NI Water: Now that £28 million reduces to £550k…

There are a number of issues worth picking up in the wake of the Minister’s performance at the Regional Development Committee.  First, that figure of £28 million we’ve talked about before.

We are greatly aided here by the fact that the contract audit upon which the IRT based it’s own report has now been put into the public domain by Nevin at the NALIL blog.

The bad news for the so-called independent IRT is that a depth analysis utterly scuppers their view that there was a serious flaw in NI Water’s procurement policy.

In fact – and this may interest both the Minister and the senior civil servants advising him – when you workbench that figure it comes to something a great deal less than even we previously thought.

The NI Water audit report (15 Jan 2010 version 1) was the raw financial material the IRT set out to base their report upon. As well as changing over a substantial period of IRT’s sitting it subsequently had to be checked by Deloitte and Touche, whose senior partner Jackie Henry was a critical part of this IRT.

The final audit report is dated 27 Jan 2010 and named version 4, although as Nevin notes it also comes with an addendum of Feb 10. This was the reason Chris Mellor fought a rearguard action with Priestly on prematurely releasing it to the IRT. A battle he lost, and Priestly won.

In fact by ‘version four’ of the contracts audit, only 24 contracts were listed as being in breach in some way or another.

And by this stage, the total spend of these contracts is around £8 million. Yet when you look at each contract in detail much of that figure was spent prior to any breach having occurred. For example, the total spend on the largest contract is £3.3m but only £0.64m was spent after the contract was wrongly extended. Thus the overall spend – as a result of the actual breaches – is less than £5.5m.

At the very best, setting this up for competitive bidding might have reduced prices by – let’s be generous – 10%. So the worst potential loss is say around £550k excluding bidding costs. Given NI Water’s annual spend is around £352m [09/10 Annual Report ] that means a loss at worst of less than – 0.2% [equal to 0.15% by calculation.]

This low level scale of problem fits with McKenzie’s story to both the head of the Consumer Council and his submission to the Utilities Regulator that there was nothing in NI Water’s procurement that would give him deep concern…

So a quick question for Kieran Donnelly, the Comptroller and Auditor General: why did your office consider Laurence McKenzie had done good work finding an actual non compliance rate which works out at less than point two per cent of NI Water’s total spend?

Note: There was a deep dive audit that followed this one, and which, uncovered further breaches… We don’t yet know whether the deep dive used the same flawed methodology..

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  • Mick, Pigeon Toes did the research, posted it on Slugger and then I hoped to make the audit report and its review more accessible via NALIl blog, Scribd and Twitter.

    I wonder when the audit report was put online.

    It doesn’t appear to come up in a DRD search or a direct Google one. I understand PT stumbled upon it fortuitously when looking for background material on Steria. Shouldn’t these NIW documents also be posted to the NIW website in line with the letter and spirit of the Model Publication Scheme – and NIW’s claim to ‘openness and transparency?

    The DRD audit document is numbered 18210. #18209 is dated 1 April 2010 and #18211, the Contracts Approval Review, is dated 10 February 2010!!

  • Pigeon Toes

    http://sluggerotoole.com/2010/09/03/ni-water-why-open-government-is-more-than-a-slogan-for-the-chattering-classes/

    “Anything not included above is excluded from scope. The following is specifically excluded:
     EP capital works contracts (subject to a recent audit of EP Procurement in September 2009, limited sample testing on capital expenditure over £0.5m
    within that review raising no major findings); and
     The method used to evaluate tenders.
    This review has not made any legal judgements in relation to compliance with procurement legislation and has only highlighted relevant exceptions as
    potential breaches to the Utilities Contracts Regulations 2006..2) Steps will be taken to inform
    all relevant stakeholders
    including the Board, the
    Shareholder and the
    Regulator….. Procurement breaches
    All issues noted above in 1 – 5 are potentially
    breaches of the procurement procedures or the
    Financial Delegations policy and are therefore
    potentially employee misconduct cases that may
    require disciplinary action.
    The Chief Executive in conjunction with the Board
    should consider if any action is required to be taken up
    with the individuals involved in the various procurement
    breaches contained in this report.
    Agreed. This will be pursued and any
    action will be documented.
    Responsibility:
    Chief Executive
    Action Date:
    31 March 2010″

  • Mick, perhaps it’s also useful to highlight what the internal review excluded:

    “Scope Exclusions

    Anything not included above is excluded from scope. The following is specifically excluded:

    • EP capital works contracts (subject to a recent audit of EP Procurement in September 2009, limited sample testing on capital expenditure over £0.5m within that review raising no major findings); and

    • The method used to evaluate tenders.

    This review has not made any legal judgements in relation to compliance with procurement legislation and has only highlighted relevant exceptions as potential breaches to the Utilities Contracts Regulations 2006.”

  • Pigeon Toes

    From my reading of this, it looks more like an internal control problem, and happens in every organisation.

    As I remarked in the other thread, 100% compliance is the ideal, but not realistic.

    Given the above exceptions to the scope of the Internal audit, it certainly isn’t as sinister as the spin that was subsequently attached to the issues under review.

  • Why do I get the feeling that the department is going to be out more than £550,000 in legal fees by the time all is done and dusted!
    Well done DRD, its nice to see you are so diligent with tax payers money!

  • Pigeon Toes

    They cant even count the number of new NED’s ..

    http://www.drdni.gov.uk/newsDetails.htm?newsRef=1306

    “Since my last opportunity to update the Committee I have appointed an Interim Chair Padriac White and three new non-executive directors to the Board of NIW on an interim basis. A full public appointments process is expected to commence shortly”

    Who can’t count?
    Padraic White,
    Plus
    Mairtin O Muilleor, Peter Bunting, Lawson Mc Donald and Kevin Steele….

  • Mick Fealty

    Nev,

    Concentrate first on what we have. if it is excluded, you need to come up with a reason for it to have been included. If they say it is excluded and it is excluded, the auditor is on safe ground.

    What I have highlighted is a methodology which hugely exaggerates the figure, and which then excuses the McKenzie Priestly axis to kick start the IRT in the first place.

    Why point at other trees when you are starring at tangible evidence that the whole calculation upon which the IRT was convened was deeply unreliable?

