NI Water: Were the IRT’s Terms of Reference ‘Gerrymandered’?

The latest we hear is that DRD/NIW are having problems getting anyone to take on the role of chairman of NI Water. Slugger understands that a number of individuals have declined an approach. It is not difficult to see why.

As a careful reading of the final report makes clear the IRT itself did not believe there was a substantive connection between the CEO’s problems with a Board that refused to rescind his resignation and the report’s headline problem of ‘single tender actions’.

It’s a bit like that infamous Illinois Congressional District 4 Gerrymander, where the constituency’s east and west boundaries slip down the central reservation of Route 294 before linking to the other half of the constituency to link to racially similar areas.

In the case of NI Water, the terms of reference appear to have shoe-horned two apparently unrelated matters into the same vehicle (emphasis added):

• Analyse how the governance failures detailed within the Contracts Approval Internal Audit report occurred;

• recommend any further action necessary to address the governance issues surrounding procurement;

• recommend any additional governance arrangements to be introduced by NIW;

• make recommendations in relation to the position of NIW Board members (executive and non-executive) and other senior managers involved in these issues;

• provide an analysis of any failures by DRD as Shareholder and any necessary recommendations; and

• make any other recommendations the review team believe to be relevant and necessary under the circumstances.

Even the IRT struggled to resolve such disparate demands in one report. The device they chose was to spend two/three out of five full paragraphs in the Overview of the Conclusions (5.1) to say that the CEO/Sub Accounting Officer should deal with the matter of his relations with the Board as he sees fit and with the backing of the DRD:

As detailed in Section 2 of this report, the IRT is aware of a serious breakdown between the NIW Board and its CEO over the way the Contracts Approval Internal Audit report had been notified to the Shareholder without consideration by the NIW Board.  The IRT has been advised by the Chair of NIW that, in his opinion, the CEO does not have the trust and confidence of the Board and that this position is now irreconcilable.  The CEO advised the IRT of a breakdown in trust between himself and the NIW Board.

The IRT is concerned about the severe difficulty this situation causes in enabling the Shareholder and NIW to put in place the necessary remedial action plan to implement the recommendations of this review and to deal with the emerging findings of, amongst other things, the deep dive audits.  It is our view that this situation cannot be allowed to continue and appropriate and action must be initiated by the DRD Accounting Officer to ensure that a proper governance and control environment is secured within the NIW as a matter of urgency. In our view this would be best secured by tasking the current CEO and NIW Sub-Accounting Officer to deliver the agreed action plan, supported as necessary by DRD.

Tellingly the issue gets just one bullet (5.4) in the detail of the conclusions, which simply refers the reader back to this rather general and un-prescriptive statement in the overview. Nowhere, that I can see, does the report’s analysis even attempt to draw the behaviour of the Board into the central issue at hand (apparently): the problem with procurement procedures.

The lack of progress in tackling the main issue in the report contrasts heavily with the swift and high profile sacking of the board. This rather one-eyed focus on the Board rather than procurement was obvious to Don Price (the one NED to survive the cull) just three days before the IRT’s final report was published (cribbed from the Hansard of the PAC meeting):

“-The issues reflect non-adherence to procedures rather than lack of a control/governance framework

-This non-adherence to procedures was not picked up by Internal Audit (despite 3 Audits on Procurement in 2009) nor were they picked up by Halcrow and at no time were they reflected in reports or assurance statements to the Board.

Despite this, the Panel from the outset has seemed determined to find Governance failures by the Board rather than working with the Board to ensure the necessary corrective actions.”

Any qualified prospective Board member will surely sniff the air at that one, and ask themselves:

  • One, can I trust a single shareholder (DRD) which appears to have gone to considerable lengths to publicly contaminate the last Board with issues that did not come under their direct purview?
  • And two, would I ever be allowed to discharge my legal responsibility to consistently provide independent advice to the company’s internal management structure as a Non Executive Director?

As I noted on the thread under our first report this expensive GoCo (£64 Million)/NDGB (£25 Million) contraption is now extremely dangerous for anyone who tries to ride it. If there is not some decisive political movement forwards or back, even more people will get crunched…

In short, the Minister Conor Murphy has a rather expensive and complicated mess on his hands.  How big that mess is really depends on who did what and said what to whom and/or when… Summer recess or no summer recess, the FOIs are storming in from all sides…  This one is just not going to go away, you know…

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  • Pigeon Toes

    “NI Water: Were the IRT’s Terms of Reference ‘Gerrymandered’?”

