• PHSO accepts errors in handling of contract worth more than £100,000
  • The board should have approved contract for onsite cafe last year
  • The regulator was criticised by the NAO for contract failings in 2015

The Parliamentary and Health Service Ombudsman failed to follow its own procurement guidance when it awarded a contract worth more than £100,000 without board approval, HSJ has learned.

The watchdog has admitted the mistake and said it has improved its processes after it awarded a contract to a company called Baxter Storey to run its onsite cafe for employees in November.

According to the PHSO’s own procurement guidance: “All tenders exceeding £100,000 can only be accepted by the [central procurement team]. A report must be submitted to the executive board.”

It said such a report should include the names of bidders, the amount of money involved and a rationale for the recommendation to award the tender to any single bidder.

Minutes from the PHSO board for January, which were published last month, show the board did not approve the contract. Board members agreed a review into “how and why the governance process was not followed and what measures have been put in place to avoid repetition” would be carried out.

The PHSO refused to release this report to HSJ or reveal the value of the contract.

This is not the first time the ombudsman has faced questions over its contract processes.

In 2014, the National Audit Office criticised the PHSO for its handling of four contracts worth more than £1m. One contract was awarded to a former business partner of Dame Julie Mellor who failed to declare the interest when she sat on the appointment panel.

The NAO concluded there was no evidence of undue influence arising from conflicts of interest but said this was only possible after a detailed examination. Based on its actions and documentation, the PHSO “would find it difficult to robustly defend itself against the charge that interests played a part” in decision making, the report said.

In January 2016, MPs criticised Dame Julie Mellor after the PHSO’s end of year accounts for 2014-15 were “qualified” by auditors because of “serious failings, including a lack of management oversight.”

Dame Julie told the Commons public administration and constitutional affairs committee that this was because the PHSO had overspent by £275,000 at the end of the financial year “because of inadequate cash planning and monitoring”.

Following the latest contract failing a spokeswoman for the PHSO said it had improved its processes through greater control over contracts given to the finance director, who sees all procurements above £3,000.

She added: “The PHSO board did not receive a business case for this work as it should have done under our governance processes. This should not have happened and processes have since been strengthened.”

Dame Julie announced her resignation as ombudsman in July after HSJ revealed she failed to take action when she was alerted to her former deputy Mick Martin’s involvement in covering up the sexual harassment of an NHS HR director.