The resignation of the Chairman of the county council’s audit committee, Mr John Evans, has put on hold the committee’s investigation into possible flaws in the the administration of the Pembroke and Pembroke Dock Commercial Property Grant Scheme (CPGS).
During my investigations into this grants business, I have had a serious disagreement with the council over the procedure for separating eligible (grant aided) work from that which is ineligible (private work).
Eligible work includes restoration of architectural features (shopfronts, windows, etc, which attracts a 90% grant rate) structural/fabric repairs (rendering, reslating roofs, etc; 70% grant rate) and refurbishing retail space (40% grant rate).
It is often the case that, while the builders are on site, developers will take the opportunity to carry out private work such as conversion of the upper floors to flats/bedsits.
While there is absolutely nothing wrong with this, such work is not grant aided.
My difference with the council is over whether these private works should be included in the lowest tender that the developer presents to the council as part of the grant application.
It seems clear to me that the inclusion of private works allows the possibility that the lowest tender for the whole project might not represent the best value for the taxpayer.
To take a simple arithmetical example:
Builder A submits a tender which includes £60,000 for eligible work and £40,000 for the ineligible works while builder B’s tender is split £50,000 – £51,000 between the two categories.
Builder A wins the contract by £1,000.
However, assuming for the sake of simplicity a 50% grant rate, the taxpayer loses out because A attracts a grant of £30,000 compared to B’s £25,000.
That leaves the taxpayer having to fork out an extra £5,000 for exactly the same outcome in terms of the improvements that the grant is designed to promote.
My contention all along has been that this problem wouldn’t arise if tenders were restricted to eligible work only.
And, furthermore, as there is no requirement that the ineligible work should ever be carried out, it gives rise to the possibility of collusion between the developer and the favoured builder to the effect that only the eligible work should be done.
That being the case, the builder can tender loss-making rates for the ineligible work in the certain knowledge that he will never be required to deliver, while at the same time loading up the rates for the eligible works in order to maximise the grant.
It seemed that my view on the need to separate eligible and ineligible work was supported by the “Commercial Property Grants Scheme (CPGS) Procedure Manual” which is given to all potential grant applicants at the beginning of the process.
4.8 The specification.
The specification should be agreed prior to the applicant obtaining quotations [my emphasis] in order to avoid the need for revision. It must be sufficiently detailed to enable a full understanding of the proposed works and the methods and materials to be used. This level of detail will help contractors to quote accurately and prevent problems and misunderstandings occurring when the work is in progress.
Conditions in the offer letter should only be used to adjust minor omissions or details of the proposal and should never be relied upon to make substantial adjustments to a specification, therefore the specification should be agreed & approved prior to going out to tender [my emphasis].
5.3 Submission and agreement of specification and plans.
(a) An itemised and detailed specification should be submitted at this stage. Plans should also be submitted if these are required e.g. to show the details of lost featutes to be reinstated.
(b) Carefully assess the specification and establish which items are eligible and which are ineligible.
(d) Agree the itemised specification with the applicant/agent and ask them to seek at least three independent itemised quotations…
It seems to me that, as the specification for any ineligible (private) work is none of the council’s business, the specification referred to must be that for the eligible works.
I’m not sure which part of “prior” I didn’t understand, but the council takes a different view.
A report to Cabinet last December prepared by the authority’s internal audit service says:
The idea that the Procedure Manual requires tenders to contain only eligible costs is wrong. It does not and there would be disadvantages if it did. However, our position is that since all tenders are based on the same specification, since the categorisation of items in the tenders as eligible or ineligible is not carried out until after [my emphasis] the tenders have been prepared and submitted to the Council and since a builder’s rates for similar work will be the same regardless of whether the work is eligible or ineligible, then the proportion of the cost of each tender that is eligible is likely to be similar. Consequently, the lowest tender will probably give the lowest grant.
There is a serious flaw in this argument in that the eligible works (new windows, roofing, rendering to the exterior, etc) are entirely different from the ineligible works (plasterboarding, internal doors, decorating etc) so any comparison between the rates in the various builders tenders is not possible.
The internal auditor’s report continues:
As the eligibility of each item of expenditure is assessed by the Council, the applicant and his contractor does not know which items are eligible and which are not. They are not provided with a detailed breakdown of the grant calculation.
Consequently they have no ability to carry out the fraud suggested, whether they collude or not.
What we are being expected to believe is that the developer purchases a property, engages an architect who produces drawings and applies for planning permission then invites tenders from building contractors, all without having any clear idea how much grant, if any, the project might attract.
The author of that other website took up this issue of the wording in the Procedure Manual with the council’s Monitoring Officer.
In an email circulated to all members the officer in charge of this grant scheme told him: “I shall answer your e-mail because as the author of the CPGS Procedure Manual I know better than anyone how it should be interpreted.”
Before going on to tell him that the words:
(b) Carefully assess the specification and establish which items are eligible and which are ineligible. and (d) Agree the itemised specification with the applicant/agent and ask them to seek at least three independent itemised quotations…” didn’t mean that there should be agreement prior to going out to tender as to what is ineligible and what is not.
This puts elected members in a rather difficult position when it comes to holding officers to account because, if a member questions whether a policy is being properly carried out, an officer can simply reply: “I wrote the policy, therefore I know better than anyone how it should be interpreted.”