Honeywell contract not disclosed

PHIL KITCHIN
Last updated 05:00 23/12/2010

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The Corrections Department did not disclose a huge contract it gave to a giant multinational company to Parliament's law and order select committee because it claims the contract is not to a contractor.

The revised undisclosed contract is among hundreds worth tens of millions of dollars Corrections has with consultants and contractors that were not tendered. One of the biggest contracts is with multinational technology and security firm Honeywell. The department says Honeywell provides services and maintenance but is not a contractor.

Several former Honeywell employees work for Corrections. At least two manage the contract and approve payments to Honeywell.

Documents obtained by The Dominion Post show the contract is for the design and supply of electronic security services. The biggest part of the contract is providing new security systems. Former Honeywell staff are also working for Corrections on its troubled cellphone-jamming project.

The law and order select committee asked last year and this year for the names of all contractors and consultants used by Corrections but Honeywell was not on the list. The company's contract with Corrections is worth millions. It was first signed in 2004 and re-signed last year without going to tender.

How Corrections deals with the Honeywell contract is part of a bigger picture of Corrections' handling of private-sector contracts.

Analysis of all other Corrections contracts provided to the select committee for the year 2009-2010 shows 80 per cent were not tendered.

More than $19m of work went directly to selected firms and 44 contracts not tendered were each worth more than $112,500.

Another 58 contracts that were not tendered were worth between $56,000 and $112,500.

Guidelines from the auditor-general say government departments should openly tender for all contracts if there are several potential contractors or consultants. For middle- to high-value contracts, departments should justify why they haven't tendered jobs.

A significant number of the Corrections contracts not tendered went to firms without unique skills – such as law firms, consultants and recruitment agencies.

Corrections' system improvements and projects director, David Linstrom, said best-practice and mandatory rules were followed.

Some contracts spanned many years and could be rolled over, so it might appear work had not been tendered but the contract had originally been tendered, Mr Linstrom said.

Honeywell was not listed as a contractor because its work put the firm in a "services/maintenance" category and not a contractor or consultant category.

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The revised Honeywell contract is due for tender next year but Mr Linstrom declined to say how much the contract was worth.

Corrections Minister Judith Collins said the department's complex projects needed to use the "very best private expertise" for short periods of time.

The department had systems for appointing contractors and consultants and "it is my expectation these are followed". Its procurement systems were "more rigid" than other government departments, Ms Collins said.

Providing a list of contractors to select committees was done to ensure transparency and openness, she said.

A Honeywell spokesman declined to comment.

ONE-MONTH CONTRACT WORTH $140,000

A multi-national consultancy firm that earned more than $5 million from the Corrections Department last year got a one-month contract worth $140,000 to audit the department's electronic monitoring systems.

Deloitte consultants got the contract without it going to tender after the firm had received more than $2m worth of other contracts, also not tendered, in the 2009-2010 year.

Corrections told Parliament's law and order select committee the $140,000 contract was a lump sum for an "independent" audit of procurement processes and "assurance tender electronic monitoring".

Yesterday the department said it was not an audit of procurement processes but an audit of electronic-monitoring provider systems.

The contract was not tendered because the audit needed to be done immediately, the department said.

Deloitte also got a four-month contract, not tendered, to supply an acting corporate finance manager worth $156,000, or $2025 a day.

Another six-month contract not tendered, worth $77,000, or $1800 a day, was to provide a business service manager till Corrections could recruit a replacement.

The previous year Corrections gave the firm four similar contracts to temporarily fill staff positions worth a total $469,000.

A Deloitte spokesman said Corrections was handling media inquiries.

- The Dominion Post

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