The report is to follow (and is now published).

The Committee considered a report of the Director of Highways and Head of Audit and Risk Management, which summarised the key events surrounding the financial failure and subsequent administration of the principal contractor (Dawnus) on the Manchester Salford Inner Relief Route (MSIRR) highways programme and associated lessons learned.

The report highlighted the timeline of events from when the framework agreement for major highways works was let in October 2017, the award of MSIRR contract to the principal contractor in June 2018 and works commencing in August 2018 to the 12 March 2019, when Highways Service were contacted by TfGM to advise that subcontractor vehicles were blocking traffic work on the scheme and the principal contractor had failed to attend a planned site meeting.

The report provided detail of the subsequent steps taken by the Council, which included the formation of an Incident Management Team (IMT) to gain an understanding of the position of the principal contractor, key risks and issues, current planned actions and further planned actions.  Subsequently, a range of options to secure a new contractor were developed and appraised through the IMT, with agreement on three phases to restart the works.  Following confirmation on 18 March 2019 that the principal contractor had entered into administration, the formal process of procurement started, with the contract awarded to John Sisk and Son, as the new principal contractor for the completion of works.

The Committee was then appraised of the lessons learned from the incident, the current programme status in terms of progress, costs and funding and finally, the proposed actions that had been identified.

The Chair invited questions from the Committee.

It was acknowledged that without the swift action of the Council, it would not have been possible to rescue the contract and the Committee placed on record its thanks to all those that had been involved.

Concern was raised in relation to the ability for sub-contractors to report any issues of concern they had around payment with the principal contractor and it was suggested that there should be a mechanism for these concerns to be raised directly with the Council.

The Committee queried that given a known cause of delay to the scheme had resulted from the need for re-working aspect of the scheme that had been assessed as being of sub-standard quality, whether the original value of the contract was not sufficient of was the principal contractor providing substandard work.  The Director of Highways responded, advising that there had been no evidence to suggest the principal contractor was delivering poor quality work, but what did become evident was that the progress of works had slowed down.  He also added that the principal contractor was paid by the Council in accordance with works completed and it was their responsibility to ensure payment was made to any sub-contractors.  It was reported that nothing had ever been raised directly with the Council on the issue of non-payments, but this would be a lesson learned for the future in regards to the whistleblowing policy.

In relation to a question on the identified changes in financial stability of the principal contractor, which had been identified on further accountant examination following the incident, the Head of Audit and Risk Management advised that the credit check report that was undertaken prior to the contract being awarded had identified the principal contractor as low risk and at the time there was nothing to make the Council concerned around their financial stability. 

In re-awarding the contract, the Committee queried why it had been agreed that the contract for the completion of works should be let in accordance with NEC Option E, as payments were on cost reimbursement plus overheads and profit which transferred a greater level of financial risk to the Council.  The Deputy Chief Executive and City Treasurer explained that although this was not a preferred form of contract that the Council would normally enter, and had only been used in this occasion given the very specific and particular events that occurred on MSIRR and the intolerable risk of further, significant details on the programme following the unexpected collapse of original principal contractor. 

It was suggested that in awarding any future contracts, consideration should be given to locally based contractors and that the ability for sub-contractors to report concerns directly to the Council should be built in to future contracts, should they not feel able to raise concerns with the principal contractor.

Decision

The Committee note the lessons learned from the MSIRR programme.