NI Water: Murphy’s department “undermined confidence in the integrity of the public sector”

Just clicking through the journalism  associated with Super Thursday’s report release day. That was the day the PAC’s report came out, and the regulator’s report.  Two remain outstanding: the Executive’s conflicted interest report; and Sir Jon Shortidge’s report into the conduct of Mr Murphy’s suspended Permanent Secretary.

Of these the PAC’s is the more substantial, but guessing from this BBC report, few professional journalists seem to have actually read it.

Interestingly the meaty stuff, which examines the serious misconduct of Permanent Secretary Paul Priestly amongst many other things, comes pinned to the back of a report on waste water (page 81 to be precise). That may well have burned off the interest of less interested journalists in NI’s vastly depleted press corps. So the media coverage is peppered with quotes from various politicians rather than any independent reading of the report.

The Belfast Telegraph even goes as far to say that it vindicates the minister’s decision to sack the four non executive directors last March (which makes whom responsible for this winter’s debacle?) As you might expect, that’s a quote from the minister himself. There is actually no other supporting evidence for that statement than the Minister’s own estimation of his own performance.

In fact the report goes on at length about the poor standards in the Minister’s own department. And on the very first page, this is what the report actually says:

7. The actions of a number of senior officials in this case has undoubtedly undermined confidence in the integrity of the public sector, but it is important to remember that there are good and honourable people at all levels in public bodies. For confidence to be regained, the highest standards in public life must be applied, but those at the top must lead by example.

8. The conduct of Mr Priestly, the DRD Permanent Secretary, towards this Committee was unacceptable. The role of the Committee in questioning witnesses is to hold them to account for their actions. In his role in drafting this letter, Mr Priestly sought to undermine the Committee; this intervention was utterly disgraceful.

9. There are concerns over the independence of the investigation of NI Water’s procurement problems. There were three potential conflicts of interest, involving two of the three review team members. There were also clear indications that the Department inappropriately influenced a small number of key findings in what was supposed to be an independent review.

10. The review team’s report failed to provide, as requested, a detailed and considered assignment of individual responsibility for the governance failures. The review team was unable to fulfil its terms of reference because of the undue haste with which Mr Priestly pressed for the report to be completed.

More later…

More later….

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  • Cynic2

    “For confidence to be regained, the highest standards in public life must be applied, but those at the top must lead by example.”

    Its great to see the Department has already reacted positively in the way it appointed members of the latest inquiry. Now what was it Felicity Houson said?

    “Mr Priestly sought to undermine the Committee; this intervention was utterly disgraceful.”

    But did he act alone? Did anyone else know? Did any SpAds encourage him?

    ” There are concerns over the independence of the investigation of NI Water’s procurement problems.”

    Understatement anyone?

    “The review team was unable to fulfil its terms of reference because of the undue haste with which Mr Priestly pressed for the report to be completed.”

    But then it appears he had already written the conclusions

  • Call me cynical but I am wondering why this is such a “non-story” in the local press

  • wild turkey

    Mick

    for about the umpteenth time, just to note that work and diligence on this story has been exemplary. many thanks for that.

    Any idea just wha the state of play is with Sir Jon Shortidge’s report?

    1. Is it completed?
    2. If no, any ideas on expected date of completion
    3. If yes, has it been forwarded to Sir Bruce?
    4. If yes to 3 above, when was the report submitted to Sir Bruce
    5. Will the full unredacted report be put in the public domain

    Am also open for any thoughts as to whether the PACs criticism of Priestly is (a) an attempt to force Bruces hand or (b) will facilitate Bruces to dismiss Priestly

    Finally, I am willing to consider making odds on the following proposition

    “Priestly will be reprimanded but not dismissed from the senior civil service. He will be dropped a grade or two in the chain… to rise again”…. a humbler and wiser man ho ho ho.

  • wild turkey

    oops!

    above should read “your work and diligence”

  • Drumlins Rock

    Pages 101-107 or the regulators report are worth a read. http://www.uregni.gov.uk/uploads/publications/Investigation_report_into_the_freezethaw_incident_2010-11.pdf

    Politely worded but basically saying the Board was a complete mess, while the regulator could not comment on the DRDs role he has went as close as he can to saying that where the problem lies. The disaster originates at Murphy’s desk he should resign.

  • the future’s bright, the future’s orange

    ah come lads. Ruane makes Murphy look like some kind of political god. If she can stay in her job, then old spud is under no pressure.

  • Mick Fealty

    DR,

    Can you throw out a few quotes you think might illustrate your point?

  • Mick Fealty

    The future, etc…

    Who’s calling for Murphy’s head? All we need is a fair estimation of the truth. There’s plenty of it in the reports, it’s just not getting out into the wider media.

