SkyCity stench demands restart

No corruption but a corrupted process.

And because in politics process can never really be separated from product, the Government ought to put its talks with SkyCity on hold pending a more open tendering process.

That's the only way to restore public confidence in the process and blow away the fetid smell that now hangs around the plans for a convention centre-for-pokies deal.

Deputy auditor-general Phillippa Smith has delivered a deeply-troubling report on negotiations between the government and SkyCity.

As has become the norm with such reports, the damage is in the detail, not in the relatively anodyne conclusions.

Prime Minister John Key and his ministers have been trumpeting the money- paragraph from their point of view: "We have seen no evidence to suggest that the final decision to negotiate with SkyCity had been influenced by any inappropriate considerations" - such as connections between political and business leaders.

That rules out corruption - no "brown envelopes passed under the table" as Labour leader David Shearer put it.

But Smith also found a range of deficiencies in the process and in "the steps that officials and ministers took" on the way to their decision to negotiate with SkyCity.

Given that broad finding - combined with the evidence SkyCity had the inside running on the Government's thinking and preferences - it stretches credulity beyond breaking point to claim that it and its ministers were exonerated by the report.

The report does not make clear - and the auditor- general's office seems not to have asked - why officials pressed on with a process that they should have known was flawed, especially considering SkyCity's proposal was ranked last of the five proposals initially assessed by officials in 2010.

Smith does express surprise at finding there was was no documented analysis or advice on the process needed, or any "systematic consideration of the relevant principles and obligations".

But why were officials so blinkered? Were they overly concerned to meet the obvious preference of their political masters without due attention to proper process?

The impression is that there was far too little focus on the principles and rules that should apply to commercial decision-making in the state sector, and far too much attention paid to the political wish-list.

Officials were explicitly warned early on by Treasury to seek advice on the probity of the process from the auditor-general, and that was also passed on to the prime minister. And yet?

To his credit, then- economic development minister Gerry Brownlee in early March 2010 opined that "too many people [are] talking to SkyCity", and Key's chief of staff, Wayne Eagleson, said he was happy to "step back" - although he had two more meetings with SkyCity later that month.

Despite the furious spin by Key and his ministers, the report uncovers serious concerns.

"Public sector agencies need to be able to demonstrate that decisions are being made on the merits of the proposals and that nobody is given an unfair advantage. These basic steps help protect against allegations of favouritism."

Those are Smith's words in the report and it is clear that the process neither removed any sense of favouritism nor removed the impression of favouritism.

Slipping information about the Government's plans to one bidder, giving it more time and indulging in talks about how proposals can be modified, while leaving other potential bidders in the dark, has no place in the public sector.

Unequal access to information is one of the main risks in any procurement process, the report notes.

Yes, in the view of the auditor-general's office, financially constrained governments will increasingly look for new and creative ways to collaborate with the private sector to achieve their goals.

"As a result we would expect more initiatives that test the boundaries of established ways of working - including established procurement procedures."

But those rules exist for a reason: to help ensure decisions are made carefully and for appropriate reasons, to promote open and fair competition domestically and internationally, and to protect against the risk of corruption and inappropriate influence.

How does that fit with discussions between the Government and SkyCity that were "materially different in quantity and kind from those . . . with other parties".

A measured mea culpa or two from Steven Joyce's economic development ministry and from Key and his officials would be far more to the point than the rearguard action they are fighting.

And all that before the Government faces its biggest test of the whole deal - justifying changing the rules to create an uneven playing field for (and between) gambling interests, and exacerbating a social bad by boosting the number of pokie machines in Auckland.

Cash-strapped the Government may be, but Key and his ministers ought to be wondering about now whether it has all been worth it to shave a mere $350 million off its capital spending.

The Press