It is noteworthy that the Public Accounts Committee have just called for contracts with private providers to be subject to Freedom of Information disclosure and, apparently, G4S, Capita, Serco and Atos are agreeing with this!
We are indebted again to Mr Magher for requesting an internal review of the so-called "disclosure" and this is worth a read as it shows the bizarre route Sandwell Council and Sandwell College have taken in awarding the contracts in the first place - attempting to resurrect the Building Schools for the Future programme which was scrapped by the Government in 2010. It is admitted that they "went to great lengths" to keep the deals secret! I have set out the request for the review below.
STOP PRESS - OUR "FRIENDS" INTERSERVE HAVE JUST "UNDERBID" TWO OTHER LARGE CONSTRUCTION COMPANIES AND BEEN AWARDED THE NEW SMBC CONTRACT TO BUILD THE NEW WEDNESBURY LEISURE CENTRE!!!!
Here is Mr Magher's request for a review:
To: (1) Adrian
Scarrott, Director of Neighbourhoods, Sandwell Metropolitan Borough Council;
(2) Mr C.
Davies, Vice-Principal (Standards & Information), Sandwell College.
Application for an
Internal Review – Freedom of Information Act 2000
SMBC Ref: INT1-658301905
Sandwell College Ref: 192984-c35c6c92c@whatdotheyknow.com
I repeat my original request dated 15th January, 2014
in its entirety. The reply does not answer the request in any way and it has
been so-heavily redacted so as to have been rendered entirely meaningless. I
believe that I am entitled to have the original request answered fully in
accordance with Freedom of Information Act 2000.
Background to the
Request
In 2013 Sandwell Metropolitan Borough Council (SMBC) closed
the public-owned facility in central West Bromwich known as “The Public”. SMBC
is a local authority funded by the taxpayer, both locally and nationally. It is
a matter of public interest that their financial dealings are open to public
scrutiny save in exceptional circumstances or where the law specifically permits
non-disclosure.
SMBC resolved to convert The Public for use primarily as a
sixth form school/college and to grant a lease for the educational usage of the
building to Sandwell College (SC). There are some ancillary agreements whereby
SC are apparently to provide a level of artistic/cultural service to the
general public, some adult education and so on.
Sandwell College (SC) is another public body reliant for the
vast majority of its income from the taxpayer, mostly via central Government
through the Education Funding Agency. It is a matter of public interest that
the financial dealings of SC are open to public scrutiny save in exceptional
circumstances or where the law specifically permits non-disclosure. It is noteworthy
that only in September, 2012 SC took possession of a brand-new £77 million
building, also in central West Bromwich, which was funded from the public
purse. Ironically, the same contractors responsible for that new building are
those that feature in these matters.
The Public was a landmark, bespoke, building designed by an
internationally-renowned architect. Nevertheless, SMBC resolved to undertake
major conversion works to the building (the “Fit Out Works”) so that it was “fit”
for educational usage. This was specifically against the recommendation of
reports from property consultants which cost £39,000 excluding VAT. In the
normal course of events, one would expect SMBC to tender for the conversion
works or open the project to some other form of open competition so that SMBC
and the taxpayer could be satisfied that the final accepted quote constituted
good value for (public) money but SMBC rejected this approach. Indeed, it
resolved to gift the conversion contract to Sandwell Futures Limited (SFL) utilising
the “standard form BSF (“Building Schools for the Future”) Design and Build
contract” and specifically resolved on 16th October, 2013 “that any
necessary exemptions be made to the Council’s Procurement and Contract
Procedure Rules” to permit this transaction. SMBC were acting with considerable
haste since the “Cabinet” only formally resolved to proceed in October, 2012
but had already (June, 2013) made public pronouncements that the college/school
would be open by September, 2014. This may well have had a significant bearing
on the decision to disallow open procurement and to enter into so-called “negotiations”
with a single party.
Having excluded the world-at-large from the procurement
process, I submit that it is particularly incumbent upon SMBC to show that the
said contract was fair, reasonable and represented good value for the taxpayer
and public (insofar as it is lawful at all).
Sandwell Futures Limited (SFL) has an opaque chain of
control/ownership but SMBC itself owns 10% of the shareholding of the Company.
The annual return of 17th June, 2013 shows a further 10% of the
shares in the hands of Building Schools for the Future Investments LLP and the
remaining 80% in the hands of Environments for Learning Sandwell PSP Limited.
There are other companies related to this tangled web but the “ultimate parent
company” is Interserve Plc and its subsidiary undertakings of which the
aforementioned companies are two. The said annual return also shows that two
taxpayer-paid employees of SMBC are Directors of SFL. One, at least, is very
senior and highly paid from the public purse.
