
We have identified a desk Instruction which suggests clients should not be trading before receiving support in order to be eligible for a payment. However, contracting documents do not provide a clear direction in relation to this issue. In.discussions with the applicant, {WBC}they are also unsure of the requirements in order for Start-up payments to be eligible. {Aren’t WBC just dandy?]
Tendering issues
Allegation 3
We selected 4 procurement exercises to review {including mini-tender from wirralbiz to WBC}and found a number of issues which, in our opinion, would constitute a breach . in EC Procurement Directives.
These include evaluation of bids no( in line with the set evaluation criteria, questions within the evaluation criteria which discriminate against bidders as well as questions which are not considered relevant at award stage of a contract
We identified one instance were the contract was split between 2 suppliers who finished 1st and 3rd during the process. However, the supplier who finished 2nd (the supplier making the allegations) was not awarded part of this contract. We also identified one Delivery Partner was not able to provide us with any documentation relating to their procurement exercise.{did they destroy these documents or were they like another contract for WBC just a blank piece of paper?)
Of the 3 exercises {ie the fourth Council Applicant had nothing they could review} we reviewed the final contracts were eventually awarded to
• suppliers who appear to have had a history of delivering services for the Delivery Partner responsible for conducting the exercise. One of these contracts relates to
. the supplier (viz wirralbiz)at the centre of the allegations in Allegation 2, therefore we undertook our own evaluation of this contract which has • raised considerable doubt on the original evaluation which led to the contract award. {Hang on Burgess was always adamant his council officers had done no wrong and so was the Leader of the Council)
Conclusion {COVER-up by WBC or not?}
• 1n conclusion, we have identified a number of anomalies with the Client files reviewed in relation to Allegation 2. However, in our opinion there is not enough evidence to confirm the existence of fraud in relation to ERDF as we cannot tie back the anomalies to actual payments made to the supplier nor can we identify a definitive description of the eligibility of start-up payments. {only because the CRM database has been lost, and the backing sheets behind wirralbiz invoices have been mislaid}
As a result of our procurement testing we did not find any evidence {however given what follows it does look likely, and no mention here of my allegation re over £11,000 on suspect wirralbiz invoices that tally with WBC actually funding wirralbiz’s tender against all the rules for erdf funding!!}that confirms fraudulent activity has taken place. However, given the allegations from S2[The complainant bidding organization] and the technical breaches identified within the procurement processes tested, there is a risk that processes may have been manipulated by Delivery Partners in order to contract with their preferred suppliers.
In our view given the anomalies in client files and breaches identified in procurement both would result in a significant financial correction being applied to the BSU2 Project if identified during an EC audit. It is also likely that some of the procurement breaches would be considered systemic as they are borne from procurement templates provided for Delivery Partners by the Project Applicant.
Recommendations. •
In relation to Allegation 2, we have identified a number of clients which we consider to be high risk and advise. that DCLG, in conjunction with BIS, should seriously consider treating any expenditure paid, in respect of these clients, as an irregularity and claw this expenditure back from the Project. {did they? this has never been publicised?}
. In relation to Allegation 3, we advise that DCLG considers applying a flat rate correction to the BSU2 project in relation to the procurement breaches identified with the call offs from the BSU2 Framework Agreement • •
We are of the opinion that both these measures are necessary to avoid a potential future liability to the Department should the BSU2 Project be selected for audit by the EC.
4.4 Allegation 3
Procurement {INTIMIDATION}
4.4.1 During our work on the BSU2 Project we received a number of allegations from S2 in relation to the practices undertaken by Delivery Partners (DP) during the procurement processes to appoint Suppliers from the BSU2 Framework Agreement. The allegations ranged from verbal threats, from DPs or organisations linked to them, in an attempt to ‘scare them off’ from bidding for contracts called off from the Framework and ‘favouritism in the bidding process’ shown towards Suppliers where DPs had pre-existing business interests with those Suppliers. {bullying by Council employees!}
4.4.2 S2 informed us that they have no evidence to support either of the allegations as, in the case of the former allegation, these threats were made during telephone calls or during private meetings with certain DPs {COUNCILS!!!)}. In relation to the latter, this allegation is borne from frustration with, in the view of S2, a lack of fairness in the bidding processes for a number of call offs where the subsequent winner had been an organisation which had a history of sub contracting from the relevant DP. S2 told us that they had complained, to the relevant DPs, where this had occurred but had received unsatisfactory explanations in most cases.
