Local authorities in England spend around £82.4bn a year on goods and services, representing over a third of all government spending. However, inefficiencies and poor processes present potentially significant risks to public money and service at a time when local authority finances are already starting to feel the squeeze.

A review of auditor reports of local authorities by Grant Thornton has flagged up inadequate governance arrangements in some councils, and a failure to deploy the appropriate skills and resources to ensure robust procurement and contract management of delivery.

The report, Local government procurement and contract management: lessons learned, highlights a number of issues including a lack of alignment between corporate priorities and procurement activity, a lack of effective monitoring against the priorities, and weaknesses in governance arrangements around procurement decisions.

Guy Clifton, Director of Local Government Value for Money, Grant Thornton UK LLP, said: “If you look at the root cause of these, it is often a result of not having the right skills and experience in place at member or officer level – or both.” 

Some of England’s largest councils have already warned that they may have to make difficult decisions this winter as the combination of rising costs and spiralling inflation put budgets under extreme pressure.

Clifton said the scale of local government procurement highlights the responsibility the sector has for ensuring effective value for money and good governance around procurement and in managing the delivery of contracts. He stressed that the report focuses on specific examples where things have gone wrong, but that the issues highlighted do not relate to all councils.

“Local authorities need to have an effective procurement strategy in place and it needs to be supported by robust procurement policies and procedures that are both communicated to and understood by all relevant stakeholders so that there is full compliance. They also need to ensure that those involved in procurement and contract management activity are appropriately resourced and skilled, and that there is effective reporting and scrutiny.”

Clifton said the lack of appropriate skills and expertise within local authorities was the main constraint, particularly for managing larger and more complex procurements, exacerbated by a reduction in back-office resources after many years of funding reductions. He also warned that some councils were failing to adhere to the Nolan Principles of Public Life, the basis of the ethical standards expected of public office holders.

Addressing procurement failing in local government needed to be a priority, Clifton said, and ironing out procurement problems could support the sector’s focus on efficiency, and other priorities such as net zero and local growth. “Effective local government procurement has a rare opportunity to make a difference to the wider government agenda,” he said. “The starting point is to ensure alignment between corporate priorities and the council’s procurement strategy. For example, where a climate change emergency has been declared, how can procurement decisions support the achievement of this goal?”

Clifton said the Annual Auditors Reports for reporting VfM are key to identifying weaknesses in arrangements and proposing improvements for individual councils. The Code of Audit Practice for Local Auditors, in force from 1 April 2020, means that auditors are still required to be satisfied about arrangements to secure value for money, but the way they report has changed. Auditors no longer issue a single conclusion on arrangements as part of their opinion on the financial statements. Instead, they report significant weaknesses in arrangements when they identify them, and make recommendations for improvement.