Final Undercliff Drive Report - Isle of Wight Council...2007/11/29 · in the Isle of Wight County...

Private & Confidential

Final Undercliff Drive Report

Isle of Wight Council

29 November 2007



Undercliff Drive Final Report

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1 Introduction

1.1 In February 2007 the Council instructed Wragge & Co to investigate officer

involvement with regard to the letting of contracts for the Undercliff Drive

project.

1.2 Our instruction followed receipt of advice by the Council in 2005 and 2007

from Addleshaw Goddard solicitors, the QP Group and Mark Heath which

highlighted failings with regard to the procurement of the services from

High-Point Rendel (“HPR”) by the Council. The January 2005 advice from

Addleshaw Goddard solicitors concluded that the Council “very likely

breached public procurement law in awarding the contract for the

provision of engineering services to HPR immediately after 1 April 2001,

and may have done so before and after this date”.

1.3 A Procurement Compliance Assessment produced by QP Group was

published in July 2005. It identified a number of failings as at July 2005, in

particular it identified the absence of written contracts with HPR on the

Undercliff Drive scheme.

1.4 The February 2007 report by Mark Heath (Solicitor and Monitoring Officer

of Southampton City Council) stated that the Council had “acted either in

ignorance or disregard of procurement regulations and the Council’s

constitution”. He also stated that in his opinion “the appointment of HPR

was unlawful” and that the Council’s “failure to enter into a lawful and fair

contractual relationship with HPR has exposed the Council to unnecessary

risk”.

1.5 In February 2007 Sharpe Pritchard were instructed by the Council to

produce a report on the contractual and procurement issues relating to the

Project. In June 2007 they produced a report for the Council which stated

that in their view two phases of the work given to HPR had been

commissioned in breach of the relevant procurement regulations (pages




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348 and 349). Sharpe Pritchard also found that no contract documentation

was in place for either phase (pages 348 and 349). For more detail on the

contractual phases determined by Sharpe Pritchard please see their report

at page 356 and our summary at paragraph 12.1.

1.6 As part of our investigation into officer involvement we have carried out 33

interviews with 25 witnesses over a period of ten months. Each interview

averaged approximately 2 to 3 hours. A schedule of interviews can be

found at Appendix D. A copy of the transcript from each interview was

provided to each individual following the interview for their comments.

Any amendments suggested by the individual to the transcript were added

in redline and strikeout. Where necessary supplemental questions were put

in writing or by telephone to relevant witnesses.1 Clarification was also

sought from a number of officers, particularly in the finance team, in

respect of systems, roles and responsibilities.

1.7 We have reviewed approximately 134 boxes of documents and have

searched the Council’s email archive, a portion of High-Point Rendel’s

document archive and the hard drives of all suspended officers’ computers

(for details of all suspended officers see Appendix B). We placed an advert

in the Isle of Wight County Press, arranged a day of public evidence taking

in Ventnor and received submissions from local residents, including Mrs

Barbara Wright and Mr Mike Starke for relevant information or documents.

1.8 Further we have prepared both preliminary and final investigation reports

in respect of 6 officers and given oral evidence at 4 disciplinary hearings,

two of which were conducted by Mr Dobson as an Independent Person.

These reports set out the available evidence and were provided to both the

Council and the individual in question prior to the Hearings.

1.9 This report is separated into three main sections. The first provides an

1 The Investigation Team sent supplementary questions to Mr Lawson and Mr Rowell. Follow up telephone calls were made to Mr Wilkinson, Mr Gallin and Mr Crabb.




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executive summary of the issues arising. The second contains

recommendations and conclusions arising from the investigation authored

by Mark Greenburgh who advised the Council throughout this process. The

third seeks to piece together on a ‘balance of probabilities’ basis the

evidence the investigation team led by Trevor Gibson has collated during

the course of the last nine months for consideration by the Council.

Mark Greenburgh Trevor Gibson Partner Partner Head of Local Government Employment Team Wragge & Co LLP Wragge & Co LLP



Section 1 – Executive Summary

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2 Executive Summary

2.1 In addition to the disregard for EU procurement law and Contract Standing

Orders set out in the reports of Addleshaw Goddard, QP, Heath and Sharpe

Pritchard we have found systematic and on-going failures of the Council’s

processes and internal controls, and inadequate supervision and line-

management of and by a number of officers.

2.2 There also appeared to be a culture of officers from the top down taking

an unduly narrow and restrictive view of their role. This has undoubtedly

been a factor in the catalogue of problems which are set out below.

2.3 As set out above, Sharpe Pritchard produced a report in June 2007 which

stated that in their view two phases of the work given to HPR had been

commissioned in breach of the relevant procurement regulations and that

no contract documentation was in place for either phase (pages 348 and

349). Having been given the opportunity those officers interviewed

provided no coherent or consistent explanation as to why the failure to

comply with the EU Procurement Regulations and Contract Standing Orders

(“CSOs”) occurred in the first place and why the project was not put onto a

sound contractual footing once the problem was uncovered.

2.4 It is not clear why further services were allowed to be procured in breach

of the relevant procurement regulations not only after senior officers of

the Council had become aware of the failures but in some cases after

having raised concerns about them. Neither is there a convincing

explanation as to why the Council's own CSOs and Financial Procedures

were not followed; why Financial Procedures which should have picked up

the failures at an early stage were avoided; and finally, why payments

continued to be made to the contractors at each stage without any checks

taking place.

2.5 It seems the most likely explanation for the failings relating to Undercliff

Drive stem from a complex interaction between factors such as inadequate



Section 1 – Executive Summary

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training, incompetence, a failure to comply with Council systems and

procedures, poor supervision and inadequate checks and balances.

2.6 The report seeks to draw together the threads in order to provide a

coherent explanation as to why the failings reported in Addleshaw

Goddard, QP, Heath and Sharpe Pritchard may have happened, why so

many officers bore culpability for the situation and to offer some

recommendations to ensure the same scenario does not arise in the future.

It should be read in conjunction with the supporting documents included at

Appendix A. All page references refer to the bundle of supporting

documents in Appendix A unless otherwise stated. We have also included

the following documents with this report:

Appendix A - Supporting documents.

Appendix B - List of suspended officers.

Appendix C - Chronology of events.

Appendix D - Witness Interview Schedule.

We would like to record our thanks to Alison Lowton, Claire Shand, Chris

Mathews, Olly Batkin and the rest of the support team for their cooperation

and relentless hard work in assisting us with this investigation. We have

often sought their assistance in respect of difficult situations and at short

notice.



Section 2 – Conclusions & Recommendations

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Conclusions, Observations and Recommendations

3 Background to the Investigation

3.1 In January 2007 the Council faced a stark choice. The new Chief

Executive, Joe Duckworth, had commissioned a report from Mark Heath, the

City Solicitor for Southampton City Council. Mr Heath’s report drew

together existing evidence of some apparently serious failings of the

Council’s processes in relation to the procurement of contractors, and the

contractual arrangements relating to the Engineering works at Undercliff

Drive, Ventnor.

3.2 The Chief Executive and Interim Director of Legal and Democratic Services

sought advice from Wragge & Co on the options available to the Council.

One option was to engage in a discussion with the senior officers who were

apparently involved in the issue, the Director of Regeneration and the

Environment, Derek Rowell; the Deputy Chief Executive, John Lawson; and

the Director of Finance, Paul Wilkinson. It would have been relatively easy,

and certainly much cheaper, to have negotiated any necessary early

retirement package/redundancy terms and to have moved on.

3.3 However, a view was taken by both the Chief Executive and Senior

Members that previous opportunities to ‘draw a line in the sand’ and to

ensure things would not happen again had not resulted in the necessary shift

in culture, or performance improvement. This had fed a perception that

senior officers had received big ‘pay offs’ for under performance and things

were just swept under the carpet. Whether or not that was a fair

assessment, it was nevertheless the perceived view.

3.4 There was also a real concern to discover the extent to which the issues

revealed by Addleshaw Goddard, QP Group and Mr Heath were isolated, or

part of a wider culture of non-compliance.

3.5 Both senior members and the Chief Executive needed to balance the




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significant investment of costs, officer time and the potential impact on the

organisation against the need to deal with things in a robust and open

manner. A judgement was reached that a thorough investigation was a

necessary part of the journey of step change that was required for the Isle

of Wight Council.

3.6 The Chief Executive and Interim Director of Legal and Democratic Services

took a statutory report to the full Council at its meeting on 21st February

2007 recommending the establishment of an Investigatory and Disciplinary

Committee to undertake a thorough review of what had happened, who was

responsible and what needed to be done to remedy the situation. Wragge &

Co LLP were engaged to undertake that investigation and advise the

Committee what, if any, disciplinary action was appropriate for the Council

to consider.

4 Methodology of the Investigation

4.1 Wragge & Co separated the employment advisory work, which was

undertaken by and supervised by Mark Greenburgh, from the investigatory

work undertaken and supervised by Trevor Gibson. This allowed Mr

Greenburgh to assess the evidence that had been collated by the

investigatory team and advise the Council on it; and left Mr Gibson’s team

to investigate impartially.

4.2 From an advisory perspective, the first task was to undertake a desk top

review of the existing documents (the Addleshaw Goddard advice, the QP

Report and the Heath Report). This led to an assessment by the Chief

Executive that three senior officers should be suspended pending further

investigation. Those officers were Derek Rowell, John Lawson and Paul

Wilkinson. It should be noted that at this time, Mr Lawson was already

absent from the office on a ‘Career Break’ and had ceased to be the

Monitoring Officer for that period of time.




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5 Very shortly after the initial suspensions had been carried out, it came to

our attention that two officers, Steve Matthews, the Head of Engineering

Services and Nick Gallin, the Principal Highways Engineer, had apparently

attempted to remove certain documents from the Council’s files relating to

a site visit they had undertaken with the Undercliff Drive contractor, High-

Point Rendel, to Lyme Regis. This apparently extended to the files held by

both the Council’s in-house lawyers, and their external advisers. This

conduct raised significant concerns as to the integrity of the investigation.

For this reason those officers were also suspended.

6 As the investigation unfolded, it became clear that Mr Matthews and Mr

Gallin, along with Mr Spencer, the Purchasing Manager and Mr Streets, the

Programme Lead for Compliance, all had significant involvement in the

factual matrix concerning Undercliff Drive and that they ought to be brought

within the scope of the investigation. Preliminary Investigation Reports

were prepared and those officers suspended (to the extent that they were

not already) as a neutral act during that investigation.

6.1 In total seven officers were suspended. Of those, Mr Wilkinson had

additional statutory protections by virtue of his designation as the Chief

Financial Officer, and the Council agreed with Mr Lawson, to confer on him

the benefit of the same process, even though he was not the Monitoring

Officer (and therefore not entitled to it) at the time of his suspension.

7 Terms and Conditions of Employment

7.1 An early issue that presented itself was that the contractual arrangements

including the terms and conditions on which these senior officers were

employed was in some cases unclear. For example, Mr Lawson remained on

the NJC ‘Green Book’ terms and conditions of service on which he had first

been employed in 2002, despite his very significant promotions since then.

This led to confusion and a number of disputes between the officers and the

council that were wholly unnecessary.




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7.2 It should be noted that the local disciplinary rules and disciplinary

procedure have not been reviewed since 1999, despite several significant

changes in the law: the Employment Act 2002; the Dispute Resolution

Regulations 2004 made under that Act; and the Local Authorities (Standing

Orders) (England) Regulations 2001.

7.3 It should also be noted that suspension is seen, in law, as a neutral act – it

is neither accusatory nor probative of anything. That is one reason why

suspension is on full pay.

8 Designation of statutory officers

8.1 An issue that caused considerable dispute between the Council and Mr

Lawson was his designation (or rather de-designation) as the Monitoring

Officer. The Council’s constitution (drafted and kept under review by Mr

Lawson) designated the Chief Legal Officer as the Monitoring Officer.

However, Mr Lawson had never held the post of Chief Legal Officer (a post

currently held by Ms Pat Szatter). He had, however, been the Monitoring

Officer throughout his employment with the Council, except for the period

in which he was seconded to be the Acting Chief Executive (January to June

2006) and the period of his Career Break (February to April 2007).

8.2 It was not expressly clear in the Constitution who could or should designate

the posts of Monitoring Officer or Chief Financial Officer (under Section 151

of the Local Government Act 1972). In the absence of any provision in law

or the Constitution reserving the matter to the full Council or a committee

of members, the Chief Executive appointed Ms Szatter to act as Monitoring

Officer in Mr Lawson’s Career Break absence. The Chief Executive has also

had to designate Ms Anna Klonowski and later, Mr Burbage to act as the

Chief Financial Officer during Mr Wilkinson’s suspension.

8.3 Each of these posts (and the Head of the Paid Service) has specific powers

and duties attached to them. Those duties must be performed personally by




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the designated post holder. Such posts also carry with them protection from

disciplinary action because of these important statutory duties. In short

such statutory protection limits the power of suspension without an

independent review to two months’ duration, and requires any disciplinary

action to be undertaken only in accordance with a recommendation of a

Designated Independent Person.

8.4 The issue for Mr Lawson was that if he was not the Monitoring Officer at

the time of his suspension the special statutory provisions on disciplinary

action which apply to that post would not apply to him. The position on this

was finally resolved in August when the Council entered into a Compromise

Agreement with Mr Lawson to the effect that, in return for him dropping

various Employment Tribunal claims, the Council would agree to appoint Mr

Stewart Dobson to act ‘as if’ he were the Designated Independent Person.

8.5 Mr Stewart Dobson was appointed by agreement of the parties to act as (or

in Mr Lawon’s case as if he were) the Designated Independent Person

(“DIP”). His reports in relation to each have already been published. His

findings of fact and recommended disciplinary actions should be read in

conjunction with this Report.