SMBC appears to state that open tender/competition was not
necessary since SFL is a “special purpose vehicle procured as part of the
Sandwell Building Schools for the Future Project” and that the BSF Design and
Build contract was awarded in 2009 following appropriate & lawful
procurement procedures. With respect, this is nonsense.
The current agreement in respect on the fit out works is a
secret bipartite affair. The decision by the Cabinet to enter into it was based
on a secret “strategic review”, part of a so-called “fundamental review”, which
has not been placed in the public domain. The fundamental review and Cabinet
decision itself are heavily redacted insofar as they have been disclosed.
The Building for Schools project commenced in 2003 and was
always a tripartite affair. The Department of Education appointed a delivery
agency called “Partnership for Schools” and the delivery vehicle was the “Local
Education Partnership” (LEP). Whilst not an actual shareholder within the
meaning of company law, the PFS was, itself, a stakeholder or partner of the
LEP in the whole BSF scheme.
A local authority could opt into the scheme and present a
“Strategic Business Case” to the PFS. This was followed by an “Outline Business
Case” (OBC) which set out, inter alia, the scope of the project, costs,
affordability, risks, the procurement route and a timetable. If approved a LEP
was formed between the authority and a Private Sector Partner (PSP) which was
identified after a tendering process in accordance with EU requirements.
In this particular case, I am prepared to accept that SMBC
set up a LEP called Sandwell Futures Limited with a PSP - Interserve Plc and
its subsidiaries as the major shareholders (as above) for the SPECIFIC purpose
of delivering building and ancillary works pursuant to the BSF programme. I do
not believe that the relevant contractual documentation for this has ever been
placed in the public domain. Very importantly, the LEP once established was not
limited to the first wave of projects but was expected to endure for the 10 or
15 years required to fulfil the whole local authority BSF programme. By a
Strategic Partnership Agreement the LEP was granted exclusivity for the
programme (but not for anything else).
(For the sake of brevity I will refer to Interserve Plc and
its subsidiaries simply as “Interserve” save where the context demands
otherwise).
In general, the BSF programme was delivered in “waves” in
accordance with a “Funding Allocation Model”. After the first wave, an OBC was
still required (save in respect of the formation of the already existing LEP
which had by then already been appointed and acquired exclusivity). Once this
further OBC approval had been given the authority and LEP did further work on
the scope of the next wave to RIBA Stage E which was then forwarded to PFS as
the “Final Business Case”. If approved by the PFS in conjunction with HM
Treasury a promissory note was issued to fund the “wave”.
The OBC in particular was a significant milestone in that
approval demonstrated that the project was robust and prepared for procurement
but was not the end of the story. The PFS would then work closely with the
authority and LEP through a two-stage process up to FBC where the LEP was
required to show evidence of value for money. Costings were compared to the PFS
benchmarking system before final approval.
This scheme was highly bureaucratic, costly and
time-consuming (one of the stated reasons for its abandonment in 2010) and was
“policed” by the PFS/Treasury. This did not suit SMBC in the current case where
the “decision” was made and had, accordingly, to be carried through in haste. With
a close review of costings, benchmarking etc the scheme was the very antithesis
of the secret and private deal allegedly done here between SMBC and the LEP,
Sandwell Futures Limited, alone. Further, as far as one can tell from press
reports, there is no external funder (PFS/H M Treasury). Rather SMBC is funding
the fit out works itself via what it calls “prudential borrowing” and will then
lease the building to SC. There is no apparent mechanism to benchmark costings
nor, indeed to check standards against the RIBA or other such schemes (although
this may be contained within the redacted parts of the so-called contracts). It
is not clear whether the lease to the College has been negotiated at less than
an open-market rental for what is a very large building and/ or whether there
is any mechanism for repayment by the College of any of the borrowing costs. It
is in the public interest for the taxpayer and public at large to ascertain who
is paying for what? For example only and without prejudice to all issues, the
local taxpayers of Sandwell have a legitimate interest in determining that they
alone are not shouldering the burden of the borrowing when the College funding
should be spread to the whole country via central government taxation and
funding. (Although it seems unlikely that central Government would have agreed
to the College acquiring a second £70 million plus building so soon after it
had moved into its own £77 million one).
