www.mccully.co.nz - 23 March 2007

A Weekly Report from the Keyboard of Murray McCully MP for East Coast Bays

A Killer Judgment

There are important lessons to be found in the judgment delivered by High Court Justice Raynor Asher this week in the case involving the three district health boards for the Auckland region. A $560 million contract to supply diagnostic laboratory services was found ultra vires and cancelled. And the Minister could offer no reassurance to 1.5 million Aucklanders that suitable laboratory services will be in place when the current contract expires on July 1st. Nor could he express confidence in the three boards.

The decision of the three DHB’s not to renew the contract for the existing supplier, Diagnostic Medlab (DML), and instead to award a $560 million contract to a new supplier, LabTest, was a huge leap of faith. The new company had yet to be properly formed, and would rely on hiring skilled staff from the former supplier. The new company was also the brainchild of a former Auckland Health Board director, Dr Tony Bierre, whose previous employment with the old supplier, DML had come to an acrimonious end.

The heavy fingerprints of the Government are to be found all over this set-up. The chairs of the three boards (Kay McKelvey, Wayne Brown and Pat Snedden) are political appointees as is Ross Keenan, the deputy chair of all three. Dr Bierre, the Court found, as an elected member of the Auckland Board, had played a key role in shaping the thinking of the Auckland Region District Health Boards (ARDHBs) about the type of changes they might expect in their lab services, in order to save costs. He then played a key role in shaping the tender that, unsurprisingly, won the contract – assisted by the fact that the existing supplier was not privy to the expectations and views of the ARDHBs.

Dr Bierre, the Court found, had a serious and ongoing conflict of interest. Both he and the Board had, on numerous occasions, failed in their duty to manage that conflict. Dr Bierre had also used information that he had received in his capacity as a director, to his benefit in a different capacity as a bidder for the contract. For those reasons, the Court found that Dr Bierre was not an acceptable bidder for the contract, nor should the Board have been prepared to accept any bid from him.

Further, health boards spending public money have an obligation to consult both the public they serve, and the other parties affected by their decisions. In this case the Board had failed to be open and frank with the public about changes that would result in the services they received. Neither had professional bodies (GPs and PHOs) been consulted about planned changes. And while the successful tenderer had been aware of those matters as a consequence of Dr Bierre’s involvement on the DHB, the other tenderer was not. This failure of statutory process meant the contract was ultra vires, and therefore cancelled. Which is about as serious as it can get when you consider that we are dealing with three public health boards charged with delivering health care to 1.5 million New Zealanders, chaired by three political appointees, whose actions have led to the cancellation of a half billion dollar contract.

The Ornamental Minister

But there is an important question that remains unanswered by the case. If the successful bidder behaved so inappropriately as to be declared an unacceptable bidder by the High Court, and the Board was found to be unable to accept a tender from such a bidder, and the Board was further found to have so thoroughly breached its own statutory duties that its attempt to write a contract was ultra vires and cancelled, then why the hell did we have to wait for months of High Court proceedings to get to this point?

When our Parliament passed the Public Health and Disability Act in 2000, it went to a great deal of trouble to give the Minister of Health a toolkit to deal with such matters. A very extensive toolkit indeed. Like the power to appoint directors. And to fire directors for misconduct. Or to sack a whole board and appoint a commissioner, if necessary. The Minister of Health has an overriding obligation to oversee the proper operation of the healthcare system and the proper use of public money for that purpose. And the Minister has the necessary powers to back up those responsibilities.

Here, all the key players were the Minister’s people. Each of the three board chairs and the deputy chair of all three boards. Faced with the serious allegations emanating from the Auckland region involving his appointees, the Minister had an obligation to enquire and to act many months ago.

More seriously, the “no surprises” policy will have seen the Minister of Health given the most careful of briefings over many months about plans to shift a half billion dollar lab contract, with all the risks that entails. The three boards would only have made a big call, like the one to fire DML and to hire LabTest, if they felt they had Ministerial blessing. In short, Pete Hodgson is in this mess up to his little eyeballs.

