Rebuilding tender process 'rigged'
The tender process that awarded an £11 million contract to re-build the landmark Lyric theatre in Belfast was potentially rigged and manipulated, a damning Stormont probe has found.
Serious failings in how a preferred bidder was selected were outlined in a wider report on a £25 million over-spend on seven capital projects delivered, and predominantly funded, by the Department of Culture, Arts and Leisure (DCAL).
The investigation by the Public Accounts Committee (PAC) found flaws in the department's handling of all seven builds - which ultimately ended up costing £103.4 million, having been estimated at £78.5 million - but its assessment of the Lyric project was particularly critical.
The theatre's construction ended up costing £17.8 million - more than £5 million over-estimate - with DCAL footing £12.2 million of the bill.
Much of the PAC's focus centred on the tender process that saw construction firm Gilbert Ash NI Ltd awarded an £11 million building contract in 2008.
The report did not criticise the successful bidder, but found fault with DCAL, the Northern Ireland Arts Council and the Department of Finance's Central Procurement Directorate - the body responsible for advising government on tendering issues.
Failures in the awarding process were revealed earlier this year in an Audit Office report. The subsequent PAC probe re-examined the matter and made its own conclusions.
Issues raised included:
:: adjustments to tender submissions by those running the process that resulted in Gilbert Ash jumping from ranking fifth out of the five bidders to first place in the value for money pecking order.
:: one adjustment saw the estimated scaffolding costs outlined in the bids being stripped out. This was despite the fact Gilbert Ash's scaffolding bill of £413,000 was still ultimately paid by DCAL.
:: potential conflict of interest issues within the Lyric arising from the fact Gilbert Ash also provided a donation of £150,000 to the theatre.
:: failure to ensure tendering documentation was retained in the wake of the contract award.
:: lack of proper arrangements for DCAL and the Arts Council NI, or their technical advisers (CPD), to attend a tender evaluation meeting.
:: failure of DCAL, the Arts Council NI and CPD to raise any concerns about the evaluation despite being forwarded reports on the process.
Assessing each issue, the report said the way the contract was awarded was significantly flawed and failed to adhere to principles of good practice
It added: "Taking all of the points in the round the Committee is left with a very strong impression that the outcome of the tender process was both rigged and manipulated."
Chairwoman of the committee Michaela Boyle said: "The quality of the rebuilt Lyric Theatre is undisputed; we recognise that it is a highly impressive theatre and that it has deservedly won a number of prestigious awards.
"However, the end does not justify the means. My committee has found that there were significant departures from good practice in the award of this £11 million contract, and this is completely unacceptable.
"It beggars belief that CPD - the organisation responsible for providing advice on the tender - did not attend the evaluation meeting for the award of this £11 million contract.
"DCAL, the Arts Council and CPD were unable to provide any assurance that the contract had been awarded in a fair and equitable manner. We believe they did not discharge their duty properly, and they failed to ensure the proper use of public funds.
"We recognise that investing in culture, arts and leisure products produces benefits for the whole community. However, this must be accompanied by ensuring that projects adhere to proper procedures and value for money considerations.
"DCAL currently has a target to deliver £158 million capital investment, but its performance to date is simply unacceptable. Given the limited resources the Executive finds itself with in these testing economic times, lessons must be learned from this report if the Department, and the wider public sector, is to prevent similar mistakes recurring in its ongoing and future projects."
A spokeswoman from Gilbert Ash said the firm did not have any control over the adjustments made to the tender submissions.
"We had no control over the adjustment to tender costs made during the procurement process - a practice that is standard in our industry to allow for like for like comparison of bids," she said.
In regard to the firm's donation to the Lyric, she added: " We are committed to positively impacting on the community around us. As such, we were delighted to sponsor the Lyric theatre, a fantastic arts venue and a major contributor to cultural life in Northern Ireland. We implemented a similar sponsorship partnership when working on the Waterfront Hall project and may follow similar practice in the future, should the opportunity arise."
The Lyric responded in strong terms to the PAC's findings.
A spokeswoman for the theatre accused the committee of not backing up its claims with evidence.
"The Lyric welcomes the PAC's report into the department's handling of the seven capital projects. However, it completely rejects the wholly unevidenced claims made against the project," she said.
Minister for Culture, Arts and Leisure Caral Ni Chuilin said she welcomed the committee's recommendations.
She said: "We will consider the PAC report and provide a formal response in due course.
"Our approach to capital projects is very different from those historic projects covered in the NIAO (Northern Ireland Audit Office) report, which date back 10 years in some cases.
"Significant changes have been made to the way in which the department manages its capital projects and many of the recommendations in the NIAO Report have already been implemented."
Finance Minister Simon Hamilton said: "In the case of the Lyric Theatre this project was grant funded and therefore it was not managed or procured by CPD.
"The project was actually managed and the contractor procured by consultants appointed by the Lyric Theatre. The consultants had full responsibility for assessing tenders and for awarding the contract.
"It is therefore a matter of serious concern to me that these external professional advisors were not able to demonstrate to the Northern Ireland Audit Office that they had applied best practice.
"As Finance Minister, I am very much aware of how critical it is that best practice procurement and project management are applied to the delivery of projects if value for money is to be achieved.
"The key to this is ensuring that the right expertise is deployed to make informed decisions throughout the project lifecycle."
He said this PAC report recognises that there is a wealth of technical advice available to departments through CPD.
"Departments who grant fund projects must take advantage of this expertise and ensure that key decisions are only taken after technical advice has been sought from CPD," he added.
"Departments are already required to procure contracts through CPD or a Centre of Procurement Expertise (CoPE) and CPD will be reviewing its guidance to make clear that departments should also only allow grant funded projects to be awarded if they have written confirmation from CPD, or another CoPE, that it is appropriate to do so."