Two contracts for water treatment plants, valued at more than $400,000 and awarded to a cake decorating company, which also got an $8.5 million contract for a sewerage plant at Franz Josef, have been put on hold by the Westland District Council.
After the issue was exposed yesterday by Fairfax and former Guardian reporter Julian Lee, Westland Mayor Bruce Smith confirmed the council was seeking legal advice but assured people that no money had changed hands.
The tenders to upgrade the Kumara and Whataroa water treatment plants were let in January to Auckland-based Techno Economic Services.
In the same month, council chief executive initiated a Serious Fraud Office (SFO) investigation against her manager Vivek Goel, who was responsible for waste, water management and other assets.
Techno Economic Services, reported to be a specialist cake-decorating business in South Auckland, is also behind the sewerage plant contract that Goel pushed through last year for Franz Josef Glacier.
However, that proposal was later thrown out by the incoming council.
Smith said he raised concerns about the company as part of his overall objection to the multi-million wastewater treatment plant proposal while running for the mayoralty.
"I was concerned that an unknown Indian company with no experience in New Zealand or Australia could end up with such a lucrative contract," the mayor said.
In November, the newly elected council kicked out the project in favour of a $1m oxidation pond upgrade.
However, the new council still awarded Techno Economic Services both contracts, worth a combined $401,800, for the Kumara and Whataroa water supply upgrades, in January.
Tender documents show it was one of 49 companies that initially expressed interest in the work, later whittled down to five.
Smith said a "robust tender process" was followed, involving independent engineers as well as councillors and council staff, including Goel.
"Red flags" were raised, which led the council to set a higher than normal bond of $100,000. It had concerns it was dealing with an unknown company.
"The mere fact that they insisted on a substantial bond... when it's very unusual to even have a bond, shows there were red flags," Smith said.
However, at the same time it was not unusual for companies outside of New Zealand to try to break into the market, he said.
The bond had not been paid.
The council was waiting on legal advice to determine whether it continued with the contracts. If not, it would go to the next best tender as soon as possible so as not to delay the works.
Until recently Kumara had been on a ''boil water'' notice. The untreated scheme serves about 310 people and dates back to the 1930s.
Last year the council secured a $270,000 government subsidy to help with the upgrade, which will treat the water to current standards.
The bore-fed Whataroa plant has also been included in the tender to ensure Ministry of Health drinking-water standard compliance.
Meanwhile, the SFO is continuing to investigate Goel's activities, who has not been at work since February. His Kaniere Rd home has been put on the market. Smith said the council was still in the dark about the nature of that investigation.
"We as councillors and myself as mayor have not been briefed on the issues in relation to the SFO investigation that the chief executive initiated in January."
At the time, a short statement was issued saying matters had been brought to the council's attention that were "a cause for concern" and had been referred to the SFO to investigate.
Winter did not respond to comments yesterday on Goel's employment status with the council. She also did not answer questions about whether the council was aware of Goel's background, which allegedly includes a string of failed businesses and a bankruptcy before he joined the executive team.
According to Fairfax, his companies, originally based in Auckland, included Goel Holdings, Anvik Liquor, Sai Super Mart and Sai Aden Investments. In February 2006, he declared bankruptcy and all his businesses were liquidated. Smith said if that was true he was "staggered".
Despite the "things that were popping up" it was still business as usual at the council, the mayor said.
"The balance sheet is in good condition, there is no money missing. It really is business as usual."
- Hokitika Guardian