9 Outcomes of the Disciplinary Process

9.1 Whilst Mr Gallin appears to have taken day to day responsibility for project

management of the scheme the lettings of the contract can be traced to

actions of Mr Matthews. Frankly it appears that when Mr Gallin was acting

on behalf of the Council in his dealings with HPR he was doing as he was told

by Mr Matthews. Why they decided to act in this way has not been

established.

9.2 It is clear that there were multiple failures of the internal controls,

obligations to record, report, investigate, monitor and ensure compliance

with the internal rules, or to remedy the defects when found. Those




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failures can be accurately described as systemic failings within the

organisation.

9.3 Within that several officers were found wanting in their conduct and

capabilities. Some were reckless, others indifferent, but all failed to

discharge important elements of their duties to the Council. There was an

apparently widespread failing to understand, or follow, basic council

procedures in the Engineering Department, and what can be best described

as indifference or tolerance of this by the rest of the organisation. It is

difficult to apportion ‘blame’ and it is unhelpful to the organisation to dwell

on that issue, as a blame culture does nothing to encourage reporting. As

ever, it is not the original failures that have been the cause of the problems,

or indeed this investigation, but the subsequent failings to investigate the

failings, report them and remedy them.

9.4 To summarise the outcome of the disciplinary action against each of the

officers in turn:

Paul Wilkinson

9.5 Mr Wilkinson was the Finance Director from 2003. He was also the Council’s

Chief Financial Officer. The allegations against him and the decision of Mr

Dobson are set out in that report and do not need to be repeated here.

However, it should be noted that Mr Dobson found that Mr Wilkinson’s

failings were acts of omission. It was what he did not do, rather than

anything that he did, which was the cause for criticism. That said the

Council was entitled to rely on Mr Wilkinson, both as Finance Director and as

its statutory Chief Financial Officer, to know what was happening, to bring

about a culture of compliance and to blow the whistle, not least to

members, when things went wrong.

9.6 Mr Dobson identified a number of ways in which Mr Wilkinson failed to do

that. He recommended that Mr Wilkinson should receive a written warning.




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The Committee could not, by law, impose any other disciplinary sanction

and so accepted this recommendation. However, the Committee felt that

the failings identified by Mr Dobson were of such magnitude that the Council

could not reasonably have trust and confidence in Mr Wilkinson in the

future. Particularly, Mr Wilkinson had misconceived the scope and purpose

of his role, and even at the final disciplinary hearings he did not recognise

that he was in error. It was agreed that Mr Wilkinson would retire early, but

without any enhancement to his pension benefits.

John Lawson

9.7 Mr Lawson was the Monitoring Officer and Head of Legal Services from 2002

and during all the material times under investigation. The DIP found as a

matter of fact that Mr Lawson was guilty of serious misconduct. His were

also acts of omission, but of a more serious nature than the omissions of Mr

Wilkinson. This was because Mr Lawson knew more and sooner, and he had

more opportunity to bring things to order and/or blow the whistle. Mr

Dobson concluded that the Council could reasonably have lost trust and

confidence in Mr Lawson.

9.8 The Committee agreed with Mr Dobson’s conclusions. Although Mr Lawson

had already resigned by the time of his final disciplinary meeting, the

Committee concluded that he could not be allowed to work his notice and

terminated the employment with immediate effect. This decision is under

appeal by Mr Lawson.

Derek Rowell

9.9 Following his suspension Mr Rowell became ill and was signed-off sick by his

doctor. He co-operated fully with the Council and attended the Council’s

independent occupational health adviser on a number of occasions. The

medical advice was that Mr Rowell was unable to properly participate in a

disciplinary hearing, and would remain unable to do so for some




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(indeterminate) time to come. Mr Rowell was the Strategic Director, and he

had ultimate responsibility for the Engineering Services Department.

Although at several points in the process Mr Rowell did blow the whistle and

had correctly identified the failings in his own team, he had not actually

done anything to regularise matter.

9.10 He did not insist enough, he did not effectively line manage Mr Matthews or

take action to discipline those who were at fault. In this case the

Committee concluded that, having regard to his ill health, the length of

time it would take for him to recover sufficiently to participate in the

process and the cost, in terms of the pay bill that would be incurred, Mr

Rowell should be allowed to resign his employment with immediate effect.

He was paid in lieu of two months notice.

Stephen Matthews

9.11 Mr Matthews was also signed off sick, but in his case the Council’s

occupational health adviser confirmed that Mr Matthews was fit and able,

with appropriate modifications, to participate in a disciplinary process.

9.12 The evidence against Mr Matthews was perhaps the most serious. Mr

Matthews had been aware of the Undercliff Drive contract throughout. He

was aware of the Phase 1 contract to HPR in 2001 and failed to ensure that

it was reduced to writing or that it complied with internal or external

requirements at all.

9.13 Although he had sought Mr Streets’ advice in 2004 prior to letting the Phase

2 contract, Mr Matthews failed to follow the advice Mr Streets had given.

Indeed he failed to comply with even the most basic requirements in terms

of procurement, contracting or financial arrangements. In fact he tried to

subvert that advice by proposing, through Mr Gallin, a waiver to Contract

Standing Orders, even when he had been told by Mr Streets that this was not

appropriate.




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9.14 In addition, there was evidence that Mr Matthews and Mr Gallin had

conspired to remove documents from the Council’s files which confirmed

their attendance at a site visit to Lyme Regis as guests of HPR. No credible

explanation has ever been given as to why they sought to remove such

documents.

9.15 Mr Matthews failed to attend a review meeting with the Occupational

Health Adviser and failed to attend the Disciplinary Committee convened to

consider the evidence against him on three occasions. The Committee

considered evidence of his ability to attend and considered his refusal to do

so unreasonable. In his absence the Committee considered the evidence

and concluded that Mr Matthews was guilty of gross misconduct. He was

summarily dismissed.

John Spencer

9.16 Mr Spencer was the Purchasing Manager and the in-house expert on public

procurement requirements. His was a peripheral role to the totality of the

Undercliff Drive, but it was important nonetheless. Mr Spencer was

consulted by Mr Streets, his line manager, as to the proper advice to give Mr

Matthews in relation to the Phase 2 work. His advice was largely correct,

except for a deliberate proposal to take a ‘pragmatic approach’ and turn a

blind-eye to the need to procure Phase 2. Mr Streets rightly omitted that

advice from his Memorandum to Mr Matthews, and instead tasked Mr

Spencer with assisting in the procurement process and in assembling a

Framework Agreement. Mr Spencer failed to progress this because he said

there was insufficient data available from the finance system. He did not,

however, tell any of his line managers that he had stopped. Even if the

Framework Agreement had been completed it would not have remedied the

difficulties with the Phase 1 contract, nor procured Phase 2 correctly. Mr

Spencer was disciplined by a Director of the Council and has now returned to

work. He has submitted an appeal against the disciplinary decision.




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Bob Streets

9.17 Mr Streets was the Council’s Compliance Manager and Deputy Section 151

Officer. Like Mr Rowell, he became aware of the problems with the Phase 1

contract at least in January 2004. When asked, he correctly advised Mr

Matthews to procure Phase 2 in accordance with the law and the necessary

Council requirements.

9.18 As Compliance Manager he should, however, have done more to both ensure

that his advice was followed and that the Chief Financial Officer was

informed. Mr Streets suffered from a distinct absence of any line

management from Mr Wilkinson (for example Mr Wilkinson never instructed

Mr Streets as to the sort of issues that he, as Chief Financial Officer, wanted

to be kept informed of) and from the general culture of non-compliance. Mr

Streets’ disciplinary case was considered by a Director of the Council. He

has now returned to work in a different role.

Nick Gallin

9.19 Mr Gallin was suspended on 23 February 2007. He resigned on the 2nd

November 2007 stating that his “resignation would be preferable than to

subject [himself] to the forthcoming hearing. Mr Gallin was one of the most

junior officers involved in the case, though his involvement was one of the

most direct in terms of acts of commission.

9.20 It was Mr Gallin who had day to day responsibility for the Project and he

was involved with the letting of the Phase 2 contracts. Further Mr Gallin

signed off the majority of HPR’s invoices for payment, including those that

contained the cost of Mr Gallin and Mr Matthews receiving hospitality from

HPR. It was Mr Gallin who proposed a waiver to Contract Standing Orders

when he knew or ought to have known they applied. It was Mr Gallin who

sought to remove documents from the Council’s files after the investigation

had begun, and Mr Gallin (together with Mr Matthews) who accepted




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hospitality from HPR and failed to declare it.

9.21 Mr Gallin was not line managed adequately or at all, and the influence of

his manager appears to have had a heavy imprint on his actions. Had Mr

Gallin not resigned we would have recommended that he face disciplinary

action.

10 Recommendations

10.1 In this section of the report we comment on the procedural issues that we

encountered both as part of the investigation and as a result of the

investigatory process itself.

10.2 These recommendations are drawn from our experience as lawyers who

specialise in the local government sector, assessing what we found in this

case, against reasonable expectations and delivery elsewhere. We are

aware that the Council has taken steps to review its procedures and to give

effect to some of the recommendations set out below as matters have come

to light. However, the Council will want to consider drawing together an

implementation plan, a reporting framework and resources appraisal for any

of the actions we recommend below.

10.3 We consider that the Council should undertaking an audit of all senior

(Deputy Chief Officer and above) officers terms and conditions of service to

ensure that they are clear and in the correct form. The Council should

note that the model disciplinary procedures for Chief Officers set out in

the JNC is subject to local variation. The Council may want to explore the

prospect of having a single set of disciplinary procedures for all staff.

10.4 The Council should review and revise both the local Disciplinary Rules and

the Disciplinary Procedure to ensure that they comply with the law. The

Council will want to consider the number of stages and involvement of

members in both disciplinary and grievance procedures. We recommend

that the route of appeal to Members is restricted to Chief Officers and that




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Members monitor through a report, twice a year, from the Head of Human

Resources on the number of grievances and disciplinary cases dealt with

under delegated powers.

10.5 The Council should review the Constitution so as to make it expressly clear

who can designate both Statutory and other Chief Officer posts, and in

what circumstances, if any, the Chief Executive can change those

designations.

10.6 It is evident that during the material times studied in this Investigation

there has been inadequate, or absent, line management and appraisal

arrangements in place or operated. The Council should review its appraisal

policy to ensure that it is an effective tool to assist both managers and

their subordinates to understand what is expected of them and to identify

any training needs. Regular (3-4 monthly) reviews should assist in keeping

track of key issues. Appraisal of Chief Officers, whilst undertaken by the

Chief Executive, should include the Cabinet Member with portfolio

responsibility for that area of service and feedback from the Scrutiny

Chair.

10.7 The Statutory Officers (Monitoring Officer, Chief Finance Officer and Head

of Paid Service) must ensure that there are adequate communication

arrangements between them, so that the Council is not placed in the

position where one thought another was dealing with an issue. Matters

such as compliance often require a corporate response and, whilst it is

acceptable for one officer to lead, the others must both personally involve

themselves and be satisfied with the response. It may be appropriate for

the Statutory Officers to have formal review meetings. As all three sit on

the Corporate Management Team, this should be unnecessary.

10.8 The Chief Finance Officer needs to ensure that the whole organisation

understands the importance of compliance and the sort of issues that need

to be drawn to his personal attention. This is especially the case for staff




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based in departments away from County Hall, where the presence of the

Chief Financial Officer may seem more remote.

10.9 The Monitoring Officer must ensure that the organisation, and especially

Committee Services, finance staff based in departments and members

(both the executive and scrutiny) properly understand the issues that need

to be checked and reported. A culture of over-reporting is to be preferred

to one of under-reporting, as this enables the Monitoring Officer (or Chief

Finance Officer as the case may be) to consider what action, if any, needs

to be taken.

10.10 The organisation must work to encourage both internal and external

stakeholders to raise concerns without fear or favour. The Chief Executive,

Leader, Chair of the Audit Committee and/or the Standards Committee

should review any such reports made and the action taken to investigate

them on a regular basis. It may be helpful to review the confidential

reporting procedure and facilities, such as the availability of a ‘hotline’ or

email box both for verbal and written reports.

10.11 Effective scrutiny of the officers and of the Cabinet members by the

Council and the Public is dependant on a flow of information. The Council

should investigate a memorandum of understanding between the officers,

the Cabinet and the Council Scrutiny Chair to review Access to Information

and the level of detail reported to members.

10.12 The Council should review (and revise upwards) the level of support for

corporate functions. Notwithstanding the very real budget pressures on the

Council and the inevitably correct prioritisation of frontline services, the

integrity and robustness of all the Council does both as a provider and as a

commissioner is dependant on robust decision taking, accurate legal and

financial advice and compliance monitoring through internal audit and the

procurement function.




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10.13 The Council should take steps to instil a cultural change, especially in

Engineering Services, with a move away from compliance being seen as

mere bureaucracy, to an understanding that demonstrating best value,

complying with the law, and keeping an audit trail are an essential part of

what local government is about and essential elements to the process of

accountability for the expenditure of public funds.

10.14 There must be an urgent and comprehensive audit of the contractual

arrangements that the Council has in place now, in every department. This

should note the value of the contract, its duration, when it was let,

whether it has or can be extended, the contract price, that the terms and

conditions comply with the Council’s CSOs and whether it was let in

compliance with the EU rules. There are software packages available at

modest cost to then track this information on a rolling basis. If there are

other examples of unlawful lettings or non compliant terms and conditions

a risk assessment should be undertaken and a recovery plan implemented

for each case.

10.15 The Council’s approach to risk management should be reviewed. It was

evident from this case that both the Chief Financial Officer and the

Monitoring Officer took a very narrow view of their obligations and failed

to consider the wider financial, reputational or legal risks to the

organisation. Significant costs can be saved by undertaking a proper risk

analysis at the outset and deciding upon a proper course of action which is

explicit, documented and understood.

