This article was originally published on May 10 2021. For an update and links to more Newsroom stories on Government procurement chaos, plus the first media interview with the new head of NZ Government Procurement, see the end of the story, below.
The Government is officially under fire for its decision to spend $38 million on a Covid vaccination register bought from international multi-billion dollar companies.
Orion Health chief executive Ian McCrae today sent a letter to the Auditor-General demanding a full audit review of the Ministry of Health’s procurement process, calling the $38 million figure “scandalous”.
Orion, which built and maintains the existing National Immunisation Register, which keeps track of childhood and other vaccinations, says the Government ignored “proper procurement processes, with checks and balances”, instead awarding the contract to international companies including Salesforce, Amazon and Deloittes, and paying $30 million-$35 million more than necessary.
Had Orion Health and others been asked to tender for this project then various local vendors and probably other international suppliers would have bid, McCrae says.
“I have had conversations with New Zealand suppliers that believe they could have also delivered this project faster and at a fraction of the price.”
McCrae sent Newsroom a 12-slide powerpoint overview he received in an email from the Ministry of Health in September 2020. The accompanying letter said “We are not looking for a formal response at this stage”. He says there was one followup phone call and, six months later, the announcement of the foreign consortium.
And that $38 million, taxpayer-funded price tag.
“It’s such a gross, ridiculous waste of money. I have never seen anything like it,” McCrae says.
Orion developed and set up the National Immunisation Register, launched in 2005 in parallel with the Meningococcal B vaccination programme. It’s been in need of an upgrade for some years, with the main beef from the medical profession being that while it works on GP IT systems, it often doesn’t integrate with other providers, like midwives and pharmacies.
McCrae says Orion has been proposing a number of enhancements to the system for several years, but the Government hasn’t been prepared to fund them.
He says a simple upgrade to the existing National Immunisation Register would have cost less than $50,000 and would have been operational within weeks.
“This solution would be live today and delivering more functionality than the current $38 million project.”
Orion could also have provided a “total technology refresh for around $1 million to $3 million”, McCrae says in his letter to Auditor-General John Ryan, “though we see little need for this”.
That would have left plenty of money “for lots of extra functionality not usually associated with an immunisation register”.
“Simply put, by not following any process, the Ministry of Health has squandered $30-35 million, which is appalling.”
Meanwhile he questions the credentials of the companies that won the contract.
“We continuously pitch and win work around the globe and never come up against the vendors that were awarded this work in New Zealand.
“These vendors do not have experience dealing with health information.”
McCrae says suggestions by the Prime Minister in Parliament that “we have not had a national, well-functioning immunisation register for years” are simply incorrect.
“Children and adults have been reliably immunised and vaccinated, and these events recorded against their health records, for years,” he says.
“Today, this $38m system is late and it is missing functionality. The spend on consultants and international software vendors is obscene. The normal checks and balances from a proper procurement never happened.
“This project urgently needs an Audit Office review to determine accountability, prevent further wastage and to ensure that this does not happen again.”
Since criticising the MoH’s lack of transparency on the Covid immunisation register, McCrae says he has been approached by other companies in the same boat – losing out on Covid-related business under emergency provisions without any proper tender process. He would like to see others make a similar complaint to the Auditor-General, though recognises smaller companies might be frightened about souring relationships and losing government business in the future.
Just 2 percent of what Government spent on IT contracts in 2020 was transparently awarded and notified.
However McCrae’s allegations are backed up in a report last month from NZRise, a not-for-profit consortium of locally-owned IT firms, which suggests the Orion experience is far from unique.
NZRise co-chair Victoria MacLennan worked with Laurence Miller of anti-corruption agency Transparency International to crunch numbers from the Government Electronic Tender Service, or GETS.
Their report, The harsh reality of NZ government digitech procurement concludes just 2 percent of what Government spent on IT contracts in 2020 was transparently awarded and notified.
“For the digital technology sector, 144 contract award notices were published in 2020, and the total published value of contracts awarded in 2020 was $64.5 million. Annual government IT expenditure is estimated at around $3 billion, so the published data is only 2 percent of total government expenditure.”
Across all government procurement last year, just 2.5 percent of government expenditure on procurement was published.
The Ministry of Health’s media team didn’t respond to Newsroom’s questions about the National Immunisation Service contract. However, a spokesperson at the Ministry of Business Innovation and Employment, the part of Government that heads up procurement, commented on the situation with emergency Government procurement.
While government agencies are required to follow procurement rules, the spokesperson said, “the Covid-19 situation rapidly evolved which created uncertainty for many procurement professionals, as well as throughout the supply chain. In this environment a balance was struck between the response to Covid-19, as well as ongoing requirements and contracts to maintain business activities”.
“For agencies subject to the Government Procurement Rules, an exemption for emergencies is available under Rule 15. However, the award of a contract over the appropriate value threshold should be published later (on the Government Electronic Tenders Service), including a clear statement that it was an emergency procurement.”
For a deep dive into the Government’s often opaque, inefficient and unfair procurement processes, see Newsroom’s story ‘Opaque, inefficient, unfair: Govt’s $42 billion procurement regime report card’
UPDATE ON THIS STORY: At the end of October, the Office of the Auditor General released its response to Ian McCrae’s concerns about the Ministry of Health’s procurement process for the Covid-19 Immunisation Register and national immunisation system. It provides a timeline and background for the Ministry’s processes, which saw officials use emergency powers to award the contract to Deloitte without following normal open procurement processes, and then retrospectively document its decision. The Auditor General doesn’t provide commentary on Ministry’s actions except to say that with future procurement processes – for example with the next stages of the Immunisation solution, with cervical screening and breast screening – it should document things properly and “continue to assess whether it is receiving value for money”.
Ian McCrae’s characteristically forthright response to the Auditor General’s report was to call the process a “non-investigation” and wonder why “after sitting on our complaint for five months, the Office of the Auditor General has declared they won’t investigate.
“Unfortunately and disappointingly, New Zealand just doesn’t have anything close to the procurement rigour that we see in most other developed nations,” McCrae says. “What is the point of the Office of the Auditor General if they don’t audit?”
Since then, says Orion global Vice President of corporate affairs Andrew Bowater, “it’s been radio silence from the Ministry of Health and the Office of the Auditor General on this issue. But we’re still getting a fair few businesses and people popping up to share stories of similar things that have happened to them.
“New Zealand makes up less than 10 percent of our total revenue, so to us this has never been about the money. But for other New Zealand businesses the impact of poor procurement has been much greater.
“We hope New Zealand ministries test the thinking on everything they procure and make sure taxpayer dollars are being used as efficiently as possible. But in order to achieve this, I think MBIE needs to play a greater role lifting procurement capability and performance across all ministries. For example, we have seen in other countries proper oversight and peer review by other agencies to ensure the best outcome for taxpayers.”
In December, Newsroom was granted the first media interview with Laurence Pidcock, the new head of NZ Government Procurement, where he talks about the challenges ahead and his plans for reform. We will be publishing the interview in Summer Newsroom