Public Accounts Committee Probing UCD Over Non Compliance
The Public Accounts Committee (PAC) of the Oireachtas is investigating UCD over its failure to competitively tender €8.5 million worth of procurement contracts. PAC began to look into the matter when UCD’s ‘Financial Statement for the 2016 Year’ was put before it on the 14th December 2017.
David Cullinane, Acting Chairman of PAC, noted both the €8.5m figure in non-competitive procurement and deferred pension funding, then proposed contacting UCD for an explanation, which is standard practice. PAC wrote to UCD on the 15th December 2017 in relation to UCD’s 2016 Financial Statements. The letter from Margaret Falsey, its Committee Secretariat, noted that 5.5% of UCD’s overall non-payment expenditure for the year was non-compliant with public procurement guidelines.
UCD President Andrew Deeks responded in a letter date the 10th January 2018. He wrote that ‘much of this non-compliant expenditure was due to the extensions of service contracts that were originally awarded competitively, while other non-compliant procurement occurred through the use of competitive quoting rather than a full tender process.’ He stated that UCD believes it ‘achieved excellent value for state and non-state money in all procurement’ undertaken during that period.
Deeks further noted that the Comptroller and Auditor General (C&AG) ‘looked at each and every case of non-compliance individually’, and that they ‘outlined the circumstances, nature of contracts and steps being taken to ensure compliance in Section 13 our governance statement submitted with the accounts.’ The rest of the letter set out that statement.
PAC discussed Deeks’ letter on the 18th January where Cullinane observed the correspondence ‘seems to suggest that the Office of Government Procurement, OGP, is facing some difficulties in supporting the college in respect of this.’ He proposed writing to the OGP for a response which will be published.
Any UCD contract which will incur expenditure of over €25,000 exclusive of VAT must be advertised nationally on the government’s eTenders website. EU thresholds apply for goods and services over €221,000. Since the 1st August 2014, all public buyers must publish details of awarded tenders over €25,000. The OGP publishes a quarterly list of these awards online.
Third level public procurement is currently in the news following recent investigations by PAC and the C&AG in the area. The C&AG’s Special Report on Public Sector Financial Reporting for 2015 noted 56 procurement-related issues from the 2015 accounts of higher education institutions. 24 of these incidents involved a failure to use the correct competitive process due to the value of the awards.
PAC assessed the financial accounts of six sample third-level institutions and produced a report in July 2017. Appendix 3 noted the status of Irish universities at the time. Their financial year ends on the 30th September. The PAC report stated that UCD’s Accounts for 2015 cleared an audit, but had pension and public procurement non-compliance issues. Dublin City University (DCU) and University College Cork (UCC) were the only two of the seven Irish universities not noted as having procurement problems. It has been less of an issue with Institutes of Technology.
The Department of Education and Minster for Education and Skills are currently reviewing PAC’s report and proposals, one of which that would allow universities to face financial penalties for non-compliance with procurement procedures, by classifying it as a failure to meet their governance requirements.
The OGP began work in 2014 and sources goods and services on behalf of the public services. It divided up procurement into sixteen categories, of which it exclusively runs eight of them. Four key areas, Health, Defence, Education, and Local Government, are all able to source goods and services from the other eight categories in which they are the main users. This system, which is still developing, has resulted in a situation whereby UCD’s procurement is handled by its own procurement office, but the OGP tells it which suppliers to use.
UCD’s Financial Statements for the Year Ended 30th September 2016
UCD’s discussion on non-compliance with national procurement guidelines is located in Section 13 of the Statement of Governance and Internal Control, which covered Financial Reporting, Internal Audit, Procurement and Asset Disposals. It noted ‘there has been ongoing delay in finalising a memorandum of understanding between the OGP and the Department of Education setting out the fundamentals of the revised procurement model.’
Under this model, the OGP selects the suppliers while UCD must handle all compliance. The ‘ongoing implementation phase of the OGP model’ and ‘resourcing due to timing issues’ means ‘it is not always possible to match the output of the OGP process to the procurement requirements’ of the University. This leads to a risk that contracts will expire in advance of being retendered or that contracts will be extended temporarily beyond their original duration without going through the appropriate procurement process.’
It also noted that there is a risk where OGP cannot deliver a procurement request that UCD lacks the resources to complete the necessary process. UCD ‘continues to deploy its minimal procurement resources (following the loss of most of its staff to the OGP in the expectation that the OGP model would encompass the full procurement requirements of the sector) to minimise this risk, but due to the slower transitioning of contracts to the OGP and the reduction in UCD Procurement Staffing levels, UCD does not have adequate resources to handle the current volume of expenditure that needs to be procured on an open ender basis.’ For the year ended September 2016, UCD prioritised the allocation of buyer resources to procurement competitions with the ‘best opportunities to deliver additional savings.’
UCD only switched to the €25,000 threshold from the 1st January 2016. For the 2016 financial year, 88 suppliers, with a combined transactions value of €8.5m, received awards for which the national procurement guidelines were not applied. UCD noted that €4.7m worth of those contracts were since re-tendered, now have an OGP framework agreement in place, or have been discontinued. It stated that the remaining €3.8m would be addressed over the coming months. UCD spent €155m on suppliers, including recurring and capital costs.
UCD observed that instances of procurement non-compliance ‘mostly relate to facilities management contracts’, and that it is actively working with OGP to resolve the issue. Where OGP frameworks are not suitable, UCD ‘intends to run separate tenders in consultation with the OGP.’
It further stated it was taking measures to prevent the situation from occurring in the future. UCD is introducing a ‘new contract management system to list all current and planned contracts with their start dates and expiry dates.’ It was also looking to hire a person for a dedicated procurement compliance role, who would ‘identify and regularise any spends with non-procured suppliers that exceed procurement thresholds, strengthening procedures for setting up new suppliers and culling the existing number of non-procured suppliers.’
While UCD promised change, its explanations are similar to previous reports. The section 13 report in its accounts for the year ended September 2015 note that €7.9m worth of transactions to 43 suppliers did not conform with the national procurement guidelines. UCD spent €149m on suppliers, which included recurring and capital costs. The accounts to the end of September 2014 noted seven suppliers were utilised under which the national procurement guidelines were not used. The 2013 accounts merely stated that all procedures for procurement were being carried out.
UCD’s 2014 accounts noted in section 13 that it used a €60,000 threshold when assessing which contracts must be put to tender. It stated that adhering to the national guideline of €25,000 would be ‘administratively challenging due to the limited procurement staff available.’ UCD only used the national figure for certain research expenditure where it was required by the terms and conditions of the research grant.
PAC is currently waiting on the OGP for a response. The note on the 88 suppliers and €8.5 million sum only appears in UCD’s letter to PAC, but is omitted from UCD’s published version of its accounts which is available on its website.
Cian Carton – Editor