Summary: X complained about the way the Council made its decision not to complete a grant funding contract for the provision of services. X says the Council’s decision-making process was flawed and it should withdraw the decision. We have found fault with the Council in failing to act with transparency and openness in the period from August to December 2020, causing X injustice and in failing to keep a proper record. We do not consider these faults affected the overall decision. The Council has agreed to apologise to X, as a suitable way to remedy the injustice, and make service improvements.

The complaint

1. The complainant, a community interest company I am calling X, complains about the way the Council decided in December 2020 not to complete a grant funding contract with it for the provision of youth services. X says the Council’s decision-making process was flawed because it failed to:
1. have proper regard to the cooperative council principles and presumption in favour of transparency and openness in its Constitution;
2. have proper regard to the references, in its 2014 report about its decision to award X the contract, to the need for co-operative decision-making; and
3. meet its co-operative decision- making standards, having reached its decision by pursuing a course of conduct which excluded X from its decision- making process.
2. X also complained the Council failed to engage with it about the resolution of outstanding issues in the period leading up to the decision. X was assured at meetings in July and August 2020 further meetings would be arranged but the Council failed to do so. The outstanding issues, stated by the Council as being part of the reasons for its decision, were:

• a failure to resolve issues about the transfer of undertakings. But these were primarily for the Council to resolve. X had not presented any obstacles and confirmed it would participate as an employer in the Lambeth Pension Fund. The Council has not provided any evidence about the outstanding issues and action taken before it concluded they could not be resolved;
• X’s request for more grant funding than the amount originally offered. But in 2018 the Council put forward, and X accepted, a revised grant offer. The Council did not communicate any concerns about the grant offer before making its decision; and
• X’s failure to engage positively with other users of the site. But the Council has not provided details of the information on which it based its decision about this. It reached its conclusion without first giving X the opportunity to respond to any specific allegations.

3. X says the Council’s maladministration in the way it made its decision caused it the following injustice:

• an inability to fully use the premises to deliver its services to the local community;
• a loss of commercial and strategic partnership opportunities with other organisations; and
• although X has confirmed it is not asking us to investigate this issue, it has incurred financial losses in respect of outstanding invoices of some £53,000 which have not been paid by the Council.

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The Ombudsman’s role and powers

4. We investigate complaints about ‘maladministration’ and ‘service failure’. In this statement, I have used the word fault to refer to these. We must also consider whether any fault has had an adverse impact on the person making the complaint. I refer to this as ‘injustice’. If there has been fault which has caused an injustice, we may suggest a remedy. (Local Government Act 1974, sections 26(1) and 26A(1), as amended)
5. We consider whether there was fault in the way an organisation made its decision. If there was no fault in the decision making, we cannot question the outcome. (Local Government Act 1974, section 34(3), as amended)
6. If we are satisfied with an organisation’s actions or proposed actions, we can complete our investigation and issue a decision statement. (Local Government Act 1974, section 30(1B) and 34H(i), as amended)

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How I considered this complaint

7. I invited X and its representative and the Council to comment on a draft version of this decision. I considered their responses before making my final decision.

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What I found

What should have happened

Our published guidance on Good Administrative Practice

8. Our guidance sets out the standards we expect when we investigate a council’s actions.
9. These standards include being open and accountable; keeping proper records; stating the criteria for decision making and giving reasons for decisions; and ensuring decisions and actions are proportionate, appropriate and fair.

The Council’s Constitution

10. The Constitution, in force in December 2020, sets out how it operates and makes decisions. It says it reflects the Council’s ambition to become a Cooperative Council, defined as a new relationship between the Council and local people so they are able to take control of services and the places in which they live.

The Constitution principles

11. The Constitution set out five principles (“Cooperative Council Principles”) for the way in which the Council designs and delivers services. These say:

• the Council holds a unique position to encourage and support a vibrant and strong civil society;
• public services should be planned together and delivered through a variety of organisations, with staff providing expertise and citizens working as equal partners;
• citizens should be incentivised to take part in the provision of public services;
• public services should enable residents to engage in civil society through employment opportunities; and
• public services should be accessible from a variety of locations

12. It also confirmed all the Council’s decisions were to be made in accordance with the following principles:
1. having regard to the cooperative council principles and any relevant strategy or policy document;
2. having regard to involving citizens in decision making;
3. decisions by individual councillors are taken in consultation with relevant officers and citizens to ensure a proper basis for decision making is in place;
4. proportionality;
5. due consultation and coproduction with citizens informed by professional advice from officers;
6. respect for human rights and equalities;
7. a presumption in favour of transparency and openness; and
8. clarity of aims and desired outcomes.

The delegation scheme

13. The Constitution set out the Council’s delegation scheme under which cabinet members had responsibility for taking commissioning decisions in relation to their own portfolio within the existing budget, policy and outcomes framework. Decisions taken by cabinet members are executive decisions.
14. It also confirms cabinet members may make key decisions and non-key decisions. Key decisions may not be taken unless certain procedures have been completed, including publication in the forward plan.
15. A key decision is an executive decision which either:

• requires an amendment to the community plan outcomes framework or a recommendation to amend the budget and policy framework; or
• results in the Council incurring expenditure, raising income or making savings of more than £500,000: or
• has a significant impact on communities in an area of two or more wards in the Council area; or
• has a significant impact on the wellbeing of the community or quality of service to a significant number of people in the area; or
• has a significant impact on communities of interest.

