The Audit of Procurement

Transcription

1 The Audit of Procurement Anthony Barrett - Assistant Auditor General David Rees - Governance Manager November A2015

2 Agenda The Auditor General s responsibilities Procurement challenges The audit of procurement: Opinion audits Local value for money audits Regional value for money audits Case study examples Promoting good practices: Think piece example Current Welsh procurement challenges Audit of Procurement Slide 2

3 The Auditor General for Wales and the Wales Audit Office Wales Audit Office: Established 2005 Some 250 staff financial, performance and IT auditors Auditor General for Wales, who is the statutory auditor: - Welsh government and its sponsored bodies - Health bodies in Wales - Local government bodies in Wales Total annual value of expenditure audited > 27bn - of which procurement amounts to 6bn Audit of Procurement Slide 3

4 The Auditor General s responsibilities Statutory duties and responsibilities of the Auditor General: Express opinion on the accounts of public bodies Value for money audits of specific bodies Value for money audits of activities at the all-wales level promoting good practice Audit of Procurement Slide 4

5 Procurement challenges More public services being provided by the private sector More innovative service delivery models needed Different ethical standards between public and private Welsh public sector lacks experience/expertise in major procurement/contract management Small nation greater risk of collusion, cartels and over-pricing Estimate of annual loss due to procurement fraud UK 3.2bn, Wales (pro rata) 160mn Audit of Procurement Slide 5

6 National Solutions National Procurement Service (NPS) bulk procurement of 1bn of goods and services in common and repetitive spend. 73 public bodies collaborating Value Wales setting common procurement standards, shaping policy, advising procurement specialists, monitoring practice, e-procurement service Sell2Wales information source for suppliers, including portal for procurement opportunities in Wales. Audit of Procurement Slide 6

7 Auditing Procurement Examples of local procurement audits: Reviews of capital contracts Reviews of revenue contracts IT procurement Public Private Partnerships Outsourcing of services Vehicle procurement Procurement of land and property Procurement of air transport services Social care services Health equipment purchases Audit of Procurement Slide 7

8 Common audit findings More complex procurement models being used; not fully understood by public bodies Lack of procurement expertise by public sector staff Conflict of interests arising from outsourcing Poor option appraisal/procurement practices Limited information on procured goods and services Lack of compliance with public sector ethical standards No embedding of sustainability into procurement processes Not ensuring social benefits arise from procurement Audit of Procurement Slide 8

9 Ethical aspects of supply chain management Think piece being prepared to support sharing good practice Increased outsourcing of public services Tension between public/private sector cultures The paper will consider how to address the uncertainty regarding: The extent to which UK public sector ethical standards (Nolan principles) apply to external suppliers How to ensure compliance with public sector ethical standards by external contractors Audit of Procurement Slide 9

10 Case Study 1 Audit of the procurement of consultancy services in Wales Audit of Procurement Slide 10

11 Case study example - consultancy services Background Extensive use made of consultants Annual expenditure by Welsh public sector 180m Benefits of using consultants: Access to skills and resources Additional short-term capacity Risks of using consultants: Tender evaluation subjective Expensive resource Can be difficult to control costs Audit of Procurement Slide 11

12 Case study example - consultancy services Audit approach Scoping Issues analysis Fieldwork: Structured question hierarchy Analysis of expenditure on consultants Survey of 50 public bodies in Wales 93 file reviews undertaken Drawing conclusions Reporting Audit of Procurement Slide 12

13 Case study example - consultancy services Findings (1) Scope to save some 23m each year by adopting better procurement practices. The public sector has reduced its expenditure on consultancy services, but few public bodies have a robust strategy for the procurement and management of consultants. There is little collaboration between public bodies in the procurement and management of consultancy services. Audit of Procurement Slide 13

14 Case study example - consultancy services Findings (2) Public bodies are failing to follow good practice in the procurement and management of consultancy services: The quality of records in support of consultancy services projects is generally poor; Absence of robust systems for assessing the need for consultants and specifying the requirements; Contract management during the delivery of consultancy projects is weak in many public bodies; and Public bodies do not routinely evaluate the benefits of, or learn the lessons from, their use of consultants. Audit of Procurement Slide 14

15 Case Study 2 Audit of the procurement of home-based social care services for the elderly Audit of Procurement Slide 15

16 Case study procurement of home- based care Background Local authority decision to outsource the service Contract value estimated at 4m per annum (4 year contract) Contract advertised in OJEU Lotted contract award with 4 suppliers to cover contract area Anticipated significant cost savings compared with in-house provision Within 12 months, 3 suppliers had failed and the service had to be brought back in house. Audit of Procurement Slide 16

17 Case study procurement of home- based care Audit approach Scoping Issues analysis Fieldwork: Assessment of adequacy of specifications Review of tender evaluation Interviews with Council staff and suppliers Document review Drawing conclusions Reporting Audit of Procurement Slide 17

18 Case study procurement of home- based care Findings Procurement was rushed the governance, management and scrutiny arrangements were inadequate The Council s information systems were unreliable The information provided to tenders was inaccurate The service specification was poorly constructed and ambiguous significant uncertainty for suppliers Audit of Procurement Slide 18

19 Case study procurement of home- based care Findings The Council had not fully researched nor understood the external market Suppliers had difficulty recruiting experienced staff to deliver care in remote, rural areas The tender evaluation arrangements were inadequate; lack of due diligence Potential suppliers were not assessed to determine whether they had the managerial or financial capacity to deliver the contract Audit of Procurement Slide 19

20 Promoting good practices Good Practice Exchange ( Good practice guides/self-assessments: - Procurement of vehicles Shared learning seminars: - Procurement of vehicles - Facilities management Webinars Procurement fraud Think pieces - Ethical aspects of supply chain management (being developed) Audit of Procurement Slide 20

21 Further information Anthony Barrett - anthony.barrett@audit.wales David Rees - david.rees@audit.wales Wales audit Office - Audit of Procurement Slide 21