10.16 The Council may wish to seek a review with the Audit Commission and the

District Auditor to understand their approach in this case. External auditors

are watchdogs not blood hounds, but it is unfortunate that although various

‘low key’ reports were made to the District Auditor about issues relating to

Undercliff Drive, he did not ask further questions of the Council or require

that the matter be investigated.




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10.17 It was also surprising that the main conduit of information appeared to be

through Mr Lawson, the Deputy Chief Executive, rather than involving the

Director of Finance and the Chief Executive. The Council will want to

revisit the effectiveness of the existing channels of communication with

the District Auditor. The Audit Commission and the District Auditor may

want to consider whether they have had access to the relevant materials at

the relevant times and whether there was any action that the District

Auditor could or should have taken to discover these issues at an earlier

date.

10.18 The District Auditor has certain statutory powers, including making a report

under Section 8 of the Audit Commission Act 1998 (a Report in the Public

Interest); the District Auditor may wish to consider whether such a report

is necessary or helpful in this case.

10.19 The Council may want to consider whether regulatory authorities, such as

CIPFA, the Chartered Institute of Purchasing and Supply and/or the

Solicitors Regulation Authority should review the findings of fact and the

conduct of their members. The Council may also want to consider whether

there is any evidence that merits a referral of the report to the Police.

10.20 The strength and effectiveness of the professional advice available to the

Council should be reviewed both by the Interim Head of Procurement and

the new Director of Legal and Democratic Services. There should be a

skills and capabilities audit to critically assess what training and

development needs exist. Legal Services in particular should review the

arrangements for and adequacy of supervision of staff, including checking

correspondence and advice for content and accuracy. In this case a

request for urgent advice from a Strategic Director took more than 6

months to be fulfilled. There needs to be a system which ensures that

requests for such urgent assistance are prioritised.

10.21 The rules and practices on declaring offers of gifts and hospitality need to




22

be reviewed and compliance with the policy needs to be monitored and

reported effectively. A simple ‘on line’ data room may assist and could be

open to both members and the public for inspection on the website. It is

also a matter that both the Executive Cabinet and a committee of the

Council (such as the Audit or Standards Committee) may wish to keep

under regular review.

10.22 The Council should consider a programme of training in both procurement

and financial procedures/CSOs for all existing staff and new joiners

together with bulletins issued by the Chief Financial Officer and Monitoring

Officer with regular reminders/rule changes. Procedures relating to the

waivers and derogations from CSOs need to be reviewed and exception

reporting made transparent by way of reports to members of the Executive

Cabinet and Scrutiny.

11 Conclusion

11.1 Without doubt, this has been a bruising, painful and extremely expensive

exercise for the Council. It can be argued that the overall costs, compared

with severance packages and pension strain costs that the Council could

have paid, is not greatly disproportionate. But the real test of value is

whether there is a resulting change in culture, reliability of processes,

corporate capacity and compliance. In this respect, the future is in the

hands of the members and senior management team.


Private & Confidential - Undercliff Drive

Section 3 – Investigation Evidence

23

In more detail:

12 Background

12.1 Undercliff Drive is a coastal road on the Isle of Wight with inherent land

instability problems. The Council commissioned HPR to complete the

following projects for Undercliff Drive:

(a) several one-off minor investigatory projects between December 2000

and March 2001;

(b) a risk assessment commissioned in April 2001 (following a serious

landslip) and completed in approximately July 2001 (“the initial

appointment”);

(c) consultancy services from November 2001 to September 2003 on the

design and commissioning of a temporary road and on the design of a

full scheme for an application for government funding (“Phase One”);

and

(d) consultancy services for the main phase of the design project from

early summer 2004 to date. This included undertaking tendering

exercises on the Council’s behalf, site investigations and risk

assessment, working on the planning application, consulting

interested bodies, preparing the Environmental Assessment, working

on the Council’s defence to judicial review proceedings and general

project management work (“Phase Two”).

12.2 Between 1 April 2001 and 30 April 2007 payments totalling over £2 million

were made either directly to HPR or to Contractors procured by HPR on the

Council’s behalf.

12.3 On the 25 January 2005 Addleshaw Goddard advised the Council that the

appointment of HPR to Phase One was unlawful (page 199). This advice

was confirmed in a report by Sharpe Pritchard dated 21 June 2007 (pages




24

348 and 349). This is because the value of the contract had exceeded the

Services Threshold in the Public Services Contracts Regulations 1993 (the

applicable regulations at the time). As none of the exemptions provided for

in the regulations applied the contracts should have been let only after an

open competition. They were not. It was not open to officers or the

Council to grant waivers from these obligations.

12.4 In addition to agreeing with Addleshaw Goddard on Phase One Sharpe

Pritchard pointed out that the appointment of HPR for Phase 2 was also

procured in breach of the relevant procurement regulations. Further,

Sharpe Pritchard pointed out that no written contracts were concluded for

either phase. This was a very serious failure in respect of the Council’s

CSOs and has exposed the Council to very significant risks. For instance a

lack of a written contract means that the Council cannot rely upon

extended limitation periods in case of negligence by the contractor, which

could and should have been avoided (page 349, paragraph 2.9).

12.5 It should also be noted that the approach taken by officers means that it is

difficult for the Council to meet its obligation to demonstrate that Best

Value has been obtained in respect of either phase.




25

Narrative

13 Pre-April 2001

13.1 We have found evidence that the Council has a long standing relationship

with HPR dating back at least to the 1990s. Sharpe Pritchard in their

report determined that HPR’s most recent involvement with Undercliff

Drive began with minor investigatory projects between December 2000 and

March 2001 (page 356). It should be noted that Robin McInnes, the Coastal

Manager at all relevant times, was involved in instructing HPR for

investigatory works at Undercliff Drive during 2000 and 2001 (pages 3, 13

and 15). While Dr McInnes told us that he had a strong personal friendship

with Dr Clark he said that he had declared that to Felix Hetherington in

1995 and felt that as a result of that he had no conflict of interest in

continuing to instruct them. Dr McInnes provided us with a copy of his

letter to Mr Hetherington (page 2A) and Mr Hetherington’s reply (page 2C).

Dr McInnes suggests a methodology for dealing with contracts in future and

Mr Hetherington’s reply confirms that Dr McInnes’ interest will be notified

to Personnel, Audit and registered on the Register of Officers’ Interests. It

should be noted that we have not interviewed Mr Hetherington or

confirmed that the interest was in fact registered appropriately. Dr

McInnes did not raise the potential conflict with any of Mr Hetherington’s

successors after such registration and continued to instruct HPR.

13.2 The focus of this report covers events from April 2001 when the most

serious landslip occurred at Undercliff Drive until February 2007 when

Messrs Matthews and Gallin were suspended. It is during this period that

the actions of officers under investigation and subject to disciplinary

procedures took place.

14 2001

14.1 The evidence shows that instructions to HPR in response to the emergency

situation at Undercliff Drive were initially given by Malcolm Smith,




26

Principal Maintenance Engineer under the direction of David Jaggar,

Director of Environment Services. It appears that Dr McInnes was also

involved at this stage to assist with obtaining central government funding

for the work at Undercliff Drive (as well as a number of other sites on the

Isle of Wight) through the Bellwin Scheme for emergency financial

assistance following storm damage in early 2001.

14.2 It appears likely from the evidence that following the deterioration of the

Undercliff and landslip on 2 April 2001 both the Council’s Coastal

Management team and Highways department were involved and attended

meetings on site to review the damage caused and consider an appropriate

response. We heard evidence that Dr McInnes, Mr Jaggar and Mr Smith

attended these meetings.

14.3 Dr McInnes’ evidence is that a couple of days after the landslip Nick Gallin,

Principal Highway Services Engineer, said that the Highways department

would be treating the project as their scheme and that they did not require

Coastal management to be involved. Mr Gallin denies telling Dr McInnes

this but acknowledges that as funding for the scheme was to be obtained

from the Department for Transport it was run by Highways from the outset.

Mr Gallin stated that Dr McInnes was involved in the first few days

following the landslide but was not involved going forward, other than

showing a general interest.

14.4 Following the April 2001 landslide HPR were instructed to carry out a more

intensive site investigation and prepare a report on the risks and options

regarding the reinstatement of the Undercliff Drive. The documentary

evidence appears to contradict the recollections of both Mr Gallin and Dr

McInnes as it shows that Dr McInnes was involved in the process of

instructing HPR up until HPR provided their Remediation Options report in

July/August 2001 (page 3, 13 and 15). Mr Gallin’s evidence is that Mr

Smith was involved in instructing HPR at this stage.




27

14.5 None of the officers interviewed provided any rationale as to why HPR

were chosen to undertake the work. However, there is consistent evidence

that they were seen as very credible for a combination of reasons: they had

previously done work in respect of Undercliff Drive and knew the area; Dr

McInnes knew Dr Alan Clark of HPR personally and believed him to be a

leading expert in this field; and HPR appeared on the Coastal department’s

‘select list’ of contractors which was compiled in 1995 (page 1). Mr

McInnes gave evidence that this list was put together as part of a Shoreline

Management Plan and formally approved by the Council. We have not had

the opportunity to verify this. He explained that the Coastal department

received 45 submissions from consultants following an advert being placed

in the New Civil Engineer Magazine. It is not clear whether this list was

procured in compliance with EU regulations which would be a requirement

in order to allow a contractor to be engaged without a further procurement

exercise. 2

14.6 Stephen Matthews (appointed as Head of Highways & Transportation in

2000) appears to have become more involved at this stage. The

documentation suggests that he attended a meeting with the Department

for Transport and Local Government (“DTLR”) and the Government Office

for the South East (“GOSE”) on 10 July 2001 (page 78) to discuss the effects

of storm damage following the previous year’s winter. HPR’s ‘Remediation

Options’ report was presented during a meeting on 30 July 2001 for Mr

Matthews’ consideration (page 82).

14.7 On 2 October 2001 the Cabinet approved a request (made in a report

prepared by Mr Malcolm Smith) to go ahead with the design of a temporary

road diversion at Undercliff Drive and that further site investigation go

ahead prior to the subsequent final design of the final scheme (page 91).

No reference to the procurement or selection of HPR appears to have been

2 It should be noted that the Coastal Department were/are in the habit of using contractors from the select list without resort to a procurement exercise. We have found evidence that other contracts, for example, Castle Haven have been undertaken by HPR at the request of this department and without recourse to such an exercise.




28

made at this meeting.

14.8 Mr Matthews met with HPR on 6 October 2001. On 12 October 2001 Dr

Clark wrote to Mr Matthews setting out HPR’s proposals for the provision of

consultancy services for the remediation of the Undercliff Drive (page 96).

On 1 November 2001 Mr Matthews wrote to Dr Clark confirming that HPR

should commence the works set out in Dr Clark’s letter of 12 October 2001

and requesting regular progress updates (page 99). In interview Mr

Matthews explained that he had proceeded with the appointment of HPR

on the back of the Cabinet’s decision on 2 October 2001. However, Sharpe

Pritchard concluded that there was no evidence that a lawful and

compliant procurement process had been followed at this stage. It is not

clear what discussions Mr Matthews had with Mr Smith or Mr Jaggar prior to

instructing HPR to carry out work in October 2001. As Head of Highways

and Transportation Mr Matthews authorised the works and let the contract

to HPR. He knew or ought to have known that doing so without following

CSOs was wrong.

14.9 On 1 April 2002 Mr Matthews was promoted to the position of Head of

Engineering Services.

14.10 At our first interview with Mr Matthews he stated that he had not been

involved with the Undercliff Drive project until he raised his concerns with

the procurement of HPR in late 2003. This is clearly in contradiction with

the documentary evidence referred to above which shows that he was

actively involved in both the outcomes of the Initial Appointment and the

procurement of HPR for the Phase 1 appointment.

14.11 We found no evidence that a written contract was put in place. In his

second interview Mr Matthews admitted that it was the contracting

department’s responsibility (Engineering Services) to ensure that a contract

was in place and that as he was Mr Gallin’s line manager he was also

responsible for ensuring that it was in place. Despite the fact that CSOs




29

required that such a contract should be in writing (page 110), and should

only be let following competition, this clearly did not happen in this case.

No officer was able to give a coherent or convincing explanation for this.

14.12 There is no evidence that John Spencer (appointed as the Council’s

Purchasing Manager in 1998) was involved in, or consulted about, the initial

procurement of HPR.

15 2002

15.1 In September 2002 John Lawson joined the Council as Head of Legal and

Democratic Services and was appointed as its Monitoring Officer. At

around the same time in 2002 Mr Gallin took over responsibility for project

management of Undercliff Drive from Malcolm Smith.

15.2 Bob Streets, who was already a Senior Finance Officer with the Council,

was appointed as Programme Lead for Compliance in 2002.

16 2003

16.1 Mr Wilkinson became the Chief Financial Officer and the Council’s section

151 Officer on 1 April 2003 with overall responsibility for the Council’s

financial arrangements, including Financial Procedure Rules and Standing

Orders as to Contracts.

16.2 In August 2003 Derek Rowell joined the Council from Scarborough Borough

Council and took over from David Jaggar in the role of Strategic Director

for Environment Services.

16.3 Sharpe Pritchard have advised that Phase One of the project finished in

September 2003 however it is worth noting that uncertainty over dates,

scope and terms of the arrangements with HPR continue as a result of the

early failure to reduce the contract to writing.

16.4 On 22 December 2003 John Spencer, Purchasing Manager, sent an email

informing Officers of the Council of changes to the EU procurement




30

thresholds taking effect from 1 January 2004 (page 114). As stated in

13.10, above, Mr Matthews gave evidence that this was what prompted him

to raise the procurement of HPR with Mr Streets. However, Mr Gallin’s

evidence was that he had discussed the procurement problems with Mr

Matthews prior to 2003.

