The devious department

In February 2003 the government launched Achieving Excellence in Construction. The aim was to transform the state into a best practice client. That involved public sector procurers agreeing common minimum standards with suppliers, such as a commitment to pay all money properly due promptly and according to the relevant contractual provisions.

This came too late for the Ruttle group of companies in Lancashire. They specialise in hiring out and transporting plant and machinery, with or without attendant labour, for civil engineering, landscaping and road laying work. The group had a long history of acting for the public sector.

When the foot-and-mouth epidemic broke out in February 2001, Ruttle was called in by DEFRA as part of a clean-up of infected areas. The group, whose annual turnover at this time averaged about £20m, invoiced £23m for the work it carried out.

It is not hard to imagine the demanding and unpleasant nature of much of the work. Furthermore, it was important and, since it was carried out on an emergency basis, speed was of the essence. This meant that each piece of work was individually instructed by a DEFRA representative on site without a specification, a bill of quantities or a budget.

In those circumstances the payment arrangements had to be practical and straightforward. The pattern that emerged was that Ruttle would provide the labour, plant and machinery required and would be paid on a man hours basis at an agreed rate with plant and machinery charged separately at cost.

Given the extent of Ruttle's work, before long DEFRA became overwhelmed by the task of keeping track of the account. Accordingly, in June 2001, both sides sat down to agree a more formal arrangement involving a call-off contract with standard agreed rates. Not only was Ruttle required to invoice for each separate piece of work, as it had been doing, it was also required to reinvoice all the work it had carried out to assist DEFRA to verify and approve the mountain of Ruttle's invoices, a 10-step investigation process was put into place that involved checking and auditing by civil servants and external quantity surveyors and accountants.

Ruttle had shown ‘remarkable tolerance’ at what appears to have been a sustained fishing expedition to beat off its claim

All did not go well. Eventually, in January 2003, Ruttle took the matter to court. It said it had invoices worth £13.3m still outstanding. That is 57% of the £23m of work carried out and invoiced. DEFRA challenged the claim and alleged that there had been serial discrepancies, overcharging and, in particular, reliance by Ruttle on timesheets that had not been signed by DEFRA representatives.

His Honour Judge Thornton dismissed most of the allegations. He was satisfied that the work was generally up to standard and that there was no pattern of overcharging. A substantial proportion of the claim turned on the unsigned timesheets but the judge found that, although the normal arrangement was for sheets to be signed, where this was not possible the parties had agreed to proceed on the basis of unsigned timesheets. DEFRA could not now go back on that agreement.

The judge was even less impressed by DEFRA's complaints about lack of substantiation. He was satisfied that Ruttle and the on-site DEFRA representatives had kept adequate records. By the time the matter came to court, the absence of contemporary records was the result of the fact that DEFRA had apparently mislaid most of the documentation or had failed to ensure it was available for the trial.

As for the 10-stage invoice validation process established by DEFRA, the judge said Ruttle had shown "remarkable tolerance at what would appear to have been a sustained fishing expedition to find, without success, a handle with which to beat off Ruttle's claim".

Hopefully the problems that Ruttle faced, which no doubt had a dramatic effect on its business, will now be a thing of the past given the government's continuing commitment to treat public sector contractors and suppliers properly.