Bolsover council forging ahead with private development company to deliver £36million housing scheme – despite concerns about conflicts of interest

On Wednesday (February 1) members voted in favour of a business plan that will see around 100 council staff move to its wholly-owned company Dragonfly Developments Ltd, previously set up as a joint venture company with Robert Woodhead Ltd bosses, which the authority took complete control of following the collapse of its housing contractor Woodhead Construction in September last year.

The plan will also see the creation of a separate lettings company Dragonfly Management Ltd to form Dragonfly Group, while Karen Hanson will take over as full BDC chief executive and directors Grant Galloway, Ian Barber and Chris Fridlington will be given new roles in the company.

One of the most controversial issues however, has been the decision by Labour leader Councillor Steve Fritchley to remain as a director of Dragonfly, sparking concerns among both councillors and members of the public that it represents a conflict of interest.

Labour member Councillor Tom Kirkham commented: “Appointing the leader and fellow members as Dragonfly directors presents unnecessary challenges to the company and council.”

He pointed out comments made in a report by the council’s independent consultants 31Ten and Sharpe Pritchard that directors must ‘act completely independently from the council and from each other’, adding ‘councillors will face challenges ‘managing conflicts of interest’ between both roles.

However when approached by the Local Democracy Reporting Service (LDRS), Coun Fritchley argued there was no conflict.

“My philosophy on most things is if you want to control it you’ve got to own it,” he stated.

“It’s what’s best for the council, you’ve got one shareholder, which is Bolsover District Council.

“If I was sat here not as a director, I’d be concerned that the company was full of private people representing the best interests of BDC as a shareholder and I think that in any organisation or any extension of what we’ve got, there’s always got to be continuity.”

Mr Galloway, who has been a director of Dragonfly since it was first set up in 2016, added: “There is no hard and fast rule over whether being a member and being on the board is correct or not.

“Members who are on the board of Dragonfly declare an interest and are not allowed to vote.”

He denied rumours that he or any other district council employees that he knew of had ever worked for Robert Woodhead Ltd prior to setting up Dragonfly, maintaining that the contractor was chosen as the authority’s business partner based upon ‘high performance and competitiveness’.

Mr Galloway said any staff moved from the council to Dragonfly would do so following consultation and would be on the same pay structure and pension scheme.

He admitted that he, Mr Barber and Mr Fridlington would be paid more, but said that was because they would be taking more senior roles at the new company.

The business case outlines the council’s plan to borrow money from the Public Works Loan Board, a Government body that charges local authorities low interest to fund capital projects, and in turn loan that money to Dragonfly at a higher rate of interest, making a return on its investment.

Many have identified a flaw in the fact that BDC as planning authority will be granting planning permission for developments and loaning cash to its own company to deliver.

Coun Fritchley said the authority was allowed to do this under the Localism Act 2011 and it was common practice at councils up and down the country.

Furthermore, he added that it made good financial sense to do so as hiring an external contractor would cost them more money.

He explained: “The expense of housing repairs, that’ll be slashed by at least 10 per cent, the building costs under the joint venture, you’ve got at least 10 per cent builders costs, about 15, 18 or 20 per cent developer’s profit.

“Now to me that is just a waste of money, that can be retained within local authority it can reduce prices in local authority, it makes services a bit cheaper and a bit more effective.

“It’s recycling cash, it saves jobs and it provides direction.”

The council plans to use Dragonfly to create both private and social housing, which the directors said would support the authority’s income.

They will also use the company to deliver large capital projects such as the £9million Shirebrook Crematorium.

In August last year the authority agreed to loan £10million to Dragonfly, shortly before rumours about Woodhead Construction’s financial difficulties first came to light.

The council chiefs stated they were unaware at the time that the building contractor was in trouble, adding the money was never directly given to Dragonfly but merely put aside to pay for works once they had been completed.

“There’s nothing strange about having a loan facility in place as long as the mechanism sat around it to protect the council to ensure that it doesn’t pay for something that hasn’t happened,” Mr Galloway explained.

“At the time when the loan facility was put in place there was no suggestion that they were going to cease trading.”

He added that about a month prior to the firm ceasing trading the council had carried out a credit check on it, which had come back fine.

Sources revealed Wednesday’s Dragonfly vote was subject to a Labour whip, with members instructed that they were not allowed to ask questions at the public meeting.

Coun Fritchley refused to comment upon this however, stating it was ‘party business’ and that he had never personally asked for a whip during his time as leader.

Prior to the vote, BDC Deputy Leader Councillor Duncan McGregor addressed members, stating that they had been given ample opportunity to ask questions.

Labour members remained silent while other councillors fielded comments and questions.

Independent member Councillor Alan Bailey said: “Dragonfly has money from Bolsover District Council, and the independent consultants said in their report this scheme could go belly up.

“It’s taxpayers money and it’s going to be a bottomless pit to Dragonfly to do what they want.”

He added that Dragonfly lacked the expertise and skill force needed to carry out the physical construction.

Responding to him in the meeting, Mr Galloway said: “We have got a workforce in place, we’ve appointed some people from Woodheads and we’ve integrated those people and we’ve integrated them into our team here at Bolsover, so we’ve got expertise in Bolsover in managing contracts.”

The motion was passed with 23 members voting for it, four voting against and one abstention.

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