Questions raised over Deloitte

TOM PULLAR-STRECKER
Last updated 05:00 04/03/2013

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Deloitte acted as the strategic adviser to Housing New Zealand Corporation over a $92 million technology overhaul and then tried to prevent the public finding out it had picked up a subcontract to implement part of the new system, a Fairfax investigation has found.

Deloitte and Housing NZ maintain Deloitte had no role in selecting the supplier, Oracle, which later subcontracted the consulting firm, so there was never any conflict of interest.

The consulting firm acted as the strategic adviser and "stage one procurement adviser" to Housing NZ on its controversial Enterprise Transformation (ETP) project, which was completed $20 million over-budget last year, before then working for Oracle to implement the system.

Deloitte was one of several consultants which helped Housing NZ put together a business case published in March 2010 that recommended the corporation replace its Rentel and TechnologyOne software systems with new software supplied by Britain's Northgate and US firm Oracle.

But a Deloitte spokeswoman said it was never involved in the actual selecting or evaluating of software vendors so there "had never been a conflict of interest with regards to Deloitte supporting Housing NZ in implementation activities". Any allegations to the contrary would be factually incorrect, she said.

Deloitte had sought to prevent the subcontract becoming public as a "matter of global policy", she said.

Housing NZ planning manager Philippa Jones said the corporation also did not view the subcontract as a conflict of interest as the software selection process had been overseen by another consultant, PricewaterhouseCoopers.

Although Housing NZ's business case identifies Deloitte as its stage one procurement adviser, Jones said the company was "not in any way, shape or form involved in the selection of the vendors".

She later clarified that Deloitte had prepared and planned the procurement process, developed procurement tools and templates and co-ordinated the development of the ETP's request for proposals. Deloitte elected not to comment on this aspect.

The corporation initially turned down a May 2011 Official Information Act request seeking the identity of Oracle's subcontractors. However, following an appeal to the Ombudsman, it has now revealed Deloitte was one of three firms that subcontracted work from Oracle on the ETP project.

Housing NZ told Fairfax in September 2012 that the third subcontractor, now known to be Deloitte, had refused to give its consent for its identity or the work it did for Oracle to be made public.

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Jones initially said that Housing NZ only became aware Deloitte was the third subcontractor this year, as result of the Ombudsman's intervention.

However, a day later she "clarified" that in a statement, saying it was aware of Deloitte's subcontract at the time it turned down the initial OIA request in 2011.

"We have no issues, and have never had any issues, with this information being released. We believed it wasn't our information to release. We're happy with the Ombudsman's decision," Jones said.

Housing NZ did not know the value of the subcontract but assumed it was only a small proportion of the ETP's total contract value, she said.

Deloitte helped Oracle implement Hyperion, a planning and forecasting tool that Jones said represented less than 10 per cent of the overall ETP system.

The ETP project has been under the spotlight since several whistleblowers approached The Dominion Post in 2010 claiming the project - and the replacement of TechnologyOne's financial software with Oracle software in particular - would be expensive and unnecessary.

TechnologyOne operating officer Roger Phare said then that its software had recently been upgraded, and that in his view replacing it was "ludicrous".

The newspaper has also revealed:

A Housing NZ evaluation panel recommended a different company be appointed its strategic adviser, but was over-ruled by senior managers.

Following a claim that Housing NZ corporate services director Roy Baker was a relative of a senior manager at Deloitte, former Housing NZ chairman Pat Snedden called then housing minister Phil Heatley to assure him any conflicts of interest had been properly managed. The conflict of interest had been declared.

Housing NZ awarded Deloitte a separate, unrelated $750,000 consulting contract following a closed tender in which only one other firm was invited to bid.

Four Housing NZ executives, including Baker, left the corporation in 2009 and set up a private consultancy that named the ETP's British software supplier, Northgate, as a partner.

Snedden and McTurk have also since left Housing NZ.

The ETP project has seen Housing NZ switch to dealing with routine inquiries from tenants by phone and axe a net 70 fulltime positions from its tenancy services division. Tenants now need to call a contact centre to make an appointment to see a tenancy manager to discuss any non-routine matters.

The transformation got off to a poor start in May last year when phone inquiries from people checking their eligibility for state housing clogged up its contact centres, leading to long call-waiting times and forcing Housing NZ to hurriedly hire extra call centre staff.

A claim in Housing NZ's 2010 business case that the ETP project would save the corporation $240m over 10 years was questioned by Labour's housing spokeswoman at the time, Moana Mackey, who labelled it "astonishing".

But Jones said Housing NZ was seeing financial benefits. The corporation now employed 952 fulltime equivalents, 130 fewer than in April last year. It was also seeing benefits from better rent-setting and tax management, though Jones accepted these could be difficult to validate and attribute back to the ETP project.

Citizens Advice Bureau policy analyst Andrew Hubbard said it was difficult to say whether the service Housing NZ provided to tenants had got better or worse. Some clients did feel the "loss of local knowledge" that resulted from the decision to make call centres their first point of contact, he said.

SMALL FIRMS 'WILL BE HURT' BY CONTRACT CHANGES

The Ministry of Business, Innovation and Employment tweeted this month that it was considering establishing "all-of-government" contracts for consulting services.

That would shake up the sector by encouraging government agencies to purchase consulting advice under fixed terms from an approved list of consultants.

Similar contracts have been introduced to procure a wide range of services from computers and vehicles to legal advice and travel.

One industry executive said he feared extending the change to consulting would be a blow to smaller consultancies and sole traders, in the information technology sector in Wellington in particular.

All-of-government contracts were "pretty clinical" and many small consultancies had taken big risks to set themselves up and develop a customer base, he said.

- © Fairfax NZ News

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