NI Water: Why did MacKenzie break up NIW’s commercial review team?
With the inclusion of a submission to the PAC from Contracting Out, the NI Audit Office team will almost certainly spotlight NI Water’s customer service and IT contract with Steria Ltd.
Not least since this is the only part of the initial controversy that substantially touches on the value for money issue.
For all the accusations flowing in the direction of the sacked NEDs, it is important to note that Mr MacKenzie was given a detailed briefing on his arrival in post by previous acting CEO and then Chair Chris Mellor on a number of failures and over payments the company’s commercial review team believed they had identified in this Contract.
Mellor also informed him of a court action, NI Water vs Steria, that had recently been initiated through the Court of Chancery (Case 09/069974). However, once Laurence McKenzie took over the reins of the company he abandoned this aggressive tack. Shortly after, this action was dropped.
Now, Steria is suing NI Water for monies which Steria alleges were improperly withheld from it under a separate action in the Queens Bench (Case 09/102351). This case is subject to the laws of sub judice, so that the issues directly at play there cannot be discussed.
Further, MacKenzie thereafter retrenched the Commercial Director, David Gilmour, who had been leading a wider investigation into procurement issues (and had in the process exceeded a DRD-set savings target of £15.3 million by £10 million), out of the business.
He also then dispersed Gilmour’s investigation team (led by Contracting Out) who had been conducting a commercial review of the Steria Contract.
Now, whilst it may not affect the final outcome, defending the Steria action, as opposed to leading an NI Water action, may have the rather convenient effect of narrowing the amount of detailed information that is likely to come to light. Perhaps this was the intention?
But the Public Accounts Committee and the NI Audit Office’s investigative team should look for a great deal more contextual information from the papers lodged with the court in respect of the first, now completed, action begun in June 2009.
Our current understanding is that these can be got hold of by those with a sufficient interest (fee of £150) through application to the Judge Master.
Now there’s an interesting twist in this constantly twisting tale. In the course of our research, we discovered that the Managing Director for Steria Ltd was a local boy called Paul Wickens (LinkedIn profile here).
By January 2009, NI Water was informed that Mr Wickens was no longer with Steria Ltd. And by August 2009 (around the same time MacKenzie started at NI Water) he took up a post as under Secretary at DFP.
Steria’s action against Northern Ireland Water began on September 18th 2009. Intriguingly, the company’s writ lists a ‘P Wickens’ as the contact for Steria.
Now, let me be clear. I am not suggesting for a moment there is a causal link here (and nor should anyone else). But I think we should be told exactly what was going on…
Topic: Government, Society and Culture
Region: Northern Ireland
I don’t undestand all that. What are you suggesting might be going on?
I thought that might be a problem.
I’ve simply laid out a sequence of events, and asked some questions I think relevant to finding out what sparked the contract review that led to the downfall of the previous Board.
I am not drawing direct conclusions, but rather arguing there are caches of information the PAC should be cognisant of in the course of its investigations.
I also believe the presence of Mr Wickens’ name on the Steria writ the month after he started work with DFP demands clarification.
There seemed to be a lot of internal investigations being initiated in NIW last year:
http://news.bbc.co.uk/1/hi/northern_ireland/8531775.stm
Was this one of the issues which the Minister referred to when he talked about the problems making their way (conveniently IMO) into the public domain?
This news item appeared on 23rd February, which according to the News Letter was the day that the Minister met with the IRT. The Minister at last weeks Regional Development Committee gave the impression (as suggested by Gary Fair) that he met with the IRT on the 25th February.
Either way this item made the news just two days before the IRT delivered the final report to DRD.
To quote Johnny Nash: “There are more questions than answers.”
Sub Judice?
Surely a ‘fair report of proceeding’ is possible?
I suspect this is as nothing compared to some of the earlier contract issues.
Are you saying, Mick, that Mackenzie was not interested in pursuing the NIW v Steria case (which could have saved the public purse considerable sums as I know Steria were not open to settlement outside court).
However he was hopping mad at other contractual situations where the public purse was adversely affected and that his attitude was at the very least inconsistent?