4.4.3 S2 also told us that they had not reported these issues at the time because they did not know who to report to outside of the BSU2 Project. They were also concerned that they would face reprisals from DPs within the BSU2 Project should they report these issues. It should be noted that S2 reported these issues to us before they were made aware of the allegations against them (see section 4.2) therefore we do not consider these allegations to be ‘tit-for-tat’. Also, as a result of our previous work with S2, we found they cooperated fully with all of our requests and they gave us no reason to doubt their credibility.
4.4.4 The former allegation relates to verbal comments without witnesses therefore we are unable to undertake any work in relation to this. However, in relation to the latter, we have reviewed documents relating to the procurement processes undertaken by the DPs concerned. As. mentioned in Section 2 of this report, DPs were able to contract with Suppliers as long as this was done through a mini-competition (qill off) involving the Suppliers appointed to the BSU2 Framework Agreement (FA) established by NWDA. S2 have indicated the contracts called off by DP1, DP2, DP3 and DP4 as •being unfairly conducted.
4.4.5 We have already raised concerns (during the A16 Audit) around the creation of this FAs there was no minimum quality score required for bidders to be appointed. As a result of this every compliant bid that was submitted to the NWDA was appointed to the FA. In total 59 Suppliers were appointed to the FA with quality scores ranging from 22% to 88% (with S2 {the complainant bidder!!} finishing in first position). This makes it very difficult for us to understand the purpose of the FA as it appears everyone who submitted a bid was subsequently appointed to the FA without any consideration being given to the quality of their bids. This means that the FA appears to serve no purpose apart from acting as a preferred supplier list for DPs.
WIRRAL ISUS DP1 Call Off
• • 4.3.6 The reference to DP1 {delivery partner 1} was of particular interest to us considering our work on the allegations made against their Supplier (S3)(viz wirralbiz) and it is.here where we had access to more documentation. DP1 advertised the call off using the standard Request for Quotation (RFQ) (which was issued as part of the BSU2 suite of documents) to members of the FA who had expressed an interest in working in the DP1 area (the Wirral). The evaluation criteria was based on Delivery Model (50%), Staffing (25%) and Pricing (25%) with each of these criteria having sub-criterion which are weighted to ensure the maximum percentage for each criteria is not exceeded.
Wirralbiz fails the first hurdle but they CAN FIX-IT. S£ Wirralbiz moves from independent score of 36% to Wirral score of 72%
4.3.10 DP1 also required a minimum quality score of 60% to be achieved; there was no mention of an interview stage within the evaluation process. DP1 received 12 bids with 4 of these exceeding the minimum requirer)lent, finishing in the following order: S3 – 72.92%, S2 – 67.08%, S4 – 62.08% and S1 – 61.67%. As a result of these scores a decision was made to appoint 83 as the sole Supplier to DP1.
DOUBLING THE SCORE by clever local government officers
As we stated earlier, during the creation of the FA S2 were appointed in first place with a score of 88%, with the nearest bidder scoring 64%. S1 finished in 13th place with 59%, S4 in 15th place with 54% and S3 in 43rd place with 36%. . •
4.3.11 We consider it unusual that a Supplier should manage such a significant reversal in performance, beating 3 organisations that were considered superior during creation of the FA. Based on our extensive experience of auditing EC procurement, the only scenarios where we . have experienced such a reversal in performance are, a) where the appointment was based on quality (or a combination of quality and price) whereas the call off was based only on price, or b) where the appointment covers multiple services but the call off relates to a single service.
4.3.12 Based on the documentation we have seen, none of these scenarios appear to be the case as the specification for appointment to the FA and the specification of the RFQ appear very similar. The only differences appear to be emphasis on knowledge of the area where the services will be delivered (the Wirral) and the people involved in evaluating the RFQs. Some of the questions within the RFQ were almost identical to those asked at appointment stage yet the scores were reversed. As a result of this we decided to carry out our own evaluation of the RFQs for S3 {wirralbiz) and S2.