  • Pigeon Toes

    Er Nevin already posted 🙂

  • Mick Fealty

    Indeed, they should. No sign of the deep dive yet, so that whittling of the figures goes as far as it goes. But it demonstrates that the methodology on which the IRT was convened was flawed.

    I cannot see how the Minister can continue to defend the indefensible: ie, the IRT. And that is even before you factor in the lines of communication between Dixon and Priestly before it convenes, and those critical changes to the report before the Minister fired the NEDs.

    More to come…

  • Mick Fealty

    You’re missing the point (again) PT. The devil is in the detail:

    “…by this stage, the total spend of these contracts is around £8 million. Yet when you look at each contract in detail much of that figure was spent prior to any breach having occurred. For example, the total spend on the largest contract is £3.3m but only £0.64m was spent after the contract was wrongly extended. Thus the overall spend – as a result of the actual breaches – is less than £5.5m.”

    So that if there is a six month overrun on a legitimate contract, Ms Brennan factors in the full term of the contract as being breach.

    This is the ‘trick’ you need to look for.

    Now, whether that trick is intentional or done through lack of experience of dealing with contracts (Ms Brennan ran *three internal audits* previously to this contract audits and found NO PROBLEMS at all.

    Again, one must ask what the Audit Office made of this?

  • Pigeon Toes

    Mick
    I think the exceptions are also important given that until now, there has been a massive amount of spin and very little detail as to the exact nature of the “malpractice”.

    There seemed to be an implication of “corruption” or indeed favouring one bidder over the other, but never spoken.The public were left to draw their own conclusions

    Now we know the Internal review didn’t look at the evaluation methods of the tenders, then it seems that exception was deliberately withheld to promote suspicions of corruption.

  • Pigeon Toes

    Mick
    I didn’t miss that point at all. I thought it was obvious enough from looking at figures.

    As I said, it looks like an internal control problem..

    There can be any number of legitimate reasons for the extension.

  • Mick Fealty

    NO they are not. You can point at them until the cows come home. But you have to have a reason to point that way.

    More importantly *you are pointing away from the fact* that £28 million appears to contract to an actual loss of less than 0.15% of non compliance.

    I know it is not intended as such, but you and Nev are running a very successful interference on the content of the post above.

  • Pigeon Toes

    It does not indicate malpractice, but bad practice…which are two entirely separate issues and treated in very different ways.

  • Mick Fealty

    NO. It is *way beyond* an issue of internal control, although those certainly exist as we will see shortly. See my latest.

    I suspect this is the tip of a very nasty iceberg…

  • CW

    Apologies for being off topic here, but I’m surprised none of Slugger’s regulars have blogged about the ETA ceasefire, particularly when Adams and co were apparently involved in talks with senior Basque figures prior to the announcement:

    http://www.irishtimes.com/newspaper/world/2010/0906/1224278288096.html?via=rel

  • Should we be into naming trees at this stage, Mick?

    In the UTV programme the Minister claimed that he called for ”further investigations’ and Malcolm McKibbin at the CRD meeting last week said, “What I know is that the accounting officer, Paul Priestly, and the sub-accounting officer, Laurence MacKenzie, jointly commissioned the project for the IRT.” When exactly did the Minister make this call and why?

    This needs to be set in the context of the audit team’s recommendation re. potential procurement breaches:

    “The Chief Executive in conjunction with the Board
    should consider if any action is required to be taken up
    with the individuals involved in the various procurement
    breaches contained in this report.”

    We don’t have a date when this recommendation was accepted or who accepted it but we do know that MacKenzie was tasked to complete it by 31 March.

  • Mick Fealty

    Be my guest Ciaran!!

  • Pigeon Toes

    Mick
    Am also wrong in assuming that there wasn’t enough on the findings of the internal report for the “big stick” and the IRT then had to look to the deep dive report?

    That’s a genuine question BTW 😉

  • Mick Fealty

    I am not sure one follows from the other. We simply cannot know, until either: we get to see the deep dive report and /or McKenzie is asked direct questions in a forum from he cannot duck an informed question…

  • Pigeon Toes

    “However, the material evidence had been withheld from the IRT upon the instruction of the chair of NIW to the head of NIW Internal Audit designate.”

    The submission to the committee also said the deep dive findings “increased substantially” the significance of the contract rule breaches.

    Responding to the review team’s comments, Mr Mellor issued a detailed statement to the Belfast Telegraph.

    He said: “The IRT terms of reference said that they were to confine their review to the original Internal Audit (IA) report.

    “The Board were very clear from the outset that the issues identified in the IA report (which lets not forget the Board commissioned) should not have happened.

    “When the first draft of the IRT report failed to find what DRD seemed to be looking for, there was then it seemed a desperate scramble to find more ‘evidence’ hence the so called ‘deep dive exercise’.

    “As this was outside the terms of reference of the IRT and given the lack of due process around the first IA report I told Internal Audit that in the first instance the “deep dive” was a matter for the Board to deal with — ie establish the facts first.

    “In the event this attempt to bring some order in to the chaos this was all causing in the business proved futile as DRD set aside the original terms of reference and the emerging raw data was given to the IRT.”

    Read more: http://www.belfasttelegraph.co.uk/news/local-national/northern-ireland/water-chairman-lsquoblocked-contracts-probe-evidencersquo-14922639.html#ixzz0yktqjC5O

  • Pigeon Toes

    I see Nevin has received a response today regarding the new NEDs

    http://nalil.blogspot.com/2010/09/northern-ireland-water-new-non.html

    “Can you please list the six NEDs and the respective categories under which each has been appointed to the interim Board? Firstly I should point out that there were only 5 interim appointments in total.
    1. Padraic White under the NED1 “Chair” category.
    2. Peter Bunting & Mairtin O’Muilleoir under the NED 2 “community confidence” category.
    3. Kevin Steele under the NED 3 “commercial and business acumen” category.
    4. Lawson McDonald under the NED 4 “public sector governance” category”

  • Another ‘tree’ has arrived – it relates to the selection of the NEDs for the interim Board. Whether or not it relates to the sacking of the former NEDs is as yet unknown.

