ILEX monitored bytop civil servants

Department of Social Development (DSD) and Office of First Minister and Deputy First Minister (OFMDFM) officals have beeh shadowing ILEX to ensure procedural propriety since learning last November of unapproved expenditure on a number of projects dating back to 2008.

An extension of the Peace Bridge consultancy contract from £75k to £479k (£404k above the original approval) involved changes which have since been outlawed by the EU Court of Justice, the Committee heard.

Under a Pressetext ruling of 2008 any changes made to a contract of this value should now result in a re-tender.

Although the Peace Bridge award occurred prior to the ruling concerns were subsequently raised by the Northern Ireland Audit Office (NIAO) which questioned the consultancy hike in its qualification of ILEX’s accounts for 2010/11.

ILEX boss Aideen McGinley admitted the increase was discovered within the organisation after she took over from former Chief Executive Bill Kirk.

Top DSD civil servant Will Haire said it was “a very serious issue” for the Department and that Social Development Minister Nelson McCausland has met with the board of ILEX and “emphasised the importance of the issue and got a clear statement from the board about the seriousness with which it takes the matter.”

The DSD Permanent Secretary revealed that he and his OFMDFM counterpart Noel Lavery now hold monthly meetings with Dr McGinley and ILEX Director of Corporate governance Mel Higgins to ensure action is being taken.

Mr Haire told the Committee: “There are a range of issues to consider, but, in those meetings, we look at the processes and the capabilities. Until I can assure the Ministers that all those issues are dealt with and are in the blood of ILEX, as it were, that system will be in place.”

Members of the Committee expressed amazement at the Peace Bridge hike.

DUP MLA Sydney Anderson said the six-fold increase in the value of the contract was “totally astonishing.”

“Expenditure on consultancy was £75,000, but the contract was extended to £479,000. That is £404,000 in excess of the original approval, yet DSD was told about that only in November 2011,” he said.

“By that stage, huge amounts of unapproved expenditure had already been incurred. How do you explain what appears to be, quite honestly, a blatant disregard for the rules and for sponsor control?” he asked.

Dr McGinley replied that the ILEX board was “extremely disappointed at what we have found in the organisation.”

She explained: “The Peace Bridge project is a very good case in point. That was tendered under the Central Procurement Directorate (CPD) secondary framework back in 2008, and, as an NEC3 contract, the scale of the project and the nature of the consultancy support that was required went from A to C.

“In other words, it was a better level of project management. I think that that was the right thing, because it made sure that the project itself was run.

“As you say, the original tender came in very low compared with the final tender, and I know that the Committee is very tasked by the scale of the differences.

“At the time, it was procedurally correct, and it was possible to extend contracts. It pre-dated a European case in 2008 about reporting of extensions of contracts subsequently, either for re-tendering or going back out. CPD has assured us that there was no breach in procedure.

“It reflected the change in the nature of the superveillance that we were asking for. However, it was wrong for us to not let the Department know. We did not find that until we did the review of adherence generally between May and September 2011, and, as soon as I was aware of it, I brought it to the Department’s attention.”

She went on to say the contract award was effectively a single tender action (STA), but could also have been classified as a single tender negotiation (STN) and should have had approval.

She told the Committee that the £400k expenditure was OK because it was less than 3.9 per cer cent the total value of the £13.5m Peace Bridge project.

“I, personally, have a difficulty, and you are quite right about this, as we should have kept the Departments informed of the change in the nature of the contract that led to the increase in the fees.

“However, the value for money has been agreed. A recent report of yours was on any preponderance for fraud, and my internal audit, which is provided to me by DSD, is looking at this case along with a number of others to satisfy me that no other alarm bells are ringing. I think that that is the point that you are making,” she told Mr Copeland.

The ILEX boss explained that since the anomalies were discovered an action plan has been put in place and the top OFMDFM and DSD officials have been meeting with ILEX since December to monitor progress.

But Mr Copeland was still perplexed by the significant increase in the Peace Bridge contract.

He asked: “Did the company that won that tender win a £75,000 contract or a £479,000 contract? That is the essential question and is one that some of the other companies that tendered could express an interest in.

“You have told me that the contract represented value for money, and I have no reason to doubt that. However, the bottom line is that a company was asked to do x, y and z, and it said that it could do it for £75,000. When they got x, y and z with a, b and c tagged on by some external process, the contract ended up at almost half a million pounds.”

Dr McGinley did not explain whether the company that won the contract won a £75k or a £479k contract.

She said: “The original requirement was for basic design. Subsequently, the scale of the project, which is European funded, increased. The percentage of 3.9 per cent was well within the allowance set by the European funding for the fees against the capital.”

Mr Copeland persisted: “I do not doubt that. What I am questioning is the attitude that will be taken to all the other companies in Northern Ireland who are hungry for this sort of work and who find themselves excluded from £479,000 of business on the basis of an accepted tender for £75,000.”

Dr McGinley said the situation would not happen “now because the European procedures have changed since the Pressetext case in 2008, insofar as if you were aware of any substantial increase you would have to go back out to tender.

“At the time, it was acceptable to do that. We have had CPD guidance, and we are still talking to SEUPB about these matters.”

During the evidence session it also emerged that ILEX made a major unapproved funding contribution to the Londonderry UK City of Culture bid because other partners - which included the lead organisation Derry City Council - “did not have the resources.”

ILEX did not seek approval or follow the procedures for the City of Culture spend because although it completed a business case “it was not submitted in a timely manner.”

Dr McGinley said she couldn’t defend what had happened stating: “I apologise and accept full responsibility. The business case should have been in with the Departments; it should not have become a retrospective matter. I understand why it was not approved; that is where I take responsibility.

“There were issues, and we had obligations to the jury and to DCMS. We secured events such as the Turner Prize and the Peace One Day concert, we did more than 30 community meetings, we were meeting with business, and we attracted a £3.75 million investment from BT for digital infrastructure during that time.

“That is not excusable. I can explain but cannot defend what I did. I was aware that I should have had approvals, and it should not have been retrospective. In that instance, I take full responsibility.”