From the Permanent Secretary Paul Priestly

Dep"rtmenl for

Regional Development

www.dr~ ~l.goy.u~

Louise Mason

Assistant Auditor General Northern Ireland Audit Office 106 Univ,ersity Street BELFAST

BT71EU

Clarence Court

10-18 Adelaide Street BEtFAST

8T28GB

20 February 2009

WAO REVIEW OF ALLEGATIONS BY COMPLAINANTS INTO THE PROCUREMENT OF THE RATHLIN FERRY SERVICE

Thank you for your tetter of 26 January and the enclosed copy ot the draft NIAO report on the above subject.

I welcome the report and was pleased to note the conclusion that the independent investigation commissioned by the Department should serve as a model for future inquiries on similar issues.

'You asked for comments 01"\ the report's factual accuracy. I feel it is worth commenting on the issues below,

Anonymised Names of Tenderers

Based on iegal advice, the investigation team didn't anonymise the names of the tenderers in their report Given that the report is in the public domain and the tenderers are named, l would question whether there is a need for the N~AO to retain anonymity. Questions could be raised jf a consistent approach is not adopted.

Number of Allegations

The draft NIAO report states that "the complainants made 26 allegations". It is more accurate to state that the allegations were summarised into 26 key allegations by the investJgation team.

AN RO~N:>I

Forbartha Reigiunal

:W\'1NVSTRIE FliR

1< In tl'!lP::r i l'I,.; Ford ~'. ,.j n

Allegations relating to Personnel Issues

The draft NIAO report states that "three allegations relating to personnel issues were upheld". There were seven allegations dealt with in Section 7 of the Investigation Report (dealing with "Management and Personnel Issues"). In the Investigation Report's conclusions on the allegations (especially in relation to the personnel allegations), there were occasions when there were elements of the allegations that were partially supported. In Ilght of this, you may prefer not to refer to the number of allegations upheld. However, if this is to be the approach, I suggest that there will be some recommendations that should be categorised as partially upheld. I would be interested to know the three allegations that the NIAO consider to have been upheld.

Perception of Favouritism

In the final paragraph the draft NIAO report says that "These lapses in basic good practice created a perception offavouritism to one particular bidder and fuelled the notion of bias and wrong-doing (emphasis mine],"1 assume that this is a lift from paragraph 8,1.12 of the Investigation Report which was making a slightly different point, i.e. that lapses had "fuelled perceptions of bias or wrong-doing [again emphasis mine]."

Rather than creating a perception of favouritism, the impact of the lapses was that it was difficult, without a formal investigation, to refute the various allegations when they were picked up by politicians. Hence I believe that the language used within the Investigation Report is the more accurate,

I trust that the above comments are helpful. Finally" I would be grateful if you could indicate when the f~nal NIAO report is likely to issue.

PAUL PRIESTLY

AUDIT IN CONFIDENCE

contract and rile impact this has OLl process Failure to do so may lead (0 confusion among bidders. CPD told NIAO that it agrees with this recommendation but pointed out that there is llO requirement under the Public Contracts Regulations 2006 to state the relevant Regulations within the render documentation.

5. CPD should ensure. perhaps through the Tender Initiation Document. that for all meetinzs, such as tender evaluation meetings. clarification meetings. debriefs, etc, an adequate note of the meeting. is formally recorded alld retained 011 file. }>fLW ilS£i:!el filEii ihal"i:! vrer.i:! a fK~i:!!' Elf iU!>fauees id,mtili0d In the ",as~ wi,'!:eTe Ihere "'el9 no popel' l"econi<3 ofmeeting5 er disc'Hssiol:, involYlug ·Jfficials. This i:) aHa~ecp~ably pser f.li'flcfice.

thGive'n the recent transition to .11011 paper based scoring and electronic record storage

\ .... irhin (,PD, the investigators recommended that the system is formally reviewed to ensure that it is operating effectively and provides a complete and transparent means of supporting public procurement decisions. CPD told NIAO that it is currenrly developing a new web based e-Sourcing Tool which will provide 11 high level of trauspareucy and audit ability throughout the procurement life cycle. CPD consider that this will address the most ofthe procurement weaknesses identified within this review.In NI:\:O's vie'.'." allY

\' .. eab1esses in tHis Qr~a has the fl9wnrial to unooonine confidence in public sector rendering Elnd the Oftlce 'Hill pay f.iarticular atrontiOH to testing thi" SYSfelH;;11 ftiftwe flHEI±~.

&.7. Norhwithstanding that CPD has fill established complaints procedure. the investigators recommended film CPD should develop a formal process ro govern situations where a material error arises in the management of the procurement. Formal documentation in relation to decision-making must be retained for management/audit trail purposes.

9,8. CPD and departments should ensure t113t all Evaluation Panel Members. both internal and exrernal to the department. are aware of the roles and responsibilities of au Evaluation Panel Member and have received appropriate training.