Yes to your first, although emphasis on the could. I would also caution that it still might produce savings in the current context.
But I am even more puzzled as to why he wrapped up a commercial review team (put together by his predecessor – the sacked chair of a Board MacKenzie thought was not taking ‘procurement’ seriously) with a record of over-shooting savings targets, if he was as interested in value for money as we have been led to believe.
Now I can think of legitimate reasons why he might do that, but I would rather hear from the company their actual reasons as to why he actually did it.
And, yes. The contrast with his pursuit of much less certain forms of savings could hardly be starker. I would also lodge a further question to the IRT: were they aware of this particular context to the issues they were pursuing?
That is pure speculation.
Indeed. It seems clear enough that the briefing on the Steria situation demonstrates that the Board took liabilities seriously.
Steria were to take on the billing of customers directly for w and s but as time went on, it became clear to the proverbial dogs in the street that this billing wasn’t going to happen anytime soon. Why, therefore maintain a hefty contarct with a company when what they had been contracted to do wasn’t happening?
Therefore, NIW decided to close things (eminently sensible and all contracts can be truncated legitimately) and Steria sharted to whine (again, understandably as they saw future revenues disappear). But a responsible company couldn’t simply give them what they wanted, whatever the cost. The cost to the Company, in both reputational and financial terms, can now be seen to be somewhat more momentous than could have been envisaged at that time.
Mackenzie’s evidence to PAC quotes a figure of 23m
JJ thats not enough to take it to court and does not fit with the comments made by Mackenzie at the PAC. It may have started as a necessary termination for the reasons you have suggested but such terminations dont usually involve a detailed commercial review, injunction (june 2009) and subsequent court action.
Mackenzie et al has tried to give everyone the impression that only because of his arrival, were any procurement issues uncovered.
It now seems that change had started in NIW quite some time before that – as evidenced by the savings ~ £25m (this takes time to achieve) and the fact that the Steria Contract, known to be one of the largest in NIW had already been reviewed and sufficient concerns found to warrant court action.
If you search those numbers given by Slugger it shows that just after the Steria v NIW Case was lodged in 18 Sept. 2009 NIW applied to strike out their own case NIW v Steria on Oct. 22 2009 – by agreement of both parties. The actions in the Steria v NIW case that are recorded on the system show constant adjournments of the case until June 28 of 2010 when the court set down a time table.
Did Mackenzie’s getting rid of everyone involved mean (for reasons that are not clear given the numbers) that NIW was not now in a position to continue the NIW case at that time and thus took the only alternative that was available to NIW – to drop the NIW case and defend the Steria case which, would give the time needed for a new team to get on board – but that would also be a more advantageous approach for Steria.
The question is then: Why at that time remove the commercial director and investigation team? NIW have been quoted in the BT as stating that they were satisfied with the investigations team’s work and fees paid. The commercial director was retrenched as not being needed!
The new team appointed would have cost money just to get read in.
No prizes for guessing the consultant company that was appointed to take over from the previous commercial review team – by STA?
Or did Mackenzie want (or was asked?) to ensure minimum impact of this case and thus got rid of anyone (following the Steria case lodging) who had identified the contract failures?
Hey before you cry ‘conspiracy theorist’ there is this thing of the Wickens twins!
Here’s the appropriate passage:
I am presuming that if they were dependent on the outcome of a prospective court action that this is why they were ‘identified’, rather than ‘recovered’.
There is a possibility that the savings would have come to nothing had NI Water’s action come to nought and the court found in favour of Steria.
And 6% of 0 = ?
This is something which I would also presume the CEO would have been aware of at the time of giving his evidence to the PAC.
That he did not mention it at the time, certainly gives rise to a perception he was not a open as he might have been.
Oh this was all so simple way back in March….
Bad guys responsible for doing naughty (but not criminal things).
Good guys kick ass…
Northern Ireland Water Board Minutes 27 October 2009 [redacted]
The Board noted that a revised policy on Financial Delegations had been approved by the Audit Committee and Board and this was now being communicated out to all staff. Staff members would be left in no doubt that if they had any concerns or were unsure about a financial delegations issue then they should seek clarification before taking any further
action.
