Northern Ireland Water: Procurement was a legacy of DRD management

Hmmm… Northern Ireland Water, remember them? You thought they’d had gone away? Well, not quite. This week one of the main characters in the whole drama, Ms Nicola Brennan (formerly an external auditor; subsequently head of Internal Auditing at NI Water), gave a detailed four page interview to Internal Auditing magazine (150,000 readership). It’s remarkable for two reasons.

One, it has been published whilst the Public Accounts Committee (PAC) is in the middle of investigating many of the issues that are discussed at length within the article. Slugger understands that it has even provoked DRD’s new Permanent Secretary Malcolm McKibben into writing a letter to the PAC today to warn them that it is already within the public domain.

Two, and perhaps more importantly, Ms Brennan details the fact that the procurement practices under investigation were a legacy issue from the Water Service days; making it clear that the poor practice originated with the department rather than with the management team or even the Board of NI Water.

This is pretty much in line with the conclusions of v1 of the Independent Review Team’s report delivered to the department on Monday, 15th February, and before Paul Priestly wrote to them suggesting they should not feel constrained by the terms of reference he had already given them and as UTV reported in August:

…he told review team member Jackie Henry that an impartial commentator reading the document might even decide the DRD was “at fault for the governance failures at NI Water”. Such a conclusion would be “perverse and a travesty”.

More than that, Brennan blames the lack of a proper IT procurement system and the sharply accelerated process of turning the organisation from being part of the Department of Regional Development to a semi independent government company (or GoCo, in the official parlance).

So on the face of it, by Ms Brennan’s accounting (no pun intended) the red flagged issues around procurement had little to do with the sacked NEDs. Rather: 1, they related to legacy problems from the days when the Department ran the whole show; and 2,the DRD legacy system in place was insufficiently refined to show the problems up at senior management level.

So why sack the NEDS for something, which by the account of the head of the Internal Audit, it appears had little to do with them? And why hold a thorough-going internal investigation that, after nearly a year, has proved utterly fruitless in finding ANYONE inside the company (or the Department for that matter) culpable of not doing their jobs properly in the same regard?

Curiouser and curiouser…

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  • james

    Not sure if I’ve read it correctly Mick but she seems to imply they existed when it was the remit of the NIO, and although not an expert I understand that a Go-Co is run similar to a private company and therefore it would be the NEDs responsibility to report these issues to the shareholders ie the DRD. Else what do NEDs do?

  • Mick Fealty

    James,

    You’re missing an important part of the puzzle (mentioned, though not detailed above). How can you deal with a problem if the details are kept from you?

  • Laurence MacKenzie, a sometime internal auditor, arrives as NIW CEO and within a week or two his antenna is twitching? Did Nicola Brennan’s antenna twitch at any time in the year preceding the new CEO’s arrival?

  • Pigeon Toes

    You have to wonder if Ms Brennan sought permission for this interview, and indeed if permission was sought, just who granted it….

  • aquifer

    ‘the red flagged issues around procurement had little to do with the sacked NEDs?’

    Company directors are legally responsible as individuals for the conduct of the company’s affairs. It was precisely their job to ensure that procurement and everything else was up to snuff, or to sort it ASAP after they took over the running of it from DRD. I would presume it was DRDs job as the shareholder to sack any directors who did not seem to be performing, and this happened. Looks a bit rough, but a directorship is not employment, and their pay is not a salary or pension. Employment and prosperity depend on having capable company directors. Similarly competitive tendering creates losers as well as winners, but when the winners do things better and cheaper, we have lower water rates.

    Capitalism has a tendency to greater efficiency that can work for everybody if it is harnessed, as in not-for-profit companies and co-operatives.

  • Mick Fealty

    That’s the theory. To understand what happened in practice you need to follow the links. Here’s a cut and paste from the link I’ve already posted above:

    “…the actual sacking of the four NEDs is not the issue at play here. Rather it is the precise manner in which they were sacked that is of public interest, if the Northern Ireland Civil Service expect to continue drawing upon the talent and expertise of the private sector.

    “Back in March, Pete was prompted to ask whether this was “an attempt to deflect criticism from the Department itself?” And this remains the primary question hanging over this story. Of course it cannot be completely answered until the Department begins to respond to the FOI requests it has received in the weeks since the Public Accounts Committee sat on this matter.

    “But there is enough information already in the public domain to suggest the Department has been a great deal less than above board in the way it discharged its duties with regard to NI Water.”