17 2004

17.1 On 6 January 2004 Mr Streets sent an email to Mr Matthews following a

telephone conversation about future expenditure with HPR on the

Undercliff Drive project (page 116). Mr Streets advised that fees of the

magnitude they envisaged would require the contract to be subject to EU

procurement rules and that Mr Spencer would be able to advise Mr

Matthews on what would be necessary to proceed along this route. Mr

Streets also stated in his email that he had discussed with Mr Spencer the

possibility of a framework agreement as a method of regularising the

procurement of consultants in future. Later that day Mr Matthews replied

thanking Mr Streets for the information and agreeing that the framework

agreement sounded like a good idea (page 117).

17.2 That same day Mr Streets emailed Stuart Fraser (Programme Lead Financial

Management) about this and stated “Over the last ywo [sic] years we’ve

spent perhaps £300k with Rendells- with hindsight, that should have been

subject to the [EU procurement] rules too!!!!” (page 118). This does not

appear to have been treated as any evidence of a breach of the Council’s

Financial Procedure Rules by Mr Streets or Mr Fraser. No report was made

(as was required) to the CFO, Mr Wilkinson or to the Monitoring Officer, Mr

Lawson.

17.3 Mr Matthews had a meeting with HPR on 12 January 2004. He then received

a letter from Dr Clark dated 14 January 2004 (page 119) which documents

that the 12 January meeting was “to discuss the next stage of the project”.

The letter goes on to set out reasons why HPR believed it provided “Best




31

Value” for the Council and argues that they should be instructed for the

further work. This letter from Dr Clark is crucial in a number of respects.

The HPR letter of 14 January is evidence that HPR believed that the

Council had a choice of provider for the further works envisaged in the

letter.

17.4 It follows too from this that there had been a previous arrangement; that

that arrangement had come to a break point; and that it was possible to go

out to tender for the provision of such advice at that point. Mr Mathews

sought advice from Mr Streets. Mr Streets conferred with Mr Spencer and

then instructed Mr Matthews that there was no alternative than to undergo

a full EU Procurement at that stage. Mr Streets copied his advice to Mr

Spencer and Mr Lawson.

17.5 Mr Matthews failed to follow the advice. Mr Spencer failed to follow-up

the offer of advice on how to proceed. Mr Lawson failed to deal with the

fact that there had been one unlawful procurement, or notice that there

was about to be another. Indeed he did nothing to investigate, follow-up

or anything at all other than pass the memo to a lawyer in his team,

Matthew Bridger. Had Mr Matthews, Mr Spencer or Mr Lawson taken any

meaningful steps to follow-up Mr Streets’ advice and ensure it was

complied with at that stage, the further unlawful procurement that

followed might well have been avoided.

17.6 In any event Mr Matthews has failed to provide any clear explanation as to

why he proceeded despite the advice he had received from Mr Streets. Mr

Gallin’s evidence was that he was aware of correspondence between Mr

Matthews and Mr Streets but not of its content.

In more detail:

17.7 Mr Matthews and Mr Streets both confirmed in interview that Mr Matthews

sought advice on the HPR letter dated 14th January and the procurement




32

issue arising from it. Mr Streets in turn spoke to Mr Spencer as the

Purchasing Manager. In any case, Mr Spencer provided advice by email to

Mr Streets dated 26 January 2004 (page 123) on the matter. Mr Spencer

was provided with a copy of Dr Clark’s letter and had discussions with Mr

Streets on this issue. It seems clear on any objective reading that the issue

in contemplation in Mr Spencer’s note is the procurement of the 2004

contract (“Phase 2”), though Mr Wilkinson and Mr Spencer denied this was

the case in their disciplinary hearings.

17.8 Mr Spencer’s email advised Mr Streets that “it is clear that the contract for

this consultancy work is subject to the requirements of the EU

Procurement Directives”. He advised that the urgency at Undercliff Drive

was “insufficient reason to gain exemption under the EU rules because that

requires extreme unforeseeable urgency”. He referred in passing to two

other exemptions which “[a]lthough highly tenuous, it might just be

possible to argue”. Having set out the applicable law, however, Mr

Spencer concluded that “All things considered and given the current state

of play, I am tempted to suggest that pragmatically we simply do as Nelson

did (“I see no ships”)!” Mr Spencer admitted during his first interview with

the investigation team that this “was really a dodgy reference” and that he

was saying “almost turn a blind eye”. Clearly as the Council’s procurement

manager this is advice he should never have given. Mr Spencer says now

that his rationale for giving this advice was that the risk of legal challenge

to the Council for the original breach of the EU legislation had passed by

2004. In his view there is also no conclusive case that the two phases

determined by Sharpe Pritchard were not part of the original contract

awarded to HPR. Nevertheless, Mr Spencer’s advice did not take account

of the risk to the Council of a further breach and, in our opinion, could be

read to condone such a breach. When asked Mr Spencer’s explanations

seem confused on whether he was advising on an act which had already

occurred or one that was about to happen. It goes without saying that if

Mr Spencer was not clear on what he was asking to advise it was his




33

obligation to find out or risk giving negligent advice.

17.9 Mr Streets replied on 26 January 2004 to Mr Spencer thanking him for “a

very comprehensive assessment” and advising that he would “draft a reply

using most of this!” (page 124). Mr Streets’ advice to Mr Matthews was

sent as a memorandum dated 27 January 2004, copied to Mr Spencer and

Mr Lawson (page 126). This appears to have been Mr Lawson’s first

involvement with the project.

17.10 Mr Streets included much of Mr Spencer’s wording verbatim but did not

include his suggestion that the Council should ‘do as Nelson did’. Instead

Mr Streets concluded that he could “see no alternative than to appoint

consultants following a full EU procurement process including

advertisement in the OJEU”.

17.11 Neither Mr Streets nor Mr Spencer carried out any meaningful investigation

into the status of the project or the existing contractual arrangement prior

to giving their advice. Mr Spencer admitted in interview that he did not

speak to Mr Matthews or to anyone else to find out more about the project.

Had they done so they may have discovered that not only had Phase One of

the project been let unlawfully but that no written contract existed

between the Council and HPR. Without such information, Mr Streets and

Mr Spencer were not in a position to provide effective procurement advice

or promote good procurement practice. Mr Streets in particular construed

his role as Compliance Manager far too narrowly focussing only on whether

payments were lawful, rather than a wider ranging remit which was

inherent from his job description and tasks.

17.12 There is no evidence that Mr Streets took any steps either to discipline Mr

Spencer in the light of his email nor to coach him to ensure such poor

advice was never given again. Mr Streets was Mr Spencer’s direct line

manager and Mr Spencer had a key advisory role in relation to procurement

across the Council.




34

17.13 In a significant failing of the Council’s systems Mr Streets failed to draw his

memorandum of 27th January to Paul Wilkinson’s attention. Despite the

fact that it must have been clear to Mr Streets that, if his advice was not

followed the resulting actions could well be unlawful and could expose the

Council to challenge by contractors and/or might lead to very substantial

fines from the EU Commission, he stated in his second interview with us

that his view was that it was not “a section 151 issue”. At the disciplinary

hearing Mr Streets stated that the primary reason for including Mr Lawson

but not Mr Wilkinson in the circulation was that he was more likely to get

support or at least some reaction from Mr Lawson. Mr Wilkinson on the

other hand said that it “might have been helpful” and “given him more

options” if Mr Streets had brought it to his attention at the time. Mr

Wilkinson should undoubtedly have been made aware of the issue.

17.14 Mr Dobson and indeed Peter Keith Lucas, Mr Lawson’s own expert witness

at his disciplinary hearing, confirmed that receipt by a Monitoring Officer

of such an email might cause a reasonable and competent Monitoring

Officer’s ears to “prick up”. Mr Lawson however replied by email to Mr

Streets and Mr Matthews, copied to Mr Bridger on 29 January 2004 (page

128) that he was “not fully appraised of this issue – and as I am away for a

few days have passed the note on to Mat Bridger to keep a watching brief.

Please let Mat know if and when you need legal advice”. This was a

significant failure. Mr Streets did not take up this offer, even when he was

later alerted to Engineering Services’ intention to ignore his advice that

there must be a competitive tender process. More importantly Mr Lawson

took no steps to investigate matters past or present, to appraise himself on

why Engineering Services were breaching the law or internal procedures or

indeed what the relevant law was.

17.15 At interview Mr Gallin said that he knew that there was correspondence

between Mr Streets and Mr Matthews in early 2004 but that he had not seen

the memorandum itself. He did, however, say that he knew “it was a




35

problem”. Similarly he gave evidence that “before we progressed the rest

of the scheme [we should] have gone through the proper procurement

process”. He maintained throughout that he had no idea why they had not

done so. If Mr Gallin did not know the contents of Mr Streets’ memo, he

certainly took no steps to seek it out. He was aware of a problem but, on

his evidence, proceeded without establishing its nature, extent or

consequences. Mr Gallin has said that he did not seek out the

correspondence of Mr Streets’s memo because Mr Matthews led him to

believe that Mr Streets and Mr Spencer were in the process of preparing a

framework agreement which could be applied to the contract with HPR.

This shows a fundamental flaw in his understanding as to what such an

agreement could achieve. Mr Matthews said at interview that he did not

take advice from either Mr Streets or Mr Spencer on how long a proper

procurement process would take. This would have allowed all three

individuals to consider the options available for dealing with the

procurement failures.

17.16 Mr Streets’ evidence is that a meeting took place on 5 March 2004 to

discuss framework agreements (page 129). Mr Streets explained that this

was a meeting called by Mr Matthews to discuss future action. It was not

to discuss what action was required to remedy the failings with Undercliff

Drive. It appears that Mr Matthews, Mr Streets, Mr Spencer, Mr Gallin and

a number of others from Engineering Services attended this meeting.

However, we were unable to find evidence of minutes for such a meeting

and it is not clear that there were any specific outcomes. Mr Streets’

evidence is that Mr Matthews did not inform the attendees of this meeting

that he was about to instruct HPR for the next stage of the project.

17.17 On 6 March 2004 Mr Matthews attended a meeting with HPR at which he

“advised that EU procurement rules generally apply however in view of

HPR’s specialist role and in depth knowledge it was considered that [the

Council] will be recommending HPR to carry out the detailed design and




36

procurement of the scheme. Mr Matthews said he thought the Council’s

approval would take 2 to 3 weeks” (page 130). Clearly Mr Matthews’

actions were directly contrary to the advice/instruction received from Mr

Streets that the contract must be competitively procured. Mr Matthews

has not explained why he did so in disregard of the Council’s legal

obligations, internal procedures and the specialist advice of the

Compliance Manager.

17.18 On 8 April 2004, Mr Holliday of HPR wrote to Mr Matthews and Mr Gallin

enclosing HPR’s “preliminary programme for the detailed design and

contract preparation of the above scheme for your information and

approval” (page 134). This provided the detail of the Phase Two work

which it was proposed that the Council would let to HPR.

17.19 Around 14 April 2004 draft reports were produced variously in the names of

Mr Gallin and Mr Matthews intended for Directors Group (page 134 to 151).

The report’s recommendation was that EU procedures should not be

followed and that the Council should continue to contract with HPR. This

was clearly contrary to the advice received from Mr Streets in January 2004

and to the requirements of EU procurement law. While it was possible for

the Council to waive CSOs it was not possible to waive the legal

obligations. Neither draft of the report was shared with Mr Streets either

by Mr Rowell, Mr Matthews or Mr Lawson despite both the latter officers

having received his original advice. In the event the report was not sent to

Directors group (see paragraph 17.21).

17.20 Mr Matthews’ evidence is that a meeting took place between Mr Matthews,

Mr Gallin and Mr Rowell place sometime in March 2004 to discuss the issue

and it was decided that a report should be produced. Mr Matthews stated

that this report was forwarded to Mr Rowell to be presented at Directors

Group but that he did not receive any feedback on the report from Mr

Rowell. Mr Matthews does not appear to have followed up on this issue




37

with Mr Rowell. Mr Rowell’s evidence is that he asked Mr Gallin to prepare

the report. Mr Gallin said that the report was produced following

discussions with Mr Matthews as to its content and recommendations.

17.21 On 14 April 2004 Mr Lawson received a copy of the draft report produced

by Nick Gallin (page 138). As stated above, it was an explicit

recommendation to breach procurement obligations. It appears that Mr

Lawson took no steps to prevent the proposed continuation of works with

HPR from happening despite the report containing an explicit

recommendation to do so. Mr Rowell’s copy of the draft report is

annotated with the comment “Discussed with JL. Not send to DG on the

basis this did not need a collective decision” (page 149). In interview Mr

Lawson was at a loss to explain why he took no substantive action in

response to this report. He could not recollect his discussion with Mr

Rowell or why the decision was taken to prevent the report from going to

Directors group.

17.22 However, in evidence at his disciplinary hearing Mr Lawson provided

further comment. His view was that Mr Gallin’s report contained a

recommendation which was not appropriate. It should be noted however

that there is no evidence that he took action to ensure that the project

was brought to a halt while he investigated the situation. His note on the

draft report reads “Mathew, this will need a bit of work. Can we speak as

soon as possible & then make contact with Nick Gallin” (page 146).

17.23 Mr Lawson appears to have stopped the report going to Director’s Group

though there is no evidence that either he or Mr Rowell did anything to

either ascertain the exact position either in relation to Phase 2 or Phase 1,

or to ensure that the project was paused until a proper decision could be

made. Instead, the evidence suggests that no one took any action to

prevent the unlawful letting of Phase Two. Mr Matthews’ position at

interview was that he was waiting for someone to tell him to stop. Whilst




38

that ignores Mr Streets’ memo of 27th January, it is clear that at this stage

neither Mr Lawson nor Mr Rowell did so. They clearly should have. In the

circumstances Mr Matthews and Mr Gallin continued to deal with HPR on

Phase Two of the project. There is no evidence that Mr Wilkinson was

informed of the decision to contract with HPR in breach of the public

procurement regulations by Mr Streets, Mr Lawson or Mr Rowell despite the

fact that, in financial terms, it was hoped government money would fund

the project and was considered by the finance department to be the one of

the biggest financial risks the Council faced.