The Chairman agreed that it was important to educate the work force and then to reinforce the message. In response to a question from John Ballard, Ronan Larkin confirmed that a system had recently been put in place that would flag up contracts that were approaching their limit in terms of authorised spend thereon.”
Um the Board seemed to be acting appropriately and asking the right questions…
Another good find PT. This is going to make Conor’s presentation on Monday very interesting…
Another recently published document on DRD website..
http://www.scribd.com/doc/37114198/Department-for-Regional-Development-Conflicts-of-Interest
CONFLICTS OF INTEREST
“You need to be, and be seen to be, honest and impartial in the exercise of your duties. You must not allow your judgement or integrity to be compromised or appear to be compromised;
•You must not misuse your official position, or information acquired in the course of your official duties, to further your private interests or those of others. Conflicts of interest may arise from financial interests and more broadly from official dealings with, or decisions in respect of, individuals who share private interests”
I’m kind of curious about the last redaction, as the reason for it has not been referred to in the covering letter.
The revised Financial Delegations were in a letter from DRD Chief Accounting Officer(&PS) who was [Text removed - mods 'worried'] over being responsible for NIW since it continued to be funded directly by his department. The new rules were a move back to NICS practice and away from a more commercial (efficient) model. Failure of policy or advice Mick?
The quote is my link above, Mick. The redaction at the end of the minutes is somewhat puzzling.
That’s a good question (though please steer clear of the personal references in future – Ball, not man remember). I will want to write about this in more detail when we get a bit further down the line with this story, but suffice to say I don’t think the ‘blame’ for that goes directly to one place.
There is a clash of cultures here that CS procedures, very much left by politicians to their own devices, have never found a way to resolve.
The commercial responsibilities of engaging private sector operators (which were thrust on 19th century departmental structures with little scope for adjustment in Thatcher’s ‘supply side’ revolution of the 80s) are immense.
Yet the inflexibility and limited tolerances of the civil service system remains almost what they were back in the Victorian days when it was first brought into existence.
Even now the CS is not set up for dealing with big private contracts. Look for instance at the £5 million bill they had to go to the supplier to find a copy of the detail for the old DRD Water Service.
That NI Water then invested in a system so that that no longer happens tells us: one, the GoCo is not the irresponsible dullard that the Minister will try to pass it off as; but also two, politicians have not prioritised putting in place the kinds of systems that would enable a government department to face outwards on to a chaotic world with greater confidence.
In short politicians changed the rules for the CS without ever spending the money (and thought capital) on enabling them to satisfactorily fulfil the new demands
Policy-wise the blame lies right around the Executive table (not just with the DRD Minister) with another major issue not being dealt with (ie what to do with GoCo when there are no revenues coming in the front door).
Frankly, I quite understand why Priestly hardened the rules to try to make the Shareholder the premier partner with NI Water, with as it happens disasterous results.
But the situation was *not* of his making. Rather it came about through the terminal indecision of his political masters.
Sorry Nevin
Mick, An interesting and fair reply. One. First time I have seen anything positive about NI Water in the media. Two. Paul Priestly was put in an impossible position by his lords and masters. He looked like a man under extreme pressure at the PAC hearings and I have nothing personal against him what so ever.
In one of the earlier threads, the question was asked about the time scale of the “restructuring” which led to David Gilmour’s position being made redundant.
I understand that from the announcement being made, the time scale was astonishingly short.
I see no mention of David Gilmour as Executive Director in NIW Annual Report 2009/2010
“The Chief Executive is supported by the
Leadership Team. Membership of the Leadership Team is shown below and comprises the
Executive Directors and Executives responsible for key central and operational functions.
Laurence Mackenzie* – Chief Executive (appointed 28 July 2009)**;
Ronan Larkin* – Director of Finance and Economic Regulation**;
George Butler* – Director of Asset Management**;
Sara Venning* – Director of Customer Service Delivery (appointed 21 May 2010)**;
Mark Ellesmere – General Counsel & Company Secretary**;
Trevor Haslett – Director of Engineering Procurement**;
Pat McParland – Director of Corporate Affairs**;
Pauline Shepherd – Director of Human Resources;
Allan Jones – Acting Chief Information Officer (until 31 March 2010);
Seamus Doyle – Chief Information Officer (appointed 1 April 2010);
Alistair Jinks – Head of Business Improvement;
Nicola Brennan – Head of Internal Audit.
