Following my account of the strange goings on with the tenders for No 10 Meyrick Street Pembroke Dock, I have received the email below from the council’s internal auditor explaining why no formal complaint has been made to the police despite what I took to be a firm pledge that this course of action would be followed.
“As discussed at our meeting, there are a number of anomalies with the successful tender. This is the reason we have made contact with the Police. Since the meeting and in order to ensure all the facts are available for the Police, further work has been undertaken and is ongoing to ascertain whether the Council has suffered any financial loss due to the aforementioned anomalies.”
I realise this is a busy time in the finance department with the budget and all that, so ever eager to be helpful I spent twenty minutes with the calculator and came up with the estimate below of how much this wheeze with the dual bills of quantities had cost in extra grant.
The starting point is the report to the meeting of the audit committee last September which contained a FAQ section designed to explain to members how these schemes work.
One important point to note is that the developer can employ whichever builder he likes regardless of whether they submitted the lowest tender.
However:
Q: If a contract is awarded to a builder who didn’t submit the lowest tender does that mean the Council awards a higher grant?
A: No. The grant is based on the lowest tender even if the builder appointed charges more. If he does so, then the extra cost must be met by the property owner. It is never met by the Council.
In the case of 10 Meyrick Street, the four lowest tenders were eliminated for various reasons and another six were ruled out for being too expensive.
Three of the four lowest were ruled out because the firms were, according to Kinver Kreations, not financially stable.
The other, which came in at £86,223 was disqualified because its rates for slating and rendering were too low.
Interestingly, the too-low rates for slating were almost exactly the same as those used by G&G builders for the three Dimond Street contracts, though that drew no comment in the tender reports for any of those projects.
As for the rendering – due to a huge arithmetical error in G&G’s tender the rate for rendering worked out at £1.17 per sq metre or one twenty-third of the £27.50 that Kinver Kreations said “must be” included.
However, you will recall that the successful tenderer, G&G builders priced for only 156 sq metres of hack off render and re-render, and 380 sq metres of external painting, while the other 13 tendered for 490 sq metres of each.
As the mathematicians among you will already have worked out, this put the unsuccessful tenderers at something of a disadvantage.
The four surviving tenders were for £97,316, £97,460, £98,275 (G&G) and £99,942.
Transferring the quantities used by G&G into the tender of the lowest of the four and recalculating the cost gives a saving of £11,000 and reduces that tender to £86,316 – making it £11,959 cheaper.
So, the grant was based on £97,316 (the cheapest of the four valid tenders) when it should have been based on £86,316 (the corrected figure).
And, of course, if you apply the correction to the tender ruled out too-low rates for slating and rendering, it is reduced from £86,223 to something like £75,000.
In that case the grant – paid at a rate of 69% – would be based on £23,000 less, giving a reduction of £15,000.
So, as there is clear evidence that “the council has suffered financial loss”, there seems to be no reason why there should be any further delay in making a formal complaint to the police.
Mind you, the internal audit service finds itself in a tricky position, having produced two reports already (September 2013 audit committee and December 2013 Cabinet) giving these grant schemes a completely clean bill of health.
Readers may remember that one of the more bizarre claims was that the level of grants paid to Mr McCosker was no higher than those paid to other developers.
This was achieved by adding together two almost identical numbers (£410,000 and £406,000) – expressing each of the original numbers as a percentage of the total, and reaching the remarkable conclusion that they each made up 50%.
This bit of circular reasoning was then used as evidence to “prove” that there was no difference between £82,000 and £26,500
How to admit that these grants were indeed fiddled, while at the same time concealing the fact that the two early reports were liberally coated in whitewash, will be a searching test even for the Kremlin’s finest minds.
Just in case anyone is thinking to claim that these 13 false bills of quantities were sent out by mistake, I should warn them that I know someone who understands the laws of probability.
What I am told is that, faced with 13 random choices of sending either the correct BoQ, or the false version, the probability of picking the false version every time is two to the power 13, or, in horse racing parlance 8,192 to one.