In any event, future BSF schemes were stopped by the
Secretary of State for Education in July, 2010 and so any concept of SFL having
exclusivity in procurement terms is absurd. The alleged contracts are based on
false premises and are a sham to avoid an open procurement process and to allow
the project to proceed with all possible haste, regardless of the costs to the
public purse. Accordingly, I will seek to persuade the Information Commissioner
(“the IC”) that the contracts are unlawful and void. It follows, if the IC is
with me on that point, that ANY and ALL clauses in the said “contracts”
purporting to thwart disclosure of information pursuant to the FOA are also
null and void and cannot protect any information that has been redacted on the
grounds of either “commercial confidentiality” or “commercial sensitivity”. I
shall rely on the statement of the Secretary of State for Education of 5th
July, 2010 that all future BSF projects which had not reached financial close
would not go ahead together with his further comments in letter form, “In
particular, I do not wish to allow the creation of area-wide exclusivity
agreements over many years with a single contractor”.
If the IC does not accept that point, it is in the public
interest to see the terms of the contract and full costings so that an attempt
can be made to benchmark those costs. There is clearly a very real risk that
the taxpayer will not have received best value. As the situation is obviously
not one in which BSF applies at all there is also the question of whether there
is any conflict of interest in two taxpayer-funded employees (one, at least,
highly paid) working for both parties to a secret bipartite transaction.
Further, the only information that has been forthcoming
about the fit out costs has come purely from SMBC press releases which have
suggested two quite different but significant sums of money ie £5.5M on one
hand and £6.7M on the other. Once again, it is the public interest that full
procurement and costing arrangements are available for scrutiny to clarify this
apparent and considerable discrepancy. There is also the question of any
mechanism for payment of extra sums in the event of the project “running over”
or for any other reason.
As far as one can tell from the limited press reports and
the heavily redacted information available through my original request there
should be the following principal documents:
1. An agreement between SMBC & the so-called LEP;
2. An agreement between SMBC & SC plus a lease.
Although most of the shareholding of SFL is in the hands of
Interserve it has specifically sub-contracted the fit out works to one of its
own subsidiaries, Interserve Construction Ltd, and this has been disclosed in
heavily redacted form as the “Design and Build Contract”. As above, this
contract which also purports to have been made pursuant to the BSF, is no such
thing and is a sham created purely for the convenience of the parties. I will
submit to the IC that it too is unlawful so that any clauses therein designed
to thwart the disclosure of information pursuant to the FOA can have no legal
effect. Again, if the IC is not with me on that point then I will say that the
public interest is not served where public money is manipulated through a
company controlled by one party (Interserve Plc in this case) and paid to a
subsidiary of the same company (Interserve Construction Ltd in this case).
Accordingly, the IC should allow public disclosure of any information which is
alleged to be either commercially confidential or commercially sensitive
between two companies which are, in fact, two parts of the same organisation.
It is noteworthy in this context that one of the contracts provides for notices
relating to same to be sent to SFL via an Interserve address in Birmingham and
for notices to the other contracting party (an Interserve subsidiary) to be
sent via Interserve’s Head Office in Reading!
If the shareholding of 10% in SFL owned by SMBC has any
bearing upon the matter then it is anathema that a public body – SMBC - should
seek to use contractual clauses drawn up by its own lawyers to thwart the
operation of the FOA and to attempt to use a small shareholding in a private
company to subvert an open procurement process and award contracts to a single,
favoured, party.
Response to the
Disclosure to Date
May I deal firstly with the lease between SMBC and SC which
appears to be of 25 years duration. It is said that the lease need not be
disclosed as it will be registered at HM Land Registry in due course. I believe
the lease was signed on or around 19th December, 2013 but as at 8th
March, 2014 it has NOT been registered and so it is not in the public domain.
As a matter of law, the lease may be considered an outright disposal of the
property by SMBC and it is in the public interest to determine the true
position. As above, it is in the public interest to determine that the lease
terms accord with those available on the open market.
It is said that information as to personal data within the
meaning of s40(2) should not be disclosed ie principally in respect of persons
signing the documentation and also, as far as one can tell from the redacted
information, names of persons appointed to a joint “strategic body”. I do not
accept that where two public bodies are concerned – both funded by the taxpayer
– that any secrecy is necessary as to appointments to joint boards etc and will
ask the IC to order disclosure in the public interest. (I also specifically reserve
my position noting the heavily redacted disclosure to date). I have no
particular objection to the redaction of names of signatories etc unless any of
the documents are signed by Sarah Melanie Dudley and/or Kerry Anne Bolister
since these individuals are both employees of SMBC and Directors of SFL and it
is in the public interest to determine that no conflict of interest has arisen
in respect of their involvement in these matters. As Directors of a Company
they must have a reasonable expectation that their identities will not be
private in respect of these matters and disclosure would not be unfair to them.
It is said that some information is redacted pursuant to s21
FOA on the basis that it is available elsewhere. I have already dealt with the
question of the lease which has not, as yet, been filed at HM Land Registry.