17.24 On 14 April 2004 Mr Spencer and Mr Streets were also sent a copy of Mr

Gallin’s draft report (page 142). This clearly should have alerted them to

the intention to unlawfully let Phase Two without recourse to the required

procurement procedure. The content of the report was directly contrary

to the advice given by Mr Streets in his memorandum that there was no

alternative to following a full EU procurement process. There is no

evidence that either Mr Spencer or Mr Streets were concerned by the draft

report, that they took up the matter with Mr Matthews or Mr Gallin, or,

discussed the matter with Mr Lawson or Mr Rowell.

17.25 Mr Matthews and Mr Gallin attended a meeting with HPR on 4 May 2004

(page 151E). The minutes state that Mr Matthews “confirmed that the

appointment of HPR has not yet been finalised internally however this was

seen as a formality. HPR confirmed they were happy to proceed under

IOWC verbal instruction”. Mr Matthews accepted in interview that

although confirmation of the appointment had not been finalised within

the Council, HPR were already on site carrying out inspections and

progressing the scheme. Mr Matthews could not recall how he received the

instruction to allow HPR to begin the next stage of the project and he

stated that he was aware that HPR had been appointed for the next stage

without the proper procurement process being followed. In doing so Mr

Matthews acted in breach of the Council’s legal obligations and internal




39

rules and contrary to the specialist advice received. He also acted before

the Council’s internal decision making process was complete.

17.26 On 17 May 2004, Mr Spencer forwarded to Mr Bridger and Mr Lawson the

advice Mr Spencer had sent to Mr Streets on 26 January 2004 (page 152). It

should be noted that both Mr Lawson and Mr Bridger had previously

received Mr Streets’ memo of 27th January 2004. Despite this and the fact

that it must have been evident from the Gallin report, which Mr Lawson

received in April, that Mr Matthews and Mr Gallin intended to continue with

the appointment in any case, it appears Mr Lawson still took no action on

receipt of this email to halt the project, investigate further or to ensure

that Engineering Services was complying with the public procurement

regulations.

17.27 It has been suggested in evidence that in January 2004 Mr Lawson formed

the view that external legal advice was required. There is no documentary

evidence to support this. Mr Lawson suggested in evidence that his

manuscript note on the Gallin report (page 146) is evidence that he was

pursuing his goal of obtaining external confirmation of the law. This

appears to have led to Mr Bridger, on 10 June 2004, (having cleared the

text with Mr Lawson) sending an email to Mr Rowell requesting information

and materials “in order to properly evaluate the situation involving the

appointment of [HPR] as engineering consultants for the works at

Undercliff Drive” (page 154). In particular this email requested a copy of

the contract for services setting out the terms and conditions for the

appointment of HPR. The email advised Mr Rowell that Dr McInnes and Mr

Gallin had told Mr Bridger that there was no written contract. Dr McInnes’

evidence is that he is not aware of ever making a response to Mr Bridger on

whether or not there was a written contract as he had no involvement in

the project after July 2001. It seems however that even at this late stage

Mr Lawson had not, either through himself or Mr Bridger, sought to

ascertain the current position with the project or the letting of the




40

contract. This was found to be a breach of Mr Lawson’s obligations as

Monitoring Officer by Mr Dobson.

17.28 Mr Matthews attended a further meeting with HPR on 14 June 2004 at

which he “confirmed [that HPR] continue with the detailed design and

contract preparation” (page 161). On the same day (14 June 2004) as one

of his responses to Mr Bridger’s email of 10 June 2004, Mr Rowell sent an

email to Mr Matthews (copied to Mr Lawson and Mr Bridger) (page 164)

directing him to “arrange for one of [his] service managers to investigate

the procedures which have been followed to award the contract for

geotechnical advice to High Point Rendel”. It went on to say that “I [Mr

Rowell] am most concerned about the seriousness of this case and would be

grateful if you would instruct your investigating officer to recommend to

you whether there is a need to consider disciplinary action as part of his

remit. A fundamental issue will be with the Council’s Financial Regulations

and Contract Standing Orders”. It appears that Mr Bridger raising his

concerns about the project with Mr Rowell in June 2004 prompted Mr

Rowell to send his own emails requesting that action be taken.

17.29 There is no documentary evidence that Mr Matthews replied to this email

or that Mr Rowell followed it up although in his evidence Mr Rowell stated

that he did and Mr Matthews assured him that disciplinary proceedings

were unwarranted. It should be noted that despite Mr Rowell’s instruction

that “you will need to be clear about lead officer responsibility and line

management arrangements for the contract in these investigations”. Mr

Matthews did not make Mr Rowell aware of the extent of his own personal

involvement in the matter, that Mr Matthews had already instructed HPR to

continue work in May 2004 or that he had confirmed those instructions that

very day. Mr Lawson, who was the Monitoring Officer and Head of Legal,

appears not to have responded in any way. Mr Bridger’s evidence is that

he met Mr Gallin to discuss what documents Mr Gallin had been able to

locate.




41

17.30 Mr Matthews gave evidence that he did not think disciplinary action against

Mr Gallin was appropriate because the appointment of HPR had been taken

with the knowledge of his Director at the time (it should be noted that Mr

Jaggar has declined to be interviewed so we have been unable to

corroborate this – there is certainly no documentary evidence to do so) and

that Mr Gallin was at the “bottom of the chain”. There is no evidence

however, that he informed Mr Rowell of the decision in this regard or that

Mr Rowell followed it up with him. Similarly it does not explain the letting

of the Second Phase to HPR in 2004.

17.31 Mr Rowell sent another email that day to Mr Gallin and Dr McInnes (copied

to Mr Matthews, Mr Lawson and Mr Bridger) (page 163) requesting that

documentation relating to the project be collated for the purposes of

instructing external Counsel. Mr Rowell’s evidence is that he agreed the

wording of this email with Mr Bridger in advance. Mr Rowell highlighted his

concern that no documentation appeared to be in place and that this was

in contravention of the Council’s Financial regulations and CSOs. We found

no evidence that anyone except Dr McInnes replied or took any action in

response to this. Mr Gallin’s evidence is that he forwarded this email to Mr

Smith who compiled documentation to be forwarded to Mr Rowell. Of

course as no written contract was in place this must, at best, have been a

limited exercise.

17.32 This alone raises questions in respect of the culture of compliance within

the organisation. Where a Strategic Director writes formally to the

Monitoring Officer, asks for urgent assistance, external legal advice and

disciplinary action yet receives no response this is a cause for serious

concern. It must also be considered what this says of the functionality of

the Directors Team and the role of the Chief Executive Officer at that time

both from the perspective that this behaviour was tolerated at all and in

respect of why no one felt it appropriate (as would seem to be the case) to

involve him in any way.




42

17.33 Dr McInnes replied to Mr Rowell’s email stating that neither he nor his

team had been involved in the procurement of works on Undercliff Drive

(page 165). This is not strictly true (see paragraph 13.1 above). Dr

McInnes also explained that in his view all phases of the work formed part

of an emergency response. This is contrary to the professional

procurement advice of Mr Spencer and Mr Streets and indeed Dr McInnes

backed away from this position to some degree during interview. Dr

McInnes’s email was copied to Mr Matthews, Mr Gallin, Mr Lawson and Mr

Bridger. We found no evidence that any of these individuals responded to

Dr McInnes’s email to challenge his view though Mr Bridger’s evidence is

that he discussed his disagreement with that view with Mr Lawson. One

would have expected, at the least, Mr Bridger (the contracts lawyer) or Mr

Lawson (Monitoring Officer and Head of Legal) to have noted the dissonant

view and sought to satisfy themselves, if they did not know, what the

correct position was or to have taken the matter up if they did.

17.34 Mr Matthews and Mr Gallin met with HPR on 19 July 2004 and said that “a

satisfactory audit trail had been established internally within IOWC” (page

174). This was despite Mr Rowell’s emails to the contrary (above at

paragraph 17.31) and was clearly not the case given both the failure to

open the tender to competition and the absence of a formal written

contract. (It should be noted that Mr Gallin’s evidence is that he was not

made aware of all correspondence from Mr Rowell).

17.35 Mr Gallin wrote to Dr Clark of HPR on 19 August 2004 stating that HPR was

“now employed on the stabilisation works for Undercliff Drive […] I can

confirm that, based on past experience, the good relationship between Isle

of Wight Council and Rendels will continue in completing this particular

scheme” (page 176). In interview Mr Gallin stated that this letter was

given as a reference for HPR, had no meaning in respect of the project and

for this reason could not help us in understanding what was going on at the

time (save for the fact that it was clearly accurate).




43

17.36 On 7 September 2004 Mr Bridger wrote to Addleshaw Goddard with formal

instructions requesting advice on the legality of the contract awarded to

HPR in 2001 (page 177). It should be noted that these instructions were

sent over seven months after Mr Lawson had received Mr Streets’s

memorandum, three months after Mr Rowell’s request for urgent legal

advice and approximately three months after the Council had contracted

with HPR for the start of Phase Two of the project. It is worth noting the

inadequacy of the instructions. They refer to the 2001 arrangements yet

commence with the Phrase that the Council “is wishing to secure

independent advice concerning the legality of a recent contract awarded

for the provision of consultancy services”. Mr Bridger’s evidence is that he

received very little organisational support in relation to this matter and

that the lack of cooperation within the Council and documentation relating

to the project had a detrimental impact on his instructions to Addleshaw

Goddard.

17.37 The instructions fail to reveal the HPR letter of 14th January 2004 or the

attempts to clarify the Phase 2 works. They fail to mention the advice of

Mr Streets and Mr Spencer or to seek a view as to which of them were

correct; or whether Dr McInnes’ view was to be preferred. They also failed

to identify that a new phase of work had begun. In short, the instructions

failed to identify the most important issues in question or to seek advice as

to the Council’s risks, liabilities or the steps it should have taken to

investigate that at that time. Mr Lawson admits that Mr Bridger sent these

instructions in his name and that he (Mr Lawson) did not see them. It is

unclear whether Mr Lawson even knew that they had been sent at that

time. Further it is absolutely clear that Mr Lawson had not explicitly

advised Engineering Services not to enter into a new contract with HPR or

taken any or any significant steps to investigate the ongoing situation.

Such action would clearly have limited the risk to the Council.

17.38 At a meeting between HPR, Mr Matthews and Mr Gallin on 22 November




44

2004 “It was agreed to continue work as previously instructed. NG [Mr

Gallin] said a full report to auditors had been completed and there was no

further actions to date. It was agreed that a formal contract agreement

should be prepared by the IOWC and pre-dated” (page 184). Mr Gallin’s

evidence is that he was acting on information provided to him by Mr

Matthews. There is in fact no evidence that a “full report to auditors had

been completed” or that either internal audit or the District Auditor had

been contacted at all save for a brief discussion between Mr Lawson and

Alastair Rankine (see paragraph 18.15)

17.39 In late 2004 Mr Bridger of legal services had meetings with Mr Gallin about

the appointment of HPR. In interview Mr Bridger explained that these

meetings were to assist him in understanding how HPR had been appointed

and how the Highways department had managed the contract. In Mr

Bridger’s words “it took time to sort of extract even the most rudimentary

information from Nick Gallin”. It appears the only information Mr Bridger

was provided with was the draft report to Directors group which Mr Gallin

had drafted in April 2004. In interview Mr Bridger expressed his surprise

that he found no evidence of letters of engagement, the terms on which

HPR had been appointed, or the amount of work they would do. We found

no evidence that Mr Bridger did anything to raise his concerns with Mr

Matthews, Mr Rowell, Mr Wilkinson or the District Auditor. Mr Bridger’s

evidence is that he did raise the issues with Mr Lawson, his line manager,

that he did not withhold information on this matter from anyone and that

it was more appropriate for Mr Lawson to liaise with others at directorate

level and the District Auditor in his capacity as Monitoring Officer.

18 2005

18.1 On 7 January 2005 Mr Rowell sent an email to Mr Matthews, blind copied to

Mr Streets and Mr Wilkinson (page 192), advising him that the notes

prepared by Malcolm Smith to justify the appointment of HPR were

inadequate and that the key decision by members to appoint the




45

consultants above the EU threshold needed to be addressed formally. Mr

Rowell also instructed him to ensure that Mr Gallin followed an instruction

repeated in December to formally record the actions being taken to

continue to procure services through HPR, to liaise with Mr Streets about

the application of the CSOs and, where necessary, to consult with the

Council’s auditors. This appears to be the first point at which the failure

to comply with EU procurement legislation was brought to Mr Wilkinson’s

attention. Mr Wilkinson admitted in cross examination that he did nothing

in respect of this issue between receipt of this email and Mr Rowell’s

second email of 11 February 2005.

18.2 In response to Mr Rowell’s email Mr Streets forwarded to Mr Rowell a copy

of his memorandum dated 27 January 2004 advising that a full EU

procurement procedure should be followed (page 193). In evidence Mr

Wilkinson said that he had considered whether his s.151 duties were

engaged at that time and concluded they were not.

18.3 Some four months after the instructions had been sent by Mr Bridger to

Addleshaw Goddard, the external legal advice was received by Mr Bridger

on 25 January 2005 (page 196). This was a year since Mr Streets had

highlighted the matter as a problem and six to nine months since HPR had

negotiated and begun work on the phase 2. The advice concluded that the

Council “very likely breached public procurement law in awarding the

contract for the provision of engineering services to HPR immediately after

1 April 2001, and may have done so before and after this date”. It is clear

that in recommending that the Council “should as a matter of prudence,

check that there are no continuing breaches of public procurement law

that present a risk of challenge, that any decision or action of [the Council]

for which there is doubtful authority is ratified and that in the event that a

matter comes to the attention of the District Auditor, [the Council] can

provide evidence of a properly documented valid decision making process”;

the adviser had not been made aware of ongoing activities. Thus even at




46

this date no-one had yet addressed their mind to the position in respect of

the now ongoing phase two of the project.

