Conflict of interest scandal rocks HIPs
Damian Clarkson    10th August 2007

The ailing Home Information Packs (HIPs) have once again come under fire, following allegations that certain players who helped introduce the scheme had a “clear conflict of interest”.

According to a scathing report by the National Audit Office (NAO), the government hired two consultants to develop HIPs who had a vested financial interest in a company involved in the scheme. Yet even when this conflict was brought to the Department for Communities and Local Government’s (DCLG) attention, it took half a year before the aforementioned party’s contracts were terminated.

Still, considering it required an entire decade of missed deadlines and bureaucratic sandbagging before HIPs even got off the ground, maybe we should take this as a clear sign that the government is speeding up its development of the packs.

How the latest fiasco came about
Consultants Christopher Legrand and Richard Theobald were called in by the government to draw up a certification scheme to vet thousands of home inspectors to provide data on condition and energy performance for HIPs.

But the two owned thousands of shares in the parent company of Surveyors and Valuers Accreditation (SAVA), the first successful bidder to run a certification scheme.

Amazingly, Legrand actually attended a panel that assessed the SAVA application to become a certification scheme. “This makes the conflict of interest even more material,” says the NAO report.

The DCLG claim Legrand had no sway with the panel in making the decision, and served only as an expert adviser. But the NAO adds: “No formal minutes were taken at the meeting, so the NAO cannot determine whether or not he was involved in the decision making.”

ICS spotted the problem. Why couldn’t government?
On 25 May 2006, the Royal Institute of Chartered Surveyors (RICS) – a rival bidder to SAVA – brought the potential conflict to the attention of DCLG.

But rather than drop the consultants immediately, the Department merely took Legrand’s word that neither consultant would gain financially from owning the shares. Unsurprisingly, the NAO deemed this to be poor corporate governance.

“The Department took this information at face value. There is no evidence on file that the relevant policy team sought advice from DCLG's financial team. They failed to investigate further… although good corporate governance would indicate this would have been prudent.”

In October, RICS hired auditors Baker Tilly to examine the possible conflict of interest, and again called on the Department to do investigate. It was only at this point that the DCLG appointed its own advisor, who concluded the appointment of SAVA to run the first certification scheme had the potential to increase the share options held in the parent company, National Energy Services, by the two consultants.

The DCLG finally terminated their contracts on 6 November.

DCLG actions left the watchdog unimpressed
Picking apart the remains of the latest HIPs debacle, the NAO concluded that the DCLG was at fault on a number of points. Here’s what it had to say:

“The Department employed consultants with a clear conflict of interest. It did not take sufficiently timely action to investigate the continued concerns raised by the correspondent.

“Departmental staff relied on assurances from the consultants themselves that a conflict did not exist. They should have taken more robust action when first informed to collect independent information to verify what they were told.

“At least three letters to the Department from RICS did not receive a written response. Good governance would see full replies being sent out within 10 days, or if that is not possible, at least holding responses.”

Click here to read the NAO’s full report.

Failure has become a habit for HIPs
Of course, this is just the latest crisis to hit the packs. Just last week, one of the HIP sellers went into administration – at almost the exact time the packs were finally launched.

Add to that the constant missed deadlines, critical shortages of energy assessors and the general disdain of HIPs from both the property industry and public, and it’s fair to say Gordon Brown is probably wishing they’d just disappear right about now.

But unfortunately for Mr Brown, that’s unlikely to happen: The NAO has just announced plans to investigate further the implementation of HIPs in full following the conflict of interest fiasco. And given their track record, only the most seasoned fantasy novelist might fathom what the NAO might uncover.

Article produced by EveryInvestor.co.uk