Agenda and minutes

Audit and Risk Committee
Monday, 25th June, 2018 2.00 pm

Venue: Committee Room 3 - 3rd Floor - Civic Centre. View directions

Contact: Dereck Francis  Tel: 01902 555835 or Email: dereck.francis@wolverhampton.gov.uk

Items
No. Item

1.

Apologies for absence

Minutes:

There were no apologies for absence received for the meeting.

 

2.

Declaration of interests

Minutes:

No declarations of interests were made.

 

3.

Markets Relocation - Lessons Learned pdf icon PDF 76 KB

[To review and comment upon the content of the Markets Relocation – Lessons Learned report]

Additional documents:

Minutes:

Keith Ireland, Manging Director reported that he had commissioned Audit Services to undertake lessons learned reviews on three capital projects. He had also agreed that the reports from the reviews be presented to the Committee in open session. He gave a brief introduction to the first of the reports on the Markets Relocation project and invited questions.

 

During the ensuing discussion and in response to questions, Peter Farrow, Head of Audit reported they were independent reviews and that no pressure had been was put on Audit Services during these audit reviews and the production of the lessons learned reports.

 

The Managing Director supported by the Strategic Executive Board and other senior officers of the Council responded to the Committees questions and observations, the details of which are summarised as follows and should be read in conjunction with the detail in the lessons learned report.

 

When the scheme was being considered was there any doubt a higher contract price would be needed to deliver the scheme?

·           The Council had a price of £2.5 million for a scheme based on advice from professionals. £470,000 was added to the cost of the project as a result of trader engagement and Cabinet approved the increased funding for the project as this would enhance to the market and add to the public experience of using the market.

 

·           From the report and the tight timescale, it was reasonable to assume that the bidder had risk priced their tender. At no time did the scheme escalate in costs once the revisions were agreed.  A contract price for the scheme was obtained..

 

It appears that no one was taking ownership of the project.  The feasibility study should have flagged up some markers about the site.  There was no pre-set format to approve the project and monitor it and the risks. Even if there is a fixed budget for the project there would be an element for a variation figure, but contract value has increased by 100%.

·           Lessons are being learned. There are examples of where the Council has successfully delivered major capital projects such as the Civic Centre building an and park. However sometimes it has not delivered as well on other projects.  In hindsight the market relocation project could not be delivered for the original contract figure.

 

·           Employees were asked to deliver a cost neutral scheme.  The issue on this project was that the costs and budget figures are being reported before we were ready.  The Council has engaged the services of Equip to advise and make sure it does not repeat these mistakes.

 

·           Council money has not been wasted on the scheme.  A decision needed to be made that led to the costs increasing.  The increased costs of the project were approved by Councillors. The market was telling us something else other than the £2.5 million cost.  The scheme that we want to take the Council forward cost £4.5 million.

 

Why did the Council only go to one company for the contract?

·           The Council sought professional  ...  view the full minutes text for item 3.

4.

Wolverhampton Interchange (Train Station) - Lessons Learned pdf icon PDF 73 KB

[To review and comment upon the content of the Wolverhampton Interchange (Train Station) – Lessons Learned report]

 

Additional documents:

Minutes:

Keith Ireland, Managing Director presented the second of three reports he had commissioned from Audit Services on a lessons learned review on three capital projects. The issues within this report on Wolverhampton Interchange (Train Station) project were more complex than the first report considered by the Committee.  It was a complex capital project involving multiple players and the Council was not managing it on its own.  This made it all complicated.

 

The Managing Director supported by the Strategic Executive Board and other senior officers of the Council responded to the Committees questions and observations, the details of which are summarised as follows and should be read in conjunction with the detail in the lessons learned report.

 

Excluding the change in contractor, what were the reasons for the increased costs?

·           Appendix A to the lesson learned report sets out the timeline of key events of the scheme and its changes. The contract for the railway station demolition/ reconstruction was awarded to the contractor in early 2018.

 

·           All railway station schemes are delivered to a Governance for Railway Investment Projects (GRIP) process.  There are eight distinct stages to the process for how railway station projects would be managed and controlled by Network Rail.  At GRIP stage 1 the project costs would be guestimates.  We probably went too early regarding the cost of the programme. A contractor has now been appointed and we have a clearly defined railway station scheme.

 

Are you confident that the contractor is robust enough to complete the project?

·           Yes.  Projects of this type are complex and risky and extremely difficult to manage. As a result, you need to go into it with clear detailed planning.  It is not a standard construction project

 

The report appears to raise and some concerns in paragraphs 4.1.9 and 4.7.1 of the report with Supplier M

·           The statements at paragraph 4.1.9 of the report were not representative of the current state of the project and the contractor.

 

(It was therefore agreed that the Auditor following discussions with the Programme Co-ordinator and the Director of Commercial Services submit a short report to clarify the issueregarding paragraphs 4.1.9 and 4.7.1 of the report suggests some concerns with Supplier M)

 

What was Corporate Procurement’s involvement in the process for the procurement of a contractor at the time and what will it be in the future?

It was also a complex capital project involving multiple parties and the Council was not managing it ourselves.  This made it complicated. Procurement had not been involved in theprocess for the procurement of a contractor because it was a railway station project and was part of a wider agreement with ION.  It was for them to deliver the contractor for the delivery of the project. The lessons learned report now set out Corporate Procurement’s role in future on all reports to Cabinet for all internally or externally procured projects.

 

‘QRA’ in the table at paragraph 3.1.2;

·           QRA was a technical issue of how we looked at individual  ...  view the full minutes text for item 4.

