Foreign Affairs

APEC contracts to be reviewed after audit concerns

Foreign affairs officials have been forced to review all contracts for New Zealand’s hosting of a major international summit, after the Auditor-General raised concerns about flaws in their procurement practices.

In August 2017, the government confirmed the dates for New Zealand's hosting of the Asia-Pacific Economic Cooperation (APEC) forum in 2021.

The year-long schedule of events will culminate in the APEC Leaders’ Week in Auckland, expected to bring around 13,000 delegates and media to the city in early November 2021.

It will cost the Government up to $330 million to host the event, compared to $44m the last time New Zealand hosted APEC in 1999.

However, early issue have been raised with the Ministry of Foreign Affairs and Trade’s (MFAT) procurement processes as it tries to plan and deliver the event.

In a briefing to Parliament’s foreign affairs, defence and trade committee, the Auditor-General’s office said it had raised concerns with MFAT about the procurement of a consultant for work relating to the APEC event which “did not meet our good practice expectations”.

'Appropriate rigour' required

The Auditor-General had recommended that MFAT review all of its existing APEC contracts “to assure itself that existing arrangements are on a sound contractual basis and resulted from robust procurement processes”.

“MFAT will be procuring a range of products and services to support APEC, such as event management and accommodation. It will be crucial that MFAT manages these procurements with appropriate rigour.”

The Auditor-General’s office had previously identified “deficiencies in MFAT’s departmental procurement practices”, and while some changes had been made, more work was required, the briefing said.

Helen Colebrook, a sector manager for the Office of the Auditor-General, told Newsroom the contract was the only one it had looked at out of 18 APEC procurements completed at the time of the briefing.

Colebrook said the contract had been at the “upper end” of the contract values, which ranged from a few thousand dollars to $300,000.

In last year’s Budget, the Government moved money out of the APEC hosting budget to fund an increase to New Zealand’s overseas aid programme - against the advice of Treasury officials, who warned no money had yet been allocated for hosting the event.

National's foreign affairs spokesman Todd McClay says it is "imperative" that APEC contracting processes are handled properly, given it will showcase New Zealand to the world. Photo: Lynn Grieveson

National’s foreign affairs and trade spokesman Todd McClay said it was “imperative” that the contracting processes were handled properly, given the importance of the event.

“New Zealand will be on the world stage, it is a very very large event and there’s a significant amount of taxpayer money that is going into it, so we just need to make sure that absolutely all the proper processes are being followed.”

McClay said the foreign affairs committee had received assurances from MFAT that it was addressing the issues, but added the topic was “certainly something we’ll be keeping an eye on”.

Given the large amount of procurement carried out by MFAT in aid and development assistance, its internal processes had to be “absolutely robust”.

“If you look at the amount of money that’s been spent in the Pacific alone, the taxpayer is right to be assured that processes are followed and they’re getting value for money.”

The Auditor-General briefing concluded that procurement for New Zealand’s overseas aid programme was “well planned and managed”.

An MFAT spokeswoman told Newsroom the APEC procurement which led to the review was for a project manager consultancy service. The audit had raised issues with the ministry's processes for declaring conflicts of interest, its plans and documentation for different procurement processes, and recording where evaluation and assessment criteria had come from.

The procurement “occurred during the programme start-up phase and prior to having long-term budget certainty and internal procurement expertise”, the spokeswoman said.

“We acknowledge that under pressure to deliver and in the absence of expert procurement advice within the programme, the demonstration of this intent was not well-documented.”

As officials worked hard to meet deadlines for business cases, they often required access to contractors with specialist skills and specific security clearances, “often on an immediate and short-term basis”.

“The intentions of the team were to conduct fair, and value-for-money procurement processes.

“We acknowledge that under pressure to deliver and in the absence of expert procurement advice within the programme, the demonstration of this intent was not well-documented.”

The review of all APEC contracts was still under way and expected to be completed by the end of June. In parallel with that process, the ministry had appointed a probity adviser, as well as an APEC commercial manager, professional services manager and finance administrator.

“We are working to support all managers with clear procurement and recruitment strategy, process and guidelines which differentiate between financial controls and procurement controls.”

MFAT was also providing ongoing training which covered “key concepts such as conflict of interest”, the spokeswoman said.

Foreign Affairs Minister Winston Peters was unavailable to comment at the time of publication.

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