    Probably

  • Pigeon Toes

    From the note of a meeting from another Paul Priestly commissioned “independent review”

    Just where exactly was/is the scrutiny of *that* review?

    “Following introductions **** expressed some concern about the terms of reference of the independent review. They were concerned that it appeared that ****and ***** had been brought in to defend the decisions taken by the Department.*** and ** gave reassurances that this was not the case and the review had been set up to establish the facts and would itself be subject to scrutiny.”

  • Pigeon Toes

    “** and ** did provide some initial comments during the course of the meeting on some of the issues raised”

    For “initial comment”, read “defended the department”.

    Astonishingly at this point the “review team” had no intention of seeking statements from other key parties, and it was only following this meeting that those arrangements were made.

    I further understand the other party did not receive an agreed note, but pre-empted that little omission by sending in a follow-up written submission!!

  • Mick Fealty

    Can you try to collate your material and put it into one post. The drip feed style makes it hard to follow, and creates the impression that there is actually a conversation going on here rather than a soliloquy… 🙂

  • Cynic

    Who would want the Chairmanship when the Directors have been appointed to include mates and political colleagues of the Minister?

  • Drumlin Rock

    Mick, would it be possible to put a time line together, or even better a “fact sheet” for those of us who find this a bit confusing, for example including the basic information of those involved (freely available in the public domain) I think I have the jist of it all but not quite sure where and with whom it all began.

  • iluvni

    Was I dreaming or did I really hear that Mairtin O Muilleoir had been appointed a non-executive director of Northern Ireland Water?

    Whats his expertise in this area…

  • Pigeon Toes

    Perhaps he was the brain behind “Only Our Rivers Run Free” branded bottled water?

    http://alaninbelfast.blogspot.com/2010/03/only-our-rivers-run-free.html

  • Mick Fealty

    That’s only on an emergency basis Cynic… I’m pretty sure all of them understand that when (or even if) a new Board is appointed by due process they will have to move on… The Company Act lays down powerful checks and balances against that happening on an ongoing basis…

    I suspect the resort to emergency process arises less from political opportunism (of appointing NEDs who share overtly the same political position on the issue of privatisation as the Minister, for instance), and more from the fact that no one qualified enough to understand the problems facing NI Water would touch an overbearing single shareholder foolish enough to back a CEO who clashes with the board when just six months into post against 4+1 NEDs (with over 75 years in the water industry) with the proverbial barge pole.

  • Mick Fealty

    I have the same problem! I am working on it!!! Though, I think a recapitulation will help at some point (with links for anyone who wants to read them in in a broader context)…

  • Mick Fealty

    Lian Patterson talks about the logic of the spread of choices in her answers to the PAC, but she doesn’t attach any of the roles to names.

    Mairtin’s a business man with experience of working on both sides of the Atlantic. The role of NEDs to bring a spread of experience some purely to do with the sector (which is why there was so few NI NEDs on the board before).

    I wouldn’t mind opening a thread on this question, but not if people are going to use it to settle political scores. The story is way too important for that kind of man playing crap!

  • Cynic

    That’s only on an emergency basis Cynic…

    Thats not my reading of it Mick. He didn’t say they were there on an emergency basis – he said he had used an ’emergency procedure’ to appoint them. I think they are there long term.

    I also don’t think the Companies Act is relevant. Whomever the shareholder appoints is a matter for them. there is no requirement that I am aware of for any rules around this.

    I agree completely with you on what’s happened but as I said before it goes far deeper than this I think. NIW appears deeply dysfunctional at every level from planning through to managment and basic accounting. It needs a strong leader to pull it through this mess but:-

    1. will the Minister want that?

    2 more importantly will the Civil Service let anyone competent near the job?

  • Cynic

    Sorry for multiple posts. Whenever I try to tab across when typing it posts a message!

  • Cynic

    The mix of skills on the board is the thing. The Non Execs are there to challenge not to run the business or second guess the Executive Directors….. so let’s see what happens

  • Don’t believe you. Just showing solidarity with Eamonn:)

  • Drumlin Rock

    Mairtin expertise is in in the sewage treatment side of NIWs business, after all he has been churning out crap on the Andytown news for years.

  • Mick Fealty

    Yep, okay I may have presumed too much on the emergency nature of the selection process. I think you have the right of it there. In which case, when the brown stuff hits the fan it puts the Minister a little closer to the epicentre than I’d calculated.

  • Pigeon Toes

    “Legal Status and Ownership
    NIW is a Government owned Company and the statutory water and sewerage undertaker, operating under licence. It is subject to regulatory oversight by the NI Authority for Utility Regulation and environmental regulators.

