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An Auckland health chief is brushing aside calls for him and others to resign over their handling of the $560 million laboratory contract awarded to a company led by former health board member Dr Tony Bierre
The High Court has cancelled the contract, saying Dr Bierre had a
conflict of interest and used inside knowledge.
Ross Keenan, a Government-appointed deputy chairman of all three health boards involved - Auckland, Waitemata and Counties Manukau - defended their actions yesterday but others refused to comment.
"I don't think I should resign," said Mr Keenan, who chairs the boards' regional grouping.
In Parliament, Health Minister Pete Hodgson appeared to distance himself from Auckland board chairman Wayne Brown.
In his ruling Justice Raynor Asher said the district health boards' failure to prevent Dr Bierre's involvement damaged the integrity of their considerations and undermined public confidence.
"[Their] failure to respond adequately to Dr Bierre's conflict of interest created the platform for Dr Bierre to use knowledge and information acquired from his Auckland District Health Board position to make a proposal when the opportunity arose."
Mr Keenan said he was shocked by the decision because Audit New Zealand had endorsed the contracting process.
He accepted the court verdict but defended those who awarded the contract.
"I don't think anybody involved in the process should resign. I accept we didn't get it right, but we have flushed out the fact that huge savings can be made if we get it right."
He was responding to National Party calls for the heads of the three boards and Mr Keenan to quit.
"I think all four have to be held responsible," said National's health spokesman, Tony Ryall.
Justice Asher ruled the eight-year contract between the health boards and Labtests Auckland, which was to take effect from July 1, unlawful.
The previous contractor Diagnostic Medlab, supported by a primary health organisation, made the High Court challenge.
Justice Asher found the health boards failed to consult PHOs and ran an unfair tender process. The unfairness centred on failures to deal with the conflict of interest affecting Dr Bierre, who became chief executive of Labtests.
The judge said the Auckland board and the regional group should have excluded him from talks on laboratories.
And they should have rejected a bid involving him because he had inside knowledge of what the boards wanted and he had influenced their thinking.
Before the health boards called for regional laboratory contract proposals, a company of Dr Bierre's was involved in negotiations with the Auckland board to finance a small, "boutique" laboratory.
Dr Bierre had declared interest conflicts in a board register, but Mr Brown said he did not know of the boutique laboratory negotiations until he received a letter from National MP Paul Hutchison in June 2005.
Mr Brown wrote a "stern" letter to Dr Bierre, stating he should "now be excluded from considerations on lab testing and the current regional process", but Dr Bierre was not excluded until December, when it became clear he intended to bid for the regional contract.
He arranged to take leave from the following month.
Justice Asher said the board was obliged to address Dr Bierre's serious conflict of interest from the time Mr Brown became aware of it.
He said the action taken by the regional boards was inadequate.
Dr Bierre had little to say last night on the judgment: "Matters are under consideration in terms of going forward. I don't want to make any comment."
Mr Brown would not discuss his chairmanship, and did not return calls.
Mr Hodgson spent much of yesterday refusing to speculate on the future of Mr Brown and his lab contract colleagues.
But in Parliament he gave a clear impression Mr Brown is in the firing line.
Mr Ryall asked if the minister recognised that the contract was declared unlawful because Mr Brown had repeatedly failed to deal with Dr Bierre's conflict of interest and that because of the chairman's "mismanagement" the Auckland health system might face huge disruption and costly legal claims.
Mr Hodgson quoted the judge's finding that the boards' action on the conflict of interest was inadequate.
"I agree with the member," the minister said.
The health boards now want to negotiate a new deal for up to 18 months, possibly involving both Diagnostic Medlab and Labtests Auckland.