..f-B.:.9.

Conflict ofInterest declarations should be completed for every procurement competition. In this case conflict of interest declarations were completed by Panel Members in the first procurement competition bur they were not reviewed in the second.

--l-+. 10.

DRD should reiterate established procedures to staff, to ensure that significant e-mail conununtcarions are saved to the electronic filing system 011 a timely basis and that a complete management/audit trail is maintained to support kev decisions taken. Such failures in this procurement were potentially serious <'IU.(\ problems experienced in DRD may hold lessons for other Northern Ireland departments.

AUDIT IN CONFIDENCE

fundamentally undermine tne competition. The investigators considered that the tender assessment did fairly reflect the considerable difference between the level of improvements in service offered in the two bids and that [he procurement process did identify the most economically advantageous proposal.

The invesrizarors were also coucerned with the conduct and manazemeut of the exercise which daruaged the effectiveness and transparency of the procurement and fuelled perceptions ofbias or wrongdoiug. One allegation, that a performance bond was Hot in place. was upheld. However. DRD stated that the operator's subsidy claim is being reduced [0 take [his into account.

There were seven attezations ill me investigaton; report dealing with manaaement and personnel issues. In fO~lr cases the. iI1vestig~tors found that the;o were elem~nts of the allegations tliar were partially supported a~ld in the remaining three cases they found no evidence to support the allegarions, Three allcgntioa9: relatiu.s to pcr5{)l1ftCl i::;(RlC:i ';',CIT ',l'F'held. HOWOV8,L tThe Investigators found no evidence of imp ropriery ineither DRD or CPO. 110r that officiaIs had any improper contact with any party with all interest in the outcome of tile procurement.

Recommendations

III tile -COlU'St> of their investizarion the investigators identified a number of deficiencies which in rhe main relate to 8.~ dislocation ill tb~ apportionment of respousibiliries between CPD and DRD and have submirtecl a number of rec ommenda tious for improvement. 1'n.\:o CmlOfSeg ta2ilC rcee1l1mendatior~:"

1. Service Level Agreements between CPD and Departments should be reviewed to ensure that there is abso lute clarity regarding the roles and responsibilities and accountability ofthe respective parties. CPD told NL~O that its quality aSSH1'fI1lCe process is currently being reviewed.

Notwithstanding its existing procedures and [11m a Tender Initiatiou Document was used in this case. CPD should review current procedures to ensure that schedules for key stages of the process detail all docuiuenration requirements and ensure that the process is operating effectively. The schedule should be signed and dated at each of the key stages and be subject to supervisory review to COnfil111 that the process is carried oUT in. accordance with procedures and is complete, accurate and reliable.

3.

Given that there have been a number of recent legal cases where judgements have established case law relating to the use of sub-criteria. sub-weighrings and scoring methodologies. CPD should commit with the Departmental Solicitors Office [Q ens me tha r procedures are appropriate. CPD told 1'-<lAO that it and the Departmental Solicitors Office are engaged with the Office of Governnienr Commerce in reviewing the impact of recenr legal judgements.

4.

The different categories of service which may be offered under a contract fire covered bv the Public Contracts Rezulations 2006. There must be absolute clarity. at "tendering: stage. on wlti!.::l; category of service is being offered ina

From the Permanent Secretary Paul Priestly

D~par1ment for

Regional Development

wv.rw.C rdn t.gO'V. uk

Louise Mason

Assistant Auditor General Northern Ireland Audit Office 106 University Street BELFAST

BT71EU

Clarence Court

10-1 8 Adelaide Street BELFAST

BT28GB

23 March 2009

NIAO REVIEW OF ALLEGATIONS BY COMPLAINANTS INTO THE PROCUREMENT OF THE RATHLIN FERRY SERVICE

Thank you for your letter of 6 March about this review. I am grateful for your cor-sideration of the points made in my letter of 20 February and the changes which have been made in tile revised draft.

I am content with the latest draft, with one exception, On page four, paragraph three it states that:

". ". .in four cases the investigators found that there were elements of the allegations that were partially sup po rted ... ''.

This may give the impression that four out of seven allegations were partially supported. My view is that for two of the allegations, there are elements of the allegations that have been partially supported.

! would, therefore, suggest the following alternative form of words to convey this message more accurately:

"There were seven allegations in the Investigators' report dealing with management and personnel issues and for two, the investigators found elements of the allegations to have been partially supported. The investigators found no evidence of impropriety in either ORO or CPO, nor that officials had any improper' contact with any party wlth any interest in the outcome of the pro cu re me nt."

I hope that this is helpful.

PAUL PRIESTLY

o

AN HOINN

Forbartha Reig;iunai

MANNYSTRIE FUR

Kintra Pair ts Forderiri