Part 1: Introduction

Auckland City Council: Management of footpaths contracts.

In this Part, we explain:

How our inquiry came about

In a letter dated 4 May 2009, the Chief Executive of Auckland City Council (the Council) asked the Auditor-General to investigate various matters relating to the Council’s management of contracts to build and maintain footpaths in Auckland.

The Council wanted an independent audit carried out of the probity and processes relating to awarding its most recent footpaths contracts, after an allegation reported by news media that a Council staff member involved in the tendering process had not acted impartially. The Council was also concerned by other public allegations about its management of footpaths contracts, and assertions that it did not properly investigate claims made about Council staff and contractors in relation to those contracts.

We were aware of various allegations made in recent years that the Council had mismanaged contracts for its footpaths work. We were concerned that a large public entity, with responsibility for footpaths contracts worth millions of dollars, was continually attracting public criticism and that the allegations persisted despite evidence to the contrary from the Council’s own auditing and external reviews. We considered that it was in the public interest to investigate and report on the allegations.

We decided to carry out an inquiry and set our terms of reference under sections 16(1) and 18(1) of the Public Audit Act 2001. The terms of reference are in Appendix 1.

The scope of our inquiry

Our inquiry took into account the eight years from 2001/02 to 2008/09. We chose this extended period because the Council’s footpaths contracts are for a long period (typically a maximum term of five years) and so that we could better understand the context in which the Council organises its footpaths work.

We wanted to see whether specific aspects of the Council’s footpaths work made sense in the overall context, and whether the detailed transactions that we considered had been dealt with in keeping with the Council’s wider system of policies and procedures. We note that the Council has progressively made changes to its approach to footpaths work during the eight-year period spanned by our inquiry.

We looked into allegations that:

  • the behaviour of an individual Council staff member had compromised the integrity of the Council’s procurement process for footpaths work;
  • the Council paid too much for footpaths work in 2005/06; and
  • the Council failed to respond appropriately to allegations about mismanagement of its footpaths work.

Our inquiry focused on the Council’s procurement processes and financial management of its footpaths contracts. Specifically, we looked at how the Council:

  • awarded the most recent footpaths contracts (for two years starting from 1 July 2009, with extensions possible to 30 June 2014); and
  • managed contract payments in 2005/06 that related to two footpaths contracts for the five years starting 1 July 2004 (the 2004-09 footpaths contracts).

We did not look at the technical specifications or quality of the Council’s footpaths work.

How we carried out our inquiry

We reviewed documents and interviewed Council staff, consultants and contractors to the Council, and former Council staff.

In June 2009, when we published our terms of reference, we also published details about how to contact us about our inquiry. A number of people took the opportunity to raise further issues. We considered the information provided by these people where the information was relevant to our inquiry.

Structure of our report

Our report discusses:

  • the Council’s approach to building and maintaining footpaths, including its overall strategies and plans, and its organisational, management, procedural, and contracting arrangements (see Part 2);
  • how the Council applied its procedures for procurement and contracting when finalising new footpaths contracts and extending existing contracts (see Part 3);
  • a detailed review of expenditure and payments made under the Council’s two 2004-09 footpaths contracts (see Part 4); and
  • the Council’s response (including its own investigations) to various footpaths-related issues (see Part 5).
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