More than 150 people lost their jobs when Fountains went into administration.
Revealed: How four companies turned down ‘loss-making’ Norwich City Council Fountains contract
by DAN GRIMMER
Tuesday, February 21, 2012
6:30 AM
Four companies expressed a “serious interest” in taking on the £4.6m contract which collapsed company Fountains had with Norwich City Council: but turned down the chance because it was losing money, it has emerged.
More than 150 workers lost their jobs last month when the environmental management company went into administration and the revelation that a string of companies turned their noses up at the Norwich deal has led a city MP to accuse City Hall of failing to properly manage its contracts.
But city council leaders hit back and criticised Norwich North MP Chloe Smith for “sitting on the sidelines” instead of helping find solutions.
Fountains Group, based in Mile Cross, had a £4.6m a year contract with the city council to clean streets and maintain parks, plus a £3.3m a year contract to collect rubbish.
While administrator BDO sold a number of similar Fountains contracts to OCS Group, the Norwich contracts were not snapped up and city MPs Chloe Smith and Simon Wright asked the administrators to explain why.
In a letter, the administrators revealed, in addition to OCS Group, three other companies expressed a “serious interest” and “undertook certain levels of due diligence”.
The letter added: “As a result of due diligence, all potential purchasers advised that they would be unwilling to take on any of the Norwich contracts as part of a sale agreement, due to their loss-making nature.”
The contracts have their roots in the £125m deal Norwich City Council signed with Connaught in 2010, which ended later that year when the Exeter-based company went bust, leading to 300 city redundancies.
At that time, the environmental management contracts were salvaged by administrators KPMG which deemed that Fountains, then called Connaught Environmental, remained a viable business.
However, Miss Smith said the revelation that four companies subsequently decided not to take on the contract because it was losing money raised fresh questions about the council’s own handling of contracts.
She said: “It demonstrates the importance of doing due diligence and doing your homework in determining whether a firm is suitable and represents a good proposition.
“We have a group of good, skilled workers in Norwich. The question is whether people have any confidence in the city council’s ability to manage those workers. This is a question of management and, to my mind, the management has failed.”
But Alan Waters, deputy leader of Norwich City Council and cabinet member for resources, performance and shared services, hit back.
He said: “When the administrators took over Connaught, we were able to transfer a couple of hundred jobs to the new entity which became Fountains and there was no question then that it was not a viable concern.
“It had been through the proper procurement process and it was the best contract in terms of quality and price. It was not the cheapest and nobody, including Chloe, complained about the jobs which were saved.”
He said Miss Smith had made “no effort” to engage with the city council over the issue and had failed to help the council to lobby for a change to procurement law, which recently saw leader Brenda Arthur write to the Local Government Association.
He said of the Conservative MP: “She stands by on the sidelines making ill-informed political points. I’d welcome her coming in so we could explain how the system works, because we have got a very good procurement process.”
He said the council was looking to retender the contract, but part of the problem was that councils were being “squeezed” by central government, at a time when private companies were also going into administration in a tough economic climate.
At a recent council meeting Ms Arthur criticised Miss Smith and Mr Wright for not lobbying for a review of procurement law after Connaught went into administration.
But Miss Smith said she had made inquiries at that time about how the situation could be helped, but added: “I do not think changing the procurement rules is the most sensible action to look at.
“In fact, I think it is a red herring. Most councils manage perfectly well in the modern world and there is no reason why our fine city should be so badly served.”
Fountains had a second contract to collect rubbish and recycling and Biffa has taken on that work.
• What do you think of what has happened at Fountains? Write to Evening News Letters, Prospect House, Rouen Road, Norwich NR1 1RE or email eveningnewsletters@archant.co.uk
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15 comments
the bottom line is that there is not enough money to pay for all these services. This country is well and truly bankrupt and hanging on by the skin of its teeth thanks to the last labour goverment. Its not helped by the new coalition who are stll spending and borrowing billions we simply do not have any more
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milecross
Friday, February 24, 2012
The real "nitty-gritty" is sorted out over Dinner at the Lodge in St. Giles.
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Mad Brewer
Thursday, February 23, 2012
Of course Chloe will criticise the city council in situations such as these and, as we can all surely see, that criticism is justified. Was she supposed to heap praise on them for this mess?
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Mel Lacey
Wednesday, February 22, 2012
Of course Chloe will criticise the city council in situations such as these and, as we can all surely see, that criticism is justified. Was she supposed to heap praise on them for this mess?
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Mel Lacey
Wednesday, February 22, 2012
i would just like to say there was a group of agencey workers who just before christmas was let go. just before all the new laws came in and some of us had been there from the very start and we also felt very let down.
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BFkev
Wednesday, February 22, 2012
Chloe Smith will always criticise the City Council no matter what it does, what we are not seeing is any decisive actions to back up these comments from Ms Smith, maybe political point scoring is more important than action in Chloe's world ?
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earth monkey
Tuesday, February 21, 2012
Typical of Chloe. Clearly she wants the council to use council tax money to pay for lager profits for her friends in the city. That's what comes of being in the Treasury I suppose!
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bgt
Tuesday, February 21, 2012
@Biglingers...why mention City Works?....that was over 20yrs ago... Why post absolutely rubbish comments (forgive the pun) Most have no idea what these street cleaners have to do and at what times they have do it...its a thankless task and now hopefully with the collapse of the previous contractor, you will see what a great job they were doing....re: Mr Trett's comment, not sure where the area is he mentions but its like it everywhere outside the inner ring road shopping areas.
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Sidney
Tuesday, February 21, 2012
Far better than the "old" Fountains guy? they are of the same doing the work! Just different logo's......plus the city area is the target area for NCC at this time.
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Sidney
Tuesday, February 21, 2012
No surprises. Whenever I saw a City works(?) contract, there'd five guys - 1 working and 4 chatting! I always remembera city works employee telling me - City shirks!
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biglingers
Tuesday, February 21, 2012
Ingo- the Labour Party has run the City for a lot longer than 40 years.Where did all these council houses come from built in the 20s,30s and thereafter?Since 2004 the Council has actually been as it is now in no overall control of one majority party and between 2002-2004 it was under the control of the Liberal Democrats.Marketisation of local government has been achieved with the help of more than one political party.As ever it's the workers who suffer and the low paid workers who suffer the most.
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Peter Watson
Tuesday, February 21, 2012
Local Elections, well I for one will not be voting for Labour, concerning repairs to the outside of my flat NCC have lied year on year when work will be completed.
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chebram71
Tuesday, February 21, 2012
The mismanagments happened under Labour, now in power for 40 years in the City, far too long and too comfortable, no change for so long meant that they have not been kept on their toes, are not eager enough. Alan Waters and Chloe Smith are of one and ther same dogmatic mainparty mindset, accusing each other, whilst more delay makes the situation worse for us all. Local elections soon, lets see how much people care, really.
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ingo wagenknecht
Tuesday, February 21, 2012
You are lucky IT Man we haven't seen anyone for weeks and the litter is beginning to pile up.
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chucky noris
Tuesday, February 21, 2012
I have to say that the guys from Biffa who are doing the street cleaning in Magdalen street are FANTASTIC - far far better than the old Fountains guy who was very rarely seen to wield a broom, these guys are doing a proper job and it is noticeable! Well done.
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IT Man
Tuesday, February 21, 2012