8 Jul 2019

NZTA chose American IT firm over cheaper NZ firms, documents reveal

8:13 am on 8 July 2019

Documents show the Transport Agency chose an American IT supplier though it was much more expensive than local companies.

Hand with pen over application form on blure water glass background

Photo: 123rf

The internal investigation shows a lot more attention was paid to the Texan multinational than to the locals, who were not given the chance to bid.

This 2015 contract is one of four being reinvestigated now, as part of three inquiries going on into NZTA's practices.

  • The first, a review of the whole agency following its regulatory failings, has expanded and is taking much longer than expected;
  • The second, into how the high-tech unit Connected Journeys was run, is about to be released;
  • The third, due out at the end of the month, revolves around how various contracts were awarded.

In 2015, two unidentified New Zealand suppliers complained to the agency they had been shut out of a contract awarded by NZTA's Zero Harm unit.

"The contract has been awarded to ISNet, which is an offshore company, using direct appointment," an internal inquiry concluded.

"New Zealand suppliers of prequalification systems have not been given an opportunity to bid for the contract."

The American system was chosen as the one that all NZTA's main contractors would have to use.

Read the NZ Transport Agency Probity Review (PDF, 8.9MB)

The inquiry report shows the upfront fees to ISNet amounted to only about $50,000.

But the revenue stream is about $500,000 a year, mostly from charging each of the 114 contractors about $4000 a year.

By contrast, the fees the two New Zealand suppliers would have charged were only a few hundred dollars.

"The preferred vendor is significantly more expensive than the other two vendors, both the cost to the hiring client NZTA and the cost to the contractors," the inquiry said.

The inquiry shows the local suppliers believed the agency was going to give them a shot, but in the end no contestable tender was run.

Their products were assessed, but not in the same way as ISNet's.

"The assessment is not consistent between the three vendors. The analysis for the preferred vendor is much more detailed. The two non-successful vendors have a lower level of analysis."

One New Zealand supplier was told their product had been considered but was not robust enough.

The local firms had several hundred clients each, ISNet had 60,000.

"The successful supplier was given opportunities to present to different industry meetings... Other suppliers were not given the opportunity to present," the inquiry said.

The consultation with industry about ISNet's product went on for 18 months before it was selected.

One of the complainants wrote to the agency four times looking for action.

The inquiry concluded the way the contract was awarded broke the rules and was not fair or transparent.

"There is limited documentation on any aspect of the selection process."

Two senior managers disagreed with these findings, with one noting that training around contracts should be better, and another saying the basic contract was under the threshold of $100,000 where a contestable tender was compulsory.

This is one of four contract processes now being reinvestigated by an outside auditor, Deloitte.

NZTA has confirmed another is the contract to develop Constructsafe, an online tool for testing builders' competency.

It was awarded to a company run by a close friend of an NZTA senior manager, Martin McMullan, who resigned in March 2019 as head of Connected Journeys, the same month the outside audit of the unit was begun.

The agency told its contractors in 2016 that they must use Constructsafe.

The Construction Safety Council had wanted the test rolled out industry-wide.

Martin McMullan was on the Construction Safety Council, along with Peter Silcock, chief executive of Civil Contractors New Zealand.

"To be clear, NZTA said, 'Look, we're happy to develop that for you' and they actually chose the person who was going to develop that for us," Mr Silcock said.

"They were paying for it, so we thought, 'Yep, you can call the shots about who's going to do that'."

Constructsafe had been very useful, Mr Silcock and other industry players said.

The technology is now owned by Construction Health and Safety New Zealand, the successor to the Construction Safety Council.

The services contract for the test provides an ongoing revenue stream of $20 for each person who passes it, or over $1 million since 2016 when the test began. About 80,000 workers have sat it, and 70 percent have passed.

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