Hamilton City Council started a $12.88 million upgrade of its computer systems without properly proving its software component was value for money, an Audit New Zealand report has found.

Lyn Daken, associate director of specialist assurance services at Audit New Zealand, recommended the council review, and formally document, the process used to demonstrate that the recommended assets solution procurement represented value for money.

She also recommended that where a sole source procurement is undertaken the council should follow a formal process to demonstrate that the recommendation satisfies the council's "value for money" principle.

Audit New Zealand's recommendations are in line with the UK Government-endorsed PRojects IN Controlled Environments 2 (PRINCE2) structured project management method for public projects that is used around the world.

"Although the business case includes a discussion of why the sole source approach has been recommended, we did not see a description of the process that would be used to determine whether the procurement met Hamilton City' Council's value for money procurement principle," Ms Daken said.

Council general manager of organisational development Oliver Te Ua believed the council had already met the recommendations. "We feel that we have actioned that in the council reports," he said.

The report comes four months after a whistleblower, formerly employed by the council, told the Waikato Times the upgrade could be costing ratepayers double what it should and website companies claimed a $2.32m gold-plated website being built as part of the project should have cost hundreds of thousands and certainly not millions.

Ray Stark, executive chairman and sole shareholder of Hamilton-based interactive messaging company Talkingtech, said: "I think there's a better way to do business in this country.

"The council has got to remember that the hard working ratepayer is not an ATM machine. That's what they really believe we are and we are not."

The council whistleblower wasn't surprised to see the recommendations go before council yesterday.

"It's standard procedure when you do anything in the IT world that they did not follow," he said. "It's the standard way that you do stuff."

Dave Blyth, chief executive of Auckland-based Webdesign, said: "It's good Audit New Zealand has said that. The council's culture, more than anything, has got to change."

Shaun Ross, director of Electric Escape Web Design in Christchurch, who was previously critical of the council spending $2.32m on a gold-plated website as part of Project Phoenix, said: "The sole source procurement doesn't sound right at all, especially for a job of that size. For that sort of cost, it needs to be fully documented and shown that Hamilton City Council will get value for money."

Mayor Julie Hardaker asked the recommendations be forwarded to the audit and risk committee to ensure they were implemented.

Councillors also sought assurances from staff that the latest tranche of Phoenix-related contract work, which will not be competitively tendered, represented value for money. Staff outlined the process and said they were confident the work, worth about $250,000, was good value.

Project Phoenix, which was initiated in 2009 and is due to be completed in 2013, has so far cost the ratepayer $5.24m.

chris.gardner@waikatotimes.co.nz

- © Fairfax NZ News

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