Apart from a few press releases, I am not aware of any other information
relating to these matters that has been placed in the public domain save that
there is an argument from the College that the SMBC Cabinet decision of 16th
October, 2013 and fundamental review are already in the public domain although
they accept this is in heavily redacted form. (It seems that I will have to
make a separate FOI request in that regard). I say for the purposes of this
review that SMBC and SC should state publicly where such information may be
located. Accordingly, at present, I do not accept redaction of information on
this ground.
Section 22 FOA is also raised ie that certain information is
to be released at a future date. I refer to my original request. The vast
majority of the information requested was clearly in existence when the
purported “contracts” were executed on 19th December, 2013, now some
3 months ago. I accept that it APPEARS that certain programme details are to be
finally determined in respect of ancillary cultural/artistic/adult education
“offerings” but these matters have, presumably, been budgeted for and those
sums were what was originally requested. For both of these reasons I do not
accept redaction of information pursuant to S22.
It is claimed by SMBC and SC in respect of the main bulk of
the redacted information that it is either commercially confidential and/or
commercially sensitive. Firstly, they rely on clauses within the various
agreements themselves which are designed to protect such information and,
secondly, they rely upon Sections 41, 42 and 43(a) FOIA.
I have already rehearsed the arguments above that the
contracts are not what they purport to be. They are shams designed to avoid an
open procurement process and to prevent the details thereof from entering the
public domain. Again, if this view is not accepted, it is abhorrent that SMBC
should seek to hide the facts of its transactions behind a 10% shareholding in
a private company so that they are unavailable to public scrutiny. I have
quoted above the precise wording whereby SMBC sought to restrict its “normal”
contract and procurement procedures and so it is particularly incumbent on them
to show that their dealings are open, fair and constitute good value for public
money. As there is not, so far as I can tell, any mechanism for a third party
(as in the BSF arrangements) to check or benchmark costs this information is of
public interest so that full independent scrutiny can be made thereof. Where
the “public interest test” applies, therefore, I say that the information must
be disclosed.
Interserve are a very large public company with
multi-national interests and although costing many millions of pounds of public
money, in the general scheme of things this is a one-off, bespoke “contract”
for them and a small-scale one to boot. It is, when all said and done just a
conversion of an existing building to them and it is difficult to imagine what
details thereof would constitute either “commercially sensitive” information or
“trade secrets”. There is not, nor is there likely to be a comparable job in
the area that one can foresee and so it seems unlikely that competitors (who
have been deliberately excluded from this work) are likely to obtain any unfair
competitive advantage from knowing the details of this unique transaction.
Indeed, it is in the public interest that competitors DO see the details as
they have been deliberately excluded from tendering since they are the
persons/companies who may be best able to give an informed opinion on the
“agreements”.
It is advanced that the disclosure of commercially sensitive
information would mean that the “LEP”, ie SFL, would be likely to refrain from
“bidding” for future public sector contracts which would lessen the competition
available when public bodies are letting public contracts in the future. This
again, is nonsense as rehearsed above. SFL was a single purpose delivery
vehicle within the BSF scheme as is clearly stated by the parties themselves in
the recitals to the various so-called contracts. It is a curious argument to
advance noting that all competition was excluded so that ONLY SFL could bid for
this particular project and it is difficult to imagine what contracts SFL would
be bidding for as BSF has been cancelled.
As above, these contracts (unlike BSF) do not appear to be
“policed” by any third party and so the three parties here have set themselves
up as the sole arbiters of what is or what is not commercially
confidential/sensitive. The contractual clauses, insofar as they are lawful at
all, are too widely drawn for contracts (mostly drafted by their own lawyers)
involving public money and two public bodies should not be allowed to determine
between themselves what is commercially confidential/sensitive and therefore
not disclosable. This is not in the public interest and it is, in law,
inequitable.
It is also said that disclosure would impede future
discussions and the viability of current proposals and future projects in
particular the renovation of The Public and that disclosure would in some
unspecified way affect the ability to secure “best value” in the future. As the
so-called contracts were signed some three months ago and Interserve are in the
building and gutting it, I do not understand these arguments nor, for the
reasons outlined above, do I consider they apply on the facts of this
highly-unusual and unique case.
Finally, it is said on behalf of the College that disclosure
can be adequately dealt with by transparent College decision-making and
reporting and accountability through regular monitoring. I am afraid this is
nonsense again since ALL publicly available College Board and Audit minutes
have been released with all references to The Public redacted. This, indeed, is
now subject to a separate FOI request (from another member of the public).
Noting the substantial delay in dealing with my original
request by both SMBC and SC, please conduct an internal review as a matter of
urgency.
Mr Darryl Magher
11th March, 2014
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