  • Cynic2

    FROM THE REGULATORS REPORT

    “the average age of water mains in Northern Ireland is 29 years,
    compared with an average of 45 years in the rest of the UK”

    and

    “there is no need for an immediate change in mains infrastructure investment levels”

    and

    ” the freeze thaw incident was not exacerbated by any lack of investment in water mains”

    This is not what we have continually been told by Ministers. Indeed Murphy blamed the whole mess on years of under-investment by th NIO under Direct Rule. We now see that that is nonsense. Our mains are among the best / most modern in the UK. They have been lying to us.

    ” the company was also reluctant to accept
    assistance from external sources.”

    Why? Is it true that Ministers in DRD and OFMDFM refused to call a Gold or Chris meeting because they refused to admit to the public that there was one?

    “The company’s executive team did not formally meet as a team or attend the HQ major incident centre at an early stage”

    Where was the Minister? Didn’t he notice any of this? Did he bother to ask who was in charge of the whelk stall?

    ” The strong operational workforce was well managed and worked tirelessly over long periods in adverse weather conditions.”

    lions led by donkeys – actually by dozy donkeys

    “5.38 Gold and Silver incident teams were established between 10 and 12 December in response to a lesser freeze thaw event. Following this they operated in ‘shadow mode’ until 27 December.

    5.39 It is understood that shadow mode for the Gold and Silver teams means that individuals are on standby and receive relevant information about the ongoing incident. This provides a route for the escalation of the incident and incident teams to be established. It has been demonstrated that the operational members of the shadow team were
    communicating via email and telephone to discuss the developing situation prior to the incident being called on 27 December.

    5.40 There is limited evidence of extensive discussions extending beyond the operational perspective of the ongoing situation (for example, ‘what if’ scenarios). ”

    Civil Service speak for – they all cleared off for Christmas and ‘kept in touch’ over Christmas by email

    ” the company’s executive team did not meet at any
    stage during the incident.”

    Civil Service Speak for – They had Christmas off

    “NI Water was initially reluctant to ask for and accept offers of assistance”

    ” The Civil Contingencies Group (NI) offered to help NI Water on 28 December. The help was initially refused but subsequently accepted on 29 December. ”

    “Ourselves alone” again

    ” The company’s executive team never met as a group in the crisis. It did not perceive that it had a role in the incident because the MIP did not say that it had.”

    It was all a matter for the serfs

    “The Chief Executive was contacted on the evening of 26 December (when category 1 was declared) but did not attend the incident in the office until 28 December.”

    So why did we pay him to go and not just sack him for negligence?

  • “the Board was a complete mess”

    DR, here are some observations from the Regulator:

    “There is no record of significant discussion at Board or at the Audit and Risk Committee on this [MIP and Business Continuity] risk in the period before the freeze thaw event.”

    “There was only one NED on the Board between March and July 2010. Four interim NEDs were appointed on 30 June 2010 and the Interim Chair was appointed on 6 August 2010.”

    The Minister had dispensed with the services of NEDs, some with experience in a water utility and replaced them with ‘water free’ NEDs. He had also added an additional NED, apparently at the last minute.

    “The interim non-executive Chairman brought appropriate experience and a clear sense of strategic imperative.”

    The Chairman AFAIK had no experience where it mattered ie in a water utility.

    “Consideration should be given to the appropriate balance of Executive and Non Executives on the Board with reference to other water utilities.”

    The Regulator has given NIW the lead role but NIW would probably need a stronger say in the selection of NEDs with relevant experience. It would seem that neither the Minister nor the DRD folks had the relevant competencies:

    From the PAC Vol 1:

    “In his meeting with the IRT, the Regulator advised that DRD did not understand the company properly, that the Shareholder role in particular was not sufficiently rigorous and that staff in the Shareholder Unit did not have appropriate skills.”

  • Mick Fealty

    Relevant point here being that Murphy’s Board hadn’t a clue, there is no such damning conclusion against the previous Board.

  • Drumlins Rock

    ok here is my reading between the lines, in brackets after the quote which I have shortened a bit.