4.3.2 O Whilst we had access to the original scoring sheets, showing the scores for each bid against each question in the sub criterion, the comments boxes were not populated so we could not see the reasons for the scores given. We undertook two separate evaluations, by different people, based on the evaluation criteria within the RFQ, comparing the original scores given with our scores. Both of these evaluations concluded that the S2 bid scored more highly than the S3 bid.
Admission of ineligible questions to assist wirralbiz
4.3.23 During the evaluation we also identified that two of the questions in the evaluation criteria would be considered ineligible during the call off stage of a procurement process and would result in a financial correction if audited by A16 or the EC. One question asks bidders to detail their experience of delivering similar contracts, within the last 12 months, in the Wirral area and the other asks bidders to provide details of other contracts being delivered which may impact on delivery of the BSU2 contract. The former is considered an ineligible question as it has the potential to favour a bidder .and the latter is not considered relevant at this stage in the procurement process.
Salford does the same as Wirral DP2 Call Off
4.3.25 We have received limited documentation in relation to the call off undertaken by DP2 ‘therefore we are unable to undertake any detailed work in this area.
We have access to a hard copy of a spreadsheet which shows the scoring of bidders against the .questions asked in the evaluation arid a copy of the bid
submitted by the winning bidder. However there is no narrative to explain why each score was awarded.
4.3.26 As we stated earlier, during the creation of the FA S2 were appointed in first
• place with a score of 88%, the eventual winner of the DP2 call off (S4) was appointed in 14th place scoring 58%. {less than the supposed qualifying score of 60%}S4 is located within the DP2 Local Authority boundary. The scoring sheet for the DP2 call off shows S4 as the winning bidder with 51% and S2 came second with 36% and, as per our comments at paragraphs 4.6.7 & 4.6.8, we consider this unusual as the only differences in the questions used during the evaluation criteria appear to be the references to the local (Salford) area.
4.3.27 We also identified that two of the questions in the evaluation criteria which we would consider ineligible during the call off stage of a procurement process and may result in a financial correction if audited by A16 or the EC. One question relates to demonstrating experience and track record in the Salford area and the other asks bidders to provide details of other contracts being delivered which may impact on delivery of the BSU2 contract. The former is considered an ineligible question as it has the potential to favour a bidder and the latter is not considered relevant at this stage in the procurement process.
KNOWSLEY DOES THE WIRRAL JIGGLE TOO DP3 Call Off
4.3.28 DP3 approached the call off slightly differently than the others as they split it into 3 Lots, Women, Social (enterprises) and Other. Organisations were allowed to submit for any combination of the above lots. S2 submitted a bid for the lot titled ‘Other’ so it is here where we have focus9ed our testing. The eventual winner of the ‘Other’ Lot was S5. As we stated earlier, during the creation of the FA S2 were appointed in first place with a score of 88%. However, S4 appear to have finished in 5th, 6m, yth, ath and 9th place with
. scores of 62%. The reason for this is that S4 appear to have submitted a number of bids as part of consortiums or for specific i;ireas only. S5 is located within theDP3 Local Authority boundary.
4.3.29 In total DP3 received 11 responses for the ‘other’ Lot and a minimum quality score of 60% was set. There was no mention of an interview process within the evaluation criteria and the criteria were scored on a similar basis to DP1 and DP2. A summary report dated 15th July 2009 shows that S2 finished in 1st place with a score of 78.87% and S4 finished in 3rd scoring 75.42%. However, a further summary report dated 5th July shows the same information but also refers to an interview process and contains.a table showing amended scores.
4.3.30 Although not mentioned in the evaluation criteria, it appears that DP3 undertook an evaluation of the bids and then invited the highest place bidders to an interview. The scores from both evaluations were added together and divided by 2 in order to get an average score. The result of this was that S4 finished 1st scoring 71.80% and S2 2nd with 71.38% a shift of 3.33% as a result of the interview.
4.3.31 We also identified that two of the questions in the evaluation criteria which we would consider ineligible during the call off stage of a procurement process and may result in a financial correction if audited by A16 or the EC. One question relates to demonstrating experience and track record in the Knowsley area and the other asks bidders to provide details of other contracts
• being delivered which may impact on delivery of the BSU2 contract. The former is considered an ineligible question as it has the potential to favour a local bidder and the latter is not considered relevant at this stage in the procurement process.