16. An executive decision which is not a key decision is referred to as a non-key decision.
17. The Constitution also says:

• The Council will keep a record of all certain non-key decisions;
• officers and individual cabinet members will pre-notify and record all officer and individual cabinet member non-key decisions involving resources between £100,000 and £500,000; and
• pre-notification means having been previously provided to all councillors and the Democratic Services and Scrutiny Manager (DSS Manager).

What happened

Background

18. I have set out a summary of the key events below. It is not meant to show everything that happened.

Events leading up to the Council’s decision

19. I am investigating the way in which the Council made its decision in December 2020. I have set out the following as context for that decision.
20. In 2014, following a tendering exercise, the Council decided to approve grant funding to X for the provision of services. This was subject to clarification of points with X. In the report confirming the decision, the Council said it was working towards becoming a Cooperative Council. It was aiming for greater involvement of local communities in the delivery of services and in making decisions and co-producing services, engagement was key.
21. In 2015 X raised its concern with the Council about a lack of progress in agreeing outstanding points.
22. In 2016 X and the Council discussed proposals for revised grant funding. An amount was agreed in principle subject to X’s questions about pension contributions, running costs and other matters. X raised further concerns about delays and difficulties in completing the process for the grant funding contract.
23. In 2018 the Council told X it had restructured staffing at the centre to reduce expenditure. It proposed a further revised grant offer which X accepted.
24. In 2019 the Council contacted X about its failure to comply with Companies House regulations. X advised this had been due to administrative errors which were being addressed by its directors.
25. In July 2020, X again raised concerns with the Council about the continuing delays and the failure to complete the grant funding contract.

The Council’s decision in December 2020

26. The Council told X it had decided not to proceed with the grant funding arrangements they had been discussing and to maintain the service provision in house instead. It said in making this decision it had considered:

• A lengthy period of time had elapsed since the initial bid submission without a resolution of the issues holding up agreement. During this period its assessment of the needs of the community and its own priorities had changed. It considered the service provision would be amenable to new ways of working;
• Meeting the requirements for the proposed transfer of undertaking had proved a serious obstacle which was unlikely to be resolved;
• X had asked for greater grant funding than originally offered. The Council did not believe this would offer value for money. X’s business plan did not meet its criteria of a viable plan providing a good service to the community at a reasonable cost, sustainable at the end of the grant period; and
• Effective partnership working was based not just on good working relationships between the Council and its partners but also between its partners. X’s partnership working with other users of the premises had not been positive. X had not engaged fully with the Council’s endeavours to manage use, access and security of the site.

27. The Council concluded, taken together with the other matters outlined, the venture had run its course and the time had come for it to unlock the site’s potential in a different direction.

X’s response to the Council’s decision

28. X responded to the Council’s decision in January 2021. It said the presentation of the Council’s decision, as having been already made, without any right of appeal, raised questions about the way the Council conducted its business.
29. It rejected any implication it was at fault. It said the Council had consistently delayed the ongoing negotiations. X had been waiting to hear back from the Council after providing requested information, only to receive this decision.
30. X asked the Council to withdraw the decision immediately and have an urgent meeting with it to conclude the outstanding issues.

X’s complaint to the Council

31. The Council confirmed it would not withdraw its decision. X then made a formal complaint to the Council.
32. X said the Council had failed to recognise it had agreed to award the contract to X but not delivered this. The Council’s change of direction was a breach of contract made in bad faith. X had provided services in good faith awaiting the completion of the contract. The prolonged delay and change of direction had detrimentally affect X’s sustainability and commercial opportunities.

The Council’s response to the complaint

33. In its reply of February 2021, the Council said:

• The decision was taken in line with its policy and decision-making processes following careful consideration of relevant material;
• Its complaints procedure could not be used to weigh that material in the balance or determine whether it should have been decided differently; and
• Accordingly, it could not consider the complaint.

34. X was not satisfied with this response and brought its complaint to us.

The Council’s response to our enquiries

35. The Council said the decision not to proceed with the grant funding contract was made by the councillor who held the post of cabinet member for Children and Young People at the time.
36. The decision was made by the councillor, as cabinet member, under delegated authority following a presentation given by officers at a cabinet member briefing which:

• included concerns about insurmountable issues with the transfer of undertaking and trust and confidence in X’s way of operating;
• referred to concerns residents were not happy with the service currently provided;
• advised the amount of grant funding now proposed could not be met by the Council, was not cost effective and would cost more in the long run; and
• advised delivering the service in house would provide best value under s123 Local Government Act 1973 and s3 LGA 1999. It would allow for the renting of the space to bring revenue back to the Council to fund activity and upgrading of site equipment.