  • Drumlin Rock

    dont forget the one “surviving” NED

  • Mick Fealty

    No indeed. Mr Price is keeping his head well done.

  • Mick Fealty

    PT,

    That’s another question, but still you are drifting further and further from the material above.

  • Pigeon Toes

    I think the addendum on 10th February would certainly indicate that even after the “final report”, the findings were flawed.

    The addendum is contained in a separate document, and neither document references the other.

  • Jj

    “well done” is that a Freudian slip, Mick? 😉

  • Mick Fealty

    Hmmm… er, no comment…

  • Dr Concitor

    NIW was formed in April 07, as a government owned company with private sector procurement rules but with overarching control by the shareholder -DRD. A commercial director, Dave Gilmore, was appointed to drive through major cost savings by moving away from wasteful public sector procurement practice. It was assumed that NIW would be funded by customer billing. This has all gone tits up. The planning and implementation of the move back to a directly funded body is typical of what we have come to expect from NICS and our politicians. I don’t think there is a mind controlling what’s going on – its just a cock up. Keep up the good work Mick!

  • Pigeon Toes

    Any auditor worth their salt, would look at the reasons why these exceptions took place. Certainly from an Internal point of view, when making recommendations to avoid future recurrence.

  • Pigeon Toes

    Mick
    And any internal auditor would also further suggest a “deep dive” based on these findings to make sure the exceptions noted were indeed evidence of bad practice, was not a symptom of something more disturbing….

    But, unless was firmly established it would not be acted upon…

  • Mick, are all the documents grouped here, including the ‘deep dive’ ones?

  • interested

    Im not entirely clear about the overall process here.
    How could NEDs be held responsible for approving or not approving contract awards or extensions that were not brought to their attention

  • Mick Fealty

    Hard to tell. Phase III is there and there is a reference to Phases I and II which aren’t…

  • Pigeon Toes

    I think that’s the point 🙂

  • Pigeon Toes

    Though I couldn’t swear to that, as apparently I keep missing it…

  • interested

    I mean-these guys are there to maintain an overview -they dont sign off on contracts-and nowhere in the audit report are they accorded responsibility

  • interested

    sorry PT our comments went at same time

  • Mick, according to the labels Document 3 is Phase II; Document 4 is Phase III and Document 5 is Phase I. Documents 1 and 2 are the Contracts Approval and Contracts Approval Review respectively. Document 6 is the IRT report. The document numbering system isn’t chronological.

  • Pigeon Toes

    As soon as the Chief Executive became aware of the *serious control issues* raised from the Contracts Approval review, in his capacity as NI Water’s
    Accounting Officer he took all necessary steps to inform all relevant stakeholders, including NI Water’s Board of Directors, DRD (as shareholder) and
    NIAUR (as economic regulator). Due to the significance of the issues the Chief Executive and DRD Permanent Secretary requested an immediate
    wider ‘deep dive’ review covering, as far as possible, all supplier arrangements not covered in the previous Contracts Approval review. The key
    objective of this was to determine whether there were further breaches of procurement controls or financial delegations that may point to systemic
    failings and the requirement for wider remedial action.

    Yeah, I would say that’s part of the deep dive report.. I also note that initially these were “control issues” and quite rightly it required further investigation, as to whether it was wilful rather than bad practice.

    The action taken was hasty, and for that NIW and DRD have very large questions to answer.

  • mopphead

    Sweet Feck, if Slugger is going to pontificate from afar in pursuance of a non-defined conspiracy theory, let’s at least retain some degree of factual accuracy. The key audit documents have been on the DRD website for weeks/months so no big cigars for Nevin on that one.
    http://www.drdni.gov.uk/index/publications/publications-details.htm?docid=5978
    And the £28m figure did not come from the IRT report (read it in the name of Allah). The total was made public by NI Water in June following the deep dive reports by NIW’s own auditors – long after IRT’s work was done.
    Oh what the heck anyway – let’s just keep on serving up undiluted Gormley bile with a side order of Stoop sour grapes and call it cutting edge journalism. You might want to spell the NIW CEO’s surname right once in and while, mind you

  • Pigeon Toes

    OOh Mopp show us where you referenced it before the recent additions. i.e. today…
    Hows medillen btw?

    Or did *you* not understand

    Bestest

    Pigeon

  • Pigeon Toes

    And Mopp head wouldn’t you naturally agree that as such, the same “malpractice” might extend further than in NIW, posssibly into DRD, and an area that the minister has further argued there was *no malpractice*?

  • Mick Fealty

    Mopphead,

    You’re doing all right as a conspiracy theorist yourself. Fair play to you for battling on on such a dodgy wicket!!

    The figures the IRT worked upon to come to its conclusions are the dodgy calculations demonstrated above.

    I’m surprised you express such confidence in the Deep Dive report, when the methodology of its predecessor is so riven with contradictions.

    Whichever way you divvy it up (and I notice you are not even trying) it does not add up the way the Minister’s former Permanent Secretary says it should.

    Certain facts are irreducible:

    The Minister sacked the board citing information that only NI Water management (and possibly the DRD’s Stakeholder Unit) had sight of? No disciplinary measures have thus far taken place in that quarter.

    The Minister considered the IRT to be independent, because when he asked them, that’s what they told them. Even when, as the Board pointed out, it included the CEO of another utility whose parent company holds other assets in the Water industry?

    The mention of the Steria contract is particularly interesting, as so far this seems to be the only real issue of substance involved all of this… The rest, to borrow the Minister’s phrase from the UTV programme, is a rather elaborate sideshow…

    But I will come to that later…

    Touché on the spelling of the name… I will endeavour to get it right in future…

  • mopphead

    Happy to answer your questions PT:
    1) I didn’t need to reference it, it was in the public domain, eg forming the basis of media reports before PAC hearing. The web page was made public by DRD in March when your mate Chris “I was only the acting CEO for 14 months” Mellor was sacked.
    2) I have absolutely no idea how or who medillen is.
    3) I have no doubt this all does go back into DRD days. This too has been reported in the MSM eg the three-year contract that started in 99 and was still being rolled over in 2010. DRD has huge qus to answer – which makes it a real pity the PAC didn’t actually put Priestly under pressure on real points – instead starting this daft conspiracy fire which Priestly himself stoked and then got incinerated in. No tears there BTW – but in all this blogosphere/UTV bollocks real issues are being confused and missed.

