ACC sticks with its man Bagnall
Earlier this week Crown entity the Accident Compensation Corporation announced the upcoming departure of chief information officer Nicholas Bagnall. Thereafter, ACC will become a ‘‘cornerstone client’’ of Bagnall’s newly formed Wellington-based firm, Te Ahumairangi Investment Management.
Bagnall is clearly a talented investment picker. ACC board chair Dame Paula Rebstock called his contribution, both to ACC and New Zealand in his 26 years at the organisation, ‘‘outstanding’’.
ACC’s investments over the period had consistently outstripped benchmarks, she said.
But ACC is part of the state sector, its money is the public’s money, and it navigated an obvious conflict of interest in hiring Bagnall’s private sector services. Bagnall negotiated the terms of his Te Ahumairangi contract with ACC at the same time as serving as one of its top executives.
An ACC spokesman said the entity followed government procurement rules as they apply to financial services in contracting Bagnall’s firm, and ‘‘at no time was Bagnall involved in the [appointment] process’’.
The process is also complicated by the fact Bagnall’s firm doesn’t exist yet. The Companies Register shows only that the name is reserved.
But the ACC spokesman said Te Ahumairangi’s operational readiness and systems would be audited by an independent third party rather than by ACC staff when the time comes.
Nick Crang, partner at DuncanCotterill, said the Government procurement rules had five principles that applied to all procurement: plan and manage for great results; be fair to all suppliers; get the right supplier; get the best deal for everyone; play by the rules.
They are pretty broad. Ordinarily, more strict process rules apply to contracts over $100,000 but ACC said ‘‘investments, loans and guarantees’’, are exempt from these.
The ACC spokesman did say that, because of Bagnall’s connection to ACC, extra effort was made to ensure the agency received commercial terms for the contract: ‘‘Additional external advice was sought ... from a suitably qualified independent investment consultant’’. And the fee was determined to be ‘‘below market rate’’. It appears ACC followed all the processes required of it and more.
But can extensive inside knowledge ever be fully neutralised?
Someone in Bagnall’s position is likely to have unique knowledge of potential competitors’ rates.
It is difficult to envisage those rates were not taken into account when he set his own. At the end of the day, the ACC situation might be more usefully covered by a ‘‘stand-down’’ policy. Some government agencies have these and they typically prevent public servants who have left for the private sector from working directly with their old public sector colleagues in their new private sector role. For civil servants (as opposed to public officials) 12 months is generally considered an adequate cooling-off period, sufficient to mitigate conflict of interest situations and not so onerous as to unduly hinder labour movement between the public and private sectors.
But such policies are spotty at best. Some former civil servants who have formed their own consultancies do report a 12-month cooling off period. But the State Services Commission does not have any specific rules on public servants contracting back to the public service, once they have ceased being employees of an agency.
There is little doubt extending the rules come at a cost. Peter Cullen, partner in the Wellington-based employment law firm Cullen Law, said he thought a widespread rule would be cumbersome. ‘‘It is a small country and this is a government city,’’ he said. ‘‘If you have done a good job and your [public sector] employer wants to have a continuing relationship with you, I can’t really see anything wrong with it.’’
However, firms competing with a recently employed public servant might not share that view.