    As owner, the Minister for Regional Development retains overall policy and political oversight and sets strategic objectives.”
    http://www.shareholderexecutive.gov.uk/performance/niwater.asp

  • Pete Baker

    Mick

    There is a post focused on the appointment of those new non-executive directors, by “an emergency process”, already.

  • Mick Fealty

    Ah, thanks to Pete, here’s what the Minister’s own Presser said at the time of the appointments:

    “It is intended that the appointments will be for an initial period of up to 9 months, until a permanent appointment process is conducted.”

    Apparently Mairtin told TalkBack that his interim position would exist for no longer than a year. But don’t quote me on that.

    The devil in this story (if it can be even called such yet) is in the detail. All I am trying to do here is to tease out the elements of what I know for sure.

    For that reason paying attention to the small particulars here is more important than trying to second guess the outcome or even just the general size and shape of the beast.

  • Cynic, here’s a piece from the 30.06.2010 press release:

    “Regional Development Minister Conor Murphy announced the appointment of four new interim non-executive Directors to the Board of NI Water (NIW).

    Those appointed will replace the Board members dismissed in light of the findings of the Review of Procurement Governance in NIW. It is intended that the appointments will be for an initial period of up to 9 months, until a permanent appointment process is conducted and while all future long-term governance arrangements of water and sewerage services are re-examined.”

  • iluvni

    Any idea what the rate of pay these interim non-executive directors will be receiving?

  • Mick Fealty

    It’s all on the other side of Pete’s link:

    “Each non-executive Director will be paid £18,000 per annum on the basis of 2 days attendance per month. An additional per diem allowance may be payable subject to an overall maximum of £21,000 per annum.”

  • Pigeon Toes

    “It is intended that the appointments will be for an initial period of up to 9 months, until a permanent appointment process is conducted.”

    Apparently Mairtin told TalkBack that his interim position would exist for no longer than a year.”

    However, that does not exclude the possibility that the interim positions become more permanent, with all the in house work experience they will gain.

    Chris Mellor acted as Chief Executive for an interim period of 14 months, according to the Belfast Telegraph.

    http://www.belfasttelegraph.co.uk/business/business-news/the-man-at-the-heart-of-the-northern-ireland-water-fiasco-14866328.html#ixzz0t2KZgeme

  • Pigeon Toes

    “July 6: 26. Miss M McIlveen (Strangford)

    To ask the Minister for Regional Development to outline the process and criteria used to appoint non-executive members to the Board of NI Water.

    AQW 8288/10”

    The answer to that question should be published today.

  • Pigeon Toes
  • Mick Fealty

    Try thinking of this another way entirely PT.

    Why would the Minister invoke emergency procedures three months after the last Board were sacked? If it wasn’t an emergency then, why is it one now?

    The most obvious answer is the one offered above: they cannot recruit suitably qualified people through the normal means.

    In reality Ms Houston will have to approve any permanent Board. She has already expressed disquiet over the appointment of the interim board so I would imagine she’ll be minded to take an even tougher view on any attempt to buck the letter or the spirit of the law next time.

    My hunch from the language used in his statement is that the Minister will try to ditch the GoCo between now and when the re-appointment of the Board is due and then seek permission to bring it back under direct government control: if he can persuade cabinet colleagues to go along with it.

    That won’t be easy since the DUP is pro privatisation and wants to get NI Water off Stormont’s public balance books.

    However, he may also have some messy legacy issues within his own rather feral department to deal with long before then…

  • Pigeon Toes

    “My hunch from the language used in his statement is that the Minister will try to ditch the GoCo between now and when the re-appointment of the Board is due and then seek permission to bring it back under direct government control: if he can persuade cabinet colleagues to go along with it.

    That won’t be easy since the DUP is pro privatisation and wants to get NI Water off Stormont’s public balance books.

    However, he may also have some messy legacy issues within his own rather feral department to deal with long before then…”

    Which if one was cynical enough, might suggest that this was the intended outcome of such a farce.
    Such a move might in fact create a whole larger set of problems for the Minister.

  • William Markfelt

    I don’t think there’s any ‘probably’ about it, Pigeon Toes. I think we can take it as a given that terms of reference are routinely ‘gerrymandered’.

  • William Markfelt

    ‘Whats his expertise in this area…’

    He drinks it and washes with it. Judging by the way in which the DRD and NIW have conducted themselves so far, he’s probably got as good a working knowledge of it as anyone else.