    “The governance arrangements between the company and DRD is outside the scope of this investigation.”
    (I suspect the problem lies here but my hands are tied)

    “The Minister for the DRD appoints NI Water’s Chairman and independent Board members.”
    (keep this in mind as I tear the board apart)

    having a board “alone will not deliver effective outcomes; the right conditions and behaviours are also necessary.”
    (it was a disfunctional board from the start)

    “Four members of the company’s executive team were also members of the Board… It is noted that two of these… have been subject to on-going disciplinary procedures.”
    (of 10 board members, 2 of the pros have been hamstrung)

    “NI Water’s Board comprises six NED positions and four Executives (as well as the company Secretary). There was only one NED on the Board between March and July 2010.”
    (for months the board was effectively 3 people, 1 NED, 1ED, & 1CEO)

    “there were five NEDs in post -four interims- The Interim Board concentrated on legacy issues such as procurement, dealing properly with the disciplinary aftermath, rebuilding the Board..”
    (they were busy covering up the previous mess)

    “There is no evidence that either the company’s executive team or the Board considered that dealing with a major incident was anything other than an operational issue.”
    (they forgot why they were there, to deliver water)

    “The Chief Executive was contacted on the evening of 26 December (when category 1 was declared) but did not attend the incident in the office until 28 December.”
    (need I say anything?)

    “The company’s executive team did not have significant numbers of years of water utility operational… experience… Only one… had such previous experience and he was… overseas.”
    (these were the “experts” on the board!! )

  • “the Department inappropriately influenced a small number of key findings in what was supposed to be an independent review.”

    Is this malaise limited to DRD or has the contagion spread across other departments? Just how high up the chain of command does it go?

    NIAO submitted a report to PAC, a report which was leaked. As I noted the other day – Super Thursday, by coincidence – DRD’s Paul Priestly requested changes to an earlier NIAO report on an ‘independent’ investigation which begs the question: “Did DRD have access to or request changes to the NIAO report to PAC?”

    It’s also worth noting in passing that these ‘independent’ reports, flawed as I believe some of them to be, may be used as ‘evidence’ in other contexts.

  • Drumlins Rock

    “The leadership style of the Chief Executive was not considered to be effective and the lack of visible leadership during the incident became a significant issue.”

    this is the CEO who resignation was refused by Murphy! who sacked the wrong people.

  • Mick Fealty

    Drumlin,

    What’s interesting about the procurement problem is that some of the STAs may go back as far as 1999. The Epartment was sanctioning such breaches for years.

    Nev,

    Keep reading. The PAC and the Audit office have really done their homework on the behaviour of Deloitte.

  • I will, Mick. Mind you, I’m not best pleased that large parts of Vol 2 has documents in image form when they could have published them in searchable form.

    I don’t suppose the Top Brass meeting – Murphy, Priestly, MacKenzie plus Patterson and McGlade – on September 2, 2009 gets a mention.

  • The David Gilmour story looks very curious:

    PAC, July 1, 2010:

    “430. Mr MacKenzie: His name is David Gilmour.

    431. Ms Purvis: What happened to that individual?

    432. Mr MacKenzie: That individual is no longer in the organisation.

    433. Ms Purvis: Was he sacked or did he resign?

    434. Mr MacKenzie: We went through a restructuring exercise, and his post was made redundant.”

    PAC Vol 1:

    1 July 2008: David Gilmour appointed Commercial director (2 year fixed term contract)

    17 Nov 2008: David Gilmour’s post as Commercial Director made permanent

    6 Feb 2009: David Gilmour (NIW Director of Procurement) and Sue Holmes (Contracting Out LLP) sign Schedule 7 under the Master Agreement between the two parties.

    2 Jun 2009: David Gilmour emails acting Chief Executive/Chair clarifying contract arrangements with Contracting Out and stating “there is no issue with procurement regulations”.

    10 Aug 2009: Laurence MacKenzie receives an e-mail from David Gilmour (Director of Procurement) asking for approval a further 130 days’ work for Contractor A at £775 a day.

    18 Aug 2009: David Gilmour now described in Executive Team meeting minutes as Commercial Director.

    Oct 2009: The Chair, when interim Chief Executive, had been informed by Mr Gilmour that appropriate procurement procedures had been followed regarding Contractor A. This was incorrect and Mr MacKenzie had undertaken to follow up which led to the departure of Mr Gilmour.

    10 Nov: 2009: Initial Meeting with David Gilmour (Commercial Director) outlining proposed restructuring

    12 Nov 2009: Further meeting with David Gilmour to discuss options including potential redundancy

    20 Nov 2009: Agreement reached with David Gilmour for redundancy. A compromise agreement including a confidentiality clause was entered into. Payment made was ‘in-line with the post-holder’s contractual entitlement’.

    1 Jan 2010: David Gilmour leaves NI Water
    ……………………

    There’s confusion over his job title and the reason for his departure. Nov 2009 saw a name change from Executive Team to a pruned back Executive Committee, a cessation of the publication on online Executive minutes but I can see no lead-up to restructuring. Was it an arbitrary decision by the chief Executive or was it sanctioned by the Board?

