Flaws dogged Mangaia harbour project

Serious anomalies in handling of this major project were similar to “Toagate” say Audit Office

The conclusion reached by the Audit Office following its special review of the tender and management process for the Mangaia harbour reconstruction project was that similar to the “Toagate” saga, the review indicated serious internal control breakdowns and anomalies in government’s handling of a major project.
Audit went on to say that it was evident the Cabinet Ministers involved and senior government officials did not perform effectively and carried out their functions and responsibilities in a manner not in line with international project management best practice and ethical conduct.
The report was tabled in parliament during the last session in April, under Audit’s 2nd Quarter Report 1 October 2010-31 December 2010 (page 225).
The events occurred during the tenure of the previous Democratic Party government and involved the key figures of Sir Terepai Maoate Minister of Finance, Tangata Vavia Minister for Infrastructure, Sholan Ivaiti Finance Secretary and Mangaia MP Winton Pickering.
The essential matters of concern were;
(1) The harbour project was to be funded by NZ Aid but after NZAid queried the tender process and some high risk issues, in July 2008 Minister Vavia, after being advised by officials NZAid’s strict criteria could not be met, decided to remove Mangaia from the overall projects tagged for the southern group. In early August Sir Terepai Maote instructed Sholan Ivaiti to source local funds for the Mangaia harbour project. On 30 August, Vavia announced through the media that alternative funding had been found but it was two weeks later that he informed the NZ High Commissioner of this. He did apologise. Audit found Maoate, Vavia and the Infrastructure Committee removed Mangaia from aid funding without informing or obtaining proper approval from Cabinet. Audit also found that had NZAid concerns been addressed, the funding would have been made.
(2) In November 2008, Cabinet decided to allocate $1.83 million from the Capital expenditure budget under the 2008/09 Supplementary Budget.
(3) In December 2008, local company Pa Reu Machinery Ltd (PRML) was awarded the contract for $1.750,222 million with a timeline for completion of 100 days. Audit found the project contract was not reviewed by a legal professional with proper commercial expertise before sign off. The contract did not provide government with adequate protection. No background checks had been made on PRML. Audit found Sholan Ivaiti thought PRML was owned by Winton Pickering’s brother. Audit found the company was owned by Winton Pickering MP and his wife. The Solicitor General expressed the view MPs should be allowed to tender for government contracts but not Ministers. Ivaiti expressed the view no MP should be allowed to tender for government contracts and viewed the matter as a conflict of interest. Audit Office is of the opinion that Sir Terepai Maoate and Tangata Vavia knew the company was owned by Winton Pickering and that they should have informed their Cabinet colleagues and the tender committee of this.
(4) In November 2009, an extra $199,039 was approved by Cabinet to cover the costs of a design variation to the berthing quay. Completion was expected in November 2010.

The Audit Office report points out that there is no legislation or policy that excludes MPs from being awarded government contracts. However Audit say that in the interests of public confidence , integrity and transparency all MPs must declare their involvement in any company tendering for a government contract.
Under the Civil List Act 2005 MPs must submit a “Declaration of Interest” to parliamentary services at the beginning of each year which details their private business interests. Audit found that Pickering along with many other MPs consistently failed to complete the declaration form as required. Pickering submitted a declaration for 2008/09 only after parliamentary services asked him to. There is no penalty under the Act for failing to comply.
Audit Office found that the Ministry of Infrastructure made a genuine effort to conduct a fair and transparent tender process with the exception of the Expressions of Interest Evaluations.
Seven companies had registered an expression of interest. Three companies had used the proper documents. Four companies registered their interest by letter. Five companies were issued with tender documents after the evaluation of the expressions of interest.
PRML was awarded the contract by consensus. The PRML tender was the most professional and comprehensive. Audit found there was no evidence to suggest political or outside interference and the tender was awarded without favour or bias.
Audit also found there was no evidence to suggest that Pickering had influenced the outcome of the Ministry of Infrastructure evaluation process.
While no disciplinary action or legal action will follow, Audit Office once again repeated its call for government to implement policy and guidelines for a Code of Conduct and Leadership Code for all public officials with applicable offences and penalties.
In his letter of 18 November 2010 in response to the Audit report, Acting Secretary for Infrastructure Otheniel Tangianau advised that Minister Vavia had informed NZAid of the decision to use local funds when he met with the NZ High Commissioner and Aid officer Julie Affleck (no dates provided).
In respect to Cabinet not being advised of the change in funding, he also advises that as far as he knows, the Ministry of Infrastructure tabled a presentation to Cabinet on the harbour.
He also commented on Audit ‘s findings concerning matters such as background checks, legal review and other issues.
The Acting Secretary for MFEM also submitted comments on matters concerning MFEM’s role in a letter dated 22 November 2010.

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