19 December 2005
Ministry of Health says Office of the Auditor-General report is useful
The Ministry of Health is pleased with the findings of an audit showing Ministry staff acted properly in their dealings
with a company led by former staff members, but believes there are some areas of Ministry contracting that continue to
be improved.
Director-General of Health Dr Karen Poutasi says the Ministry takes very seriously its responsibility to be a safe and
trusted guardian of public funds to ensure that it gets good value for money from all Ministry's activities.
Dr Poutasi says that's demonstrated by a concerted effort over the past few years to improve contracting and internal
processes used by the Ministry. We established an internal Contract Management project two years ago; the first part of
this project focused on contract monitoring and was completed earlier this year. The second part of the project - a
major review of contract management policy including procurement has recently been completed.
A key finding in the audit was that although the Ministry generally followed good process, it did not always document
this in a way allowing this to be easily verified. This will now be much easier through the Ministry's proposed new
electronic filing system for contracts, which is a further initiative, expected to be in place next year.
"We have either put in place or are putting in place mechanisms which fulfill the recommendations of the report."
Dr Poutasi says the Ministry's move towards continuous quality improvement in its contracting was recognised by Audit
New Zealand in its latest report:
?Contract management and monitoring continued to be significant areas of focus for the Ministry. The Ministry has
enhanced the contract control environment with a number of recent initiatives, including quarterly reporting to the
Audit, Finance and Risk Committee and consolidating work into the Contracting Support Office. The Ministry?s Risk and
Assurance function is involved with monitoring Directorate performance, and ensuring compliance with good practice in
this area. No significant issues were noted during our review of a sample of NGO contracts?.
Dr Poutasi says the Ministry recognises the significant value brought by contracting out expertise in specialist areas.
"Increasing specialisation in health means that it isn't possible to employ specialists in every area. Even if this were
possible, it would be far too inefficient in practice. Contracting in that expertise means that we are able to have
policy advice that we know will work in the real world, because we are able to use contracted staff who have worked in
these areas."
By way of example, Dr Poutasi says the award winning campaign to reduce the public stigma attached to mental illness,
the 'Like Minds, Like Mine' campaign, only maintains an administrative toehold within the Ministry and is almost
exclusively contracted out.
This happens to greater and lesser degrees across the breadth and depth of health programmes from suicide prevention, to
smokefree legislation and healthy eating and healthy action.
Dr Poutasi says, like our overseas counterparts, we work across a wide range of issues, and we need to ensure that we
work from the best evidence base available. That means tapping into external skills and experience in research, surveys,
analysis and evaluation which are the foundation stones of best practice health programmes.
"New Zealand has an incredible pool of talent available, its just limited by our size. Our task, particularly in health,
is to make the most efficient use of that expertise, which we do through a mix of advisory committees, peer review,
secondments and contracting."
"One thing is clear - developing, negotiating and managing contracts is a skill similar to managing staff and its an
area where improvements can always be made. We have put major effort - commencing prior to the Office of the
Auditor-General audit - into improving our contract management across the Ministry as a whole."
Dr Poutasi says the goal underlying these moves is acknowledging that strengthened contracting provides the best
opportunity to improve population health and reduce health inequalities.
"We are constantly mindful of the need to steer a path between building our own capabilities and being able to access
skills and expertise from the sector to complement those of our own.
It's clear that the Ministry focus needs to balance not only delivery on the task being contracted out, but the process
we use for doing that, and ensuring we have good systems in place to record what we've done. This report is a useful
reminder of the importance of all those steps.
Key activities the Ministry has put in place to improve its contracting processes include:
a. Developing competency statements for the specialist competency of contracting
b. A complete review of our procurement and contracting policies, procedures and guidelines. There is now one set of
statements applying to departmental and non-departmental expenditure
c. Transferring the project work (on improving contracting) of the last 2-3 years into a newly formed Contracting
Support Office, so that the progress that has been made will continue and have a clear profile within the Ministry
d. Altering the responsibilities of the steering group responsible for the contracting and procurement projects so that
it is now responsible for the work programme of the Contracting Support Office, and for maintaining the refreshed policy
statements (under the overall governance of the Executive Team)
e. Developing and implementing contract monitoring standards
f. Developing and delivering training on the basics of contracting and procurement, negotiation, and on monitoring
contracts; and requiring all contract managers to take these courses
g. Reviewing the levels of support available to contract managers in terms of contract monitoring; we are currently
assessing a high level business case for implementing an electronic procurement and contracting system for
non-departmental expenditure.
The work programme of the Contracting Support Office for the next two years will build off the work that has already
been performed, with an increased focus on applying policy in practice. A trainer has been hired to round-out the
current training, so that it covers all aspects of the procurement and contracting life-cycle and accounts for the
practices that are unique to the Ministry (such as s.88 contracting and Crown Funding Agreements with DHBs). This
trainer will work with the Syndicated Procurement Unit of the State Services Commission.
A project manager is also being hired to work on the implementation of the new contract management system for
departmental expenditure contracts, as well as other projects that will enhance contracting practice. These are key
appointments to the Contracting Support Office.
ENDS