Pat MacFie, co-founder and major shareholder in We Are Indigo, which was recently awarded a $5.3 million four-year contract. Photo / Supplied
Creative New Zealand has awarded a digital services contract worth up to $5.3m to a subsidiary company of We Are Indigo, despite two reports on the firm which led Crown agency Callaghan Innovation to reject Indigo from bidding in a request for proposals earlier this year.
The contract appears to be We Are Indigo’s largest ever public contract; it was awarded to the firm’s newly formed subsidiary, Toi ki Tua, to establish and deliver “a new Digital Arts Commissioning and Capability Service”, according to Creative NZ (CNZ).
The service aims include helping both artists and arts organisations to: safeguard intellectual property; increase their reach with audiences and help monetise their work through digital platforms; and, provide training and skills development.
A more specific plan is to be established by Toi ki Tua in consultation with the arts sector.
Indigo is a digital agency, controlled by former Icehouse head Andy Hamilton, former Xero executive Pat MacFie and sportsman Monty Beetham.
CNZ said its contract with Toi ki Tua has an initial term of 19 months (from December 2, 2022, to June 30, 2024) worth $2.0275m. This funding is derived from the Covid Response and Recovery Fund.
The agreement also includes a right to offer Toi ki Tua an extension for a period of 31 months from July 1, 2024, to January 31, 2027, worth a further $3.3075m. The extension is at CNZ’s sole discretion. All figures exclude GST.
The Art’s Council, CNZ’s governing body, and a Crown corporation made the announcement on Tuesday afternoon, and in conjunction, it took the unusual step of releasing some 49 pages relating to its procurement and decision-making process.
CNZ did not approach Callaghan Innovation to discuss the due diligence reports Callaghan had commissioned on Indigo (also referred to as Manaaki) because, “both the report and Callaghan’s handling of it were (and remain) matters of contention”, the CNZ documents state.
Neither did CNZ seek any advice from government procurement at the Ministry of Business Innovation and Employment (MBIE), to which Callaghan provided both reports in June.
Callaghan has declined to release the reports publicly under the provisions of the Official Information Act on grounds that include the likelihood that they “unreasonably prejudice the commercial position of the person who supplied or is the subject of the information”.
The reports are now the subject of a complaint to the Ombudsman.
CNZ documents said, “[the agency] believed it had and continues to have sufficient information about the issues surrounding the Callaghan Innovation report.”
CNZ’s own due diligence on Indigo involved speaking to two referees provided by Indigo, one of which was MBIE; however, the discussion, which took place on October 7, was limited.
“At the outset of the discussion, Creative New Zealand advised MBIE that the purpose of the reference check was solely to canvass We Are Indigo Ltd’s performance as a supplier to MBIE in relation to its work on Digital Boost, and not to discuss the (then) recent NBR article,” the CNZ documents state.
“In the course of the discussion, MBIE alluded to the allegations set out in the NBR article, including that MBIE was aware of tension in the relationship between We are Indigo and K&J Growth regarding their payment dispute (which had subsequently been settled between the parties)” the documents say.
The parties appear not to have discussed the Callaghan due diligence reports directly.
A June NBR article referenced Callaghan’s due diligence reports and detailed several alleged business disputes Indigo had been involved in.
CNZ chief executive Stephen Wainright said in a statement that a “comprehensive contestable procurement process” was held to award the digital services contract to Indigo’s Toi ki Tua.
The process included a call for Registrations of Interest, shortlisted respondents were invited to submit to a Request for Proposals, and these were assessed by an evaluation team of both internal and external members.
The timeline released by CNZ shows that the contract signing was deferred at the beginning of November while further information was prepared by the Arts Council’s Audit and Risk Committee.
At the time, a number of media reports and social media posts described the dispute that was unfolding between Callaghan and Indigo.
By November 22, the Committee concluded that the “[CNZ’s] due diligence process was thorough, and there is no reason to revisit the Arts Council’s 19 October 2022 decision to sign the agreement with Toi ki Tua”, the agency’s timeline shows.
“Of all the proposals received, Toi ki Tua consistently ranked highest and aligned most closely with Creative New Zealand’s strategic goals for the digital service. Toi ki Tua were chosen not just for their technical expertise in digital delivery, but for their commitment to Te Tiriti o Waitangi, positive outcomes for Māori artists, Pasifika artists and representation of underserved communities. I know they look forward to connecting and working with the arts sector to establish the service,” Wainwright’s statement said.
The Herald has been provided with partially redacted copies of Callaghan’s due diligence reports.
The first report is preliminary and the second expands on the first. The reports contain both testimony and descriptions of business interactions and dealings supplied by parties who have worked with Indigo. The second report also contains a third party description of concerns.
Indigo has been asked to respond to the allegations made. It has not yet supplied a response.
Lawyer for Indigo, Michael Heron KC, told the Herald he considers that the Callaghan due diligence reports contain false and defamatory information.
In a report published by the Herald’s sister news site BusinessDesk, Indigo director Andy Hamilton contested the process by which Callaghan conducted its due diligence on the firm.
His objections included that Indigo was not interviewed by the investigator hired by Callaghan to produce the due diligence, and that a conflict of interest existed between the investigator and a number of the parties he interviewed.
Last month Callaghan released an EY report it commissioned to review the due diligence work, conducted by consultancy Isacorp, concerning Indigo.
That report found, “no significant deficiencies to address in the due diligence process performed by Isacorp that would have changed the outcome of the process and decisions made because of the process followed”.
Its scope precluded consideration of whether any conflict of interest was present.