Procurement of services by the University of Waikato

We wrote to the University of Waikato about the procurement of services from Joyce Advisory Services in 2019.

3 May 2024

Rt Hon Sir Anand Satyanand
Chancellor
University of Waikato

Tēnā koe Sir Anand

Procurement of services from Joyce Advisory Limited

As you are aware, we have been looking into concerns our Office had about the procurement of services by the University of Waikato (the University) from Joyce Advisory Services Limited (the contractor) in 2019.

From media reports, we became aware of the procurement and had questions about whether it was subject to a competitive process. Our appointed auditor also asked for details about whether a standard procurement process was followed to procure the services from the contractor and did not receive a full response.

We were therefore interested to know more about how this procurement had been carried out and whether it accorded with best practice expectations for a public organisation.

Background

In October 2019, the University entered into a contract with the contractor to provide services. The contract described those services as including serving on the Board of the Division of Management, providing presentations to international delegations or short courses on public policy, economic policy, and the business environment in New Zealand, supporting University delegations in their interactions with officials overseas, and providing advice as requested by the Vice-Chancellor and other senior staff at the University.

The contract was for three years and was for a total minimum agreed amount of $288,000. The contract was extended in 2022. By October 2023, the amount paid to the contractor since the start of the contract was about $1.1 million. This amount was for the work initially contracted and additional work requested by the University. We understand the contractor’s work is on-going.

The University has said to us that the work done by the contractor also included strategic advice on recruitment and marketing, leading an enrolment review, work to increase the Waikato Management School’s profile and hold its annual Economic Forum, and leading projects about the University’s website, intranets, and Customer Relationship System.

The University’s policies

A key principle of procurement best practice is that an agency should use an open competitive process wherever possible, to give all suppliers the opportunity to compete, unless there is a clear and documented rationale not to do so.

The University has a procurement policy that sets out the processes it will follow in its procurements and purchases. The policy in place at the time stated that “in exceptional circumstances” services could be procured from a single supplier without a preferred supplier agreement or considering other suppliers. It also stipulated the justification for a sole-sourced procurement must be provided to the Chief Financial Officer (CFO) whose approval must be obtained in writing before the procurement. Likewise, the University’s tender manual says that a direct procurement from a single supplier “without inviting competition from other suppliers … is the exception to the rule and must be fully justified”. It goes on to say that, in those situations, a tender plan still needs to be prepared, seeking approval from the Vice-Chancellor for the procurement.

The procurement policy at the time also had a provision stating that “only the Vice-Chancellor has authority to waive or vary the provisions of this policy in individual cases”.¹

A direct procurement

In this case, the University has confirmed that the contract was a direct procurement and there was no engagement with any other potential suppliers. The Vice-Chancellor negotiated and signed the contract with the contractor, agreed and supervised the work, and approved the payment of invoices.

The Vice-Chancellor has also said to us that he used the authority he had in the procurement policy to waive the provisions of the policy to carry out the direct procurement, rather than carrying out a competitive process that the policy would otherwise require for a procurement of this value.

Little assurance about the process for the procurement

We do not make any comment about the quality of the services that have been and are being delivered by the contractor. Rather, our interest is in the processes used to procure those services.

Where there has been a direct procurement like this, and one that to date has cost well over $1 million of public money, we would expect to see a clear and documented reason for the services that were needed, why the provider who has been selected was the only or best placed provider to deliver those services, and why the amount paid to the provider was appropriate. This is good procurement practice – being able to explain why services have been purchased and provide assurance that the right provider has been obtained at the right price provides confidence that public money has been appropriately spent.

That explanation, and the assurance it would provide to the public that public money has been appropriately spent, is missing.

Rationale and approaching the market

The Vice-Chancellor has explained to our Office that he considered the contractor’s background and experience could assist the University with its brand revitalisation, and that the contractor was considered the only option to help the University shape a marketing strategy, on a flexible basis. He has also said that the University wanted to secure the contractor’s services and “exclude the contractor working with any other tertiary education provider”.

