Auditor-General's overview

Inquiry into procurement of work by Westland District Council at Franz Josef.

E ngā mana, e ngā reo, e ngā karangarangatanga maha o te motu, tēnā koutou.

This report concerns a decision of the Westland District Council (the Council) to carry out work at Franz Josef to protect the town's wastewater treatment plant from flooding. The work was carried out on an urgent basis and resulted in the construction of a new 700-metres-long stopbank on the bank of the Waiho River.

In this report, we acknowledge the serious nature of the flood risk the Council was dealing with, and the motivation of the elected members who were driving the decision to act in the community's best interests.

However, we have serious concerns about what was done in this case.

Our concern is not that the Council decided it needed to do something to address the flood risk. Our concern is about the way the Council went about making that decision, the apparent confusion or disagreement among the elected members about what had been agreed, and about the way the decision was subsequently carried out.

We also have serious concerns about the extent to which some of the elected members lost sight of the fact that their role is to govern, not manage, and that their drive to get things done needed to be balanced by an understanding of the importance of doing things right.

This report identifies numerous examples of poor decision-making and poor procurement practice. They include the lack of any proper risk analysis or consideration of alternative options, the failure to seek expert advice on either the immediacy of the flood risk or whether building a stopbank was the right response, an inadequate planning and procurement process for a project of this type and scope, an apparent disregard for legislated decision-making requirements, and a failure to consult those affected by the work until the work was already under way.

Underlying all these concerns is a fundamental question about whether the construction of a stopbank was authorised in the first place. Council records show an agreement to carry out maintenance on an existing flood embankment, not to construct a new stopbank.

What Westland District Council did

Faced with what some of the elected members believed to be an imminent flood risk, the Council decided to carry out urgent maintenance work on a floodbank to protect the town's wastewater treatment plant from flooding. At the same time, it decided to carry out work to address ongoing non-compliance with the plant's discharge consent. This work involved spending an estimated $1.3 million of public money.

As it turned out, rather than carrying out maintenance work on the floodbank, the Council effectively built a new stopbank. The proposed work to address compliance issues with the wastewater treatment plant was not carried out at all, although we understand it was completed later.

What was wrong with what Westland District Council did

The decision that urgent work was needed was based on an assessment by two of the elected members that the wastewater treatment plant was in imminent danger of flooding. That assessment was effectively endorsed by the Council as a whole without confirmation from anyone with relevant expertise and without any expert review of the Council's proposed response.

Potential contractors were identified and approached by one of the elected members using his business and personal connections, rather than by Council staff following a procurement process suitable for a project of this size and significance to the community.

Work then began on constructing the stopbank without any plans being drawn up, without any engineering input, without consulting with affected parties, and without considering the effect constructing a stopbank might have on the flood risk posed by other parts of the river.

Not only did the Council not seek advice from any external experts, it did not properly involve its own staff until work was already under way.

The first stage of the work was carried out without any clear contracting arrangements in place, and without any certainty about who was responsible for managing the work on the ground or for matters such as health and safety, compliance with the Resource Management Act 1991, or quality control.

The lack of proper contracting arrangements for the first stage of the work means it is uncertain what recourse the Council will have, if any, if the stopbank fails due to a design or construction flaw.

When some of the elected members tried to raise concerns about the scope of the work, aspects of the Council's decision-making process (such as the lack of involvement of Council staff), and disquiet in the community about perceived conflicts of interest, these concerns were effectively dismissed or minimised.

All of this is unacceptable.

What Westland District Council should have done

The decision to take steps to prevent the town's wastewater treatment plant from flooding was a decision the Council was entitled to make. However, before making that decision:

  • The Council should have got advice, from either its own staff or appropriately qualified external advisers, about whether its concerns about an imminent flood risk were valid.
  • Assuming the concerns were valid, the Council should have got advice from suitably qualified advisers on whether a stopbank was an appropriate and cost-effective solution. This was particularly important because a decision had not yet been made about whether the wastewater treatment plant would remain at its current site in the long term.
  • The Council should have considered, or sought advice on, its decision-making obligations under the Local Government Act 2002 – in particular, the requirement to assess the significance of the decision, to weigh up the costs and benefits of other options, and to consider the views of those likely to be affected by, or interested in, the decision.
  • The Council should have considered, or sought advice on, whether it needed consent for the work, or any part of it, under the Resource Management Act and the extent to which the proposed work could legitimately be classed as emergency works under that Act.
  • All of the elected members needed to have a clear understanding of the rationale for the decision and the scope of the work that was being contemplated.

For councils, these sorts of decision-making requirements are not just a matter of common sense. They involve both legal and good practice requirements. As with any public organisation, a council is exercising public powers. It is the essence of the rule of law that public powers must be exercised in accordance with the law.

In the case of councils, being able to demonstrate that decisions are made lawfully and for the benefit of the community is all the more important because a council is collecting and spending the community's money, and because the only opportunity the community has to influence who makes decisions on its behalf is at local government elections every three years.

The discipline imposed by the decision-making requirements of the Local Government Act is therefore essential in holding councils to account. These requirements are, in effect, the building blocks for democratic and responsible decision-making in local government. Bypassing them where they are perceived to be unnecessary or inconvenient is not an option.

Why we do not accept Westland District Council's justification

The justification we have been given for much of what happened is that the work was urgent and elected members had to step in because Council staff were not available.

We do not fully accept either of these arguments. In particular, we are concerned at the extent to which the sense of urgency appears to have clouded good judgement.

There is no doubt that the wastewater treatment plant was at risk of flooding. It had flooded the year before, with serious consequences for the town. But the Council had no expert basis for assuming that history was about to repeat itself or that, if it was, a stopbank was the most appropriate or cost-effective solution to the problem.

Even if we accept that the concerns about an imminent flood risk were valid, it does not justify the approach the Council took. Building a new stopbank – if that is, in fact, what the Council agreed to do – is not a "quick fix". It requires careful planning, engineering expertise, a clear understanding of resource consent requirements, and consideration of the effect that building a new stopbank would have on an already volatile river. All of these crucial steps were missing.

Why the end does not justify the means

The question of whether the construction of a stopbank was properly authorised and whether it was the right thing to do, is no longer of any practical relevance. The stopbank has been built and, although several of the elected members voiced their concerns at the time, the Council, in effect, endorsed the decision to build it.

We acknowledge the genuine motivation of all of the elected members we spoke to, to try to address their concerns about the flood risk to the wastewater treatment plant in what they believed to be an efficient and cost-effective manner.

The point has also been repeatedly made to us that, so far at least, the stopbank has achieved its intended purpose of protecting the wastewater treatment plant from flooding.

However, none of this makes what the Council did right. The end does not justify the means.

A council that is contemplating spending $1.3 million of public money to construct a reasonably significant piece of infrastructure needs to be able to show that the decision to spend the community's money was based on something more than an assessment of risk by two of the elected members, and that all those who had a right to be involved were properly involved in the decision-making process.

It is the essence of good governance that a governing body can demonstrate to its stakeholders that a decision has been well made and their money has been well spent.

In this case, unfortunately, the Council can do neither.

Nāku noa, nā,

Signature - JR

John Ryan
Controller and Auditor-General

1 March 2019