5.

Civic Halls Refurbishment - Lessons Learned pdf icon PDF 68 KB

[To review and comment upon the content of the Civic Halls Refurbishment – Lessons Learned report]

 

Additional documents:

Minutes:

Keith Ireland, Managing Director presented the third of three reports he had commissioned from Audit Services on a lessons learned review on three capital projects in the city.  This repot related to Civic Halls refurbishment.

 

Member of the Committee reported that they were shocked and horrified with what had happened on the project. It was not in keeping with the way the Council now operated and it was felt that the reputation of the Council had been damaged as a result.  Members also felt that the Council had not received the level of service expected by contractors on the project and that there were issues of competence, particularly in respect of the costings.

 

The Managing Director supported by the Strategic Executive Board and other senior officers of the Council responded to the Committees questions and observations, the details of which are summarised as follows and should be read in conjunction with the detail in the lessons learned report

 

It does seem that there has been a responsibility issue that has come out from the report. How has the management team been managed?

·           Detail on the action taken in relation to council employees accountability and responsibility for the project could be discussed in private session.

 

(The Chair commented that he would like as many questions answered on the open session of the meeting.  If there were any questions that could not be responded to in open session, then the meeting would move into closed session)

 

·           The Council had not accepted what has happened on the project and a number of things have happened to improve the Council’s services over recent years.

 

·           The project comprised two schemes.  One to do with capacity of the Civic Halls and the other to do with the building. The project had slipped through the net and it had not been picked up sooner.

 

·           We know we need a Project Director, and top advisors. At the time the Council did not get the right advisors.

 

Whether legal proceedings against the external advisors/ contractors who had failed the Council on this project.

·           Meetings have taken place to determine whether grounds exist for claims and the value of claims against external firms. Employees were exploring the Council’s ability to cover costs and legal activity was being pursued

 

Why did the project fail?

·           It is complicated what was going on. In 2010 no one employee owned the project. I did not ask questions about Civic Halls because it was not part of my area.  Things were not done and the Council received bad advice on the project.  No one asked if the intrusive survey work had been undertaken.  There were competence issues.  There is evidence that the project was never on track and was being under categorised in its risk rating.  The third Project Manager came in and identified issues with the project.  The project was then categorised as red risk.

 

·           The first the Senior Management Team became aware of the issues was when. it received a limited assurance report  ...  view the full minutes text for item 5.

6.

Action Plans - Lessons Learned pdf icon PDF 67 KB

[To review and comment upon the content of the action plans with regards to:

a.     Markets Relocation – Lessons Learned

b.     Wolverhampton Interchange (Train Station) – Lessons Learned

c.     Civic Halls Refurbishment – Lessons Learned]

 

Additional documents:

Minutes:

The Committee received the report which brought the three action plans from the lessons learned reports together in a single document to provide an overview of the Council’s intended actions to improve in the future. Keith Ireland, Managing Director reported that the action plans would set the Committee’s agenda for the future.

 

The Committee noted that the recommendations from the Markets Relocation Action Plan were in place, however the action plan did not include any timescales. The Chair asked that the Council’s Projects and Programmes Manager be invited to future meetings of the Committee as appropriate to provide an update on projects.

 

The Chair of the Committee said that while it was not the role of the Committee to micro-manage large scale capital projects, it would continue to monitor the risks associated with such projects – predominantly through the strategic risk register, but would welcome support from the Council’s Projects and Programmes Manager if it was flagged that such projects were not meeting financial or completion targets. The Committee would also focus on ensuring that the recommendations made in these reports were being implemented in a timely manner and he stressed the importance of ensuring that these are achieved.

 

The Committee was informed that the Audit function was taking a larger role and was now more integrated within project management boards than in the past.  The model the Council now had for managing major capital projects was the right one.  In the future Mr Bob Hide from Equib would be attending meetings of the Committee, as appropriate, to provide the Committee with independent audit assurance on major projects and programmes.

 

Resolved:

1.    That the lessons learned action plans be received.

 

2.    That the Committee oversee their implementation over the next 12 months and to receive a quarterly update report on progress with implementing the lessons learned.

 

3.    That the actions taken to date be supported which include:

a.    To improve programme and project management

b.    To ensure better financial modelling

c.    To ensure partners deliver their commissions to the right quality and specification

d.    To ensure the right people are appointed to the right roles including appropriate project managers and/or a programme director for large scale capital projects

 

4.  That the Managing Director’s decision to make the report an open report to ensure maximum transparency be noted.

7.

Exclusion of the press and public

Minutes:

Resolved:

That in accordance with Section 100A(4) of the Local Government Act 1972, the press and public be excluded from the meeting for the following items of business as they involve the likely disclosure of exempt information falling within the paragraphs 1, 3 and 5 of Schedule 12A of the Act.

 

8.

Action Plan - Lessons Learned

Minutes:

In response to further questions and comments from the Committee on the lessons learned reports, the Committee was informed of:

·       Action taken to hold employees and contractors accountable for their shortcomings on the Civic Halls refurbishment project.

·       Capacity existed within the Council’s Legal Services and external legal support that could be secured to ensure the Council’s interests are protected.

·       The role Verto project management system in providing the Council with the information it needs to manage projects.

·       Deep dives that would be taking place into projects to check and provide independent assurance to the Committee on the state of projects and programmes.

·       The Director of Finance’s expectation that her team would be involved at the outset on any capital programme project group set up by the Council.

 

Resolved:

            That the verbal report be noted.