UniServices – Management of conflicts of interest

We wrote to the Chief Executive of Auckland UniServices Limited (UniServices) about how UniServices managed conflicts of interest for work it did for a government department in 2020 and 2021.

26 October 2023

Dr Andy Shenk
Chief Executive Officer
Auckland UniServices Limited
Auckland

Tēnā koe Andy

UNISERVICES – MANAGEMENT OF CONFLICTS OF INTEREST

As you know, we became of aware of concerns about how Auckland UniServices Limited (UniServices) managed conflicts of interest for work it did for a government department in 2020 and 2021.1

Thank you for the information you have provided and for the discussions we have had. This letter outlines our views and describes the improvements that UniServices is putting in place.

Background

In October 2020, UniServices was asked to prepare a proposal for a government contract to provide a training, education, and support programme (the Programme). The work needed was urgent, and a proposal was needed by the end of that month.

The proposal was prepared by staff at UniServices. UniServices also engaged an external expert to help in preparing the proposal. The expert is the spouse of a director at UniServices.

UniServices’ proposal outlined which parties would be involved in delivering the Programme. One of those parties was the organisation that the expert worked for, which had relevant expertise.

The proposal was successful and a contract to deliver the Programme was entered into in February 2021.

The contract was worth about $970,000 and a formal sub-contracting agreement was signed in June 2021. UniServices told us that, due to the scale, urgency, and limited number of providers, it did not run a formal contested procurement process for this contract. Instead, it chose to work with the organisation selected because that organisation was considered to have proven expertise and it was available to carry out the work in the urgent time frame.

Part of the sub-contracted work was ensuring that the Programme had enough monitoring and evaluation activity to enable optimal delivery of services. To assist that work, UniServices paid the expert directly to help develop the monitoring and evaluation methodology. The expert was paid about $11,000 for this work. No formal written contract for these services was agreed until March 2021, when most of the work was complete. We did not see any formal documentation to explain why the services were directly procured or why this expert was selected.

UniServices does not have a record of a formal declaration about the relationship between the expert and the director. Consequently, there was no plan to manage the conflict if the need arose.

Comments

In our view, this combination of events gave rise to a potential conflict of interest that UniServices needed to manage.

Both contracts entered into by UniServices involved services provided by the spouse of one of their employees, where:

  • The director and the expert were both involved in preparing the proposal setting out what the Programme would involve and who could deliver it.
  • The expert was employed by the organisation that UniServices proposed would help deliver the work and that it sub-contracted to assist.
  • The agreements were entered into without any competitive process.
  • The expert was paid directly by UniServices to prepare the monitoring and evaluation methodology.
  • There was no formal documentation to support the direct engagement of the expert, explaining why the expert was selected, who approved their selection, and why the amounts paid were appropriate.

We understand that there might have been a need to act quickly, as there were in many situations in recent years, particularly during the Covid-19 pandemic.2 However, there is a clear risk of a perception that the provider of the services in both arrangements was selected because of the relationship between the director and the expert.

Conflicts of interest often occur in public life. However, in any situation where activities are paid for from public funds, the public needs to be confident that any actual or perceived conflicts of interest are identified and appropriately managed.

UniServices told us that staff were generally aware of the relationship between the expert and the director, and some steps were taken to manage the conflict of interest when the contracts were being entered into. The steps included:

  • UniServices verbally informing the relevant government department in November 2020 about the relationship between the director and the expert. However, there is no record of whether this resulted in action being taken to manage the conflict.
  • The director was not involved in the sub-contracting arrangement (including not being involved in any decisions about the budget or contract negotiations). However, we note that the director was involved in preparing the proposal for the work, which anticipated the sub-contract.
  • The director had only an advisory role in the work and was not in a leadership or decision-making position.
  • A second person was appointed to co-lead the work under the sub-contract so the project was not led solely by the expert. We were told this was different to the organisation’s usual practice of having one project leader in similar situations and was done because of the relationship between the expert and the director.

However, in our view, UniServices could have taken further steps to manage the conflict of interest.

In 2019, UniServices required all managers (including the director) to disclose any interests that could potentially lead to conflict of interest. This was consistent with its conflicts of interest policy at the time. However, there was no recorded response from the director and no follow-up action was taken.

If staff were aware that the director had a spousal relationship with the expert, the director should have been encouraged to disclose the relationship at that point. 

UniServices told us that before 2023 it did not operate a centralised interests register or any formal system to record management plans. Instead, it relied on individual business units to have their own processes in place.

Having and maintaining a central register gives relevant managers information about ongoing interests and can help people to be alert to an interest that might lead to a conflict. A central register also helps identify conflicts of interest at an early stage and can be used to document any agreed mitigations, especially for predictable situations. This creates a record of both the individual and the organisation having thought about the risks and taking appropriate steps to manage them.

It is not enough to rely on general awareness of a conflict of interest or a relationship, or on verbal discussions about how it might be managed, because there is a risk that relevant staff might not know about it. It is also difficult to respond to any concerns that might arise about a perceived conflict without a documented record about how a conflict has been managed.

In our view, a central register of interests would have helped. If the relationship between the director and the spouse had been recorded in the register at the time (that is, in 2020 or before), there would have been an opportunity to put in place an agreed plan on how to manage any arrangements that involved both of them and provide assurance that they were not influenced by their relationship.

We also did not see any evidence of the expert being asked to declare any interests or known conflicts at the time he was working on the Programme or providing services directly to UniServices. If that step had been taken, the conflict might have been documented and managed more appropriately.

Regarding how the expert’s services were procured, UniServices did not have any record of its selection process. Also, although a contract was eventually entered into, this was some months after the work started. Even though the contract was for a relatively small amount, it is good practice to clearly explain and document the rationale for a procurement, including who the preferred supplier is, the process that been used to select the provider, the anticipated cost of the services, and who is approving the procurement. This, in addition to a clearly documented declaration and management process for the conflict, would have provided more transparency about whether the spousal relationship influenced any of the decisions made.

Improvements by UniServices 

UniServices told us that procuring services from the expert without a formal procurement process, without documented reasons for the process it did follow, and without a written contract was inappropriate and should not have occurred. We understand that a new procurement policy is being prepared. It will include expectations that will help to avoid this situation in the future.

UniServices also acknowledged that it could have managed the conflict of interest better. In December 2022, UniServices completed an internal review and subsequently updated its conflicts of interest policy and procedures. It also plans to make further changes to how it records and manages conflicts of interest, including:

  • developing an electronic conflicts of interest database for the whole of UniServices;
  • implementing annual refresher training for key UniServices’ positions and senior leadership; and
  • regularly discussing conflicts of interest during executive leadership team meetings.

We will be interested in how those changes are progressed and implemented. We also encourage UniServices to consider:

  • requiring staff to complete a declaration of their interests, even if they have not identified any (that is, a “nil declaration”). This will allow UniServices to have confidence about the completeness of the central register of interests; and
  • asking potential contractors to declare interests and known conflicts that might arise from their work. A person entering into a contract with an organisation is in the best position to know any connections they have with current staff.

We thank UniServices for its assistance. Because of the public interest in how conflicts of interest are managed, we intend to publish this letter on our website.

Nāku noa, nā

David Lemmon
Manager, Inquiries

1: UniServices is a wholly owned subsidiary of the University of Auckland.

2: As reported in our recent report: Getting it right: Supporting integrity in emergency procurement — Office of the Auditor-General New Zealand (oag.parliament.nz)