Operating and Financial Review”
Yet he appears as part of the “Executive Team” here
http://www.niwater.com/ourexecutiveteam.asp
David Gilmour
Commercial Director
David has a strong global commercial background and has considerable experience of achieving significant cost reductions, supply chain management, change management and engineering/capital construction purchasing.
“He is responsible for commercial sourcing and the effectiveness of supplier relationship for NI Water. David is also responsible for developing and implementing the procurement strategy and for NI Water’s supplier selection and contracting strategy.”
Probably a tree
The link to that report is here http://www.niwater.com/siteFiles/resources/htmlfiles/information_management/niw_annual_report_2009_2010.pdf#search=“minutes 2009″
Not at all. Pretty spot on, in fact. It seems MacK restructured the executive of NI Water in rather interesting and utterly idiosyncratic ways, which could bear a few more FOIs.
All part of the move back to DRD control I would imagine. Mr Gilmour’s skills are not required in the NICS. Also have you noticed the deafening silence from NIAUR. I thought they were the financial regulator for NI Water. When did this stop?
PT, you may recall that back in November 2009 there was the ”autocratic’ rumpus. November 2 was the date of the final publication of 6 to 8 page ‘executive team’ minutes.
By November 16 we have the trimmed down ‘executive committee’, the trimmed down minutes (two pages) and the termination of online publication of executive whatsit minutes.
That ‘executive team’ page has been obsolete since November 2009; the current link takes you to the ‘executive committee’ page.
I understand NIW takes guidance from the Information Commissioner. Now that the executive minutes have been reinstated perhaps the IC could encourage NIW to return to more ‘open and transparent’ minutes – and add ‘informative’ Board minutes
Nawwww …..this transparency thing is difficult. People start to ask questions
The airbrush ran out of ink?
The Minister will also face further questions about the selection of the new NEDs for the interim NIW Board. Will he answer the George Savage questions on Monday or will he wait until the September 21 ‘deadline’?
The CPANI audit of the ‘proper’ process for the appointment of the two previous NIW NEDs gave DRD a sharp rap on the knuckles:
“2.1 Overall, the quality of the appointments process associated with this competition in terms of compliance with the Code (on a scale of HighMedium-Low) has been assessed as Low as a result of the nature of the audit issues identified.”
The audit of the ‘emergency’ process should be worth reading
And some good news for those who favour more open government eg online publication of FoI responses:
“Also as discussed I advised that CPANI has just answered an FOI request related to the NI Water interim appointments and that our policy is to list the request, along with documents released, on the CPANI website.
We are hoping to do this Tuesday or Wednesday of next week. If you are interested in seeing these please feel free to browse the site.”
Indeed. Seriously though, I think it gives us a glimpse of MacKenzie’s rough shod management style.
I’ve had complaints from people inside the organisation who say communications simply stopped once MacK took over.
I suspect he was not comfortable with the conflicted management lines PP put in, but I also suspect the step up from NIE (which is a shadow of what it was when I worked there 30 years ago) to NIW overwhelmed him.
It’s a much more complex organisation with a large industrial base to manage. By contrast with NIE, even the power stations have been sold off to what was a subsidiary to British Gas. It’s all maintenance of lines and cables these days.
The HQ of NIE now only occupies a fraction of the space it used to. Everything is contracted from a large complex of offices into what was once the Executive floor in the old building at Danesfort.
” He looked like a man under extreme pressure at the PAC hearings ” I think the reason for this seem very much of his own making – “oh what a tangled web we weave when first we practice to decieve”
PT, David Gilmour’s linked in profile has, er, linked out.
your reference to NIAUR brings up a whole new dimension, perhaps outside the scope of this thread, about the overall governance model-the body was originally introduced to regulate competition(not finance) in the Electricity sector but its role has been extended to other functions including regulating the NIW water monopoly which is not yet and may not become fully privatised. It is independant of OFWAT and the supporting legislation seems to also be different.
http://www.uregni.gov.uk/water_sewerage/
Some Steria references from NIW Executive minutes:
7 July 2009 – Liam Mulholland reported that the changeover from Steria had been achieved smoothly and bills will be issued by 20 July.