  • mopphead

    You have repeatedly said the IRT report produced the £28m figure. Where in its report is that figure cited?
    But let’s hear the full conspiracy theory, instead of all this fannying about?
    What exactly was the plot?
    What was the motive?
    Name all the organisations and individuals that went along with it.
    And explain to me again why breaking the rules on contracts with taxpayers’ money is neither here nor there.
    (Explain it too to the SDLP MLAs Slugger has been cheering on, because they have been beating their chests about how bad the procurement breaches were)

  • Pigeon Toes

    Mopp, perhaps you misunderstand, you are expected to back your argument… unless its in your own opinion, which you are also expected to back, and be prepared for criticism.

    Sometimes, it’s not nice, but indeed valid…

    (Head bowed Mick)

  • I don’t do cigars, mopp, but perhaps you can illuminate the Ministerial quote on UTV: “.. so the core issue is here is that attention my attention was brought to the fact, initially in relation to one contract that there was something on-toward going on within NIW and I asked for further inquiries into that and that turned up 73 contracts with £24.5 million of awarding of contracts which couldn’t be defended which was done in an improper fashion”

    On what date(s) did the Minister ask for these inquiries and who did he ask? Did his special adviser act as a go-between? I can’t find this information on the internet.

    As for information on the DRD website I’m not sure I’d trust all of the presented data. There would appear to be a mismatch between document numbers and dates. Documents have been known to disappear and then reappear when the disappearance was brought to official attention!!

  • Mick Fealty

    You have to have independently mined information to put guys like Priestley on the spot… At the time, you will remember. they were co-ordinating with the NIAO…

    Though Jim Shannon’s request unearthed some interesting information about how poorly run the Water Service was run before NI Water…

  • interested

    or even crow, like some other journalists, about where the minister will put other place men

  • Mick Fealty

    It’s a smart lad who only ever asks questions, and never answers them!! Next time, make an effort to engage, or take your phoney questions somewhere else.

    However, just to indulge you one last time, here’s what I think happened…

    MacKenzie takes the job up thinking he’s going to be CEO of NI Water. Second day at work, he is informed that he’s actually a sub accounting officer and will be line managed by DRD chief accounting officer, aka, the now suspended Permanent Secretary, Paul Priestley.

    This is nominally because NI Water is shipping £300 million a year in ‘Brown money’, ie transfers from HM Treasury, and it has been re-classified as a non-departmental public body (NDPB)…

    This usually for admin purposes only, but Priestly after protracted negotiations with the DFP had that hardened so that MacKenzie now has two bosses to report to: the Board (10 times a year); and to Priestly (who largely through the Shareholder Unit has 82 points of contact a year)…

    Here’s the reference in the IRT report:

    “Also, in response to these developments, DRD has introduced strengthened governance arrangements, including the designation of the NIW CEO as an Accounting Officer in support of the DRD Accounting Officer.”

    There is nothing in the correspondence I’ve seen that denotes any great tension between the Board and MacKenzie. But there was a number of disagreements. One was the rate of cuts around PC10.

    There seems to have been a differing of opinion between the Board and the CEO (possibly at the behest of his line manager in the Department) over the speed and depth of proposed cuts.

    At no point is the size and nature of the procurement problem brought to the Non Executives. In fact, at the point McKenzie resigns, one of the Non Execs (Gormley in an email to the CEO on 18th January) points out how that the poor nature of the information the Board is getting on this very subject:

    “I know that a lot of these items are difficult to track but for the exec team to be unaware of 20 (including a breach of the licence) is quite frankly unacceptable.

    “I know that these occurred before your time and therefore you can’t be expected to know about them. But I am pretty sure that (some or all) may have occurred since I was on the Board and that does make me question whether we are being told the minimum to keep us happy as non Execs or worse that the Executive Team simply don’t know what’s going on inside NIW – neither prospect is particularly appealing.”

    This is the day that MacKenzie resigns. From the style and manner of the communication there is no evidence of the ‘disconnect’ (never mind Priestly’s insertion of ‘breakdown’) which the IRT later reports.

    But by that stage the IRT is reporting on a situation in which the Board is off side and Priestly alone is line managing MacKenzie.

    It is during the CEO’s ‘resigned period’, that UTV have that record of a meeting in which MacKenzie suggests to DRD that the Board be asked consider its position.

    After the IRT is assembled (it takes just a few hours, Priestlys friend Dixon and Lian’s old colleague from Deloitte to agree; the third person approached that day turns them down), all comms between the Board and MacKenzie are suspended

    That would be the ‘disconnect’ the IRT first honestly reports… I am pretty sure that even with the questions of independence hanging over them, the IRT had tried to do an honest job with a constantly moving target.

    In fact, before Priestly starts his work MacKenzie concedes the first draft is a fair reflection of the situation.

    On the Thursday 21st January, Priestley writes to Gary Fair, Head of the Shareholder Unit, asking him for clarification of what they might need to sack Directors. Later in the day, the Board gets sight of a full copy of Brennan’s Audit Report (note that McKenzie has had it from the 12th January) *for the very first time*.

    After the final draft is published (with the Deep Dive chuntering on after them), Lian Patterson asks the NEDs to consider their positions. Four refuse to resign, and are sacked. One, Don Price, the chair of the Audit Committee, and the one most likely to have known something about the procurement breaches, is made sign an agreement and retains his job.

    Later Priestly tries to undermine the unexpected attack on the IRT in the PAC meeting of July 1st by drafting a letter for a member of that IRT attacking the MLAs responsible: John Dallat (SDLP), Patsy McGlone (SDLP) and Dawn Purvis (Independent Unionist), all of whom had received some independent briefing.

    I understand others were briefed, but panicked when the Bel Tel unleased its planned (according to MacKenzie three week earlier) attack on NI Water…

    What do I infer from this? Well apart from the facts, I suggest that Mr MacKenzie is not a happy man. He told the Utility Regulator there was nothing in NI Water’s procurement practice that would give him deep concern, and he sold a similar line to Adrienne McKeown at the Consumer Council, at the same time he was suggesting to Priestly that the Board should be got rid of over the head of it.

