Agenda item - Overpayments on the housing repairs and improvement contract

Report of the Acting Executive Director, Finance & Resources (copy attached).

That the Audit & Standards Committee:

1)           Note that the council’s housing revenue account was over-charged by an amount estimated by audit at more than £300,000 over a 17 month period for work carried out by a sub-contractor working on the housing repairs and improvements contract.

2)           Note that the council expects to recover the overpayments from the main contractor, Mears Ltd.

3)           Note that the council is working positively with Mears Ltd to identify any other overpayments that may have been made and to prevent any overpayments in the future.

65.1      The Committee considered a report of the Acting Director, Finance & Resources that summarised the results of the internal audit review of overpayments identified by the council in respect of housing repairs carried out by its contractor Mears Ltd.

65.2      Councillor Druitt stated he felt that the correct measures had been put into place subsequent to the discovery of overpayments but raised his concern that the structure of the contract meant that Mears Ltd were requesting, undertaking and inspecting work and each of those processes should be assigned to different groups.

65.3      The Head of Housing stated that the arrangement in managing and supervising work was set out in the contract between Mears Ltd and the council and delivered significant savings to the council and its tenants. The issue of overpayment had prompted a review to improve that system.

65.4      The Chief Executive, Mears Ltd stated that his organisation were supportive of an audit of repairs.

65.5      Councillor Robins stated that he felt the underlying issue was Mears Ltd use of subcontractors and that only 10% of completed work was inspected. Councillor Robins added that in most instances, it would be difficult to give a judgement on the quality of work at the stage of completion and there should be regular checks by a Clerk of Works as a repair was progressing. Councillor Robins asked if sub-contractors made a profit on the repairs they carried out and if this was in turn passed onto the council via Mears Ltd.

65.6      The Chief Executive, Mears Ltd stated that the average cost of a repair was a £100 and there were many minor jobs that would not require inspection such as fixing a light switch. In that context, it was not justifiable to have every job inspected. He added that it was not possible for Mears Ltd to employ specialists in every area of trade as in some areas, there was insufficient demand to employ a full-time member of staff. In such cases a sub-contractor would be used on the basis of a fixed price quotation with the same charge invoiced to the council.

65.7      Councillor Morris asked if post-inspections were still carried out on 10% of works.

65.8      The Head of Housing Strategy clarified that the number of responsive repair inspections was still 10% and checks on major and planned work increased temporarily to 100%. The Chief Executive, Mears added that they had also increased inspection rates to 100% initially to ensure that overpayments were not a systemic problem.

65.9      Councillor Taylor asked why it had taken 17 months to discover the overpayments made.

65.10   The Chief Executive, Mears clarified that the underlying issue was the improper use of a fixed price code on a regular basis and investigation had found that this was not a systemic problem.

65.11   Councillor Robins asked for clarification on whether Mears Ltd intended to review work as it progressed.

65.12   The Chief Executive, Mears Ltd stated that live inspections were carried out on larger jobs. For smaller work, Mears Ltd asked its staff to take photos before, during and after repairs jobs. Furthermore, Mears Ltd had committed to providing funding for the council to employ a Quantity Surveyor for a three to six month period with discussion on a long-term solution to follow.

65.13   RESOLVED- That the Audit & Standards Committee:

1)           Note that the council’s housing revenue account was over-charged by an amount estimated by audit at more than £300,000 over a 17 month period for work carried out by a sub-contractor working on the housing repairs and improvements contract.

2)           Note that the council expects to recover the overpayments from the main contractor, Mears Ltd.

3)           Note that the council is working positively with Mears Ltd to identify any other overpayments that may have been made and to prevent any overpayments in the future.