Introducing Gas Central Heating in Housing Executive Homes

A report published today by John Dowdall CB, the Comptroller and Auditor General for Northern Ireland, examines the arrangements operated by the Northern Ireland Housing Executive (NIHE) for the award and implementation of gas heating contracts between 1997 and 2001. In the past, most NIHE properties were equipped with either solid fuel or electric heating systems and, by 1995, NIHE had identified 10,000 systems as being in need of replacement or upgrading. In 1997, NIHE offered gas to tenants as a replacement option for the first time, and spent over £25 million on installing new gas heating systems in the period up to 2001.

Main Findings

The decision to offer gas heating systems

  • NIHE’s decision to offer gas heating represented a major policy change and was based on a 1997 heating policy appraisal, but the Audit Office report says this did not comply with Department of Finance and Personnel guidance for appraising expenditure proposals and policy changes (paragraphs 1.2 and 1.3).
  • In view of weaknesses in its appraisal of boiler types, the Audit Office does not consider that NIHE’s decision to install back boiler systems was based on sufficiently robust research. In June 2001, NIHE changed its policy in favour of wall-hung boilers, to counteract the poor quality of work experienced on some contracts. By this stage, almost 8,000 dwellings had back boiler systems (paragraphs 1.8 to 1.14).

Managing the award of heating contracts

  • Between 1997 and June 2001, NIHE awarded 52 separate heating contracts, worth between £100,000 and £662,000. By not aggregating these into fewer, larger, contracts, the report says that NIHE limited the opportunity to maximize competition and the potential for securing value for money (paragraphs 2.2 to 2.5).
  • Despite disqualifying a number of contractors on grounds of insufficient financial capacity, NIHE awarded three contracts, with an estimated value of £1.7 million, to a firm whose vacant financial capacity it had set at only £100,000 (paragraph 2.9).
  • The Audit Office supports NIHE Internal Audit’s conclusion that some contractors may have been engaged in collusive tendering to win contracts, and says that these concerns should have alerted NIHE to the need for a further, more rigorous, independent and properly resourced investigation (paragraphs 2.12 to 2.19).

Managing installation of heating systems

  • Final contract costs have consistently exceeded tendered prices, and net overspends and variances are likely to be at least £2.5 million (paragraphs 3.4 to 3.14)
  • At the beginning of the gas programme, there were only 2 appropriately qualified NIHE staff in Belfast assigned to inspect contractors’ work on site. One of these went on long-term sick leave and was not replaced, and the remaining inspector had other duties (paragraphs 3.17 and 3.25). A Health & Safety Executive investigation concluded that the overall lack of control of the contracts exercised by NIHE allowed the contractors to produce poor work with impunity (paragraphs 3.28 to 3.31).

Managing maintenance of heating systems

  • Much of the documentation supplied to NIHE by contractors installing gas heating systems before June 2001 was incomplete and incorrect. Consequently, data used by NIHE to schedule and manage the planned servicing programme, was unreliable and placed it in a position where it was likely to be in breach of the Gas Safety Regulations (paragraphs 4.2 to 4.3).
  • The report says that the evidence suggests widespread non-compliance with the Regulations, potentially exposing a number of tenants to health and safety risks, and making NIHE vulnerable to prosecution and fines (paragraph 4.5).

The potential of new partnering arrangements to deliver value for money

  • In March 2000, the NIHE Board approved the consolidation of the heating replacement programme into three large partnership contracts, each with an estimated annual value of £5-6 million over a five-year period. (paragraphs 5.3 to 5.6). The Audit Office says that the evidence available to date suggests that the partnership arrangements will deliver many significant benefits and that the lessons learned from the early gas heating contracts have wider application to other NIHE projects, and to projects in other public sector organizations (paragraph 5.18 and Introduction, paragraph 6).