A North Derbyshire Council has been advised that its most favourable option is to dissolve its wholly-owned controversial development companies and to take the services back in-house despite claims from the current company board that there has not yet been a fair and full assessment of their success.
Bolsover District Council’s Executive formally noted during a heated meeting on July 9 an Options Appraisal from advisers Local Partnerships which highlighted the most favoured preference for the council, following a recent review, would be to take services provided by Dragonfly Development and Dragonfly Management back in-house under complete council control.
The Labour-controlled council currently has two wholly-owned Dragonfly companies – the Dragonfly Management company representing the services that used to be run by the authority and the Dragonfly Development company which is involved in construction like council properties and developments for third parties.
Bolsover District Council’s Dragonfly was established by the former Council Leader Stephen Fritchley when Edwinstowe-based Woodhead Construction fell into administration in 2022 while working on Elmton-with-Creswell Parish Council’s costly Creswell Heritage and Wellbeing Centre project which Dragonfly subsequently completed.
Council Leader, Cllr Jane Yates, said: “The Dragonfly companies were set up for the right reasons, the company saved jobs and prevented delays in the projects that were underway when the joint venture with Woodheads failed.
“Unfortunately, independent advice was not followed at the time and instead of recruiting independent directors to the board, councillors were put in those positions instead. This created a conflict of interest and left vital skills and experience off the board. This was worsened by the fact the former Leader of the Council sat on the board as Chair, causing further conflict of interest.
“Before I became Leader there was call for a review from the council’s statutory officers and from day one of my Leadership I insisted it went ahead.
“I saw the review as an opportunity to see the state of the companies and see where improvements could be made as well as highlighting good practice. The Dragonfly Board did not agree a review was necessary which I found disappointing.
“I wanted to ensure myself and the council were being open and transparent, so with the support of the Cabinet, we published the report in full and unredacted.
“Today’s (July 9) meeting was the first step towards moving forwards with the companies following this review. Every councillor was given the opportunity to speak and every opinion will be considered when the Executive meets at the end of the month to decide what we do next.
“I want to reassure our residents that the majority of the Bolsover District Councillors, across the parties, have been fully behind the review and welcome the findings. As a council, we will do the right thing and put our residents at the heart of our decisions.
“I want to reiterate that there are no planned job losses for current Dragonfly staff.”
Dragonfly has attracted concerns from members of the public and councillors about possible conflicts of interest with the mixing of a commercial company with a public authority’s work.
And the council-commissioned Local Partnerships’ review criticised the authority’s relationship with Dragonfly identifying – what it claims to be – a lack of good governance, a lack of a business plan and a conflict of interest between the roles of the organisations.
However, Dragonfly Development’s board of directors – including four Independent councillors – has suggested they are being made ‘scapegoats’ by the council for its own lack of governance and shortcomings and that Dragonfly has been profitable.
Dragonfly Board Chairman, Cllr Deborah Watson, claimed the council’s review could have ‘serious catastrophic, reputational and financial consequences’ for Dragonfly which she also claims has made an estimated £3m in profit for the council, built homes for residents and that the council has put the company into disrepute by releasing the review and not preparing an action plan.
During the latest meeting, Cllr Watson argued the council has not presented an updated business case and considered a full assessment of the companies’ performance and more information needs to be considered before any decision on Dragonfly’s future.
She claims that the review contains ‘inaccuracies’ including a claim that Dragonfly did not undertake more than 20per cent of work for the council even though Cllr Watson argued the company is not legally allowed to undertake more than 20per cent of work for the authority.
Cllr Watson also disputed claims that Dragonfly has not complied with reserved matter planning processes which address additional details on developments after they have been granted outline planning permission.
She also disputed claims that Dragonfly does not have a strategic risk register although Local Partnerships said its register did not align to the council.
Cllr Watson also disputed the review’s claims that the board does not have the necessary skills pointing out that one of the board has worked in housing and they are educated to degree level.
But Local Partnserships’ Simon Bandy said he would expect the board to have more non-executive directors with more commercial finance and development skills around investment, treasury management and business planning.
Cllr Watson told the meeting: “The whole debacle is a charade and it is blocking democracy and our point of view is not being heard.”
Local Partnerships’ Mr Bandy and Vivian Holland presented an Options Appraisal with their most favoured option being to bring the Dragonfly companies back in-house under council control.
Other less favoured options included: Retaining both companies and improving governance; Retaining Dragonfly Development and bringing Dragonfly Management back in-house; Dissolving the companies and entering into one of two joint venture arrangements with other parties for both companies or just for Dragonfly Management; And finally outsourcing to a commercial third party.
Cllr John Ritchie, who presented council calculations on Dragonfly’s finances, told the meeting by looking at profit from external schemes the cost to the council to generate this income far exceeds the return and raises questions about value for money for the council.
Following the meeting he said: “Dragonfly Development Ltd. was created following a failed joint venture. It was created to carry on building the much-needed council houses we had started to build, and no one should argue with that decision.
