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L&Q carried out closed tender for major IT contract, leaked documents reveal
One of the sector’s largest housing associations ran a closed tendering process for a multimillion pound IT contract, despite its own procurement plan describing the approach as ‘non-compliant’ with regulations.
Documents obtained by Inside Housing revealed L&Q offered the chance to bid for the contract to implement its new IT system to three pre-selected companies in August last year.
Procurement regulations require all public companies, including housing associations, to offer contracts worth more than £180,000 publicly with a listing in the Official Journal of the European Union (OJEU).
Despite the procurement plan, which was written in July, an L&Q spokesperson denied the final approach taken was non-compliant, saying “exceptional circumstances” meant the contract was covered by some of the specific exemptions in the rules.
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An invitation to tender for the contract – for the implementation of new Microsoft Dynamics 365 IT across the 90,000-home housing association’s business and valued at up to £3m – was offered to Hitachi Solutions, Avanade and HCL/Power Objects in August.
L&Q’s own procurement plan, produced in July, said: “It is proposed to invite the three suppliers to submit proposals via a closed tender process due to the likelihood that only these gold partners can fulfil L&Q’s requirements and due to the aggressive timescales.
“Given the anticipated value of this procurement, such an invitational/closed tender is non-compliant with Public [Contracts] Regulations (PCR) 2015.”
It noted that no pre-existing procurement frameworks existed which included the three suppliers – who it said had been specifically recommended by Microsoft as “gold partners” with the “necessary capabilities” to support the project.
The procurement plan, signed by Andy Brown, chief operating officer of the organisation, added that there was a “risk of challenge” given the non-compliant procurement approach which could have “additional timescale and cost implications, plus a possibly minor reputational impact on L&Q”.
Power Objects was announced as the winning bidder in November.
A spokesperson for L&Q said the document was “poorly worded” and did not refer to the whole the procurement plan.
“The procurement of Microsoft Dynamics 365 was an exceptional case given the limited number of suppliers with expert awareness of all relevant business-critical applications and the related specialist knowledge, accreditations and rights required,” the spokesperson said.
“Our approach to the procurement of Microsoft Dynamics 365 involved a comprehensive competitive exercise involving all suppliers known to have the necessary capability to meet L&Q’s requirements and we considered it in line with the Public Contracts Regulations.
“We are satisfied that the process resulted in L&Q achieving value for money and reduced risk to our operations as existing applications reach end of life.”
It is understood the organisation believes the exemption to the regulations is based on the “urgency” and “absence of competition” provisions in Clause 32 of the regulations.
A procurement expert told Inside Housing these exemptions are interpreted “strictly” by courts and their availability is “extremely limited” as a result.
Public procurement rules exist to ensure there is broad competition for public services to increase value for money and prevent nepotism in the award of contracts.
Housing associations have been required to abide by them since 10 September 2004.
But one source told Inside Housing the rules are often ignored in the sector, as organisations deem the risk of being challenged low, and feel they can negotiate better deals without them.
If a contract is found to have been tendered in a non-compliant way, companies who were not invited to bid can challenge the organisation which offered it in court.
The court then potentially has the power to strike down the contract and impose penalties against the organisation in breach.
Housing associations are also required to sign a declaration that they have “complied with all relevant law” as part of the Regulator for Social Housing governance standard - which includes procurement regulations.
L&Q was tendering for the implementation and support of its new Microsoft Dynamics 365 IT system.
It was due to run for three years before potentially being extended by two further periods of two years. The value of the contract was estimated at between £1.5m and £3m in the procurement plan.
The companies were required to submit responses by 27 August, with the aim of having the contract up and running by 17 September.
