A Wanganui building firm is taking legal action against Whanganui District Health Board, claiming its tender process for work on the Te Awhina mental unit was flawed and alleging there may have been a conflict of interest among some of those involved in the selection process.
Background to the legal challenge has come to light after the Chronicle sought details about the contract from the WDHB under the Official Information Act.
In correspondence released to the Chronicle, the board has deleted names of some individuals and companies involved, citing sections of the Act. And the company principal taking the legal action said he had agreed with the WDHB that no information would released which identified the parties.
In November, the Government signed off a $3.2 million upgrade for the acute in-patient mental health unit at Wanganui Hospital. The rebuild was due to start last month and be completed by July 2012.
The tender was advertised on the Government's electronic tender services website, asking suitable builders to submit a registration of interest (ROI). Six ROIs were received and from them four were chosen to submit tenders for the project. Ultimately three of the four builders put forward tenders.
Julie Patterson, WDHB chief executive, said a panel reviewed the tenders and in some cases asked the builders for more information. That panel included Brian Walden (WDHB strategic and corporate general manager), a quantity surveyor and an architect. Their evaluation was then passed on to the sub-committee of board chairwoman Kate Joblin, the board's risk and audit committee chairman Michael Sewell and Mrs Patterson.
But on December 21, the builder wrote to board member Ray Stevens outlining his concerns.
After receiving the letter, Mr Stevens emailed Mrs Patterson (December 17) asking for an explanation.
He later acted as an advocate for the aggrieved contactor at one of the meetings with board management but told the Chronicle that his involvement was now deemed to be a conflict of interest.
"But if conflict is determined by who I know or who knows me, then that means I can't represent the several thousand people who voted for me in the local authority elections either," he said.
"I'm not doubting the ability of any of the contractors involved here. But what I'm concerned about is the transparency of the process and the fact the lowest price was not accepted.
"If I have to declare any conflict of interest then the same must apply to any party involved in this tender process because without it the perception does not look good."
He said in terms of spending the health dollar, the contract should have gone to the lowest conforming tender.
"When we talk about quality, one of the [unsuccessful] bidders has just finished [the contract] for one of the country's largest health providers at a cost of over $5 million and quality was not an issue," Mr Stevens said.
In an email to board chairwoman Kate Joblin (December 20), he said he understood that the contract had been let to the contractor who was doing an alteration at the home of the architect for the (Te Awhina) project.
"This has serious implications and as a board member I have responsibilities to this board for the health dollars expended," he said.
Later that day Mrs Patterson sent an email to board members saying she was very concerned about the "very serious allegations" being made which not only impugned the contractors and successful tender "but also the integrity of senior staff, our process and our decision-making panel".
Two days later Mrs Patterson sent out a report explaining that selection criteria for the Te Awhina tender.
She said tender price made up 40 per cent of the panel's overall assessment criteria and the three prices submitted were spread across $166,000 (from highest to lowest). The middle price was $71,000 higher than the lowest while the highest price was $95,000 higher than the middle price.
She said the contract was decided not only on price but also involved an evaluation criteria that looked at relevant experience, reference checks, people and resources, the planning and organisational capability and prices put in by the three builders.
"The general manager [Mr Walden] was made aware some months ago that [name deleted] was adding an extension to [name deleted] residence, a home originally constructed by this contractor. This was noted and considered by the general manager and not deemed to be material," Mrs Patterson said.
She said she had reviewed the tender process and was satisfied the integrity was to an appropriate standard and in line with guidelines from the Office of the Auditor-General.
Her view was that the board did not need to spend about $10,000 commissioning an independent investigation.
"However, if it is the board's view that the probity of the process is lacking then clearly an independent investigation should be commissioned," she said.
In the wake of the Chronicle's OIA request, Mrs Patterson said the tenders were assessed against a range of criteria to establish the most suitable builder to undertake the contract works. The result of the selection process was then reported to a board sub-committee which then made the decision to award the contract. In the end the second lowest tender was awarded the contract.
She said none of the people involved in the assessment or selection process declared any conflicts of interest.
On January 10 board representatives met the builder upset his tender had not been accepted to explain why.
Mrs Patterson said the board was not obliged to accept the lowest price of the tender.
"Price alone could not be the sole determinant [as this] is a complex four-stage development over 38 weeks in an acute mental health facility that must continue to operate," she said.
She said the major rebuild of the Wanganui Hospital posed a challenging environment for the contractors and "if the contractor we selected did not perform well then operational problems for the board and associated costs could easily outweigh a difference in construction price".
For that reason she said the ability of the successful contractor to perform in an operating hospital environment was an important factor in the evaluation.
The Chronicle was refused details of the successful tender price.
The contract is due to start on February 13.