We have not been provided with any formal record, such as a business case or procurement plan (or equivalent document), that sets out the services that were needed and how the procurement would be done. We have also not been provided with a satisfactory explanation or analysis to support the Vice-Chancellor’s view that the contractor was the only suitable option to deliver the services. Recording the reasons for these points, and being able to produce them, is good practice, even where the market is approached directly. It is also consistent with the University’s policy that non-competitive processes must be justified. Without this analysis, the public may speculate about the reasons why a provider was selected, the amount paid, and whether it was appropriate.

The Vice-Chancellor also told us that “once the University had identified the party it wanted to work with”, there was little need to engage with other potential providers, including those already used by the University in other capacities, as this would waste their time and erode goodwill. In our view, deciding not to approach the market in this way does not excuse the need to record the reasons why the provider was selected without engaging with other suppliers.

No recorded reason or process for waiver

While the Vice-Chancellor has the ability to vary internal University policies, it is important that the reason for waiving the usual requirements in this case (for example, to seek the CFO’s approval for a sole-sourced procurement and prepare a tender plan) were clearly articulated and recorded at the time. The Vice-Chancellor told us that there is no formal documentation because “there was little point in him writing to himself” about the process. This misses the point that it is through comprehensive recording of procurement processes that the public can have confidence that good decisions have been made to spend public money. This is even more important where the Vice-Chancellor is using a power to put the usual processes to one side.

Determination of cost

Likewise, there is little formal record available about how the University determined the agreed minimum amount ($288,000 over three years) and considered whether the whole-of-life cost of the contract was an appropriate amount to pay for the services it was procuring. The University has said to us that the amount was:

set after discussion with the contractor;
based on the Vice-Chancellor’s assessment of the contractors’ skills and experience and a rate used recently in a similar context; and
based on a commitment by the contractor to work exclusively for the University and a commitment by the University to provide enough work to justify exclusive work for the University (in the tertiary sector).

In our view, paying an amount necessary to secure exclusive services is not sufficient to provide assurance that the money being spent on those services is appropriate and the money is therefore being well spent. Again, we have not seen any satisfactory explanation about how the University determined the amounts that would be paid for the services when the contract was entered into. We also note there was no market analysis or competitive process to measure the agreed amount against the market for the services the University wanted.

There is also no explanation about how the University considered the likely overall cost when the contract was extended in 2022. The University told us that it has been very pleased with the work done since the start of the contract, and that the quality of the work has resulted in additional work being given to the contractor. However, there are no records to support how the University turned its mind to whether the expanding scope of the services being provided (and the substantially increasing cost) was still providing value for money.

General comment

The University and the Vice-Chancellor have told us that they accept that “it would have been better practice for the Vice-Chancellor to prepare clearer documentation”, and to obtain explicit support from the University Council, relating to his ongoing decisions to engage the contractor’s services since 2019 without using a tender process. The University has also said that the services provided by the contractor have been beneficial to the University, and that the Council was made aware of and continues to be comfortable with the Vice-Chancellor's decision to engage the contractor, and the outcomes achieved as a result. The Vice-Chancellor went as far as to say that what actually matters is the outcomes produced by the work, rather than the process by which the money is spent to achieve those outcomes. I agree that achieving good outcomes for the public is important and have said on many occasions that those outcomes need to be reported in a meaningful way.

However, a focus on outcomes needs to be balanced with an appropriate attention to how those outcomes are achieved. To do otherwise risks an approach where the ends justify the means. In this case the University does not seem to appreciate that it is accountable to Parliament and the public for whether it has followed appropriate processes when spending public money. Relying on a view that the University is “entirely satisfied” with the work produced does not provide that assurance.

I note also that when my Office asked the University to provide a full explanation of the work done by the contractor, we were told that it was not considered necessary or appropriate to do so. Although we received subsequent confirmation that there was no further information to provide, I remain concerned at the initial response. A public organisation that is spending public money should be able, and willing, to explain what that money has been spent on, to my Office and to the public.

The matters raised here are similar to those in other recent work of my Office and serve as a useful reminder for other public organisations about the need for appropriate and transparent procurement processes, and in particular the need for each procurement decision involving public money (including where existing contracts are being extended) to be appropriately assessed and evidenced.

Because of these wider procurement lessons, we therefore intend to publish this letter on our website.

Nāku noa, nā

John Ryan
Controller and Auditor-General

1: We note that University’s current procurement policy (updated in 2022) does not include this provision.