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Tuesday, April 2, 2013

Value for money is not the central procurement ideal

I have had previous posts illustrating the "no harm, no foul" excuse for improper procurement, collected here. But it has been awhile since the last example, so to remind, here is another example.

Council broke procurement rules in 78% of deals
Auditors have found significant problems with how Waterford City Council has spent public money. A report into the local authority’s expenditure said that proper procurement rules were not followed in 78% of deals examined.

This meant that €4.3m, out of €4.9m which was audited in 2010, did not meet requirements. In 40% of these cases contracts were awarded without a procurement process. A quarter of all problem purchases, spotted by the internal audit team, related to the €8m investment the council made in the relocated visitors’ centre for WWRD’s Waterford crystal operation.

In other areas of spending the auditors could find no evidence of a procurement file on the traffic fine management system; the Tramore Rd improvement scheme; the work at Knockboy junction and repair works on Rice Bridge.

In total the council spent €822,941 on 12 different projects in 2010 where there was no procurement file available for the auditors to inspect.

In the case of €788,328 of spending, the contracts in question were not advertised.

In the case of one construction company on this project there was no evidence of other firms being involved in a tender competition.

Because of this Waterford City Council was told to give back €101,866 in grant aid it got from the European Structural Fund. In total the council had to return €218,952 of ESF money received for the Waterford crystal project because it was not spent according to the rules.

The council said it believed it got value for money.

“Whilst acknowledged that the full rigours of the procurement rules were not adhered to, the adhered to principle of obtaining value for money was of upmost importance,” it told the auditors.
It is never an acceptable excuse for improper procurement to say, "well, we spent the money well, so what's the fuss?"

First, if the rules are not followed, if competition is not sought by effective specifications and needs assessment, what faith should we hold that prices paid were indeed the best obtainable, that the thing acquired was indeed the one best matched to our needs?

More importantly, when shortcuts are taken, they tend to be repeated, and before long there is no rigorous procurement system. There is always a systemic risk created when we try to rationalize away failure to follow the system with after-the-fact valuation satisfaction. 

Best value, value for money, are matters that should be judged, if ever, at the beginning of the process, to assure by rigorous methodology that we have wrung the best price for the most suited product available from the marketplace. Otherwise, it is simply a cover-up.

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