    In his ‘presentation to the Northern Ireland Water Forum in May 2009 he said that he expected £19 m savings by year end, some way ahead of the Assembly target, and during the course of the year, in association with Mellor, had nearly halved the expenditure on consultants.’

    If he was following a process that had been in place apparently from 1999, savings were ahead of target and expenditure on consultants was cut by 50% what exactly was the point in restructuring, restructuring that may well have contributed to some of the difficulties this winter and the one before

  • Mick Fealty

    That is actually ‘wood’ rather than ‘tree’ Nev.

    I see the Minister’s party outriders are pushing hollow figures on the procurement issue again. But they don’t explain why the Commercial team was broken up whilst in the process of pursuing huge savings?

    More here: http://sluggerotoole.com/2010/10/01/ni-water-how-mr-mackenzie-jettisoned-millions-in-commercial-savings/

    Even more here (http://sluggerotoole.com/2010/09/10/ni-water-why-did-mackenzie-break-up-niws-commercial-review-team/) in which the guy heading up the disputed Steria contract (which ends up costing NI Water money as a direct consequence of MacKenzie’s decision to break up the commercial team), turns up in DFP, just as Mr MacKenzie takes office.

    Shortly after, MacKenzie begins procedures to wrap up NI Water’s aggressive case against Steria.

    However, I don’t understand your reference to a process that had been in place since 1999. Gilmour was a contracts specialist, that capacity relates to his employment with the company.

    When he was made redundant, NI Water lost the capacity to examine contracts and test whether the supplier was in fact delivering value for money as agreed in the contract.

    The dropping of the Steria case was inevitable when neither he and Contractor A were no longer available to the company in pressing their case.

  • “That is actually ‘wood’ rather than ‘tree’”

    It’s all part of the NIW/DRD/PAC/Minister ‘forest’, Mick 🙂

    I don’t find MacKenzie’s response to Purvis convincing. You assert that he was made redundant but the detail I’ve posted would indicate that he was ‘fired’ because the statement
    he made in June to Mellor was incorrect; declaring his post redundant appears to have been the exit mechanism. It’s quite possible he was ‘fired’ for a different reason.

    “The actions of a number of senior officials in this case has undoubtedly undermined confidence in the integrity of the public sector”

    How many cases do they need before they realise that the watchdogs are no match for erring Ministers or public servants?

  • Mick Fealty

    Well, you need to take a bit more care how you phrase things. Gilmour’s job was axed, he was not sacked. That’s a crucial distinction.’

  • Mick, the language is far from clear so any distinctions are problematic. Was Gilmour’s statement to Mellor correct or incorrect at the time that is was made? Was restructuring an arbitrary decision by the Chief Executive or was it sanctioned by the Board?

    Contracting Out LLP can’t have been too happy by its treatment at the hands of PAC, Priestly and MacKenzie.

  • Pigeon Toes

    The fact that he signed a compromise agreement means that he cannot claim unfair dismissal etc.

    Normally there is a financial “sweetener” in such situations, and crucially he agreed to it.

    I can’t help thinking he had a very lucky escape given what followed.

  • Pigeon Toes

    That was badly phrased, I meant he agreed to go and not pursue any action against NI Water.

    Apologies to Mr Gilmour, and hopefully he has been able to pursue his career and life without the taint of the NI Water fiasco.

  • “Two remain outstanding: the Executive’s conflicted interest report”

    Correspondence released by the Commissioner for Public Appointments.

  • malairt

    Some comments Nevin

    The job of Commercial Director was created on 1st April 2008. I don’t know where July has come from but it’s wrong.

    The job was titled Commercial Director as NIW already had a Director of Engineering Procurement, Trevor Haslett. The careless sometimes reported the title wrongly and got the two roles confused, but the Commercial Director role existed from 1st April 2008 until 1st January 2010 when it was abolished.

    Chris Mellor was indeed assured that the appointment of Contracting Out was in compliance with procurement regs because it was. CO made an excellent submission to NIAO which lays out the arguments far better than I can.

    10th November meeting was asked for in order to clear the air between a difficult CEO and a Commercial Director who was struggling to work in harmony with him. The solution presented was to abolish the role of Commercial Director and tuck the Commercial Directorate under Finance. This was on cost grounds, specifically not on performance, and there was no mention made at any point of the Steria case or the appointment of Contracting Out.

    The 12th November meeting again confirmed that the Commercial Director post was being abolished because the targets had largely been reached and there was a need to save money. NIW also offered a redundancy package that was rejected.

    Email exchanges the following week agreed a redundancy payment exactly in line with the contract and that was that. There was no sweetner or anything untoward. I’m not sure why NIW is so in love with non- disclosure agreements – it just gives the impression that there’s something to hide.