    It subsequently looks like contrary to his evidence the rate of procurement at NIE was as bad, if not worse than what he discovered at NI Water. We won’t know until and unless there is a similar deep dive over at Danesfort.

    Why did happen? Honestly, I don’t yet know. We (and the Minister) have been lied to over and over. Priestly is a disgrace, and the Minister is foolish in the extreme if he keeps trying to pass Priestly’s work as valid.

    Priestly lied about not interfering with the PAC. He deleted the email which contained the Dixon text, and so did his deputy PS Lian Patterson, as did McKenzie.

    These were both senior people with substantial responsibilities to the Minister and ultimately to the Assembly’s Committees and they were copied into the one thing we can safely describe as a conspiracy without recourse to potty theories.

    What was Priestly’s motives? Not losing a third CEO in his short time at DRD? Who knows? It’s for the PAC (and/or the Minister) get to the fuller truth.

    But here’s the problem for your story that this was a problem worth sacking a Board for. It is utterly hysterical. There will be calls for a much closer examination.

    Having blown the ultimate sanction over a minor level breach, what do you do when it is replicated or worse across a whole department in Translink, the Harbour Commission, or the Roads Service?

    By your logic, the Minister should go, whether he was aware of the breaches or not. That would be utter nonsense, of course. But it’s where we end up when you play out your own logic.

    After all of this, all I see is unnecessary damage.

    Morale inside NI Water is very low. The company’s reputation has been trashed, not least by the endless inference from the Minster that it is a basket case.

    MacKenzie clearly thought he was playing with the big boys and will find his own career prospects severely curtailed. My suspicion is that he would rather be anywhere else than where he is today. My further suspicion is that he will be kept until such times as the Minister can restructure the company and bring it (expensively) back into DRD.

    Jackie Henry’s reputation as a senior consultant is also damaged, to be associated with a professional document she allowed to be ‘sexed up’ sufficient to allow Priestly to sack the four Non Execs.

    Peter Dixon’s status with Phoenix Gas must be greatly diminished by his role in the attack on the PAC. How he can be seen as independent when working so completely at the behest of the PS is beyond me.

    Lastly the sacked NEDs. Well to be frank I don’t really know them, nor do I know whether they were any good at their jobs. The plain truth is they could (and may be should) have been asked to step down, which the Minister could have done perfectly easily without this hellish circus.

    As for motivation? I simply don’t know. I hope not to see another case of such vicious incompetence any time soon. Already there’s been talk amongst senior civil servants of not ‘doing a Priestley’: ie, messing it up completely.

    Now, how about answering some of my questions for a change?

  • Pigeon Toes

    “Already there’s been talk amongst senior civil servants of not ‘doing a Priestley’: ie, messing it up completely.”

    or perhaps “getting found out” 😉

  • Pigeon Toes

    http://www.niassembly.gov.uk/public/2007mandate/agenda.htm

    Yet another closed session…

    PUBLIC ACCOUNTS COMMITTEE

    TUESDAY 7 SEPTEMBER 2010
    ROOM 135, PARLIAMENT BUILDINGS

    12.00PM Onwards – CLOSED SESSION

    ITEMS FOR DISCUSSION:

    Issues arising from the oral evidence session on Performance & Governance of NI Water
    Witnesses: Northern Ireland Audit Office Officials

    Mr Kieran Donnelly, Comptroller & Auditor General
    Mr Stephen McCormick, Director
    Mr Neil Gray, Director
    Mr Joe Campbell, Audit Manager
    Ms Jacqueline O’Brien, Audit Manager

  • This neatly keeps the great unwashed out of the loop, PT, and minimises the impact of dissenting voices within PAC. Why do MLAs ‘acquiesce’ so easily?

  • Mick, IMO Priestly is the limp lettuce in this fiasco; Murphy and MacKenzie appear to be the prime movers in the various power-plays that are taking place, it’s likely that they both have ‘their people’ on the interim board.

    BTW Murphy is doing his ‘Emperor of Rathlin Island’ party piece today. The Forum convenes on the island at 11.15!!

  • “Transparency” says it all!

  • mopphead

    Now we are getting somewhere.
    “Why did happen? Honestly, I don’t yet know” – MF post above.
    So you don’t have a motive. You have spent weeks cooking up a conspiracy theory and you have questioned the professionalism and integrity of named individuals and organisations. You have done so without talking to these individuals or attempting to get their side of the story. Citizen journalism, how are you?
    At some point or other the following bodies have been lumped into the conspiracy: DRD, Deloitte, the NI Audit Office, Consumer Council, NI Water’s internal audit, the Belfast Telegraph (the Rathlin ferry might be involved too). Why would they all go along with it and risk their reputations?
    You don’t know.
    Good theory.
    PS you refer to “independent briefing” – surely that has to mean a bit more than Declan Gormley

  • mopphead

    Consider a different narrative. Imagine that this is not a conspiracy but a slow motion train wreck. You have no idea why MacKenzie offered to resign.
    Could it not be, as he has said, that he was getting internal opposition to tackling procurement issues?
    DRD is the paymaster and has to account to PAC on these matters. Will it just stand back and do nothing?
    The NEDs also throw a hissy fit over the fact that MacKenzie tells DRD ahead of them about the procurement breaches. Nice attitude to accountability lads. You are not IBM but a publicly-owned outfit.
    The NEDs also exacerbate the tensions by refusing to accept MacKenzie’s withdrawal of his resignation.
    Mellor also told the IRT and the Minister that the board’s relationship with MacKenzie had totally broken down. There is later an attempt to retreat from this position – strangely when Murphy is about to get medieval on their asses
    From the outset, there was also a good case for DRD taking charge of any review – on top of the basic fact that they fund the fecking outfit.
    Many of the problems occurred when board chairman Mellor was acting chief exec – a fact that is persistently overlooked here. Is Mellor going to be left to review the thing?
    No one yet has gainsayed the rule breaches reported on by IRT and NI Water auditors. (Aside from this Slugger post which accuses IRT of fabricating a £28m total it did not even issue).
    Such repeated breaches put Mellor in bother, given his previous CEO responsibilities.
    Murphy has made clear that the NEDs helped seal their own fate with their attitude to the whole situation. That includes the hissy fit mentioned above, the resignation withdrawal saga and the general sense of turning the whole thing into a pissing contest with MacKenzie. Nice governance lads.
    Gormley helped seal his particular fate with long, hostile emails to the IRT and refusing to agree the minutes of his evidence to it. What did he say to them? Did he back Mellor 100% for instance? No one’s asking because he’s the source of the bile-infused offerings.
    Meanwhile, the evidence that MacKenzie and Dixon are pals is pisspoor – a couple of emails from months earlier in relation to Regulator matters.
    And the sexing up of the IRT report is also far from proven, to say the least. It’s called a clearance process – DRD and the NIW Board both made submissions and suggested & secured alterations. The full documentation would have to be in the public domain before Closeau O’Toole can reach a fair verdict.
    The reason the conclusions toughened up in the final version was that the emerging deep dive audit findings had shown that the procurement breaches were much wider.
    Were their power plays and big boy games in all this? Of course. Was DRD trying to shield its own arse. Duh. That’s what Depts do.
    But some facts are still out there. There were serious procurement breaches. Mellor had been acting CEO. The other NEDs made a royal balls of their response and gave every impression of not taking it seriously.

