This item was published during the term of a previous administration that ended in April 2007
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Warm Deal central heating programme
28/03/2003
The Executive has concluded an investigation into claims in relation to the contract for its Central Heating Programme.
The investigation, begun on February 26, found that:
- All funds paid by the Scottish Executive to Eaga have been applied by Eaga for the purposes of the Central Heating Programme and the Warm Deal
- The number of installations reported to the Scottish Executive and to MSPs is supported by evidence held by Eaga, including the geographical spread reported by post code area
Social Justice Minister Margaret Curran has written to the convener of the Social Justice Committee, Johann Lamont MSP, setting out what the investigation found.
Text of letter:
Dear Johann
On 26 February the Scottish Executive announced that it had appointed KPMG to assist in an investigation into claims in relation to the contract for the delivery of the Central Heating Programme and the Warm Deal by the Eaga Partnership. The Scottish Executive's investigation has now concluded.
We found that for the period under investigation, that is April 2001 to December 2002:
All funds paid by the Scottish Executive to Eaga have been applied by Eaga for the purposes of the Central Heating Programme and the Warm Deal.
All invoices presented by Eaga to the Scottish Executive to draw down funding for the programmes are supported by detailed lists of invoices from contractors for work done.
The number of installations reported to the Scottish Executive and to MSPs is supported by evidence held by Eaga, including the geographical spread reported by post code area.
The projected number of completed Central Heating Programme installations for 2002/03 is 4,718 which exceeds the target for the year which was 4,600.
The projected number of installations of central heating systems is 5,500 units and these will become completed installations during 2003/04. Eaga are on course to meet the target of 20,500 Warm Deal installations.
Four of the claims made in respect of the contract are supported in part or in whole by the investigation, though none of these claims would support any contention that Eaga have engaged in fraud or wrongdoing in respect of the contract or support any suggestion that the programme is at risk. The Scottish Executive does not intend to publish or comment on any claims or aspects of claims which are not supported by evidence.
Our investigation has found that there have been weaknesses in Eaga's data management systems that make those systems vulnerable to abuse or error in respect of payments to sub-contractors for work undertaken, though there is no evidence that these weaknesses have in fact resulted in loss.
The Scottish Executive has directed Eaga to appoint their auditors, PriceWaterhouseCoopers, to conduct a sample-based review of payments to contractors taking account of particular risks identified during the investigation. If loss has occurred it will be for Eaga as contractor to make good any loss to the programme.
The Scottish Executive will receive a copy of the report prepared by PriceWaterhouseCoopers and assess if any further action is required at that time. Our investigation found that in advance of any claims being made to the Scottish Executive, Eaga had themselves commissioned work to identify weaknesses in their systems.
The arrangements agreed between the Scottish Executive and Eaga for handling work over the end year period 2001/02 were not followed in all cases, though there were variations to those arrangements that may have lead to confusion as to what was required. The effect of this is that work identified as having been completed in 2001/02, whether on the basis of full or partial completion, may not have been completed until beyond the originally agreed cut off dates of 15 April or 20 May 2002 respectively.
However, the investigation confirms that the 3,559 units reported as fully completed for the year 2001/02 have been completed and do not overlap with the figures reported for 2002/03.
The average cost reported by Eaga to the Scottish Executive for systems installed in 2001/02 of £2,292.87 was inaccurate, though the revised figure of £2,448 is still below the target average of £2,500 per household. The reason for the difference is in part due to the non-inclusion of VAT within the original figure, but also because not all relevant invoices were attributed to the correct year.
Eaga has received bulk discounts to the value of £28,160 plus VAT which have not to date been passed on to the Scottish Executive. The discount was made as a single payment from a supplier in January of this year and is clearly disclosed in Eaga's books. There is some ambiguity in the contract as to whether the Scottish Executive is entitled to receive the benefit of this discount, but we consider that it should accrue to us and have informed Eaga accordingly.
In parallel with the investigation into the specific claims made we have been carrying out a review of contract compliance by Eaga focusing on the handling of applications, procurement, customer care and quality control.
This review is continuing and will conclude shortly. At that time we will consider whether changes to the contract are required and you will be informed.
I have copied this letter to all members of the Social Justice Committee and put it in the public domain by means of a brief factual news release which is attached.
Margaret Curran MSP
Minister for Social Justice