37. The decision was not a key decision and so deemed a non-key executive decision. It does not have a record of its categorisation at the time it was taken.
38. It accepts it did not communicate closely or clearly with X following their last meeting in August 2020. It did not give X the opportunity to persuade the Council it should proceed with the grant funding contract.
39. It says it was entitled to make the decision it did having regard to the matters outlined in its December 2020 decision letter. The matter had been drifting since 2015 and X was aware of the Council’s concerns. X had made little or no progress on a viable business plan, the transfer of undertaking requirements or forming and maintaining good working relationships with other partners.

My findings – was there fault by the Council causing injustice?

40. Our role is to review the process the Council followed when it made its December 2020 decision. We will consider the standards we expect a council to meet and whether it has properly followed its procedures and considered the relevant information. But we cannot question the merits of a council’s decision.

The authority to make the decision

41. I consider the Cabinet Member for Children and Young People had the appropriate authority under the Council’s constitution to make the decision, on the Council’s behalf, not to proceed with the grant funding to X.

The decision-making procedure

42. The cabinet member made the decision following a briefing by officers. The information in the briefing was relevant to X’s delivery of the services to citizens, its cost effectiveness and value for money of the grant funding by the Council if it went ahead with the proposed contract with X.
43. The Council decided the decision was not a key decision. I do not consider there was fault in this approach, taking account of the following factors:

• The decision not to proceed with the grant funding contract with X was not a decision that resulted in the expenditure, raising or saving of over £500,000, which would have triggered the key decision process. It was a decision to cease working with a third party service provider, based around concerns it had about its business practices; and
• The Council was not proposing that services ceased on the site, and was clear that it instead planned to bring the service in house. There is no suggestion this would have resulted in savings in excess of £500,000 which would have meant the matter should have been dealt with as a key decision, given that any in-house service would also carry a cost; and
• The fact it also proposed arranging services in-house meant there would be no significant impact on the community, which would have been another trigger for the key decision process (indeed, its decision not to proceed with the contract was based in part around concerns the business plan did not provide a viable service to the community, and that X wasn’t engaging fully with the Council to manage concerns around use, access and security).

44. Given these factors, I am satisfied the Council was entitled to determine, in December 2020, this was not a key decision. Having done so, it did not have to follow the procedure for key decisions and was not required to publish advance notice of the decision in its forward plan.
45. I have not found fault with the Council in the way it decided this was not a key decision.

Recording the type of decision

46. The Council is required by the Constitution, to keep a record of all certain non-key decisions, and record and pre-notify other councillors and the DSS Manager about all certain non-key decisions involving resources between £100,000 and £500,000.
47. The Council did not record the type of this non-key decision. My view is it should have done so to confirm its consideration of whether it was the type of non-key decision it was required to record and pre-notify to other councillors and the DSS Manager. I consider this was a failure to meet our expected standard of keeping proper records, and fault by the Council.
48. But I do not consider this fault had any impact on the outcome of the cabinet member’s decision in December 2020 and did not cause X any injustice.

The Council’s decision-making principles

49. I do not consider the 2014 report is relevant to the Council’s process for making its decision in December 2020. The Constitution is clear it is the document in which the framework and principles for Council decisions are set out.
50. I do not consider the Constitution required the Council to consult with X before making its decision. In my view, save for meeting the expected standard regarding openness and transparency as referred to in paragraphs 51 and 52 below, the Council had due regard to the appropriate decision-making principles in its Constitution when it made its decision.
51. But, in my view there was poor communication with X between the last meeting with X in August 2020 and the decision in December 2020. Given the significance of the decision to X, I consider it would have been good administrative practice in accordance with our expected standards, for the Council to have alerted X to the decision it proposed to make and check there had not been any material change in circumstances since August which might have affected its view.
52. In my view the Council acted with a lack of transparency and openness in failing to do and this was fault. This fault caused X a degree of distress and frustration when the decision was unexpectedly received. I consider an apology is an appropriate remedy for this injustice.
53. We are not proposing any further remedy because X had the opportunity to challenge the decision and make representations in response to the decision letter, and through the complaints process. The Council considered the representations, which did not appear to include any new evidence, and did not change its view.

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Agreed action

54. To remedy the injustice caused by the above faults and, within four weeks from the date of our final decision, the Council has agreed to:

• apologise to X for its failure to act with transparency and openness about its proposed decision between August and December 2020.

55. Within three months from the date of our final decision, the Council has agreed to review its:

• procedures for maintaining records of its executive key decisions and non-key decisions; and
• guidance to officers and councillors about the requirement to have regard to the principle of transparency and openness in the decision-making process and its communications with parties affected by proposed decisions.

56. The Council should provide us with evidence it has complied with the above actions.

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Final decision

57. I have found fault by the Council in failing to act with transparency and openness in the period from August to December 2020, causing X injustice, and in failing to keep a proper record. I do not consider these faults affected the overall decision. I have completed my investigation on the basis the Council will carry out the above actions as a suitable way to remedy the injustice.

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Investigator's decision on behalf of the Ombudsman