  • Mick Fealty

    I notice you’ve not challenged any of the things I’ve written above. Interesting.

    Look, I’ve said it already but I’ll say it again for the benefit of your dysfunctional ‘tin ear’: I don’t know for sure what the motive was. I have talked to several people who have their own theories about it: but I have not publicly advanced my own thoughts on that matter.

    And frankly, I’ll wait until I am satisfied I can see the whole picture: then, and only then, will I venture an educated guess. But be my guest, what do you think induced a Permanent Secretary to get up to such dark tricks behind his Minister’s back?

    And you are right, I haven’t talked to the people on the other side of the story (which is interesting, since I guess that was a subliminal declaration of interest on your part). Most, if not all, of the people I have spoken to have approached me, not the other way round.

    If any of your colleagues want to make contact, I would be delighted to speak to them and hear what they have to say. Ask them to drop me a line to editor@sluggerotoole.com.

    And you can quit fishing on the ‘briefing’. My point was crystal clear. The Minister, the Department, the NIAO and even the BelTel were being briefed to put the PAC off balance before July 1st.

    What turned the tables was the MLA’s access to rich alternative streams of *hard* information. That’s something that needs to be factored in until such times as the various parts of the ‘permanent government’ learn they are supposed to working ‘independently’ of one another.

  • Mick Fealty

    Sorry Mopp, I posted the response below to your previous terse message. Sorry for the slightly uncivil tone. But thanks for this, it gives me a lot more to go on.

    I will comment in due course.

  • Jj

    Surely, THE prime example of a “hissy fit” was the resignation threat. A carefully but highly risky assumption that DRD didn’t want to lose another CEO. The man got the collywobbles.

  • Pigeon Toes

    “From the outset, there was also a good case for DRD taking charge of any review – on top of the basic fact that they fund the fecking outfit.”…Was DRD trying to shield its own arse. Duh. That’s what Depts do.”

    Hmm…

  • Pigeon Toes

    http://www.bbc.co.uk/news/uk-northern-ireland-politics-11215174
    “Audit Office set for NI Water probe
    The BBC has learned that the NI Audit Office is set to begin an investigation into the troubled government-owned company, Northern Ireland Water.

    The probe has been requested by Stormont’s Public Accounts Committee which is scrutinising the sackings of four non-executive directors.

    The directors were fired after an independent report revealed contracts were handed out without being tendered.

    Questions have subsequently been raised over the independence of the report.”

  • Mike Scott

    No doubt there were serious breaches. I think we can all await the Steria court action with interest. When NI Water cancelled the contract in June 09 they said it would cost £3m upfront but save money in the long term. http://news.bbc.co.uk/1/hi/northern_ireland/7819685.stm

    Looks like you can make that over £20m now.

    Can we really be sure the Board was doing a decent job watching the house on behalf of taxpayers?

  • Mick Fealty

    Mopp,

    Slow train wreck, yes.

    “Could it not be, as he has said, that he was getting internal opposition to tackling procurement issues?”

    This is your mistake. The non execs were not told about the issue until they were under investigation.

    The Ernst and Young audits and Nicola Brennan’s three internal audits did not find this issue.

    Only MacKenzie finds them when he wants to back out of Mellor’s argument over the enormous (ie, nearly £1 Million pcm Steria contract). He is instructed by the Board in October to initiate Brennan’s contract review.

    He then hides the findings from them after until Priestly initiates an IRT to investigate. It is this simple and indisputable fact falsifies almost everything else in your argument.

    As for MacKenzie’s resignation, he cites three issues:

    – Complete ambiguity around the price control process

    – The differing views between me and the Board in terms of how future efficiencies can be delivered

    – The significant corporate governance issues I have been faced with.

    Er, no mention of procurement.

    The bullet points and phrasing are MacKenzie’s. Note the phrasing in that last one “significant corporate governance issues *I* have been faced with”.
    Er, no mention of the Board.

    To somewhat labour the point, that would be because the Board do not yet know the detail of these issues so they cannot have played an active role.

    Here’s Mellor’s response (which I am guessing you have not seen):

    “This is a complete shock. I am very sorry you feel this way.

    “I was thrilled you accepted the post in the first place, and am very pleased with the way you have performed so far. I am very sorry if I have let you down and not supported you as you feel I should.”

    < <<<<<<<<<<<< SNIP >>>>>>>>>>>>

    “I would love to try to persuade you to change your mind, but regardless of the outcome I will help in any way I can.”

    Yes, very IBM…

    After three days of messing them around, MacKenzie, tells Mellor by VM he wants his resignation back from the Board, they refuse.

    MacKenzie only gets back in on a legal technicality (ie, the Board have not accepted his resignation in writing, so they cannot refuse). The backing of the DRD is real enough, but it is not a factor in the rescinding of the resignation.

    If there had been a real breakdown between the Board and CEO, why would Mellor have offered his help to try and resolve whatever issues MacKenzie might have had.

