Natural Resources Wales timber sales ‘not lawful’ – Audit Wales

A new Wales Audit Office report, written by the former auditor general Huw Vaughan Thomas, has heaped further opprobrium upon the Welsh Government agency which has already suffered the resignation of chairwoman Diane McCrae over repeated failures to offer timber grown on publicly-owned woodland for sale on the open market, and the qualification of its public accounts for three years running.

In early 2017 the auditor general criticised NRW for eight 10-year deals to sell timber to BSW Timber without tendering.  At that time, he was unable to satisfy himself that the decision to agree those contracts was lawful – a criticism he has repeated with the newer contracts.

But despite this incredibly strong – and rare – criticism of a public body, NRW embarked on a further 59 contracts with three different firms which were again not tendered, despite its legal obligations as a public body.

A total of 21 of the new deals – created following the termination of the original contracts – were also with BSW Timber, or a firm owned by it.  In his new report, attached to the 2017/18 accounts, he said NRW had not treated his previous findings “sufficiently seriously”.

NRW went on to award 59 contracts – 11 to BSW, 11 to a company owned by BSW called Tillhill, and 38 for the sale of standing trees to a timber harvester firm, Euroforest.

The deals with the latter firm came about after they emailed the NRW on 31 March 2017 asking for the same arrangement as BSW.

NRW was unable to demonstrate it had a good enough reason to depart from its own timber marketing plan “when it entered into 59 timber sales contracts without seeking competition from the market”.

“I am therefore not satisfied that NRW complied with principles of public law when entering into the contracts, and that the resultant transactions are lawful,” Mr Vaughan Thomas wrote.

In addition to repeated breaches of legislative requirements to advertise public contracts and ignoring warnings from its own legal advisors that it may also be in breach of European Union State Aid obligations, NRW accepts that it lost up to £1M of revenue from its first series of ten-year contracts.

A loss compounded in the subsequent tranche of transitional contracts which led the Wales Audit Office officials examining the transactions to have serious doubts as to whether the subsequent deals were priced at market rates.

Prices differed between what was offered to BSW Timber and what was offered to Tillhill and Euroforest.  In 11 of the 38 contracts to Euroforest, the prices for wood were the same as the terminated deals, which NRW had itself acknowledged were poor value for money.

The report said that if all the contracts – most of which were completed by March 2018 – had been priced the same way as the BSW deals, NRW may have received £186,232 more in income.

Llanelli Assembly Member Lee Waters said NRW was “clearly an organisation operating outside of any control” and questioned the nature of NRW and BSW’s “cosy” relationship.

“It does beg the question, the nature of the relationship between a close supplier and a public body like this, that they can behave like this without consequence,” Mr Waters said.

The chairman of the Public Accounts Committee, AM Nick Ramsay, has written to NRW asking for officials to come before the Public Accounts Committee in September.