National in denial over SkyCity report | The Jackal

20 Feb 2013

National in denial over SkyCity report

Yesterday, National reported:

Economic Development Minister Steven Joyce today welcomed the release of the report by the Office of the Auditor-General (OAG) into the expressions of interest process for an international convention centre in Auckland.

“The report dismisses the Greens’ claim that SkyCity was given an unfair advantage in the bidding process. The OAG makes it clear it has seen nothing to suggest the final decision to negotiate with SkyCity was influenced by any inappropriate considerations,” Mr Joyce says.

Boy that's a relief! We can all sleep better at night now that Steven Joyce says the government did nothing wrong! According to him, the Office of the Auditor-General's report (PDF) says that there was no advantage given to SkyCity... Thank god for that.

However today, the NZ Herald reported:

While the report revealed SkyCity was treated "very differently" to other bidders, Prime Minister John Key said it "utterly refuted" allegations his Government had struck a "cosy deal" with SkyCity. He blamed officials for "a few procedural matters" but said there was "nothing of substance that would have changed any of the outcomes".

The process problems identified by Deputy Auditor-General Phillippa Smith emerged in the report from the time the Prime Minister - also Tourism Minister - became personally involved. In August 2009, Mr Key told officials to halt a scoping project on a convention centre proposal to "close off the SkyCity angle". He later explained he had a "broad awareness" SkyCity had development plans.

Mr Key's understanding of the casino's desire for development followed a meeting between himself and SkyCity executives although neither Mr Key or the casino "can recall the discussion" on May 14, 2009. There was also a later meeting between the casino and the Prime Minister's chief of staff Wayne Eagleson on June 17, 2009, at which development was discussed.

So John Key has failed to provide the Auditor General with all the relevant details, once again using plausible deniability to get himself off the hook.

After the PM halted the scoping project, SkyCity met the PM's senior advisers in September 2009 who said they wanted changes to the Gambling Act which had previously stymied the casino's expansion plans by limiting the number of pokies and other games allowed.

Then Mr Key was briefed on options for the convention centre at a dinner with SkyCity board members and executives on November 4, 2009. He urged them to "think outside the box".
As the casino and Beehive moved closer together, Treasury began raising concerns about "process and probity".

Ms Smith said: "We have concerns about the apparent readiness of officials to support those discussions developing into more substantive negotiations without preparing to give advice on the Government's procedural obligations and options."

Warnings about process were conveyed to Mr Key in a briefing note on November 12, 2009.

In 2010, the Government began calling for an expression of interest from groups wanting the contract. At a meeting with officials, Mr Key said the SkyCity deal was "a good proposal".

However Ms Smith said the process "fell short of good practice in a number of respects". That included the fact ministers and officials continued to have contact with SkyCity to discuss its proposal.

Ms Smith said these meetings were "not appropriate" as it provided SkyCity with information other bidders did not receive. She also said the casino had the advantage in knowing the Government didn't plan on putting any money into the project, allowing it to shape its offer.

Clearly National and John Key in particular gave an unfair advantage to SkyCity by informing them of specific information that led to them winning the bidding process. That unfair advantage seems to have developed from a cozy relationship and what amounts to a conflict of interest.

The press release by Joyce and the previous claims by Key that there was nothing amiss while the report clearly confirms the Greens suspicions that SkyCity was given an unfair advantage are glaringly obvious contradictions.

With consideration to the way in which SkyCity was awarded the contract and that there's a lack of strong economic evidence for it, allowing the convention centre to go ahead would simply be wrong! But try telling John Key that.

100% comfortable? Don't make me laugh!

Today, the Listener reported on a few bits of the OAG report that shouldn't be ignored:

1. “We found a range of deficiencies in the advice provided and steps taken leading up to [the] decision.”

2. “Although decisions were made on the merits of the different proposals, we do not consider that the evaluation process was transparent or even handed.”

3. “By the time it was expected that SkyCity would put a firm proposal to the Government for support, officials should have been working to understand and advise on the procedural obligations and principles that would need to govern the next steps. We found no evidence that officials were doing so at this stage.”

4. “The meetings and discussion between the Government representatives and SkyCity were materially different in quantity and kind from those between the Government and the other parties that responded.”

5. “SkyCity was treated very differently from the other parties that responded and the evaluation process effectively moved into a different phase with one party. In our view, the steps that were taken were not consistent with good practice principles of transparency and fairness.”

6. “Overall, we regard the EOI [expressions of interest] process in stage two as having been poorly planned and executed. Insufficient attention was given to planning and management of the process as a whole, so that risks were not adequately addressed and managed.”

7. “We did not see any evidence of formal discussions or decisions on the evaluation process and criteria, or mapping out of the basic options for what might happen next, or advice to Ministers on how the process would be managed and their involvement in it. We do not regard this as adequate for a project of this potential scale, complexity, and risk.”

8. “We have concluded that the preparation for the EOI process and the EOI document, fell short of good practice in a number of respects.”

9. “In our view, the result was that one potential submitter had a clearer understanding of the actual position on a critical issue – that the Government did not want to fund any capital costs – than any other potential submitters … We accept that it is unlikely that this flaw made a material difference to the outcome. However, we have spent some time discussing it because we regard it as symptomatic of the lack of attention to procedural risks, and therefore to the fairness and credibility of the process.”

10. “We are unable to comment on the value of any contribution the Government might make as part of any eventual agreement with SkyCity, because negotiations have not yet been concluded.”

Here's a part of the Auditor General's summary:

Given this complexity, we were surprised to find that there was no documented analysis or advice on the process that needed to be followed from a procurement perspective, or any systematic consideration of the relevant principles and obligations that should guide the steps taken. In our view, those involved had a strong focus on the need to manage the difficult relationship between the commercial issues and the policy and political decisions that were needed, but too little focus on the disciplines that should govern commercial decision-making in the public sector.

The reason proper process wasn't followed is because Key had already made up his mind to award SkyCity the deal... There was therefore no reason for the Government to be disciplined in their decision making process. However the use of public money and changing our laws to suit private business interests should always be undertaken with the utmost care.

In my opinion, there were inappropriate considerations made by the Prime Minister because he had given SkyCity an advantage no other bidder's were offered, and that advantage leading to the contract being awarded to SkyCity is obviously highly inappropriate.

Couple those undeniable facts with the detrimental changes to New Zealand legislation demanded by SkyCity and one has to conclude that the wheels are falling off Keys plan for a gambling mecca in Auckland... National and their supporters seem to be the only ones who haven't noticed.