    Had there been real animosity between the CEO and the Board, they might have responded immediately and there would have been no way back for MacKenzie.

    How do *you* account for that change?

    Now, the £28 Million. You are right, it is not the IRT’s. It comes from the Minister’s when drawing on a report published long after the NEDs were fired.

    £28 Million or £8 Million or less than half a million, a stitch up is a stitch up. You can believe the ‘situation was much worse’ than previously thought narrative, but it’s not what the IRT said in their submission to the PAC.

    Rather, over and over again, they cited the Priestly originated line that Mellor had obstructed them in getting early sight of the figures from the both the deep dive and the contracts review.

    In fact Brennan supports Mellor in his view that these exercises should be completed before the IRT have sight of the findings (and anyway, what was their rush?).

    Neither Preistly nor the Minster have produced any material that supports their line that Mellor ever ‘blocked contracts probe evidence’.

    Ach, I’m getting tired. But I think you get the drift. We’re after the truth here, not protecting well upholstered backsides, or writing crime fiction.

  • Pigeon Toes

    Now why didn’t NIW and DRD just call the NIAO in to start with?

    It might have saved all the embarrassment 😉

  • Mick Fealty

    Well, I have a post on the Steria thing awaiting more detail. However I do know that the former acting CEO Mellor briefed the current CEO on the aggressive recovery action he was taking on the matter upon the latter’s arrival last August.

    Whereupon the new CEO, Laurence MacKenzie, promptly countermanded Mellor’s strategy, backed off Steria, restructured the Director in charge of the recovery of procurement ‘losses’ out of the company and sacked the agency (ie, Contracting Out) who was leading the company’s forensic inquiry.

    And we are talking £20 million in real money, not made up government accountancy figures. And this time, Steria is suing NI Water.

    I’d be *really* interested it what you think Mike??

  • malairt

    NIW never said that the termination of the Steria contract would cost £3m. The BBC and other media focused on the £3m that was potentially available to Steria should they be able to prove that they were entitled to it.

    Why do you think it will cost NIW over £20m now?

    A rhetorical question, surely, but where is the evidence that the previous NED’s weren’t watching the house?

  • Mick Fealty

    malairt,

    As is thoroughly obvious to anyone still awake enough to be following this story there is NO EVIDENCE of that. If there was it would be in the public domain by now.

    The suspicion has been planted by McKenzie’s judicious briefing of the BelTel, but for anyone who looks closely at the matters pertaining to this that is all that emerges.

    The guy is telling Priestly weeks in that the Board would not be missed, for god’s sake. When he resigns and sees Priestly panic (as Dixon says ‘I’ll bet PP’s eye were popping out his head’, or words very similar to that effect)… and takes his opportunity.

  • joeCanuck

    The amount of money involved is neither here nor there.
    The questions should be:
    Were proper procurement policies in place? If not why not?
    Were the procedures followed?
    If the procedures were not followed, who was responsible?
    Was there corruption, i.e. did someone illegally benefit?
    Was wrongdoing covered up and, if so, who was responsible for that?

  • Pigeon Toes

    “A spokesman for the audit office confirmed: “The comptroller and auditor general decided to go into Northern Ireland Water (NIW) having been requested to do so by the PAC. It will be happening in the next few days.

    “It is to examine documentation relating to procurement issues identified in various NIW internal audit reports.”

    The PAC meeting was in closed session.”

    http://www.belfasttelegraph.co.uk/news/local-national/northern-ireland/audit-office-to-probe-ni-water-14936326.html

  • mopphead

    Things that you’re liable
    to hear from sacked directors
    It ain’t necessarily so

  • observer

    You could solve this question for yourself if the department published all the witness statements that were taken by the IRT. Why don’t they publish them? Perhaps you could ask them to put them on their web site – in the same way they published the audits.

  • observer

    the minister referred to a slow dripfeed of leaks to the media from “the establishment”. a couple of questions:
    1. Who is the establishment – Declan Gormley? Jamie Delargy? Come on Mopphead surely this from the Minister is not credible?
    2. When the Minister referred to the long slow dripfeed , was he referring to that organised by DRD, Laurence Mackenzie or whomever between January 2010 all the way upto the July 1st PAC. Someone fed the BTEL on this all through that period. Any response?

  • Mick Fealty

    That second line doesn’t scan Mopp. 🙂

  • mopphead

    That must be Paul Priestly’s fault then. Least that’s what Declan says.

  • Mick Fealty

    Due process will sort this issue out in the end Mopp…

    I don’t know if we are going to get that, but the NIAO’s TORs look comprehensive enough to me… The ‘raid’ is slated for Thursday… whilst Mr MacK is off on holidays in Scotland…

    There’s a long way to go yet…

  • Mick Fealty

    If that’s who gave it you, why not? You should always question your sources thoroughly before going public with lyrics like that…

  • William Markfelt

    ‘So the worst potential loss is say around £550k’

    Yes, indeed. I number crunched these in one of the previous threads as, 6-7%, suggesting maybe even lower in the current economic environment.

    So these figures are even more startling, in that it now appears that, in the round, we can assume that the antennae were going up at the fact of people undertaking work for cost, plus nominal sums, the theory being that it’s better to simply work and turnover cash than do nothing.

    That’s an economic reality of business that few, if any, have grasped in all of this.

  • William Markfelt

    Mick, They aren’t lyrics, it’s haiku.

    Here’s another example

    Plunged into water
    and held down for a long while
    Best place for mop head.

  • William Markfelt

    ‘the NI Audit Office is set to begin an investigation into the troubled government-owned company, Northern Ireland Water’.

    The question is, does NIAO collude with NIW or with the PAC.

  • Pigeon Toes

    William, you live? (Relieved ;-))

    I think you’ll find that even the bould Minister din’t believe there had been a loss of money to the public. Mind you that was way back in March….

    I

  • William Markfelt

    A few more dead red wine induced brain cells than last week, and slightly more red skin, but alive and not well. Sangria’s a bitch, come the 3rd pitcher of it. Disappointingly, I had no internet access and have spent most of Sunday looking up how NIW is doing.

    Not very well, it appears, and now the NIAO beginning to adopt a more central role, although it’s laughable that PAC imagine that the NIAO can provide answers to the questions they’re asking.

