NI Water: Now that £28 million reduces to £550k…

There are a number of issues worth picking up in the wake of the Minister’s performance at the Regional Development Committee.  First, that figure of £28 million we’ve talked about before.

We are greatly aided here by the fact that the contract audit upon which the IRT based it’s own report has now been put into the public domain by Nevin at the NALIL blog.

The bad news for the so-called independent IRT is that a depth analysis utterly scuppers their view that there was a serious flaw in NI Water’s procurement policy.

In fact – and this may interest both the Minister and the senior civil servants advising him – when you workbench that figure it comes to something a great deal less than even we previously thought.

The NI Water audit report (15 Jan 2010 version 1) was the raw financial material the IRT set out to base their report upon. As well as changing over a substantial period of IRT’s sitting it subsequently had to be checked by Deloitte and Touche, whose senior partner Jackie Henry was a critical part of this IRT.

The final audit report is dated 27 Jan 2010 and named version 4, although as Nevin notes it also comes with an addendum of Feb 10. This was the reason Chris Mellor fought a rearguard action with Priestly on prematurely releasing it to the IRT. A battle he lost, and Priestly won.

In fact by ‘version four’ of the contracts audit, only 24 contracts were listed as being in breach in some way or another.

And by this stage, the total spend of these contracts is around £8 million. Yet when you look at each contract in detail much of that figure was spent prior to any breach having occurred. For example, the total spend on the largest contract is £3.3m but only £0.64m was spent after the contract was wrongly extended. Thus the overall spend – as a result of the actual breaches – is less than £5.5m.

At the very best, setting this up for competitive bidding might have reduced prices by – let’s be generous – 10%. So the worst potential loss is say around £550k excluding bidding costs. Given NI Water’s annual spend is around £352m [09/10 Annual Report ] that means a loss at worst of less than – 0.2% [equal to 0.15% by calculation.]

This low level scale of problem fits with McKenzie’s story to both the head of the Consumer Council and his submission to the Utilities Regulator that there was nothing in NI Water’s procurement that would give him deep concern…

So a quick question for Kieran Donnelly, the Comptroller and Auditor General: why did your office consider Laurence McKenzie had done good work finding an actual non compliance rate which works out at less than point two per cent of NI Water’s total spend?

Note: There was a deep dive audit that followed this one, and which, uncovered further breaches… We don’t yet know whether the deep dive used the same flawed methodology..

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