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A London Borough faces an overhaul of its housing contracts after an investigation into some £246m of outsourcing exposed aggressive pricing, excessive claims for works and “dishonourable culture” were common practice.

Some contractors working with Hackney were said to have overcharged for works; proposed to deliver and charge for work that wasn’t needed; falsely claimed work to be complete; and delivered “shoddy” jobs.

That’s according to the council’s own in-house investigation run by the “Living in Hackney” scrutiny commission.

The resulting report stresses the need for a “manifesto commitment” from the council to review external contracts to look to expand in house services – while working with other Councils to improve related standards and skills.

One sub-contracted job is already under criminal investigation after allegations of money laundering and bribery were made following “substantial over-claiming” for fire safety work.

The council has retained “a significant sum of money” under the contract because works that were claimed to have been carried out are still under dispute.

A restructure within the council last summer was prompted after problems with an electrical specialist came to light.

Under an £810,000 contract, the firm was supposed to be doing the jobs the council couldn’t do in-house – but only completed 24% of the 1,452 repairs it should have done in 18 months.

Many jobs had to be redone because of the low quality, and the council had to spend considerable time training up a whole new project management team after the first lot weren’t up to the job.

They were also found to be guilty of “aggressive pricing”, which saw double charging by claiming for works that had already been invoiced for, and claiming for greater amounts of work than appropriate.

When council officers gave evidence to a scrutiny commission set up to look into the matter, it was found that aggressive pricing was a common issue and some providers might under-price to win contracts before seeking to recoup at a later date.

Cllr Sharon Patrick, who led the commission into partnering contracts, said that in “hindsight” it was felt that some of the prices put forward  were unrealistically low.

“The partnering approach was designed to foster trusting and collaborative relationships between contract providers and their clients. Evidence shows this vision to have been idealistic.

“Rather than working truly in partnership with their clients, some partnering contract providers appear to be seeking to take advantage of this approach whilst relying on client representatives not looking too closely at the pricing or invoicing, and on clients not having internal resources to carry out full checks of works,” she said.

In response the council has brought the “clerk of works inspection” post back in-house rather than contracting it out to a consultancy company.

They are supposed to now ensure full sign-off of works before payments are made.

Having halved the number of its quantity surveyors from 12 to six, the council has had to employ more – and the role of “resident liaison officer” is now being delivered in-house wherever possible rather than by contractors.

During the 2017/18 municipal year the Commission held a number of items relating to the management of contracts by the Council’s Housing Services.

Members received a number of updates on the performance and management of one specific major contract – that for Specialist Electrical Works with Morgan Sindall – and held a more general discussion item focusing the benefits, risks and issues with some of Housing Services’ larger ‘partnering’ contracts.

In July 2018, a detailed set of findings from this work were handed over to the Scrutiny Panel.

The investigation was relevant to inter-related procurement, contract management, and divisions between insourced and outsourced services.

Acknowledging that large, long term partnering contracts have helped facilitate “very significant” levels of investment in the Council’s housing stock and some partnering contracts as working very well, key findings of the investigation included:

  • Evidence pointed to the vision of large and long term partnering contracts achieving true partnership working as misguided
  • Stark examples of poor behaviour by partnering contractors
  • Large long term partnering contracts relying on “close and intensive” management to ensure value for money for residents – with quality assurance and resident feedback mechanisms needing to be fully separated from the contractor.
  • Bringing external Clerks of Works contract back in house and recognise the “considerable strain” caused by cutting related service capacity
  • The need for a “manifesto commitment” to review external contracts to look to expand in house services, and to work with other Councils to help deliver improve standards and skills