  • William Markfelt

    ‘Due process will sort this issue out in the end ‘

    I wouldn’t hold my breath, Mick.

    PAC are central to the matter of ‘show trials’, the problem rather than the solution. Asking the NIAO to investigate simplt demonstrates the witlessness of PAC. To my mind, if they wanted ‘due process’, the thing to have done would have been to involve an actually independent audit body, not one who brown noses the various government bodies.

    Although, as with Antoinette McKeown’s sudden distancing herself from McKenzie after THOSE emails, I suspect NIAO will not do all in its power to distance itself from a former cosy relationship.

  • William, it will be interesting to see what the Commission for Public Appointments has to say.

    It gave DRD a LOW rating on the previous NED selection process and I don’t think it’s taken too kindly to the recent ’emergency’ one.

    CPANI is going to publish its FOI responses within the next few days and these may add fresh fuel to the flames; this will also put pressure on other agencies to follow suit.

  • Mick Fealty

    Well, they can. It remains to be seen whether they will. At least they should be given the chance to ‘do the right thing’.

  • Pigeon Toes

    What is interesting, is that PAC may have set the TOR….

  • William Markfelt

    ‘At least they should be given the chance to ‘do the right thing’.

    Ah yes. The submission of skewed NIAO reports that bear no relation to actual events, just the events as various agencies want them presented. The right thing….how are ya?

    And by ‘doing the right thing’, they could certainly have invited personal representation from Declan Gormley and his ‘missing’ testimony.

    Frankly, I don’t believe PAC has either the balls or the wit to do the right thing, ultimately. There’s been a few noises here and there, but none of these civil/public servants will have their lives radically altered by decisions made by others, and have no rights to appeal, to due process, to the expectation of human rights applied.

    What’s the phrase again? ‘Show trials’?

    And let’s not forget that Rathlin Ferry contract, another incident where NIAO’s role to ‘do the right thing’ may be regarded as suspect at best and just plain in-the-pocket of permanent government at worst (and in reality).

    Regardless of who set the TOR, the NIAO have a track record of failure in their reporting, and I don’t expect them to break the habit of a lifetime now.

  • William Markfelt

    I did think that was immaterial, PT, but on reflection the NIAO is now riding two horses at once. Firstly, they’re working to their paymasters in the NIA (the NIAO hardly being independent, then) and secondly to their chums in permanent government (‘it would be helpful if you were to meet’, etc).

    It’s likely that the NIAO will do everything they can to a) save their own asses first and foremost and b) position the blame away from the DRD/NIW because c) they know members of the PAC can and do change and as time goes on, interest begins to wane, so they can simply ride it out, to some extent.

    And what’s all this with in camera sessions involving NIAO? That’s hardly going to inspire faith in open and transparent government, is it?

  • Mick Fealty

    Which is pretty much where you came in. However even if there are some signs of intelligent life on the PAC, it will ultimately depend on their performance now as to whether we can believe in their work. Some members, it seems, even take a pride in the fact they don’t understand the issues before them.

  • Jj

    “So the worst potential loss is say around £550k’”

    And this over how many years? In each year of which period expenditure averaged £300 m?

    What % is £550,000 of say, £1,500,000,000??

  • William Markfelt

    ‘Which is pretty much where you came in.’

    ‘Tis, aye. And it doesn’t negate a very important point worth re-stating, again and again, about the NIAO or PAC, one of whom is up the arse of government and the other being impotent and ignorant.

    As you say, the latter quality is almost a badge of pride which is shocking and shameful. So I’m happy to keep re-stating it until it maybe gets someone’s dander up and some determination emerges to put their many collective failures of the past behind them and do the right thing. Not holding my breath, though.

  • William Markfelt

    If I were an autocrat whose antennae were going up, I’d be suggesting that ‘if you do the sums, you come to a very small figure’.

  • William Markfelt

    http://www.bbc.co.uk/news/uk-northern-ireland-politics-11283107

    Failed statelet now a nation shock.

    Conor wants NIW ‘renationalised’. Looks to me like his escape route is to re-focus attentions away from NIW’s recent troubles and fix on the future as a way to help us forget the past and move on.

  • And all this from someone who is usually keen to “dig up the past”. Oops, that was a bit insensitive!

  • Jj

    Well, does this now suggest a framework for recent events?

    Minister: unhappy with the GoCo as a

    (1) Direct Rule creation, “foisted” on the Assembly.
    (2) Chair & Board mainly English (2 NI Directors appointed during Murphy’s time)

    SF wishing to maintain their “no privatisation of water” stance.

    New CEO, similarly unhappy with organisation & Board that he finds himself saddled with:

    (1) Procurement “issue” a pretext for demanding a change – which integrates with Minister’s wishes:
    (2) New “interim” arrangements not and never intended to such – only to be sustained until organisation is dismantled as GoCo. However long that takes.

    And in the middle, the abused and utterly demoralised employees, about whom no-one gives a flying fiddlers…

  • Jj, those who will have to pay the bill for this ongoing fiasco are caught in the middle too.

  • William Markfelt

    JJ,

    I opt for autocratic cock up, as opposed to political conspiracy.

    The idea that those core to the matter could plans their moves like Russian Grand Masters is simply laughable. They strike me more as being D2-D4 opening gambit players, and get Mrs. Windsor (as one of the new NEDs was fond of calling her at one point in a mature, grown up way) into play, quickly followed by the bishop (not that the NED had much time for them, either according to what I’ve read). A Guico Piano/Two Knights Defence is beyond them all.

    No, the framework is more likely an autocrat fiefdom building overplays his manipulative psychological games and everything flows from that.

  • Jj

    I don’t think it was conspiracy either, just that the Minister never liked the GoCo set up anyway (for the reasons I spelled out) and MacKenzie didn’t like the man who appointed him (Chris Mellor) though the latter was worth 100 of the former.

    I do agree with you though that none of this would have happened had anyone else been appointed to the CEO post.

    Still think it a laugh that a senior (£80,000) post was created to head up a Shareholder Unit that presided directly over this pile of cr*p. Another part of the ongoing bill for this fiasco, Nevin! 🙂