    And then…

    “There is no doubt there has been a serious problem with the way the company has handled its procurement processes. But put in context, it still has a 96% compliance rate. Indeed at the beginning of this ‘crisis’ in September, the Department for Finance and Personnel awarded NI Water Exemplar status for their procurement practice.

    “If you examine the timeline, at first the problem is handled appropriately within this downbeat frame of reference. The Board is appraised of a process issue on the 27th October but it is not flagged to them as a serious issue nor are they informed by anyone in Laurence McKenzie’s management team that there is anything specifically to do with procurement.

    “In fact, nothing much happens until Nicola Brennan sends her audit report to McKenzie (who during this time has been appraising his friend Peter Dixon of his difficulties with staff) on 12th January. Within three days McKenzie calls a meeting with his senior management team.

    “Three days later on Monday, 18th January, McKenzie circulates a summary report to the Board (i.e., a two page email) and later that morning to the Chief Accounting Officer (ie, the Permanent Secretary) in DRD. At 9-40am he tenders his resignation.

    “McKenzie’s resignation appears to be the fulcrum for what follows.”

    What then follows is that the Board is placed under investigation (and thereby prevented from acting on the matter) before it has a chance to discuss never mind take action on the issue.

    That’s not normal practice in the industry. And if it is normal practice why haven’t those in charge of Translink, who have a similar patterns of use of Single Tender Actions, also been sacked? Why? Because there were no *serious* breaches of procurement policy.

    So what’s the story here then?

  • malairt

    We don’t appear to have a reply facility any more?

    I’m glad to see Nicola coming out with a fairly balanced view of the tumultuous last 18 months or so – although I also presume that she had permission from MacKenzie to do so.

    She had a hard time from the start as an ex E&Y person, building an IA capability from a standing start and coming into an organisation weaning itself off the comforting embrace of consultants. NIW was and is a complex organisation and I know from experience it’s tough to try and grasp legacy issues when you’re faced with disinterest and downright hostility.

    Her comments on systems are entirely correct: in 2008 NIW had an Oracle ERP system with an e-procurement module bought but not implemented. 750 people in the organisation had the capability to raise purchase orders via paper order books and senior managers could commit the company to contractual relationships without any procurement input.

    Internal Audit can be a very effective ally for any corporate function wanting to introduce change and tighter controls. Colleagues who think they can do your job as well as their own are a nightmare and an IA improvement notice is a powerful weapon in your arsenal.

  • Mick Fealty

    It began to act ‘irrationally’ so I switched it off.

    “…in 2008 NIW had an Oracle ERP system with an e-procurement module bought but not implemented.”

    Does that relate to the part of the article where Ms Brennan refers to savings ‘identified’, but not ‘recovered’?

  • observer

    It is easy to be critical here but this article probably captures how tangled this whole thing is and points back to an organisation going through huge change under a new board and management team and being asked to change and modernise in 3 years. No other part of govt. could do it so why did Northern Ireland Water get tasked with it and then beaten up by the Dept. who set the task in the first place?

    It is not clear if Brennan was one of the auditors at Ernst & Young and jumped into the big job and just got swallowed up – out of her depth amongst Priestly, Dixon,Henry and Mckenzie.

    Who knows why this article has emerged. only brennan and her bosses might know, maybe it is a solo run. In any case it looks like huge own goal and smacks of a complete lack of judgement on her part. Silly, silly.

    But this sheds light on her own thoughts – has she flagged these up to anyone else before she went public! The story seems determined to live on.

  • gottasay

    Nicola Brennan ( Head of Internal Audit) finds herself able to give a self serving, and no doubt intended to be self promoting interview, (which has blown up in her face!) but over the last nine months found herself unable to express these views to the Minister or the Board at N.I.W(or did she and they just ignored it?)
    Considering four people lost their jobs, and had their reputations severely damaged did she not consider that this information was vital in clearing the NEDs of any wrong doing?

    She, along with Don Price, and McKenzie,should hang their head in shame that they have allowed this to go unreported until now.

    Ah well, I guess by the time the defamation lawyers are finished with MsBrennan and/or the IRT and/or others involved in this debacle, we’ll find out the cost to people like Ms Brennan and Price [text removed – play the ball – mods]

    The NEDs must be in shock that they find themselves vindicated by the most unlikely source,in what has to one of the most spectacular PR gaffes to date in this story!

    A nice Xmas gift to them by Nicola Brennan-wonderful!

  • Jj

    “why hold a thorough-going internal investigation that, after nearly a year, has proved utterly fruitless in finding ANYONE inside the company (or the Department for that matter) culpable of not doing their jobs properly”

    Mission accomplished, therefore?

