By Cranmer

With the release of the Ministry for the Environment’s internal review of the Waste Strategy Ropu’s appointment process last week, it’s a good time to consider its findings and put them into context.

The appointment of Gannin Ormsby and two other family members to the Ministry for the Environment’s Waste Strategy Ropu was one of the first concerns that I raised on twitter on 7 May and since then numerous government contracts and appointments to the family of Minister Nanaia Mahuta have emerged across a wide range of ministries. They all appear to show serious deficiencies in government procurement practices including with regard to their approach to dealing with conflicts of interest.

To their credit, the Ministry for the Environment documented the appointment process in a relatively thorough manner (when compared to other ministries) and they rightly identified the major appearance risk due to the direct source procurement approach and the perceived conflict of interest (albeit at a late stage in the process). In the aftermath of public revelations, it has also acted quickly and transparently.

After my tweet on 7 May, two OIA requests were submitted to the ministry on 9 and 10 May (not by me). Privately, the Chief Executive ordered an internal review on 17 May which reported its initial findings on 23 May – presumably done to ensure that they could safely comply with the OIA requests without giving rise to further criticism.

The OIA requests were then made public on the ministry’s website on 10 June and there the matter might have ended.

However, the discovery of additional government contracts to the same family members increased the pressure and meant that on 22 June, the Chief Executive asked for a further review to be undertaken. That review was completed on 16 August and made public last Friday, 16 September. When compared against the original procurement documents it paints an interesting picture.

The review highlighted a number of shortcomings and notes that it was not a straightforward process. Although the shortcomings in the ministry’s procurement processes were numerous, I do have some sympathy for them as it’s clear from their review that many of the difficulties arose due to the requirements of Gannin Ormsby and the ropu regarding the composition of the group and its compensation.

Whilst it is still not entirely clear who within the ministry first initiated contact with the group members, the ministry’s Partnerships Directorate and Communications team were involved at the early stages in June 2020.

In addition, Te Ohu Maori, described in their papers as ‘the Maori secretariat for the Ministry’s Chief Executive’s office’, supported early conversations with the expert group.

At this stage the plan was to engage a group of three – Gannin Ormsby, Teina Boasa-Dean and Jacqui Forbes. And here the first discrepancy in the review emerges – when considering the potential conflict the review notes that “this was identified and discussed early on (June 2020) as a risk associated with the process”.

However in a parliamentary question made by Simeon Brown, Minister Parker stated that “the Ministry was first aware of the family connections on August 14, 2020”.

It seems that the individuals within MfE who first engaged with the potential members knew exactly who Gannin Ormsby was and his relationship with Minister Mahuta and although it was not until their Project Manager learned of the relationship on 14 August that it was flagged internally as a potential conflict of interest to consider, it was still not identified as a risk factor in the engagement plan prepared on 17 August.

Then a curve ball was thrown – when the Project Manager received the draft agenda for the selection meeting to be held in early September it included two extra people who were also related to the Minister.

When this was queried, the reason given was “that they work closely with one ropu member in a family consultancy business, rangatahi presence is very important to the ropu, and this was how the ropu wanted to operate” – certainly a novel approach to the concept of ‘direct procurement’ and the first indication that it was the ropu, and not the ministry, that was calling the shots.

The selection meeting was then held on 3 and 4 September and here another discrepancy in the review emerges.

It concludes that there was no “political involvement in the process” – that may be correct in a formal sense but it fails to mention that the Minister attended the start of that meeting between the group members and government officials albeit in what is described as a personal capacity.

In whatever capacity Mahuta attended, and no matter how brief, clearly attending that meeting was inappropriate and at best ill-advised. It clearly signaled to officials that the Minister was aware of the process and it could be viewed as her putting her thumb on the scales.

Her attendance warranted consideration in the review but its absence seems only to highlight one important point – it appears to be acceptable for blame to fall on the ministry for various failings but it is strictly verboten to be critical of Minister Mahuta or her husband.

Then the kicker – after foisting two other family members into the group and after the selection meeting had finished, the ministry emailed the group an outline of the suggested terms of their contract.

What followed was described by the October procurement plan as “careful discussion of scope and scale of work over a two month period. Daily rates are consistent with market and reasonable ($1,000/day)”. The review is slightly more revealing when is states that during August and September there was “some confusion over pay rates for the services”.

Translation – there was a dispute over compensation. And it becomes apparent why there was disagreement when you compare it against the remuneration paid to the members of the Waste Strategy Advisory Group (the group into which the ropu fed its advice) – which the ministry has confirmed were each paid an honorarium of between $300 to $600 per day.

Suddenly a plan to have a group of 3 experts paid an honorarium for some advisory work was transformed into a group of 5 each paid $1,000 per day, with three of them being family members of a Minister!

When the Project Manager sent the plan to the Procurement team on 13 October – their first involvement in the appointment – several heads must have exploded. Procurement advised that the appointment could not go ahead until they and Legal had signed off and only on the condition that the approval of the Chief Executive was obtained. The review notes in understated fashion that “the next few days were occupied by some intense work to rework the procurement plan and draft contracts”.

