Assurances given on council joint venture

Assurances have been given that construction firm Kier is committed to Heart of Wales Property Services (HOWPS), which has a main depot in Newtown.

HOWPS is a joint venture between Powys County Council (PCC) and construction group Kier and looks after 5,400 homes and 630 properties in the county.

Its depot on the Dyffryn Industrial Estate employs a large number of local people.

PCC has identified HOPWPS as an area of significant risk due to the financial difficulties Kier has faced in recent years.

Internal Auditors, SWAP, had been asked to look at how PCC manages the HOWPS contract, which included contingency plans of what to do if Kier went bust.

SWAP Assistant Director, Ian Halstead, put his findings to the Audit Committee at their meeting this week.

He said PCC needed to be keeping a “close eye” on how the company was performing.

He also recommended that HOWPS be scrutinised by an independent body.

Having senior staff and cabinet members on the board was a “potential or perceived conflict of interest”.

The contract needed to be tweaked to make sure that all facets of work were covered with Mr Halstead giving smoke alarms as an example.

HOWPS did test them but they weren’t covered in the contract.

Audit committee Vice Chairman and independent member, John Brautigam also shared the findings of his own discussions with Kier.

Mr Brautigam said: “Last year, Kier Group did a strategic review.

“They decided to completely change their structure, concentrate on its core. They were going to exit the market for a lot of small operations.

He explained that Kier Facilities Services a subsidiary of the Kier Group actually have the company holding in HOWPS.

While on paper this part of Kier was seen to have net liabilities of £18 million and an overdraft of £28 million, Mr Brautigam said this was not due to operational losses: “but entirely to provisions being made for exiting unprofitable contracts and compensation”.

Mr Brautigam said: “Kier Group issued a letter of support to Kier Facilities which runs up to December 2020.

“We have received verbal assurances, and I hasten to add these assurances of continued support have been given in absolute sincerity.

“They have behaved absolutely impeccably in terms of communication on their financial performance.”

“Kier is committed to HOWPS.”

But, due to how the Covid-19 pandemic is affecting the economy, he believed it was essential to receive a further written assurance of Kier Group’s support going beyond the middle of December.

Finance portfolio holder, Cllr Aled Davies, said: “The leader (Cllr Rosemarie Harris) did have a meeting with the Kier directors and they gave a very strong clear commitment to the future, and obviously we welcome that.

Director of Transformation and Resources, Vanessa Young told the committee that PCC already a business continuity plan in place that covers “unplanned exit.”

Ms Young said: “We are not suggesting it’s going to be required but it is appropriate we have a plan in place.”

“The contract runs from 2017 to 2027 but there is a break clause in July 2022.

“Both parties will be looking and reviewing the situation ahead of that, to decide whether to enact the break clause or continue to 2027.”

She added that work would be done to “appraise” options so the council could make an informed decision.

 

 

By Elgan Hearn, Local Democracy Reporting Service