2.8 Regional Councils – Management of Bovine Tuberculosis Vector Control Contracts

Local government: results of the 2002-03 audits.


Nine Regional Councils, a unitary District Council (and some other entities) manage regional bovine tuberculosis (Tb) vector34 control programmes under contract to Animal Health Board Incorporated (AHB)35.

The Government makes the largest individual contribution to AHB’s annual budget, to enable it to implement the National Bovine Tuberculosis Pest Management Strategy (NPMS). In the financial year 2002-03, the Ministry of Agriculture and Forestry paid out $32.1 million against an appropriation of $33.6 million in Vote Biosecurity.36 The largest other source of AHB’s annual revenue is the levy on all adult cattle killed – $33.5 million in 2002-03.37 In addition, the Councils contribute about $4 million annually to AHB’s budget.

An important part of implementing the NPMS is Regional Tb Vector Control Programmes. AHB has management contracts with the Councils to carry out the programmes by way of contracts for specific vector control activities.

Concerns About Contracts

In October 2002, we received representations from a large vector control contractor expressing concerns about the letting of vector control contracts by a Regional Council. Subsequently, we received a further series of complaints from other vector control contractors relating to the actions of two other Regional Councils and two Regional Council-owned businesses operating as vector control contractors.

The seriousness of the representations and the complaints was such that we decided that it would be appropriate to conduct three separate formal inquiries. These inquiries involved the three Regional Councils and the businesses that two of the Councils owned.

We completed the inquiries in early-March 2004, and the reports on them have now been made public.

Although these inquiries dealt in the main with specific local issues, we identified a number of national issues relating to the vector control activities that need action. We discuss these issues in the following paragraphs.

National Guidelines for Tendering Processes

It was apparent from the outset of our inquiries that, while recognised standards exist for tender processes in general, no commonly recognised industry standards existed against which we could audit the appropriateness of the tender criteria, such as evaluating a contractor’s qualifications38, and price/quality score weightings. These had been developed by each Council vector control managers independently.

After we discussed the matter with a number of Council chief executives and AHB, a project involving AHB in consultation with various Councils was launched to help draw up a set of national guidelines for the handling of vector control contract tenders.

Progress on the project has been slow, but we anticipate that the guidelines will be completed and introduced in time for the 2005 vector control contracts tendering round (expected to start from February 2005).

AHB has confirmed that the nine Regional Councils and the unitary District Council that act as appointed vector managers would be required to align their tender processes to the new national guidelines.

At a later date, we intend to review how well the Councils have responded to the new national guidelines and to see whether their tender processes have improved as a result.

Treatment of Council-owned Businesses

The two Regional Council businesses we inquired into compete directly against private contractors in their own and other regions. The existence of this competition requires that the tender processes treat all contractors competing for contracts equally. That is, a Council should show no favouritism towards its own business when competing for work in the Council’s region.

In addition, both of the Council-owned businesses we inquired into shared buildings and resources with their owner while carrying on their business. As a result, we were also concerned to ensure that the Councils were not providing any inappropriate financial support by way of reduced amounts of fairly allocated Council overhead costs.

In both cases, the tender processes and the allocated share of Council overheads were appropriate and fair.

Preventing Conflicts of Interest

We also identified a need for the Councils we looked at to apply higher standards for preventing conflicts of interest during the tendering for and the management of vector control contracts. The improvements we suggested were to put in place written standards that:

  • identify and handle conflict of interest situations involving Council employees or elected representatives (such as past business relationships with tenderers) throughout the tender process and in making decisions to award contracts; and
  • define acceptable business relationship standards for vector control managers (such as not accepting gifts) when dealing with tenders and managing day-to-day relationships with vector control contractors.

We noticed some differences in how two of the Councils audited the contractor’s compliance with the contracts. These differences were in the vector manager’s use of field audits to ensure that the contractors were complying with the work plan they submitted as part of their tender documentation. These work plans are important as they set out both how and where the poisons and traps will be used and controlled by the contractor.

The matters of both probity standards and the field auditing requirements are currently under action by AHB as part of the tender guidelines project mentioned in paragraphs 2.809-2.810 on page 86.

Footnote 34: A “vector” is a wildlife species infected with Tb that is involved with transmission of the disease to livestock. The most important two such species are the brush-tailed possum and (to a lesser extent, but significant in some parts of the country) the ferret.

Footnote 35: AHB is a non-profit society incorporated under the Incorporated Societies Act 1908. Its members are Federated Farmers of NZ (Meat and Fibre Producers of NZ, Dairy Farmers of NZ), NZ Deer Farmers Association, NZ Game Industry Board, Dairy Insight, Meat New Zealand, and Local Government New Zealand. AHB is accountable to its members and has responsibilities to the Minister of Agriculture.

Footnote 36: Source: MAF Annual Report 2002-2003, page 50.

Footnote 37: Source: AHB’s 2002-03 Financial Statements, Note 6.1.

Footnote 38: Such as holding a poisons licence, health and safety record, and past experience.

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