20 July 2009 – Pat McParland confirmed there had been very little press coverage following the Steria handover date. The Chairman and Executive Team thanked and congratulated all employees involved in the final steps to termination for their efforts and hard work to bring about a successful handover. .. Liam Mulholland outlined key highlights from the Customer Services report. Particular attention was drawn to possible discrepancies being unearthed around customer contact reporting following the termination of Steria services.
4 Aug 2009 – Liam Mulholland gave an update on customer service issues. David Gilmour agreed to produce a briefing note for the Chief Executive on legacy issues arising from the termination of the Steria contract.
22 Sep 2009 – Mark Ellesmere agreed to provide an update on the Writ issued by Steria for inclusion in the report [CEO Report for September Board]. .. David Gilmour provided an update on the present situation.
9 Oct 2009 – David Gilmour reported that Mr George Savage MLA had asked for details of the amount retrieved to-date from Steria. David Gilmour agreed to let Laurence MacKenzie and Pat McParland have sight of the response before it was issued. .. David Gilmour briefed ET on the status of the mediation process with Steria and said that it was anticipated that a mediator would be appointed shortly, with a proposed mediation date of 28 or 30 October 2009. It was agreed that Laurence MacKenzie would contact the Chief Executive of Steria to discuss the steps necessary to achieve Mediation and ensure the smooth transition to the process.
19 Oct 2009 – Mark Ellesmere reported that Dundas and Wilson were sending through a case summary document [on Steria]. He also agreed to copy Ronan Larkin and George Butler on the Heads of Claim.
2 Nov 2009 – The ET discussed current matters of importance including the Company’s response to PC10, the BHC indemnity, the Q2 forecast and the Steria dispute.
[Paul Wickens stepped down as MD of Steria in January, 2009, the month that part of Steria's contract with NIW ended. He joined NICS's DFP in August 2009]
It was discussed in quiet corners by staff in the know, that upon learning he was surplus to requirements Gilmour approached MacKenzie with an exit strategy and was asked by MacKenzie if he could implement it by Friday of that same week.
I assume the inference being that MacKenzie wanted him out and wanted him out fast.
McKavanaghs, that’s indeed *very* interesting. Can we assume that the exit strategy was indeed the “restructuring”?
There’s quite a few more that I would like hauled in front of PAC, for questioning by Purvis , Mc Glone and Dallat….
I actually feel sorry for Priestly, as I get the impression that he was misguided rather than malicious.
I cant say for sure whether it was or not, however it was mentioned at the time that Gilmour envisaged it would roll out over a number of months.
As their web site says they are the utilities financial regulator, the NI equivalent of OFWAT for the water industry. Example- their recent questioning procurement procedures at NIE(STAs). AES, owners of the power stations, have to provide NIUAR with a detailed financial model to justify their wholesale unit cost for electricity to NIE, NIW have to justify their proposed spend through the PC10 process. Phoenix have to justify their price fluctuations as the wholesale gas price rises and falls. So why are they not taking the lead on the procurement issues with NI Water
Um obviously missed something i.e. What presentation?
Ah the times “they are a -changing”
Alternatively, is it easier now to proffer up a civil servant. rather than a Minister?
http://www.bbc.co.uk/news/uk-11272622
“HM Revenue and Customs Permanent Secretary Dave Hartnett told those who will have to pay an average of £1,428 each he was “deeply sorry”.
Earlier Mr Hartnett had told the BBC he “saw no need” to apologise as tax reconciliation was a routine measure.”
I”ndeed. Seriously though, I think it gives us a glimpse of MacKenzie’s rough shod management style.”
No it’s “autocratic”, as acknowledged by himself…(Not the way to run a business)
Conor Murphy – High Noon – NI Water Governance Issues – another pantomime performance. Even the BBC is getting in on the act – Monday 14 September.
in support of regulating what?