18.4 This advice was forwarded to Mr Gallin and Mr Matthews, Mr Lawson, Mr

Streets, Mr Spencer and Mr Rowell by Mr Bridger on 28 January 2005 (page

200) and (page 205). Mr Lawson’s copy of this email is marked with a

manuscript note which documents a telephone call with Mr Rowell (page

210). The note suggests that Mr Rowell intended to ask Mr Matthews for a

proposed course of action. It does not however indicate that either Mr

Lawson or Mr Rowell did anything to take the matter seriously or to

understand as a matter of urgency the current position in respect of the

project. It might be considered that in light of this advice they should

have ensured that the project was brought to a halt and carried out further

investigations. They would then have been in a position to assess what

action was necessary to implement the recommendations of the Addleshaw

Goddard advice and put the contract into writing in order to adequately

protect the Council’s position. Mr Rowell says that he is only unable to

show what action he did take as he does not have access to his own file on

the matter. The investigation team have been unable to locate the file to

which he refers.

18.5 Mr Rowell’s evidence is that following conversations with Mr Lawson and Mr

Matthews he wrote to Mr Matthews on 11 February 2005. This email was

copied to Mr Bridger, Mr Lawson and Mr Streets (page 215) and instructed

Mr Matthews to stop payments and instructions to HPR pending clarification

of a number of procedural issues. Despite this it seems that neither

payments nor instructions to HPR were suspended. Further it appears that

Mr Matthews did not inform Mr Rowell of the extent of his personal

involvement in the act of appointing HPR in 2001 and again in 2004. Mr

Gallin’s evidence is that he was not aware of Mr Rowell’s email.

18.6 Mr Rowell also sent an email to Mr Lawson and Mr Wilkinson on 11 February




47

2005 (page 216) stating that he was alerting them to the issues formally as

Monitoring Officer and s.151 Officer asking for their support in reviewing Mr

Matthews’s findings (following his investigation) and identifying corporate

means of addressing shortcomings in existing proceedings.

18.7 In interview Mr Wilkinson stated that he had received and read Mr Rowell’s

email of 11 February 2005. He explained that he did not take any action in

response to this email as he was working through a busy period at the

Council and expected to see an appointment arrive in his diary to discuss

the matter in March. Mr Wilkinson never attended such a meeting. Mr

Wilkinson also stated that in his view Mr Rowell’s email did not convey the

seriousness of the situation. It is clear, however, that receipt of such an

email calling on a statutory officer to exercise his powers was extremely

unusual.

18.8 In interview and at his disciplinary hearing Mr Lawson stated that his

response to Mr Rowell’s email of 11 February 2005 was to commission the

procurement compliance review carried out by the QP Group (see

paragraph 18.18). This was hardly an appropriate response to the wider

issue of non-compliance with procurement obligations within the Council.

The contracts for QP were pre-selected prior to the consultants considering

them. In the circumstances the QP exercise was not capable of uncovering

all contracts which had been unlawfully let without recourse to open

competition.

18.9 It was not until this point that Mr Streets considered he should inform Mr

Wilkinson about the issue when he advised Mr Rowell’s secretary that an

email about the advice received from Addleshaw Goddard on the unlawful

procurement should be copied to Mr Wilkinson (page 217). We find it

surprising that Mr Streets did not mention this to Mr Wilkinson, his direct

line manager, at any time in the previous 12 months.

18.10 On 14 February 2005 a meeting took place at the request of Mr Matthews.




48

Messrs Matthews, Gallin, Streets, Spencer and Bridger attended the

meeting to discuss the HPR situation.

18.11 While it seems there are no minutes of that meeting in existence, Mr

Bridger recorded in an email to Mr Lawson (page 218) the outcome of the

meeting. He set out his view on the options and advised Mr Lawson that Mr

Matthews would like to speak to him for further direction. Mr Bridger also

highlighted to Mr Lawson that Mr Matthews “was quite frank and said that

any contract [in Engineering Services] which had the potential to breach EU

Procurement has almost certainly done so, therefore how far back should

the investigation go?” Despite this admission Mr Lawson said in evidence

that he did not “read it as being a confession that everything in his [Mr

Matthews’] had been done wrongly”, but that he felt this referred only to

the Undercliff Drive/HPR Contract.

18.12 Mr Lawson certainly did nothing to investigate the suggestion and despite

this and the suggestion in the Addleshaw Goddard report that as a matter

of prudence the Council “should enter into a framework agreement after a

call for competition”, he did nothing to ensure a systematic review of all

contracts under the responsibility of Mr Matthews.

18.13 No one who was aware of this comment by Mr Matthews took any action to

deal with these issues in Engineering Services or to review the position in

respect of other contracts.

18.14 Mr Matthews met with HPR on 21 February 2005 (page 225) and “confirmed

that a framework agreement will be required for the subsequent

supervision works of the scheme”. Despite this no framework agreement

was ever put in place. There is however evidence that Mr Rowell was

chasing progress on the framework agreement (see paragraphs 19.2 and

19.5) and that Mr Spencer and Mr Smith met to discuss how to move the

issue forward (see paragraph 19.8).




49

18.15 There is evidence that on 1 March 2005 Mr Lawson met with Mr Rankine

(the District Auditor). It should be noted however that the District Auditor

has not been interviewed by the investigation team. In Mr Lawson’s email

of that date (page 227) to Mr Streets and Mr Matthews describing the

meeting, he said that “[w]hen pressed as to whether there were specific

problem projects, I confirmed that we had given advice about two projects

… my view at the moment being that they were relatively minor issues”.

We found no evidence that either Mr Streets or Mr Matthews challenged Mr

Lawson’s view that Undercliff Drive was a minor issue.

18.16 Mr Lawson claims that discussions took place about the plans for dealing

with the problems with Undercliff Drive at the Directors Group meeting on

3 March 2005 (page 235A). Unfortunately no such discussion was minuted.

Mr Wilkinson also stated at his disciplinary hearing that the unlawful

procurement had been discussed at that meeting. However, we found no

evidence that this was a full discussion leading to a collective decision.

Under cross-examination, Mr Wilkinson said that he had not been prepared

for the meeting, had not seen the Addleshaw Goddard advice or the

questions asked of them and that he did not contribute to the discussion.

18.17 Mr Matthews met with HPR on 6 April 2005 and confirmed that “IOWC will

pursue a framework agreement for future work” and that “Mr Bob Streets

(Procurement Manager for IOWC) [SIC] [was] preparing pre-qualification

documents for a range of services” (page 235). At interview Mr Streets

denied having told Mr Matthews that he was preparing such documents. Mr

Streets’ evidence was that he was not responsible for putting a framework

agreement in place but, along with Mr Spencer, he would have advised Mr

Matthews on the process for getting it in place. Mr Gallin’s evidence is

clear that he believed that Mr Streets and Mr Spencer were going to

prepare a framework agreement. There is evidence to suggest that Mr

Rowell at the very least believed that it was Mr Spencer’s responsibility to

ensure that an agreement was in place (see paragraphs 18.9 and 19.5).




50

18.18 In or around April 2005 the QP Group were commissioned to carry out a

Procurement Compliance Assessment. It reviewed four contracts, two of

which were within Engineering Services. Despite the fact that the

Addleshaw Goddard advice had highlighted the fact that the Council had

breached procurement law in 2001 and that Mr Bridger had noted that

other contracts entered into by Engineering Services may have done the

same, it was never sought to use the opportunity to review all the

contracts in Engineering Services. At no time has anyone given any

coherent suggestion as to why such a comprehensive review was not

commissioned. In our view this was a significant failure. Mr Streets’s

evidence was that he did not understand why the procurement compliance

review was not further reaching but he did nothing to address that remit.

18.19 The Council received the QP report in July 2005 (page 242). QP found,

amongst other things, that “no [formal] contract was created between the

council and High Point Rendel for the consultancy work carried out on the

Undercliff Drive scheme. Value (£894,260)”. It identified that CSOs were

not complied with and the Council did not have legal cover and cost control

as a consequence. It also found that the works for the sub-contract

awarded to Geotechnical Engineering Ltd under the Undercliff Drive

Scheme had begun before a final contract had been issued. The evidence

shows that even after receipt of this report in July 2005 no one took any

active steps to ensure that the contract with HPR was reduced to writing.

In evidence Mr Lawson reluctantly accepted that when QP stated that the

Council is subject to risk as a result of the absence of written contracts,

this was the identification of a legal risk and, as such, was a matter for the

Head of Legal Services. However, even after receipt of this report in July

2005, Mr Lawson took no action to ensure that the contract with HPR was

reduced to writing. As highlighted by Mr Dobson in his report following Mr

Wilkinson’s disciplinary hearing, given the political change which took

place in May 2005 this would have been an ideal time to bring the issue to

the attention of members (pages 444 and 445).




51

18.20 The QP report also found that an area of improvement was to remedy the

absence of a “localised procurement process in place to support CSO usage

/ compliance, a lack of document control and ownership process”. It was

only when he received a copy of the QP report in July 2005 that Mr

Wilkinson first became aware that there was no written contract between

the Council and HPR. Still he was not fully briefed until Mr Streets drafted

the report to Directors Group to present the QP report in August. We

found no evidence of a record of Mr Wilkinson considering whether these

problems required him to make a section 114 report or take any further

action short of a formal report. Mr Dobson found this was a failing and that

Mr Wilkinson’s “assessment and evaluation of financial risk that he claims

to have undertaken must of necessity have involved a fair degree of

guesswork” (page 446). We have found similar failings to those highlighted

in QP in respect of CSO usage and compliance and a lack of document

control and ownership.

18.21 There is evidence to suggest that Mr Matthews, Mr Spencer and Mr Streets

met on 20 July 2005 to discuss framework agreements (page 236). There is

no written evidence of the discussion as the meeting was not minuted. Mr

Streets and Mr Matthews were not able provide any evidence of outcomes

following this meeting and, indeed, there is no evidence that the

Framework Agreement was progressed with any more urgency or at all even

after this meeting. Mr Spencer said that this was because “I think we all

got besieged with other work and other priorities”.

18.22 The Directors Group meeting on 4th August 2005 is the next significant

date. Amongst those present were Mr Fisher, the Chief Executive, Mr

Wilkinson, the Chief Finance Officer, Mr Lawson, Monitoring Officer and Mr

Rowell. The meeting considered the QP Report and an action plan that had

been prepared by Mr Streets (page 237). Crucially there was no suggestion

that any report should be made to elected members, or the District Auditor.

The adequacy of the action plan must be considered to be lacking given that




52

it did not specifically recommend action to rectify the contractual and

procurement failings with the Undercliff Drive scheme or indeed any other

scheme considered by QP. In our view the failure to report to members

(both the Executive and Scrutiny) was a very serious failing and a breach of

the statutory duties of, at the least, the CFO and Monitoring Officer. These

matters, however unwelcome or critical of their own systems, should have

been reported as the members hold the democratic accountability for the

expenditure of public funds and the public have the right to hold them to

account. By failing to disclose their own failings the officers deprived

members and the public of that right. At interview Mr Fisher, who chaired

the meeting, stated that he did not recall reading the QP report and that

members were not consulted because the covering report did not suggest

that this should happen.

18.23 On 4 August 2005 Mr Streets sent an email to all Strategic Directors and

Heads of Service identifying the “need for better awareness training for

staff of the requirements of Contract Standing Orders. This includes better

understanding of the EU procurement regulations” (page 274). Despite the

fact that this suggests a growing awareness of the institutional failings,

there was still no comprehensive review undertaken to unearth the extent

of such failings or the reason why such failings might have come about.

18.24 On 25 August 2005 Mr Streets drafted a memorandum for Mr Fisher, then

Chief Executive, “to address poor procurement practice”. Mr Streets’ view

was that it was “only Steve Matthews who warrants individual attention”

(page 285). Mr Streets’ evidence was that he believed that this was to be

the start of disciplinary proceedings against Mr Matthews. Mr Fisher has

indicated that this was never his intention.

18.25 The memorandum was sent to Mr Matthews on 9 September 2005 (page

288). In his first interview with us Mr Matthews could not recall receiving

this memorandum. However, at his preliminary hearing Mr Matthews told




53

us that he contacted his secretary whilst he was suspended so that she

could locate the document for him from his file. It appears that she did so.

Mr Matthews also claimed that he had written a response to Mr Fisher. We

found no evidence of this.

18.26 Mr Fisher’s memorandum stated that as at that date there was a “

particular concern about non-compliance within Engineering Services, and,

in particular, the way in which the consultants for Undercliff Drive have

been procured […] This is not a new issue, but one that appears not to have

been adequately addressed. My purpose in writing to you is to emphasise

formally that a line needs to be drawn under the practices of the past”. Mr

Fisher concluded by asking Mr Matthews to “ensure that this note is drawn

to the attention of your relevant managers so that they are clear what is

expected of them in future”. It is thus clear that no disciplinary action was

instituted. Mr Matthews distributed the memorandum received from Mr

Fisher at the management team meeting of 16 September 2005 (page 294).

18.27 The minutes of the 1 September 2005 progress meeting with HPR (page

281) show that Mr Gallin and Mr Matthews attended and that there was “no

further development” regarding HPR’s terms of engagement with the

Council.

18.28 On 2 September 2005, Mr Streets forwarded to Mr Spencer information

from Scarborough Borough Council on its framework agreement, which was

“available to any coastal authority to use” (page 282). From this date Mr

Spencer had a template framework agreement to consider. He says that he

and Mr Smith gave up on the framework agreement because the Council’s

financial systems were so inadequate that they could provide no relevant

information on which to proceed. That may well be true, but neither Mr

Spencer nor Mr Smith appear to have told anyone that they had stopped

work on the framework agreement.

