By Richard Johnstone | 6 September 2011
The audit work of the outgoing Audit Commission will be outsourced in ten lots grouped in four English regions and valued at around £89.4m, it has been announced.
The commission
has formally launched the process to privatise the work of the in-house audit
practice through a notice in the Official
Journal of the European Union.The contracts will cover all the audited bodies in a geographical area. The indicative prices show that the biggest deal will be for the auditing of the bodies in the Northwest of England, at £12.5m, followed by London (South), Surrey and Kent at £11.7m.
An accompanying procurement strategy says suppliers are free to bid for all the work, but only one lot will be awarded to any supplier in a region. This means that the total number of contracts that can be won by one supplier is four.
The tender is the latest step in the government’s plans to disband the commission, announced by Communities Secretary Eric Pickles last August.
From September 5, pre-qualification questionnaires can be issued on request to potential bidders. These must be returned by October 7. Bidders will then be shortlisted, with tenders for the work being submitted by December 16. Contracts will be awarded in February 2012, with commission staff transferring to the successful bidders on October 31, for audits of the 2012/13 financial year.
The contracts have been valued based on ‘audited body notional value’, which is being used as the basis for the proposed fee scales for 2012/13. Suppliers will be asked how much they would charge to provide the services specified in the tender documents, with any savings passed back to audited bodies in the form of lower audit fees.
The strategy states that the procurement aims to allow ‘a range of firms to bid, to support market plurality during the period of transition to new audit arrangements’. This confirms the intention of the commission to encourage new players to enter the market, as revealed by Public Finance last month. Chair of the Commission Michael O'Higgins said that the proposals created an opportunity for audit firms not currently in the public sector to gain a foothold.
Within each region, lots will be awarded in order of size with the largest lot, in terms of ABNV, awarded first. The successful supplier for the largest lot will then be removed from the evaluation of bids for other lots in the same region, and the same process will apply where there are three lots in a region.
The procurement strategy also confirms that the commission and the Department for Communities and Local Government are still to decide whether to award three- or five-year contracts.
The commission has also given the go-ahead to bids from the existing in-house audit practice.
It was announced in July that employees in the commission’s audit practice were likely to bid for contracts, and would then transfer into a stand-alone entity, which could be employee-owned, if any were won.
The commission says it is willing ‘to allow the Audit Practice Bid Team to set up a new business and to prepare and submit bids for the work of the Audit Practice’, subject to terms and conditions.
Its guidelines state: ‘The commission recognises that a bid prepared by members of the Audit Practice is in the public interest because it has the potential to lead to a new, employee-owned practice and is likely to increase competition and diversity in a market dominated by a few large firms. Under this revised protocol, the commission proposes to give written permission to named senior officers of the Audit Practice to take leave of absence from their normal duties to prepare and submit bids in the outsourcing exercise.’
The full list of tenders and ABNV values is:
Northern region
North West £12.5m
North East and North Yorkshire £5m
Humberside and Yorkshire £6.9m
Central region
West Midlands £8.9m
East Midlands £7.8m
Eastern £8.6m
London region
London (North) £8.4m
London (South), Surrey and Kent £11.7m
Southern region
South East £11.4m
South West £8.2m