    See “Yes Minister” on the role of internal investigations, passim… ;(

  • Pigeon Toes

    http://www.niassembly.gov.uk/qanda/2007mandate/writtenqfora/drd/drdwq1.htm

    “10. Mr P McGlone (Mid Ulster):

    To ask the Minister for Regional Development whether his Department issued any direction to NI Water in relation to the article in Volume 34, Issue 11 of ‘Internal Auditing’ to which a senior NI Water official made a contribution.”

  • Have PAC and NIAO gone into hibernation on this story – or can we expect an announcement just before Christmas?

  • “[MacKenzie] also then dispersed Gilmour’s investigation team (led by Contracting Out) who had been conducting a commercial review of the Steria Contract.” .. Slugger 10 Sept 2010

    “By early September [MacKenzie] called in Brennan and her team to investigate how this contract with Contracting Out, a procurement specialist, had been awarded” .. Internal Auditing

    Would this have been just before or just after that September 2 meeting in a Belfast restaurant involving Murphy, McGlade, Priestly, Patterson and MacKenzie when soon afterwards MacKenzie told his NIW executive that one of the items on the menu was the Steria business. Unfortunately, DRD allegedly has no notes/minutes of the ‘informal’ discussion and any directions that might have been issued to the NIW CEO.

  • bittersweet

    You’ll note Priestley is out of the above quintet already and I hear Patterson is out on extended leave

    What are the odds that McKenzie’s luck is going to run out and he’ll be next?

    Information Commissioner’ report due soon,more AQ’S arriving by the day, another appearance in front of the PAC,a Mnister who can’twait to see the back of him-who would want to be Laurence McKenzie-the most discredited Chief Executive in Northern Ireland today(maybe a tie with that other clown Dixon)
    Now on top of all that Nicola Brennan blows the lid on the whole stitch up of the NEDs.
    A sorry mess where the key players keep screwing up, or in Mc Kenzie’ case being economical wih the truth up to the point he can squirm no more and eventually gets caught out.
    What a sad way to live your life and what shocking bad luck for the people at NIW that they ended up with a man that epitomises everything that’s wrong in the management
    of our most important utility.

  • Jj

    “I hear Patterson is out on extended leave”

    Really?

    Anyway, is PP back at a desk, yet?

    Shurely we should be told…?

  • William Markfelt

    ‘You have to wonder if Ms Brennan sought permission for this interview, and indeed if permission was sought, just who granted it….’

    Of course, it could just be a cynical ploy to taint some evidence relating to investigations, and by putting it in the public domain, render certain lines of inquiry worthless.

    It is not beyond the bounds of possibility that Ms Brennan takes one for the team by conducting this interview, in full foreknowledge of the implications of her actions.

  • William Markfelt

    ‘It began to act ‘irrationally’ so I switched it off.’

    If we could do the same with the NIAO we’d be getting somewhere.

  • bittersweet, the Minister and his Special Advisor are also part of the quintet. Not only were they involved in the September 2 meeting, they were also involved in the selection of the new NEDs. Perhaps Felicity Huston will wish to comment on the procedures used, including the potential for cronyism.

  • Pink Lady

    All Mackenzie wanted for Christmas was a ‘deep dive audit’. However all got is this ‘deep drain on the credibility’ magazine article, and nearly a whole month early!

    Ms Brennan would appear to have attempted to set out an honest account of the root cause of the audit issues, naively thinking that it could only result in some good publicity for her and MacKenzie. However Brennan’s article only helps to vindicate the complaints being made by the Board members who were sacked – bring on the apology by Murphy!

    This article further illustrates how very wrong it was for Priestly to seek to deflect any criticism away from DRD by tampering with the findings of the independent IRT Report.

    No wonder Lian Patterson is on ‘extended leave’ from DRD –any person with integrity who had been so misled would find this stressful. Coffee and a good chat with another recovering victim, such as Antoinette McKeown, Mellor or Gormley, should help.

    The trouble for MacKenzie is that in the process of weaving a complex web of stories to achieve his own goal of getting rid of the old Board he has obviously ended up telling so many twisted tales that he probably cannot even remember which way is up, yet alone what the truth is, who knows what, who needs to be silenced, and what piece of propaganda should be released by whom and when.

    Disappointing though that Ms Brennan chose to communicate this to the PAC through a magazine with a 150,000 readership. But better late than never.

    Thank you Slugger for helping bring this to the attention of Murphy and the PAC.

  • bittersweet

    Pink Lady

    A most succint summation of all that has gone on here.