The Deputy Secretary only became aware of this monumental SNAFU on 19 October at which point he required his Director to speak to the Public Service Commission in an attempt to get some extra air cover for what was clearly a highly risky proposition. Approaching the PSC involved a delicate balancing act in order to get the right answer – and that involved only disclosing to the PSC that there was a potential conflict with one family member of a Minister, and not the three that were in the group. Having downplayed the extent of the conflict, the review states that the ministry followed the PSC’s advice – that is correct to a point.

The PSC’s file note of the call specifically recommends “informing their Minister of the group, its membership and any conflicts of interest”. It goes on to suggest that “the Minister, herself, might wish to declare a potential conflict with the PMO (or the appropriate body or person)”.

Neither of those two actions happened.

There was clearly a calculated decision not to inform Ministers – the review notes that the risk was not discussed with Ministers “to minimize any risk of accusation of influence” and it concludes that “the Ministry effectively accepted the remaining level of risk on behalf of the Minister involved and the Government”.

That is indeed an accurate summary but again the question is why did the ministry feel that it had to take on that risk?

Eugenie Sage (as the responsible minister) and Nanaia Mahuta could have been advised and the Prime Minister’s Office updated as recommended by the PSC. This would seem to be a sensible approach, and if it had been done consistently across all ministries, it would have identified the many roles and contracts being awarded to one family of a Minister and thereby flag the increased conflict and appearance risk.

The review tacitly agrees with this by stating that “it could have been raised with the Minister for the Environment via usual Ministerial channels as part of the ‘No Surprises’ principle”.

At the insistence of Procurement and Legal, the procurement plan was broken into two – one for the group of three experts and a second plan for the two other family members providing support services. There was now massive time pressure given that there was a scheduled meeting in Wellington on 29-30 October and the procurement plans needed to be signed in order for the travel and time costs of the ropu to be covered. The Deputy Secretary asked that the plan for the three experts be prepared first (on 21 October) and for the second contract to be separately “scoped and addressed”.

However the review notes that “the ropu made it clear they wanted the support service provider’s role signed off in time so they could attend as well” and thus the procurement plan for the two support providers was prepared at the very last minute, on 26 October. The plan makes the candid admission that “Gannin Ormsby has offered to withdraw from the work if his involvement is too problematic” – in other words, he threatened to walk unless his terms were accepted.

Finally on 28 October, the day before the meeting was scheduled to take place, the Deputy Secretary asked Procurement if he could sign the documents (rather than the Chief Executive) “given the process that had been followed” – the Chief Executive (wisely) was not putting her name to this dumpster fire, instead the Deputy Secretary had to take responsibility. In any event, the procurement plan did state that it was “subject to the approval of Vicky Robertson”. However, the review notes that contrary to that stipulation from the Procurement and Legal teams “this did not occur, with the Deputy Secretary responsible eventually approving the procurement plan for both the ropu and the associated support services” – clear evidence that the Chief Executive was not happy with this process and chose not to approve the plan or sign the papers.

Indeed so rushed was the process that final contracts were not signed by the ropu members until November at the earliest, and in the case of one, not until April 2021.

The review incorrectly states that “the general election was held on 17 October 2020 – the week before contracts were signed”. In fact it was only the procurement plans that were signed the week after the election – in actuality it took months for all of the final contracts to be signed. Just like Kainga Ora’s handling of their Ormsby contract, it seems that signing final contracts is an optional extra when working with this Government.

The folly of the ministry letting itself be man-handled by Gannin Ormsby is that they have now paid $135,000 of taxpayer money for an eight page document titled ‘Progress Report 02’ which is clearly not fit for purpose. They agreed to commercial consultancy rates but received nothing of use.

The review does not consider whether the rates were appropriate or if the ministry received value-for-money – that would appear to be too sensitive a topic to broach, for the time being at least.

When compared to the Department of Conservation, MfE ran a more rigorous process which identified the risks (albeit late in the day) and attempted to manage them; however they paid out a huge sum of money for a pitiful return. The Department of Conservation, on the other hand, didn’t identify the risk or adequately document the process – but they only paid out $11,800 of a $60,000 contract because milestones were not met and the work product that they did receive was considered to be substandard (their internal review is not due for completion until October).

Two totally different approaches but neither ministry covers themselves in glory.

Again, to its credit, the MfE review (which was proactively made public) does make a number of recommendations to improve the appointment process with the aim to reducing the likelihood of “similar issues” arising (ahem). But will other ministries be as self-aware and will the improvements identified by the Ministry for the Environment be adopted across Government?

The bar has now been set by which to measure the conduct of other ministries.

Presumably this review should now be considered by the Public Service Commission both in relation to the ministry’s actions and proposed remedies and also in terms of its general applicability across Government.

Of course the major shortcoming of the MfE review is that it only considered issues within its ministry and does not acknowledge that the public outcry over perceived nepotism has grown so loud because of multiple contracts being awarded across a number of government ministries.

Just as the number of family members in the ropu increased the appearance risk, so too does the number of contracts and appointments made to the one family.

In order for any review to conclude that the appointments were not made because of any family connections to a Cabinet Minister it is clearly necessary to assess all contracts awarded to the family across Government and what patterns (if any) are evident. And it is for these reasons that a review led by the Public Service Commissioner or the Auditor General is required to get to the bottom of this mess.