If the Minister and his officials had done their jobs, this problem would have been sorted months ago. But now the 1 July date looms large. And Health Minister Pete Hodgson is dependent upon the very people who have failed over many months, to miraculously find a solution in the space of a few weeks. And that just isn’t going to happen.

The $15 Million in Savings

Driving the change in laboratory service provider, according to the DHBs, was a belief that the change would result in $15 million in savings. Which even on a cursory inspection is absolute garbage.

The alleged savings are really a massive exercise in service reduction and cost shifting – all of it concealed from the people to whom the Board should have been responsible, and whom they had a statutory duty to inform. Trifling matters like a change in the turnaround time for a routine lab test result from 12 hours to 48 hours, cuts to pathology staff, and an intention to shift the burden of doing half the lab tests to unsuspecting and unrewarded GPs. Little wonder these matters were glossed over in the Board’s public announcements.

All of which raises further questions about the judgment of the Minister. Even an elementary glance at the ARDHBs’ alleged $15 million in annual savings should have told him that they would be reflected on the other side of the ledger by service cuts and cost-shifting. It shouldn’t have been rocket science to see that the 1.5 million Aucklanders who were to have their services cut, and the sensitive and noisy GPs who were being told to conduct 50% of the tests without compensation, were going to have quite a lot to say. And if Pete Hodgson couldn’t see that coming, then Helen Clark really does have a problem.

Still Soft on Terrorism

The Terrorism Suppression Amendment Bill is due for its first reading in Parliament next week. Standing in the name of Foreign Minister Winston Peters, whose previous interventions on this topic reveal that he has yet to read the parent legislation, the Bill will provide a useful opportunity to prod along a government that is seriously soft on terrorism.

The Terrorism Suppression Act was passed in 2002, in the wake of the September 11 attacks, and mirrors similar legislation in jurisdictions like Australia. The Act provides a range of powers for the authorities to use in dealing with individuals or groups designated officially as terrorists. Two groupings of terrorists are dealt with, according to United Nations’ resolutions. Under UN1267 the UN Security Council provides a list of Al Qaeda or Taliban-linked terrorists to be, in turn, designated by member countries. UN 1373 provides for member states to designate other (non-Taliban) threats as terrorist entities.

The changes proposed by the Amendment Bill will improve the operation of the UN1267 Taliban-related list under New Zealand law. They scrap the need for a whole lot of bureaucratic carry-on and provide for the UN Security Council list to automatically be the New Zealand UN1267 list. Currently that covers over 400 terrorist entities. They will simply stay on the NZ list until such time as the Security Council drops them off their list. The previous process for reviewing that list (something the NZ authorities had no means of doing anyway) will be scrapped.

Changes are proposed also in relation to the UN1373 (non-Taliban) list. The Prime Minister may designate terrorist entities under this section, and the Amendment proposes the removal of a process that requires the High Court to review each designation every three years. Instead, it proposes that the Prime Minister may simply decide after three years whether to renew a designation or not. Given that the Prime Minister is the Minister responsible for the SIS and in receipt of regular SIS briefings, that makes sense.

And what a dramatic impact this amendment will have on improving New Zealand’s security arrangements against terrorists. The new section will send a clear and unmistakable message that New Zealand is very very tough on terrorism indeed. Each and every one of the terrorist entities designated by Helen Clark under UN 1373 since the legislation was passed in 2002 will be under no illusions as to the foolishness of attempting to carry out their evil craft in this country. And, given that Australia has designated over 80 individuals and groups under its 1373 provision, and Canada over 50, that must send this unmistakable message out to a lot of terrorist groups in this country.

Well….no, actually. At last check Helen Clark had yet to designate a single terrorist entity under the UN1373 provision. That’s right. NOT ONE. So won’t that provide an interesting little talking point when the legislation comes before Parliament next week?

ENDS

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