    McKenzie is such a busted flush, that even Murphy must realise that to regain some control of the situation he has to ge rid of him.

    Whatever about being a victim ,I think Gormley is nowhere near reaching the outcome which he believes he is due, and
    it is my understanding he is gearing up for what could be described as the “next phase” of his campaign to get his reputation cleared.

    He, deserves all our thanks for exposing the entire disgraceful charade for what it is- the abuse and manipulation of positions of authority in Northern Ireland-, masquerading as respectability in the highest levels of Govt,The Civil Service,Busness and certain Media outlets.

    What we need now is a leading business or political figure to emerge who will say publically what ever one knows-this was an outrageous act perpetuated by McKenzie, Murphy, McGlade,Priestley, Patterson,Fair Dixon ,Henry and Thompson.

    They have no place in a decent society and should br hounded from office for the scurrilous and unprincipled individuals they have shown themselves to be by their behaviour.

    It is time the people made thier feelings known about what is and IS NOT acceptable in the new Northern Ireland.

    This cannot be the standard that we wish to be measured by as a country.

  • Pigeon Toes

    PUBLIC ACCOUNTS COMMITTEE

    THURSDAY 9 DECEMBER 2010
    ROOM 144, PARLIAMENT BUILDINGS
    3.00PM – 4.30PM – CLOSED SESSION
    From 3.00pm – 4.30pm

    Briefing on NIAO report ‘Arrangements for Ensuring the Quality of Care in Homes for Older People’
    NIAO Examination of Procurement Breaches in Northern Ireland Water

  • Pigeon Toes

    http://applications.drdni.gov.uk/publications/document.asp?docid=20281

    “DEPARTMENT FOR REGIONAL DEVELOPMENT
    MINUTES
    DEPARTMENTAL BOARD MEETING TUESDAY 2 NOVEMBER 2010

    SECOND QUARTER CORPORATE GOVERNANCE
    (INCLUDING CORPORATE RISK REGISTER AND
    PRESENTATION ON CORPORATE RISK (DB 93/10)
    John Mills and Stewart Matthews joined the meeting at this point.
    John Mills made a short presentation on Corporate Risk in NIW. During the question and answer session which followed, Malcolm outlined the unique governance arrangements NIW operated within. Although established as a Government Owned Company it was being treated as an NDPB for public expenditure purposes. DB (M) 10/10
    4
    ITEM DISCUSSION ACTION
    In addition, Malcolm and Lian had been encouraged that after an independent review, NIW’s COPE status had been maintained and its interim Board was addressing a number of financial and operating issues. Malcolm thanked John for his presentation.”

  • Jj

    Interesting that Gary Fair didn’t make this presentation as he is responsible for the risk management in NIW.

    Persona non grata, perhaps?

  • bittersweet, there also seems to be a problem with those who ‘police’ the process. I think there are a number of bodies that have acquiesced when, perhaps, they could have kicked ass. In no particular order, these include Stormont committees, Northern Ireland Audit Office, Commission for Public Appointments and the Consumer Council for Northern Ireland. The mainstream media also has a role to play but it seems to be almost as impotent as a Stormont committee.

  • Jj, according to the agenda, a general presentation on corporate risk was to have been given by Lian Patterson/John Mills/Gary Fair. Perhaps John was the only one still standing.

  • Jj

    Fair point, Nevin. 🙂

    John MIlls is the Director of Water Policy, perhaps the only individual to remain untainted by this years shenanigans…?!

    One hopes that 2011 is Declan Gormley’s year.

  • William Markfelt

    ‘The trouble for MacKenzie is that in the process of weaving a complex web of stories to achieve his own goal of getting rid of the old Board’

    So a new one was appointed.

    http://www.bbc.co.uk/news/uk-northern-ireland-11957359

    The link says the process of appointing a new, new board has begun (funny how it coincidentally is announced at the same time as the last couple of NIW related events).

    The link says O’Muilleoir is giving up ‘the gig’.

    Incredible. It only seems like August 26th that he was fretting about ‘the risk of sounding like a water-nerd’ and ‘spending a full day at NIW staring at the Cave Hill and golf course’ (October 28th) and August 13th when he declared had changed, people were appointed on merit (obviously written prior to investigations and commentary on the appointments process) and he was ‘up for the challenge’, a challenge he has now decided he’s not up for, four months later.

  • shamie

    Be assured of one thing. Slugger is only beginning to get to the dark heart of this…

    It will be back on our front pages again before too long. Big question remaining is whether or not MSM will stay awake this time around.

    They should…