NAO report slams fire service procurement agency, reveals £6.5m legal challenge

Firebuy, the specialist vehicle set up by the Department for Communities and Local Government to procure equipment for fire and rescue services, has cost twice as much to set up and run as it has saved, according to the National Audit Office.

Calling on ministers to consider scrapping the body, the NAO urged the DCLG to “quickly assess whether to continue with a nationally directed central procurement body”. The 46 local fire and rescue services in England spend £120m a year on specialist equipment, such as fire engines, protective clothing and breathing apparatus.

The NAO said that if a decision was taken to retain Firebuy, then the way it operates should be changed. Alternatively Firebuy’s operations should be transferred to another professional buying body – such as Buying Solutions – or a fire and rescue service.

The watchdog acknowledged that a number of fire and rescue services and suppliers believed that Firebuy had brought more discipline and professionalism to procurement.

But it highlighted the fact that Firebuy is in a “difficult position” because it does not have the power to make local fire and rescue services use its national procurement contracts and so has to rely on persuasion.

“Progress has therefore been slow with only five out of the 14 framework contracts it has set up being used by more than half fire and rescue services to purchase equipment,” it said. This was in part because some equipment was not ready for renewal, but in many cases it was because individual services continued to choose other procurement routes.

The report described the DCLG and Firebuy’s agreed approach to developing framework contracts as “flawed”. This was because most of the Firebuy contracts allow suppliers to offer several different variations of the equipment, and allow fire and rescue services to buy bespoke equipment. They also prevent suppliers offering lower prices through high volume orders.

“The approach to measuring savings achieved by Firebuy is inadequate and the information that the estimated savings are based on is mostly unreliable,” the NAO added.

Firebuy, which was launched in 2006, was expected to be self-financing by 2008/09, but is still heavily reliant on grants from the DCLG.

Amyas Morse, head of the watchdog, said: “To deliver value for money for the taxpayer, public sector bodies should prevent the procurement of unnecessarily expensive bespoke equipment and collaborate successfully to build higher volume orders which reduce supplier prices.”

The NAO report revealed that establishing and running Firebuy’s procurement contracts cost the taxpayer £17m, “nearly double their resulting claimed savings and income combined”.

However, the DCLG and Firebuy have disputed the cost/savings analysis, arguing that the £6.5m of costs relating to a legal challenge should be excluded from any such comparison.

The legal challenge related to the Integrated Clothing Project, which was intended to find the right quality uniform and personal protective equipment for all fire and rescue services.

One of the losing bidders took Firebuy to court, alleging 16 flaws in the procurement process. At a preliminary hearing a judge ruled that 14 were inarguable and refused to grant an injunction preventing the signing of the contract with the winning bidder, Bristol Uniforms.

The court gave leave for the other two allegations to go to trial, which related to the weighting of different factors in the methodology used to select the winning bid. The case was settled on leading counsel’s advice, and after consultation with the DCLG and the Treasury, to avoid “a lengthy trial and very substantial legal costs”.

“The total legal and management cost of the case for Firebuy and the Department was about £6.5m, including the settlement,” the NAO said. The date of the settlement was not revealed by the report.

The watchdog said that even if this amount was excluded from any cost/savings comparison, costs still exceed the total of claimed savings and income.

“Firebuy’s running costs are relatively high compared with those in the commercial world, because of the top heavy nature of its staff grading mix,” it added. “The continued operation of Firebuy in its current form represents poor value for money.”

Firebuy declined to comment. However, in a letter to fire and rescue services and suppliers, the agency pointed out that the NAO had included all start up costs from the DCLG and the costs of the litigation arising out of the clothing procurement, which it said it had inherited.

"The NAO did not accept savings identified by Firebuy although these have mostly been calculated using methodology accredited by the Office for Government Commerce," it added.

The agency said it was keen to work with the government and fire services to identify how greater savings and efficiencies can be achieved. It also noted the NAO's recommendation that fire services be mandated to use nationally arranged procurements, warning that "this approach has been proven not to work in the past".