“The governance of the Dragonfly companies started to cause concern over the last two years and the Shareholder Board decided to have a review. This was due to ongoing debates around conflict of interest, appropriate business planning, costs and value for money.
“Tensions have been heightened between the Dragonfly Board and the council and its Shareholder Board, including comments attacking both the Shareholder Board and the council’s statutory officers. This is unacceptable especially as our officers are working hard under very difficult circumstances.
“In the 32 years I have been an officer and six years as a councillor in Local Government I have learned that respect is a two-way street, and comments made have caused relationship breakdowns between the Dragonfly Board and officers.
“The Shareholder Board acts in the best interests of the council and residents. We work to safeguard taxpayers’ money and achieve the best possible outcomes. In this regard, I will work hard to ensure we do not fail to do so.”
Deputy Council Leader, Cllr Donna Hales, said she felt it was remarkable that some were not accepting the review’s recommendations from experts because she believes the report is very thorough and evidence-based and the council will be reviewing all areas of governance.
But Cllr Watson claims that Dragonfly staff have been left disillusioned and demoralised by the review and they fear for their jobs and she questioned whether the council has the staff capacity to deal with alternatives to Dragonfly.
However, Cllr Yates said: “I have had Dragonfly Management staff contacting me saying they did not want to be out of the council in the first place and they are looking forward to coming back.”
She added: “Despite articles in the press that there could be job losses I have been clear from the beginning that there will be no job losses either in Dragonfly Development or Dragonfly Management.”
Conservative Group Leader, Cllr Will Fletcher, said he acknowledged the expertise of the review’s authors and added that their findings should be treated with respect and he feels the best way forward will be to bring both companies back in-house.
Following the meeting, Cllr Yates said: “We could not have got a more qualified company to do the review and we 100per cent trust their findings.
“From Cllr Ritchie’s presentation we are not financially better off having Dragonfly and in fact we are worse off.”
Cllr Yates argued that the Local Partnerships has stated that putting councillors on the board of directors is not the advised model and it has been pointed out that the board, according to the review, does not have the experience to run a construction company.
She also claims that communication with the Dragonfly board has broken down and she cannot see how that situation can be resolved.
Cllr Yates added: “I think yesterday’s meeting (July 9) demonstrates the exact reason why we should not put councillors on the board because it pitches half the council against the other side of the council. Yesterday’s meeting was a line that underscored why they should never have have been on the board.”
She agreed that Dragonfly was originally set up for the right reasons and it enabled projects to carry on and it saved jobs and she does not dispute the quality of the work but she claims the end cost for social housing – which the council is keen to promote – has been higher than options involving S106 infrastructure arrangements with outside developers.
Cllr Yates, who said she was shocked by the report because she realised things were worse than expected, added: “Cllr Watson has accused me of bringing the council into disrepute by publishing the report but I was always clear that the report would be published unredacted and we would have to deal with the consequences.”
Bolsover District Council’s Dragonfly was established by the former Council Leader Stephen Fritchley when Edwinstowe-based Woodhead Construction fell into administration in 2022 while working on Elmton-with-Creswell Parish Council’s costly Creswell Heritage and Wellbeing Centre project which Dragonfly subsequently completed.
Dragonfly Development has since overseen much of the council’s building projects but it has attracted concerns from members of the public about possible conflicts of interest with the mixing of a commercial company with a public authority’s work.
Bolsover District Council’s relationship with its wholly-owned Dragonfly development companies was criticised by the review after risks were identified including a lack of good governance, a lack of a business plan and a conflict of interest between the roles of the organisations.
It highlighted that a large proportion of the board has been formed of elected members presenting a risk of conflict of interest with some councillors having to withdraw from meetings to the detriment of their other responsibilities.
However, the review has advised that If the council decides to bring the services back in-house and to dissolve the companies it will need to ensure that it is capable of doing so and that there is capacity to support a working group to lead the transition, and that it is aware of its limits and that there is sufficient financial resource to cover TUPE implications and staffing implications.
Bolsover District Council will also need to understand, according to the review, that it has the resources and due diligence for the transfer of contracts from company to the council with a clear stakeholder and staff plan and that any adverse financial implications are understood.
Prior to the publication of the review, a separate Auditor’s Annual Report for the 2023-24 identified ‘significant weaknesses’ and ‘risks of significant weaknesses’ in Bolsover District Council’s governance and efforts to establish value for money arrangements with its development company Dragonfly.
The council’s Executive Committee already voted at an Emergency Meeting on June 16 to replace the Dragonfly board with a new interim team while it considers the future of its two related companies.
During the latest meeting, councillors voted against Cllr Watson’s requested amendment for a further full review of the Dragonfly companies with impact assessments before they voted to note the Local Partnerships’ review and options appraisal at this stage.
The council’s Executive is due to meet again on July 28 when a potential decision on the future plans for its wholly-owned Dragonfly companies is expected.
