Part 1: Introduction

Inquiry into procurement of work by Westland District Council at Franz Josef.

Why we carried out an inquiry

On 5 July 2017, Westland District Council (the Council) approved work for the Franz Josef wastewater treatment plant (the wastewater plant) at an estimated cost of $1.3 million. The work was described as maintaining the flood embankment and developing a new infiltration gallery. The infiltration gallery is the part of a wastewater plant through which wastewater is filtered before discharging into the environment.

Within days of the decision, concerns were raised about the Council's procurement of the work and whether the Council had appropriately managed any potential conflicts of interest.

These concerns came from members of the public, Franz Josef business and community groups, and others in the local government sector. The concerns included the Council not following a proper procurement process, awarding a contract without a tender process, and one of the elected member's business or personal connections having influenced the choice of contractors.

These types of concerns can undermine trust and confidence in a Council's decision-making processes. After making initial enquiries with the Council, we decided a formal inquiry was necessary to better understand what happened.

What our inquiry covered

In our terms of reference, we said that we would look at the Council's procurement of the work for the wastewater plant, including:

  • how the Council determined that emergency works were needed;
  • the procurement and contract management practices adopted by the Council for the work;
  • how any potential conflicts of interest were managed; and
  • any other related matter that the Auditor-General considers it desirable to report on.

Our inquiry has focused on the work directly connected to the Council's decision on 5 July 2017.

The Council has been working to address problems with wastewater management in Franz Josef for some time. This has included considering options for replacing or upgrading the wastewater plant and, at one point, running a procurement process to identify a preferred provider for a particular option that was ultimately not pursued by the Council. This work is outside the scope of our inquiry and we have not investigated it. However, this report does refer to aspects of this work where it provides important context for our inquiry.

What we did

We travelled to the West Coast and met with several elected members of the Council (including Mayor Bruce Smith and Councillor Durham Havill), senior Council staff, and the Chief Executive of the West Coast Regional Council (the Regional Council). We also visited the wastewater plant site at Franz Josef.

We met with or spoke to other key individuals, including the General Manager of Westroads Limited (a wholly owned subsidiary of the Council), the Council's Acting Chief Executive, who was in the role from April to November 2017, and the Council's former Chief Executive, who ended her term in April 2017.

We also received and reviewed information from the Council, Westroads Limited, and the New Zealand Transport Agency (NZTA).

Structure of this report

In Parts 2 and 3, we provide background information about the wastewater plant, why it is at risk of flooding, and why it needs to be upgraded. We also explain the complex situation that the Council was facing in making decisions about upgrading the wastewater plant because of uncertainty about the long-term future of Franz Josef at its current location.

In Parts 4 and 5, we describe what happened in the days leading up to the Council's decision to carry out urgent work at the wastewater plant, and the decision itself, which was made at an extraordinary meeting of the Council on 5 July 2017.

In Part 6, we describe what the work involved, how it was carried out, and some of the issues that arose along the way. In Part 7, we briefly outline the contracting arrangements the Council entered into for the work. We have provided summaries or observations about our findings at the end of each of these Parts.

In Part 8, we summarise the end result of the work, how much it cost, and where things currently stand with regard to a replacement wastewater plant. In Part 9, we summarise our overall findings.