    I don’t follow you on “following a process that had been in place since 1999”. NIW’s procurement processes were poor, that’s why Katherine Bryan brought in PwC and then created the Commercial Director role.

  • Pigeon Toes

    Malairt,

    My apologies, I didn’t mean that such payments with a compromise agreement were in any way untoward. Such payments are generally viewed as compensation for giving up the right to bring an unfair dismissal claim.

    Interesting that Mr MacKenzie was breaching the non-disclosure agreement at PAC.

    Is it not the case in such compromise agreements, that the employee must receive independent financial advice for the agreement to be valid?

    Mr MacKenzie certainly availed of this, but then again he *resigned*

    “The 12th November meeting again confirmed that the Commercial Director post was being abolished because the targets had largely been reached and there was a need to save money. ”

    WTF???

  • Pigeon Toes

    “10th November meeting was asked for in order to clear the air between a difficult CEO and a Commercial Director who was struggling to work in harmony with him. The solution presented was to abolish the role of Commercial Director and tuck the Commercial Directorate under Finance.”

    That’s a rather novel way of “clearing the air”

  • Pigeon Toes

    http://www.newsletter.co.uk/news/local/ex_niw_directors_in_challenge_to_murphy_1_2481043

    “In their first joint statement since their dismissal, the directors — Declan Gormley, Chris Mellor, John Ballard and Ruth Thompson — said that since Mr Murphy sacked them they “have believed that the truth would surface, and that we would be exonerated of all wrongdoing..“As events have unfolded, we agree with the PAC that gross inadequacies have been revealed in each link of the chain of events that led to our dismissals, particularly that the ‘evidence’ on which the [independent review team] made its findings is questionable, that the DRD inappropriately influenced a number of key findings and that nothing in the report justifies the decision to dismiss four out of the five non-executive directors.”

  • Malairt, many thanks for providing additional clarity to the conversation. I’d spotted the confused labelling of the Commercial Director’s position in the Executive Team minutes. My reference to 1999 flows from my misunderstanding; I withdraw it.

    Can you shed any additional light on the restructuring process? I presumed it would have warranted a mention in the ET minutes alongside a mention of the final ET meeting. EC replaced ET and its first meeting is referred to in the heavily truncated Executive minutes.

    References to the Commercial Director and to Contracting Out which appear in official documents that are in the public domain IMO ought to be amended/struck out where they are demonstrably incorrect.

  • Minister Murphy has made a small correction to an answer he provided two weeks previously:

    Mr T Elliott asked the Minister for Regional Development to detail (i) when exactly he became aware of Philip Holder having applied for the position of the Chair of NI Water; and (ii) whether he informed the First Minister or deputy First Minister of a potential risk of conflict of interest.

    (AQW 4130/11)

    Minister for Regional Development: (i) I became aware of Philip Holder having applied for the position of the Chair of NIW on 21 May 2010. (ii) Yes, I recently wrote to the First Minister and deputy First Minister to advise them accordingly.

    has been changed to:

    (AQW 4130/11)

    (i) I became aware that Philip Holder had been considered for the position of the Chair of NI Water on 21 May 2010. (ii) Yes, I wrote to the First Minister and deputy First Minister on 12 January 2011 to advise them accordingly.

  • McLaughlin – SDLP deputy Leader compromises PAC Investigation into NI Water procurement procedures.

    Here’s part of the exchange in the chamber today:

    “The Minister for Regional Development: The report clearly confirmed that there was a culture of disregard for procurement processes in NIW, which led to serious failings in procurement procedures totalling £46 million. That was not challenged by the Public Accounts Committee. I think that this is a matter on public record, although I am unable to respond in any great detail.

    Members of the Member’s party sat on the Public Accounts Committee. I am surprised that no conflict of interest issues arose as a result of that, because while two of her party colleagues sat on the Public Accounts Committee, they continued to lobby for the reinstatement of directors who were dismissed as a consequence of a report that established that there was a culture of serious disregard for procurement processes. That has not been challenged by the Public Accounts Committee. In light of that, I am not sure how her party has the brass neck to continue to lobby for those directors to be reinstated, and I would question, in relation to —

    Mr McDevitt: No apology, then?

    The Minister for Regional Development: Mr McDevitt is asking for an apology.

    Mr Speaker: Order. Allow the Minister to continue.

    The Minister for Regional Development: I think that Members who sit on a Public Accounts Committee inquiring into these matters, while privately lobbying for the very people who are the subject of the inquiry, should perhaps owe an apology to the other members of the Public Accounts Committee.”