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Probity concerns flagged on huge council streetlight tender

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An international company has pulled out of a multi-million dollar tender to replace thousands of streetlights across eastern Adelaide because of concerns about the role played in the tender process by an associate of a competing company, InDaily can reveal.

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Citelum – a subsidiary of the world’s largest electricity producer, Électricité de France – has withdrawn from the tender to replace aging streetlighting infrastructure in the Burnside, Campbelltown, Norwood, Payneham and St Peters, Prospect, Tea Tree Gully, Walkerville and Unley councils – linked together as the ‘Eastern Region Alliance’.

The project to supply, install, maintain and manage thousands of energy-efficient LED streetlights for the councils is estimated to be worth about $50 million to the successful tenderer.

However, Citelum withdrew from the race for the Eastern Region Alliance’s Bulk LED Replacement Program in February.

Citelum’s concerns about the tender include the role of engineer Scott Williams, a director of lighting company ENE.HUB and its partner company, Complete Urban.

ENE.HUB is the largest shareholder in a “special purpose vehicle” company, ENE.HUB SA, which, InDaily can reveal, has made a bid in the tender.

The Eastern Region Alliance confirmed to InDaily that Williams had also been project director for the Bulk LED Replacement Program, and “during his time as project director, part of his role included assisting with the technical specification of the tender brief”.

Citelum’s Australia/NZ managing director Adam Carey told InDaily the lighting company pulled out of the tender because, among other reasons, “it was unclear what role Complete Urban had in the [tender] process”.

“We believe ERA Councils are certainly trying to achieve better outcomes by collectively tendering but perceived conflicts of interest certainly erode confidence in the process,” Carey said.

“We are unaware of the corporate structure of ENE.HUB SA, but ENE.HUB and its related entities published on its website certainly creates a position in which we could have inadvertently divulged commercially sensitive information to a company that appears to be in competition with Citelum.

“We didn’t want to disclose any sort of intellectual property to a competitor, or to a company that had competing interests.”

Documents filed with the Australian Securities and Investments Commission (ASIC) show the principal place of business for ENE.HUB SA is the same address on Regent Street in Chippendale, New South Wales, out of which ENE.HUB and Complete Urban operate.

The companies are also linked by Kevin Brown, who is both CEO of ENE.HUB and a director of ENE.HUB SA, and by Ewan Sean Woellner, who is a director of both companies.

But Brown told InDaily Williams’ roles at ENE.HUB and Complete Urban and his role helping to develop the documents for the competitive tender did not constitute a conflict of interest.

“No, and all potential conflicts were declared and managed appropriately,” Brown said in a statement.

“I confirm Mr Scott Williams is not a director of ENE.HUB SA, the entity [which] has submitted the proposal.

“[However] Mr Williams is a director of ENE.HUB.”

Brown said ENE.HUB did not make a bid in the tender.

Williams did not return InDaily’s calls.

“We are pleased to submit a proposal for this innovative project and am confident we will be evaluated on the merits of our offer,” Brown said.

“I know we have conducted ourselves to the highest of professional standards through what is a rigorous and independent evaluation process.”

A spokesperson for the Eastern Region Alliance told InDaily “we are extremely conscious of the need for independence and the risks of conflicts of interest arising, and have accordingly, studiously avoided such risks”.

“Members of the Eastern Region Alliance (ERA) who were involved in the tender process, refute any suggestion or implication that there has been a lack of probity,” the spokesperson said.

“The ERA has an appointed [a] probity adviser who constantly reviews all aspects of the procurement process and has indicated that this project is being conducted in an open and transparent manner in regards to probity and the approved process.

“The tender panel is entirely independent and objective.”

The original deadline for submissions to the tender was 14 January 2016, but the deadline was extended.

According to correspondence between a representative of the Eastern Region Alliance and one of the companies that submitted a proposal to the tender, obtained by InDaily, the deadline was extended because ENE.HUB had had access to information other tenderers had not.

In the correspondence, the Eastern Region Alliance representative describes the unequal access to information as an inadvertent error, and that the councils were not aware that the information that was available only to ENE.HUB existed.

Documents filed with ASIC show that ENE.HUB SA was registered as a company on 11 January 2016 – three days before the original deadline for tender submissions.

In addition to Williams’ project director role with the ERA, he was involved in a 2014 audit of public lighting for one of its member councils, the City of Unley.

The audit report, compiled by Complete Urban, suggested there was interest from “private industry” to invest in Unley’s lighting infrastructure and that the council should initiate a street lighting infrastructure project.

Complete Urban’s ‘Public Lighting Audit and Future Opportunities’ report, obtained by InDaily, says Unley’s street lighting service levels are “below standard” and that the council “can finance infrastructure more cost effectively than the current provider”.

“In addition, private industry has shown an appetite to invest in street lighting infrastructure,” the report says.

“This could provide further savings to Council, and / or reduce capital requirements.

“… Savings in the order of $250,000 per annum, and over 1,050 tonnes of CO2, could be achieved through the provision of new street lighting infrastructure in the City of Unley LGA.

“… Council should initiate a Street Lighting Infrastructure Project (SLIP) as the catalyst to achieve the economic, environmental and social benefits to the community.”

The ERA spokesperson said it was “to be expected that there are existing relationships between councils and their current suppliers, but we can assure you that those relationships do not impact on the tender process in any way whatsoever”.

Carey said he had also become concerned by the Eastern Region Alliance’s non-disclosure of another streetlight audit report by Complete Urban – this time the report was for the City of Campbelltown.

“Not all the information was made available to all tenderers,” Carey said.

“One report [regarding the City of Unley] was divulged … whereas the other for Campbelltown City Council wasn’t.

“It was clear that 11,000 assets were audited, by companies related, yet only a portion of that information was given to tendering parties.

“The information is valuable – significant competitive advantage can be achieved knowing simply the mounting heights and locations of the streetlights.”

The Eastern Region Alliance spokesperson confirmed that the Campbelltown audit report was not distributed to tenderers, and claimed there had been “no requests from any of the tenderers for the Campbelltown Audit Report”.

However, InDaily understands concerns had been raised with the Eastern Region Alliance by one of the tenderers early this year over the non-distribution of the report.

And Campbelltown CEO Paul Di Iulio told InDaily in a statement that: “Although not intimately involved in the tender process, it is my understanding that the audit report was provided to all the prospective tenderers and that any questions that have been raised by them have been answered”.

The ERA spokesperson said that “all relevant tender materials were provided to all prospective tenderers… [and] all questions raised by tenderers have been answered and shared with all parties”.

InDaily has acquired a copy of an email from the City of Unley’s General Manager of Assets and Environment, John Devine, sent to stakeholders regarding the tender last week.

It says that, following the completion of the Complete Urban audit reports for Unley and Campbelltown, “Unley and Campbelltown approached the ERA councils to determine if they were interested in pursuing opportunities to reduce costs, improve environmental outcomes, or seize some of the technology benefits of public lighting and its associated infrastructure”.

“Complete Urban, who had completed the audits for the councils, was asked to assist ERA to put together a technical project brief, suitable to put to the market,” the email says.

Local Government Minister Geoff Brock told InDaily “if there are concerns about the tender process, they should be directed to the Office for Public Integrity or the Ombudsman”.

A spokesperson for the Local Government Association said it “does not have legislative oversight of the procurement activities of its member councils” and “any questions around the issues raised below should be directed to the Eastern Region Alliance”.

Streetlighting infrastructure across South Australia is mostly owned by SA Power Networks, but some rests with councils. According to the Unley audit report, that council owns about 4500 streetlights.

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