Queenstown Lakes District Council (QLDC) has released the outcome of an internal review into procurement practices following an investigation by media outlet Crux over the council paying consultancy firm ZQN7 more than half a million dollars over a two-year period.

Mayor Jim Boult said the report on the review, released today (Thursday February 18), showed council’s practice was “generally” aligned with the current QLDC procurement policy - but said misunderstandings existed regarding the application of the guidelines. 

“The ZQN7 situation was exacerbated by key staff leaving, the scope of works increasing, and the extended process of working through the reviews with councillors,” Jim said. “Along with this a number of staff in the organisation unintentionally misconstrued the procurement process regarding a decision-making threshold of $50k.”

Jim said there was a “common misconception” about the procurements under $50k and “many staff believed it was ok to directly appoint suppliers without a competitive process and have structured contracts to be managed efficiently, not appreciating the total value of the work to be completed.”

A council representative confirmed to the Wanaka App today the Auditor General has carried out “initial enquiries” into the matter of the ZQN7 spend.

Mayor Jim Boult says there were misunderstandings regarding the application of the procurement guidelines. PHOTO: Supplied

The report pointed to two aspects of the procurement policy which were directly relevant to the ZQN7 contracts: ‘Negotiating with a sole supplier (without any contestable process) is only explicitly permitted as a procurement option with an approved procurement plan’ and ‘Splitting contracts into component parts with a view to procuring to a lesser standard is not permissible.’

ZQN7 (owned by former QLDC manager Ruth Stokes and her husband) was paid $530,000 (excluding GST) between 2018 and 2020 to review three local bylaws, including the controversial speed limits bylaw which resulted in the lowering of speed limits to 40kph across all the district’s urban roads. 

Council staff told the Wanaka App it had selected ZQN7, which had not conducted a speed limit review before, because of its “experience with the formal bylaw process, including public consultation and hearings…”.

Past QLDC speed limit reviews had been conducted in-house by experienced council staff but there was no “internal capacity” at that time, council said.

The procurement review report (which a council spokesperson said was written by QLDC recovery manager Steve Batstone, “with assistance from other staff”) said while actions contravened the guidelines there was no suggestion of bad intent.

“The fact remains that the practice of sole-supplier negotiations without an APP is contrary to the guidelines’ articulation that a sole-supplier negotiation must be supported by an approved procurement plan,” the report said. “However, there is no evidence whatsoever that it demonstrated deliberate or malicious intent to subvert the guidelines…” 

“I must reassure the community that there is generally excellent procurement practice within the council,” the mayor said. “Where it has deviated, the report is clear that there is no ill or unlawful intent or activity, or desire to furnish mates with work.”

Councillors reviewed and discussed procurement practices on February 15 and committed to seeking a further review of the report by the council’s audit, finance and risk committee.

Jim said he has asked staff to “explore” making contracts awarded a matter of public record by default, with appropriate redactions for commercial sensitivity. 

“As a first step on this path the report into procurement practice has been publicly released,” he said. “No entity always gets things right, but it’s important that when errors are made we resolve them, learn from them, and always continue to strive to improve.”