18.29 A meeting took place on 12 September 2005 to discuss the procurement of




54

consultants (page 291). Mr Matthews, Mr Streets, Mr Spencer, Dr McInnes

and Mr Gallin were all attendees at this meeting. No solid actions came

out of this meeting and Mr Streets accepted in interview that “it’s difficult

to see why not actually”.

18.30 On 7 October 2005 Mr Lawson was promoted to Assistant Chief Executive.

He retained the role of Monitoring Officer. As at this date he still had done

nothing to ascertain the current position on the Undercliff Drive contract,

to uncover which contracts had similar failings, or to put in place a written

contract to ensure maximum protection for the Council.

18.31 On 30 November 2005, Dr McInnes sent an email to Mr Streets, copied to Mr

Spencer, stating that “through the proposed new framework agreement we

need to find a way of ensuring best value and wise choice of consultant”

(page 295).

19 2006

19.1 On 9 January 2006 Mr Lawson took up the role of Acting Chief Executive

and from 12 January 2006 Mr Streets was appointed as Programme Lead for

Performance Improvement in the Chief Executive’s Department. It does

not appear that either undertook a review of issues to be addressed in

their new roles.

19.2 On 27 April 2006, Mr Rowell sent an email to Mr Spencer and others

including Mr Streets (page 303) stating that he understood from a

conversation with Mr Matthews that “the agreement to put a framework

agreement in place to provide consultancy services for Engineering projects

is yet to be progressed despite the urgency of the action and the

agreement made with the District Auditor. In view of the substantial nature

of the costs involved in schemes such as the Undercliff Drive, I would ask

that you urgently expedite this particular project to ensure that a

framework agreement can be satisfactorily completed on a corporate basis

to reduce the risks to the Council”.




55

19.3 Mr Rowell’s email continued “If you are experiencing difficulty in

resourcing this project then please let me know and I will be happy to take

this up at the Directors Group to ensure that this is prioritised as a matter

of urgency in view of the potentially serious implications for the Council”.

19.4 Mr Lawson sent an email to Mr Spencer and Mr Rowell on 28 April 2006,

stating that “if there is anything I can do to unblock this, please let me

know” (page 304). This appears to be the only evidence of Mr Lawson’s

involvement in implementing the recommendation by Addleshaw Goddard

that a framework agreement should be put in place for future works

required. Mr Spencer did not at any time take up either of these offers of

assistance.

19.5 Mr Rowell sent a further email on 8 May 2006 to Mr Spencer (page 305)

stating that he was “pleased to hear from Steve Matthews that you have

now prioritised this work” and asking him to confirm various details,

including a target for completion. Mr Rowell wrote again on 30 May 2006

(page 305) asking Mr Spencer to let him know of any progress.

19.6 On 31 May 2006, Mr Spencer sent an email to Mr Dunkerly (of the South

East Centre of Excellence) (page 308) stating that he was “looking to

establish a suitable framework agreement” and “wondering whether SECE

[…] has any direct expertise”. In interview, he said that he “didn’t really

get a response there. I did raise it with the Office of Government

Commerce. I went to one of their presentations […] I did ask the question”.

19.7 The next day, 1 June 2006, Mr Spencer replied to Mr Rowell’s emails

stating "I am sure you will appreciate that it is not something that I can

deliver single-handed (nor, of course, was it ever the intention to do so)

and like colleagues in Engineering Services, prioritising this particular piece

of work has been difficult. No excuses however; we do need to get it

sorted and I am confident we can! The framework agreement was never

delivered and neither Mr Lawson nor Mr Wilkinson ever checked to ensure it




56

had been.

19.8 Mr Spencer sent an invitation to a meeting on 7 June 2006 to Mr Smith

(Highways) to discuss “Engineering Services - Consultancy Framework”

(page 312). In the invitation, he stated that “You’ll recall from that initial

meeting with Steve Matthews on this subject all those months ago [2005]

that it effectively fell to you and I to take this project forward. Lucky us! I

know we’ve both been inundated with other work and unfortunately it’s

had to take a low priority; however I’m now getting some pressure from

Derek Rowell to confirm when it’s going to happen”.

19.9 At the monthly progress meeting with HPR on 7 June 2006 (page 320), the

minutes record that “IOWC did not have any further news to report on

Expressions of Interest for a Consultant’s framework agreement”.

19.10 In June 2006 Joe Duckworth was appointed Chief Executive. The Undercliff

Drive was not reported to him by Mr Lawson, Mr Wilkinson, Mr Streets or

any other officer who was appraised of the situation and the risk it posed

to the Council. In October 2006 when he became aware of the problem Mr

Duckworth required an external review, which was undertaken by Mark

Heath, Solicitor and Monitoring Officer of Southampton City Council.

19.11 Mr Lawson was appointed as Director of Partnership, Policy and

Performance and Deputy Chief Executive effective from 13 June 2006. He

retained his responsibility as Monitoring Officer.

19.12 In October 2006, Mr Spencer and Mr Smith “tried to get some information

out of the FIDO system” as part of their work towards a framework

agreement for consultants. This information was to assist them in drafting

a framework agreement which would meet the specific requirements of

Engineering Services. Mr Spencer admitted in interview that this “proved

fruitless”. There is no evidence to suggest that Mr Spencer or Mr Smith

took any other substantive action to progress the framework agreement or




57

enlist any additional assistance.

19.13 On 20 December 2006, Mr Streets (in an email to Mark Heath, assisting with

the preparation of his report) stated that “[n]o real progress has been

made with the proposed framework agreement. Some initial discussion as

you can see form [sic] emails but nothing happened after that” (page 322).

Although Mr Streets was highlighting the fact that the Council had failed to

implement the main recommendation of the Addleshaw Goddard advice he

appears to have taken no action to ensure that the Council remedied the

situation and put an agreement in place.

20 2007

20.1 On 9 January 2007 Mr Lawson began a career break from his role and began

undertaking part time project work for the Council.

20.2 Mr Mark Heath (Solicitor and Monitoring Officer of Southampton City

Council) reviewed the procurement of consultancy in relation to Undercliff

Drive. He produced a report dated 9 February 2007 (page 325). Mr Heath’s

report stated that the Council had acted either in ignorance or disregard of

procurement regulations and the Council’s constitution. He also stated

that in his opinion the appointment of HPR was unlawful and that their

appointment had exposed the Council to unnecessary risk.

20.3 On 19 February 2007 Mr Wilkinson, Mr Lawson and Mr Rowell were

suspended pending an investigation into the Undercliff Drive project.

20.4 On the morning of 22 February 2007 Mr Matthews asked Mr Gallin to go to

his office so they could review the files they were submitting as part of the

Undercliff Drive investigation. Mr Gallin’s evidence is that Mr Matthews

wanted to make sure that they kept copies of the documents they would

need to continue running the project. Mr Gallin stated that while

reviewing the files Mr Matthews stumbled across some minutes which

referred to a trip Mr Gallin and Mr Matthews had made to Lyme Regis, on




58

the invitation of HPR, to view the scheme there which is similar to the

Undercliff Drive project.

20.5 Mr Gallin stated that when Mr Matthews found these minutes Mr Matthews

jested that under the climate at the time within the Council the visit may

be seen as collaboration with HPR. Mr Gallin stated that he disagreed with

Mr Matthews but that Mr Matthews removed the minutes from the file. Mr

Gallin stated that the mistake he made was not putting the minutes back

on the file. Mr Matthews, for his part, denied asking Mr Gallin to remove

any documents from the files.

20.6 On 23 Febraury 2007 Mr Gallin received a telephone call from Lara Borrett-

Lynch at Glanvilles Solicitors offering Mr Gallin assistance with the

Compulsory Purchase Order for the project (Glanvilles had been engaged

by the Council to provide external legal support in relation to the

Undercliff Drive project itself). Mr Gallin stated that the subject of the

suspension of other Council employees came up in general conversation

and Ms Borrett-Lynch mentioned that she also had to submit her files for

the investigation. Mr Gallin stated that he joked with her that she should

look at these minutes. Ms Borrett-Lynch later telephoned Helen Miles from

the Legal Service informing Ms Miles of her concern that Mr Gallin had

asked her to remove minutes from her files and not submit them to the

investigation.

20.7 Mr Gallin explained that later that day he went to see Helen Miles to see

what progress was being made with the project generally. Mr Gallin met

with Ms Miles in the Legal Support Office and they had a general discussion.

Mr Gallin stated that Ms Miles seemed “a bit flummoxed” but that was

because she was trying to get all her files together. Mr Gallin stated that

he again joked with Ms Miles about the minutes, about removing them from

the file, but that he was joking. Ms Miles’s evidence is that Mr Gallin

appeared entirely serious. Her attendance note covering these events can




59

be found at page 339.

20.8 In interview Mr Gallin stated that his interpretation was that the trip would

be viewed as a “jolly” or “hospitality visit”. Mr Gallin explained that Mr

Matthews did refer to the minutes in a joking manner but that Mr Matthews

obviously had some concerns about it and wanted to remove the minutes

from the file.

20.9 It appears likely that Mr Gallin and Mr Matthews removed minutes of

meetings held between the Council and HPR, in particular which referred

to a trip to a construction site at Lyme Regis on 7 and 8 June 2006 to see

and discuss comparisons with the project, in order to cover up hospitality

received from HPR. The minutes are dated 19 December 2005 and 7 June

2006 (page 302 and 321). Copies of these minutes were found in Mr

Gallin’s desk drawer following a search of his office for documents relevant

to the investigation. Mr Gallin’s evidence is that he did not remove any

documents from files but that Mr Matthews did.

20.10 In summary, on 7 and 8 June 2006 following the progress meeting with

HPR, Mr Gallin and Mr Matthews travelled to a construction site at Lyme

Regis with Dr Clark of HPR (in Dr Clark’s car) to consider similarities with

the Undercliff Drive project. They stayed over in a hotel and told the

Investigation Team that the cost of their travel, food and accommodation

was met entirely at the expense of HPR. Neither Mr Gallin nor Mr Matthews

declared this hospitality in the Council’s hospitality register. In interview

both officers admitted that they knew they were obliged to record such

hospitality and did not do so. Mr Gallin’s evidence is that he forgot due to

the pressure of his workload. HPR have said the visit was organised to see

and discuss comparisons with the Project by visiting a working construction

and included a PPP presentation of the Project to the visitors, a site

inspection and private discussions with the Project manager to discuss

issues relating to the works from a client’s perspective. They said that the




60

Lyme Regis site visit could not be characterised as ‘hospitality’ and was

nothing other than a trip organised as part of the services it was providing.

The also said that the cost of travel to Lyme Regis, accommodation and

subsistence were legitimate project expenses in order to see and discuss

comparisons with the Project.

20.11 The Council’s hospitality register is designed to record the receipt of gifts

and hospitality by Members and Officers. Any gift or element of hospitality

received by a Member or Officer above the value of £25 should be

declared. The hospitality register is a mechanism devised to avoid any

impression that individuals may have been influenced by any gift or

consideration, or persuaded to show favour or disfavour to any person or

organisation while acting in their official capacity. ‘Hospitality’ in this

sense is taken to include anything the officer would not have received but

for his role and includes provision not intended by the provider to influence

but which could, nevertheless, be perceived to have the potential to

influence the recipient. The use of the term ‘hospitality’ throughout this

report should therefore be read in that context. For the avoidance of

doubt it is not suggested here that HPR intended any of the hospitality

provided to influence the letting of the Undercliff contract or any other.

20.12 On 23 February 2007 Mr Matthews and Mr Gallin were suspended pending

an investigation into alleged interference with the Undercliff Drive

investigation.

20.13 During the course of the investigation it came to our attention that both Mr

Streets and Mr Spencer may be officers which the Council should consider

suspending pending an investigation into their role in the Undercliff Drive

project. The Council considered suspension appropriate in each of these

cases and on 16 May 2007 both Mr Streets and Mr Spencer were suspended

as part of the investigation.

20.14 In June 2007 Dr McInnes resigned very shortly after a meeting with the




61

Investigation Team. Dr McInnes has asked us to note that he had written to

the Council in August 2006 expressing a desire to leave, wrote again to his

line manager in December 2006 and discussed it further with the Chief

Executive early in 2007. Dr McInnes explained that he had resigned for

reasons related to family. The investigation team has seen evidence to

suggest that at least one other contract between the Council and HPR for

which Dr McInnes was responsible, the Castlehaven scheme, and perhaps

more may suffer from the same failure to comply with EU Regulations as

the Undercliff Drive. At interview Dr McInnes was of the view, as with the

Undercliff Drive, that this did not have to be procured as it was an

emergency situation. Dr McInnes’ evidence is that there was the fullest

involvement of elected members at all stages of the project. Such

involvement cannot, of course, excuse any failure to comply with any legal

obligation which was owed. We have not had the opportunity to come to

investigate this contract in any depth but it is recommended that a review

of all contracts let under Dr McInnes’ area of responsibility is undertaken.

20.15 As the investigation continued further instances of Mr Gallin and Mr

Matthews accepting hospitality and failing to register such came to our

attention. When questioned, Mr Matthews suggested that such hospitality

was confined to those occasions put to him; namely his visit to Lyme Regis

with Mr Gallin and Dr Clark and a trip to London in December 2004. Of

course because the hospitality register was not maintained (as it should

have been) recording not only every gift or act of hospitality over £25

accepted, but also those offered; it was not possible to verify the degree

of hospitality received from the evidence held by the Council.

