NZ Report / Proposal Template - State Services Commission

Audit New Zealand that there were also some minor issues around documentation. We
agree with the comment by Audit New Zealand that the engagement of key personnel for
RPDP should be managed by the Department alone as far as possible, or by using a
completely independent recruitment specialist.
Contracting Expertise
5.71 At the time of entering into CWA for the construction of the regional prisons, the
Department had very little knowledge and understanding of CWA. It was heavily
dependent on a small number of key individuals including, in particular, Stewart Rix of
CMS and John Hamilton (the Project Director). Neither are employees of the Department.
As a general point, it is preferable, particularly on projects of the size, complexity and risk
(financial, operational and reputation) of the RPDP projects, to avoid being too reliant on a
small number of external advisers. That said, however, it is acknowledged that expertise,
particularly in relation to the CWA methodology, was relatively scarce (in part, reflecting its
limited use in New Zealand).
5.72 Through the projects completed to date (and nearing completion), the Department
has built significant organisational capability within the RPDP team. For future projects,
the Department needs to ensure that it retains people who are able to advise, from a first
principles perspective, on the choice of optimal procurement methodology and then, once
the decision is taken, lead and advise on the implementation of the chosen procurement
method. This includes the role of being a member on the Principal’s Group.
5.73 A blend of competencies and experiences are required to undertake these tasks;
commercial, construction as well as understanding of Government machinery and
decision making processes. The range of competencies is unlikely to be found in one
individual. We note, and support, the decision by the Department to add a department
employee to the Principal’s Group at both Spring Hill and Otago. This initiative usefully
supplemented the commercial and construction background and expertise of the Project
Director notwithstanding his previous involvement with the Department since 1997 (as
employee and as contractor).
5.74 We note that the issue of having the right mix and level of expertise might apply
more widely than just the Department of Corrections. For example, a unit has been
established within the State Services Commission to assist with and advise on aspects of
major IT investments. Although well beyond the scope of this review, it is worth
considering whether there is a need for an equivalent group in respect of major building
construction or even procurement more generally for the public sector. Although not
appropriate for New Zealand given the much smaller size of our economy, we note the
example from the United Kingdom which has established the Office of Government
Commerce (OGC) which is an independent Office of the Treasury. The OGC is
responsible for a wide ranging programme which focuses on improving the efficiency and
effectiveness of procurement within central government.
Market Testing of Costs
5.75 The Department and Government more generally, needs assurance that the
amounts being paid for the regional prisons are based on efficient levels of cost. The way
in which CWA has been implemented by the Department means that such assurance is
sought through a process of subjecting the development of the TOC to extensive
independent review and audit. Under traditional NZS 3910 contracts, prices are market
tested through the competitive tendering process. As applied to Spring Hill and Otago,
the CWA methodology has not provided this same market testing. Accordingly, under
CWA, there needs to be exceptionally robust and transparent processes around
Methodology and Processes: Design, Costing, Procurement and Scheduling 42