Video transcript: Inquiry into Callaghan Innovation’s procurement process
Title: Inquiry into Callaghan Innovation’s procurement process
Narrator
This report sets out findings from our inquiry into a procurement process carried out by Callaghan Innovation for its Founders and Start-up programme. We were aware of media commentary about the Start-up procurement. Manaaki, a tenderer, raised concerns about how Callaghan had managed the procurement process.
John Ryan, Controller and Auditor-General
So the government procures many billions of dollars of services from the private sector every year, and it’s critical for trust and confidence in the government, in the public sector more broadly, that that procurement process is run with integrity.
Narrator
Callaghan wanted providers that would provide a safe environment for the founders that the programme would support. Therefore, it carried out more intensive due diligence on the shortlisted tenderers. It hired an external contractor, a private investigator, to do this. After a second round of due diligence, Callaghan excluded Manaaki from the procurement.
John Ryan
It was reasonable, in my view, for Callaghan to do additional due diligence during this procurement. It had concerns that it wished to understand more about. However, the process it followed was neither transparent nor fair, in my view.
One of the concerns I raise is that Callaghan had not considered how it would deal with the information that it gathered through the additional due diligence process. There was a lack of natural justice, in my opinion, for Manaaki when those due diligence reports were received and in their ability to respond to them.
Narrator
The contractor Callaghan hired had previously worked for a company that had a dispute with We Are Indigo, Manaaki’s parent company, and at that time the contractor had made allegations of fraud against We Are Indigo. The contractor went on to interview that company as part of the due diligence.
Despite being told about the contractor’s earlier work and the related fraud allegation, Callaghan asked the contractor to do a second round of due diligence on Manaaki.
The second due diligence report included an allegation of misappropriation, similar to the contractor’s previous allegation of fraud. The Auditor-General’s staff could not find evidence that an interviewee made this specific allegation.
John Ryan
Effective management of conflicts of interest is critical to any procurement process. Callaghan did not do enough, in my view, to manage the perception of bias that could’ve occurred because of the contractor’s previous work. It needed to do more, in my view, to manage that risk.
Narrator
Callaghan shared copies of the due diligence reports with other public organisations that were not part of the procurement process. These organisations were not told that the due diligence was mostly based on testimony, included matters that had not been corroborated, and that not all findings had been put to Manaaki. Nor were Manaaki’s earlier responses to the first due diligence report included.
John Ryan
Public organisations need to very carefully consider what information they share from a procurement process with other public organisations or with anyone else for that matter. In this situation, I do not believe that Callaghan was either transparent or fair in the sharing of information.
Narrator
After the procurement, the two due diligence reports were sent from an anonymous email address to many external individuals and organisations. The source of the leak remains unknown.
John Ryan
It is critical that the confidential information gathered through a procurement process is kept safe. Callaghan’s responsibility was to keep that information safe. It is deeply concerning to me that the due diligence reports found their way into the public domain.
Callaghan has told me that it has reflected on what changes it will make in the future. I will remain deeply interested to see how they progress with that work.
Title: Read our report at oag.parliament.nz