20.16 For the reason given above we attempted to corroborate the situation

against records held at HPR’s offices. We saw documents which suggested

that HPR had re-charged such hospitality to the Council as a disbursement

(“Hospitality to UK Clients”). Mr Matthews and Mr Gallin, the recipients of

such hospitality, had themselves approved the payment of all such




62

invoices. Unfortunately HPR refused to allow us to copy or remove such

documents from their offices maintaining that they were confidential

documents to which they alone held ownership. We subsequently entered

correspondence with them but they have to date chosen not to provide any

such documents. Their explanation as to why it appeared that these sums

had been re-charged to the Council was initially that it may have related to

their own subsistence incurred in relation to the Project. HPR have said

that they chose not to disclose their “un-invoiced work reports” because

they are internal records of time recorded on a file prior to time being

formally invoiced. HPR’s invoice of 31 December 2004 includes expenses

of almost £750.00 for accommodation and “Entertaining – UK Clients” (see

page 190) at a time which Mr Matthews accepted they had been

entertained in London at HPR’s expense. Mr Gallin’s evidence is that to his

knowledge any invoices he authorised did not include any claim for

hospitality.

20.17 In response to this report HPR have said that the reference to expenses

incurred of £750 is misleading The explained that the progress meeting

that took place on Monday 20 December, attended by Steve Matthews and

Nick GalIin from the Isle of Wight Council was held in London because

employees from our client’s staff had input to the meeting and it was cost

effective for the Isle of Wight Council to visit London. The meeting

continued throughout the rest of the day. They also said that the meeting

continued to a working lunch locally involving 6 people (2 from the Isle of

Wight Council and 4 from our client) at a cost of £73.13. (i.e.

approximately £12 each).Bookings had been made (2 for the Isle of Wight

Council and 2 employees of our client) to stay overnight at the Novotel at a

corporate rate cost of £560.15 (i.e. £140 each). The evening was spent

(partly) on general discussion of project related matters followed by a

meal costing £111.09 (i.e. approximately £27 each). They also said that, in

accordance with their protocol for expenses related to VAT, since ‘clients’

were involved in the meals these were recorded as “Entertaining” whereas




63

in fact they were “working meals”. They say that such expenses were

charged to the Isle of Wight Council through the invoice system as they

were project related for December 2004 and were approved and paid by

the Council. Similarly they explained that invoices that relate to

“Hospitality to UK Clients” and “Entertaining - UK Clients” were also in

fact “working meals”.

20.18 Mr Matthews stated in interview that he “assumed that the cost of our

accommodation would be recharged to the scheme” but that he had not

discussed this with HPR. Mr Gallin stated if he had known that such

hospitality would be recharged “no way would we have had that”. Whilst

Messrs Matthews and Gallin’s expectations as to whether it would be

recharged differ, we cannot draw any conclusion as to whether it was of

any influence in the letting of contracts to HPR. However we are of the

view that hospitality at this level should not have been accepted in any

event.

21 Conclusion

21.1 It seems clear that officers at every level of the Council failed to address

the procurement and contractual problems with the Undercliff Drive

scheme. The majority of individuals involved appear to have ignored not

only the legal requirements set out in the relevant legislation but also the

Council’s constitution and internal procedures.

21.2 The Council will no doubt note the conduct of the officers involved with

the scheme both in terms of how effectively they operated within the

organisation and their external dealings with HPR.

21.3 During our investigation we encountered particular difficulty establishing

an audit trail within the finance department, which was consistently

unable to provide or locate accurate records relating to the Undercliff

Drive scheme. It is recommended that the Council’s internal systems are




64

reviewed to ensure more robust systems are in place for the future.

It also should be noted that the investigation team have found that many of

the officers interviewed during the course of the investigation seemed to

take an unduly restrictive and narrow view of their roles within the Council.

This undoubtedly hampered the organisation’s ability to deal effectively

with the problems encountered with the Undercliff Drive scheme as the

issues straddled more than one department and discipline. In effect the

officers with clear operational accountability for the proper procurement of

engineering consultancy advice failed to follow the council’s rules and the

express instructions made in writing by the strategic director to address the

irregularities formally. The corporate systems which should have triggered

higher level interventions failed to deliver the improvements the council has

a right to expect. Everyone considered the problem to be someone else’s

responsibility to sort it out so no-one did.


Undercliff Drive

Appendix A – Supporting Documents

65

~NOTE – PLEASE SEE SEPARATE BUNDLE~


Undercliff Drive

Appendix B – List of suspended officers

66

1. John Lawson - Director of Partnership, Policy and Performance and Deputy Chief Executive (suspended 19 February 2007). 2. Paul Wilkinson – Chief Financial Officer (suspended 19 February 2007). 3. Derek Rowell – Director of Regeneration and Development (suspended 19 February 2007). 4. Stephen Matthews – Head of Engineering Services (suspended 23 February 2007). 5. Nick Gallin – Principal Highways Engineer (suspended 23 February 2007). 6. Robert Streets – Programme Lead for Compliance (suspended 16 May 2007). 7. John Spencer – Purchasing Manager (suspended 16 May 2007).


Undercliff Drive

Appendix C – Chronology

67

Date Event

1998 John Spencer appointed as Purchasing Manager.

September / October 2000

Stephen Matthews appointed as Head of Highways & Transportation.

2001 Nick Gallin appointed as Principal Highway Services Engineer.

2 April 2001 Landslip occurs at Undercliff Drive.

April 2001 Sharpe Pritchard determined Initial Appointment Phase began.

September 2001 Sharpe Pritchard determined Initial Appointment Phase ended.

November 2001 Sharpe Pritchard determined Phase One Appointment began.

2002 Bob Streets appointed to post of Programme Lead for Compliance.

1 April 2002 Stephen Matthews appointed as Head of Engineering Services.

September 2002 John Lawson joins Isle of Wight Council as Head of Legal and Democratic Services and Monitoring Officer.

August 2003 Derek Rowell joins Isle of Wight Council as Strategic Director for Environment Services.


Undercliff Drive


68

September 2003 Sharpe Pritchard determined Phase One Appointment ended.

22 December 2003 John Spencer circulates details of revision to EU procurement thresholds by email.

December 2003 Stephen Matthews raised concerns with the procurement of the Undercliff Drive project with Bob Streets.

6 January 2004 Email from Bob Streets to Stephen Matthews confirming that an EU procurement process should be followed for Undercliff Drive and suggesting implementation of a framework agreement.

12 January 2004 Meeting between Stephen Matthews and Dr Alan Clark of HPR.

14 January 2004 Letter from Dr Alan Clark to Stephen Matthews setting out proposals for HPR’s continued involvement in the project and setting out why HPR consider themselves to be Best Value for the Council.

26 January 2004 Email from John Spencer to Bob Streets providing advice on procurement of Undercliff Drive.

27 January 2004 Memorandum from Bob Streets to Stephen Matthews (copy to John Lawson and John Spencer), advising that full EU procurement should be followed.

4 March 2004 Letter from Dr Alan Clark to Stephen Matthews attaching proposals for undertaking next stages of work on Undercliff Drive (follow up to letter of 14 January 2004).

5 March 2004 EU Procurement Meeting (Stephen Mathhews, Bob Streets,


Undercliff Drive


69

John Spencer, Steve Boswell, Nick Gallin andPhil Hayward)

6 March 2004 Stephen Matthews meets with Dr Alan Clark and Jon Holliday of HPR and advises “that EU procurement rules generally apply however in view of HPR’s specialist role and depth in knowledge it was considered that IOWC will be recommending HPR to carry out the detailed design and procurement of the scheme.”

14 April 2004 Nick Gallin drafted a report to Directors Group putting forward reasons for the continued involvement of HPR and why a full EU procurement process need not be followed.

May 2004 Matthew Bridger contacts Addleshaw Goddard regarding advice on procurement.

Summer 2004 (To date)

Sharpe Pritchard determined Phase Two Appointment began.

14 June 2004 Email from Derek Rowell to Nick Gallin and Robin McInnes, (copy to Stephen Matthews, John Lawson and Matthew Bridger) requesting that documentation relating to Undercliff Drive project be sent to Matthew Bridger.

Email from Derek Rowell to Stephen Matthews, (copy to John Lawson and Matthew Bridger) requesting that Stephen Matthews arrange for a service manager to investigate the procedurws followed for the award of the contract for geotechnical advice to HPR.

7 Septmeber 2004 Letter from Matthew Bridger to Andrew Finfer of Addleshaw Goddard formalising instructions for advice on procurement position.

7 January 2005 Email from Derek Rowell to Stephen Matthews (blind copy to Bob Streets and Paul Wilkinson) asking him to liaise with Bob Streets to rectify the procurement position.


Undercliff Drive


70

25 January 2005 Email from Andrew Finfer of Addleshaw Goddard to Matthew Bridger enclosing advice on appointment of HPR.

28 January 2005 Matthew Bridger forwards Addleshaw Goddard advice to Nick Gallin, Stephen Matthews, John Lawson, Bob Streets, John Spencer and Derek Rowell.

11 February 2005 Email from Derek Rowell to Stephen Matthews (copy to Matthew Bridger, John Lawson, Bob Streets) requesting that payments to HPR be suspended and that Stephen Matthews put forward recommendations on how to proceed in order to comply with EU Directives and Standing Orders.

Email from Derek Rowell to John Lawson and Paul Wilkinson alerting them to the issues surrounding Undercliff Drive in their capacity as Monitoring Officer and s.151 Officer.

14 February 2005 Email from Matthew Bridger to John Lawson outlining outcomes of meeting regarding HPR and repeating discussion with Stephen Matthews who stated that “any contract which had potential to breach EU Procurement has almost certainly done so”.

1 March 2005 John Lawson discussed Undercliff Drive with Alistair Rankine at the Audit Commission.

28 June 2005 Email from Nick Gallin to Bob Streets confirming that there is no formal contract between the Council and HPR.

July 2005 QP report on Isle of Wight Council procurement practice received.

4 August 2005 Report to Directors on Procurement Compliance.

25 August 2005 Email from Bob Streets to Mike Fisher attaching draft memorandum to Stephen Matthews regarding improvements


Undercliff Drive


71

to procurement practices.

2 September 2005 Email from Robin McInnes to Steve Boswell (copy to Stephen Matthews and Bob Streets) attaching details of a framework agreement prepared by Scarborough Borough Council.

9 September 2005 Memorandum from Mike Fisher to Stephen Matthews (copy to Derek Rowell) regarding Improvement to Procurement Practices.

12 September 2005 Meeting on appointment of consultants (Stephen Matthews, Bob Streets, John Spencer, Nick Gallin, Robin McInnes and others).

January 2006 John Lawson appointed to post of acting Chief Executive Officer.

27 April 2006 Email from Derek Rowell to John Spencer (copy to Stephen Matthews, John Lawson, Robin McInnes and Bob Streets) chasing progress on implementation of a framework agreement and offering additional resource if required.

28 April 2006 Email from John Lawson to John Spencer offering assistance to progress framework agreement.

8 May 2006 Email from Derek Rowell to John Spencer requesting timescale for development of framework agreement.

30 May 2006 Email from Derek Rowell to John Spencer chasing progress on framework agreement.

June 2006 John Lawson appointed to post of Director of Partnership, Policy and Performance and Deputy Chief Executive.

1 June 2006 Email from John Spencer to Derek Rowell (copy to Malcolm


Undercliff Drive


72

Smith and Laura Seward) confirming that he will progress framework agreement.

7 June 2006 Meeting on Consultancy Framework (John Spencer and Malcolm Smith).

7 and 8 June 2006 Nick Gallin and Stephen Matthews travel with HPR on a trip to a construction site at Lyme Regis to see and discuss comparisons with the Undercliff Drive project.

February 2007 Report from Mark Heath, Monitoring Officer of Southampton City Council, received by the Isle of Wight Council.

19 February 2007 Paul Wilkinson, John Lawson and Derek Rowell suspended pending an investigation into Undercliff Drive.

February 2007 Wragge & Co instructed to carry out investigation into Undercliff Drive.

23 February 2007 Stephen Matthews and Nick Gallin suspended pending an investigation into interference with the Undercliff Drive investigation.

16 May 2007 Bob Streets and John Spencer suspended as part of the investigation into Undercliff Drive.

June 2007 Robin McInnes tendered his resignation.


Undercliff Drive

Appendix D – Witness Interview Schedule

73

Tab Interviewee Date Interview

1 Nick Gallin 13 March 2007 First

2 Paul Wilkinson 13 March 2007 First

3 Helen Miles 13 March 2007 First

4 Matthew Bridger 13 March 2007 First

5 Bob Streets 13/14 March 2007 First

6 John Lawson 14 March 2007 First

7 Derek Rowell 20 March 2007 First

8 Laura Busby 21 March 2007 First

9 Joanne Ledicott 21 March 2007 First

10 Steve Boswell 8 May 2007 First

11 Tracy Ringer 9 May 2007 First

12 Phil Hayward 9 May 2007 First

13 Gareth Hughes 9 May 2007 First

14 Malcolm Smith 9 May 2007 First

15 John Spencer 9 May 2007 First

16 Stephen Matthews 10 May 2007 First

17 Ged Richardson 10 May 2007 First

18 Sue Ward 10 May 2007 First

19 Stuart Fraser 10 May 2007 First

20 Raymond Strong 29 May 2007 First

21 Cllr. Ian Ward 30 May 2007 First

22 Ernie Fox 30 May 2007 First


Undercliff Drive

Appendix D – Witness Interview Schedule

74

23 Robin McInnes 5 June 2007 First

24 John Lawson 22 June 2007 Second

25 Nick Gallin 25 June 2007 First

26 Alison Bean 25 June 2007 First

27 Paul Wilkinson 25 June 2007 Second

28 Mike Crabb 26 June 2007 First

29 Bob Streets 27 June 2007 Second

30 John Spencer 27 June 2007 Second

31 Robin McInnes 24 July 2007 Second

32 Stephen Matthews 24 July 2007 Second

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