£39m timber deal was an extraordinary error, say AMs

It was "extraordinary" the environment regulator decided to sell £39m of timber to a sawmill company without a proper business case, AMs have said.

Other firms were unable to bid for the Natural Resources Wales contract, which may have broken EU competition laws.

Public Accounts Committee chairman Nick Ramsay called it "a serious error of judgement".

NRW accepted the recommendations of the committee and said it would address them.

The company is not named in reports, but BBC Wales understands it is BSW Timber, which has a saw mill at Newbridge-on-Wye, Powys.

The report, out on Thursday, also said it had "serious concerns" only one official at the regulator was in charge of the deal.

"Given the sums of public money involved we find it to be wholly unacceptable that a full, open and fair retendering process did not take place," it adds.

BSW Timber failed to open a new saw line in Wales as it was expected to as part of a 10-year contract with NRW.

When it met the committee in March, NRW could not say whether the obligation had been met, despite the deadline for completion being a few days away.

The trees were worth £72m. After deducting BSW's costs, NRW estimated it would make around £39m over 10 years from the contracts, which involved 1.9m tonnes of larch and spruce.

But the report says: "We do not believe there is any evidence to demonstrate whether the contracts represent value for money."

The committee recommended NRW review the way it awards contracts and its approach towards EU state aid rules, which limit public funding for private-sector companies.

Lawyers told NRW the rules had not been broken, but AMs heard legal advice was not sought until three years after the contract was awarded.

NRW also said it needed to award contracts quickly to control the rapid spread of the disease Phytophthora Ramorum in larch trees.

The official responsible was the former director of the Forestry Commission, one of the organisations that merged into NRW in 2013.

Labour AM Lee Waters, a member of the public accounts committee, said: "A key part of the justification for giving this very big contract without going to tender was that the company needed to invest in expensive new equipment to be able to handle the amount of wood.

"It is now clear the company did not deliver on that and I would expect NRW's lawyers to be looking at this."

Plaid Cymru called the report further evidence a "complete shake-up" of NRW was needed.

Environment spokesman Simon Thomas said: "The organisation needs to be reformed from the top down and practices reviewed in order to make it a more accountable and effective organisation."

A Welsh Conservative spokesman said the handling of the contract raised serious questions and concerns over its legality were "deeply worrying".

"We need to see evidence that lessons have been learnt, so that the taxpaying public has confidence in how state-sponsored bodies operate," he said.

An NRW spokesman said it was addressing concerns over the contract raised by the auditor general for Wales in March and would ensure its "action plan" also covered all the committee's recommendations "which we accept in full".

"We accept that there are matters that need to be addressed but there has been no complacency by NRW in responding to the issues raised by the auditor general; we were dealing with a very serious situation with larch disease at the time and needed to act quickly," he said.

"Our recent timber marketing plan has significantly changed the way we operate and we have incorporated the lessons learned from the previous contracts."

In May, the UK Forest Products Association said there was "serious concern" in the timber industry over the deal.