Multiple poorly managed conflicts of interest, no formal procurement plan, and a failure to properly appoint a probity auditor are among the failings in the health ministry’s procurement of saliva testing in a report published today by the Office of the Auditor General (OAG).

The watchdog makes a number of damning findings and expresses “serious concerns” about the way the ministry conducted the highly controversial $60 million contract to provide saliva testing that was awarded to Asia Pacific Healthcare Group (APHG) in May.

Among key findings was that four of the five people on the panel selecting the saliva testing provider had declared possible conflicts of interest, including “past and current employment relationships with staff from potential respondents or associated laboratories”.

The OAG also caned the ministry over its approach to the appointment of a probity auditor to oversee the process, as is required by public sector procurement rules.

Instead, the ministry had a single undocumented conversation with the specialist audit and assurance team at Audit NZ and used that meeting to claim that a probity audit process was followed, including in questions for written answer to National party covid spokesman, Chris Bishop, received as recently Oct 29.

The auditor-general saw that differently.

No proper probity audit

Describing this conversation as “advice from an independent probity auditor … could not be said to reasonably reflect the situation”, the OAG report says. Audit NZ’s team was:

  • “not formally engaged for advice;
  • “not made aware that the informal discussion was being used as advice on the procurement;
  • “was not briefed on the procurement processes;
  • “not provided with any specific information about the nature of the conflicts of interest across the five-panel members;
  • “does not recall seeing any of the management plans prepared for each of the declared conflicts; and
  • “was not asked to review any of the management plans.”

The discussion also occurred after the selection panel had been appointed.

“It is difficult to reconcile the view that independent probity advice has been obtained on the transaction,” the report says.

On conflicts of interest, the OAG found that while the ministry had a code of conduct for managing conflicts, it was “brief and minimal” in its advice on the practical management of conflicts.

“In our view, the steps in this case were not enough to mitigate the perception or actual risk that the tender process is not impartial or influenced by the conflicts.”

Simply assuming that each member’s individual conflicts could be managed was not necessarily adequate. The ministry “could also have considered the overall effect of the conflicts it had identified”. 

Ministry sowed doubt

In a statement, Bishop described the OAG report as “deeply troubling” and “not unexpected”.

Calling for an independent inquiry into the saliva testing procurement, Bishop said the health ministry “spent much of the first half of this year casting doubt on the accuracy of saliva tests in comparison to nasal PCR tests, even though an existing private provider, Rako Science, had its test diagnostically validated by New Zealand laboratories and Associate Professor Janet Pitman, of Victoria University”.

While today’s report deals with the procurement process, there are wider, unanswered questions around saliva testing in New Zealand.

The saliva test contract was supposed to have begun in mid-April but delays, which the OAG also criticised the ministry for failing to communicate well enough to tenderers, meant the contract was not let till almost mid-year and actual saliva testing by APHG was barely available by September. 

That was a year after an independent review called for the urgent implementation of saliva testing to complement the use of nasal swab tests.

An alternative provider of the tests, Rako Science, was accredited to perform highly accurate saliva tests in January this year and has protested vociferously at the way its bid was treated, especially as it was ready to begin testing at scale early this year whereas APHG was not.

APHG runs a network of diagnostic laboratories NZ-wide, whereas Rako is a startup backed by an expatriate, American billionaire Sean Colgan.

Rako battled the ministry’s public statements, repeated by ministers on numerous occasions, that saliva testing was less effective than nasal swab tests. The ministry eventually agreed to a joint statement conceding that the Rako test was as, if not more, accurate than nasal swab tests.

The ministry has, in recent weeks, indicated it may be willing to contract with Rako and other saliva test providers for ‘surge’ testing capacity, but those talks have yet to bear fruit.

In a statement issued this afternoon, a ministry spokesman said it accepted the findings and “will be using the recommendations from the auditor general's review to guide its ongoing planning and management of the ministry’s procurement process”.