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‘Unsatisfactory conduct’: councils abandon contentious streetlight tender

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The tender process to replace thousands of streetlights across eastern Adelaide has been abandoned, after an independent review found the conduct of the group of councils responsible was “not satisfactory”.

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Streetlight tender under fire

The Burnside, Campbelltown, Norwood, Payneham and St Peters, Prospect, Tea Tree Gully, Walkerville and Unley councils have agreed to discontinue the tender, which they now concede was plagued by “perceptions of conflict of interest”.

The councils, linked together as the Eastern Region Alliance (ERA), paused the tender process after an InDaily article revealed major international lighting company Citelum had pulled out of the process over concerns about the role of an associate of a competing company in helping design the tender for the streetlight replacement contract – which has been estimated to be worth $50 million – among other issues.

Concerns about the tender centred on the role of engineer Scott Williams, who helped develop its technical specifications, and was project director for the streetlight replacement program.

He is also a director of Complete Urban and lighting company ENE.HUB, the largest shareholder of ENE.HUB SA, which made a bid for the tender. He is not, however, a director of ENE.HUB.SA. All three entities operate out of the same Sydney address.

SA Ombudsman Wayne Lines had been “making inquiries” about the process in June this year, but had not decided whether to formally investigate it.

InDaily can now reveal the independent review of the tender process, commissioned by the ERA, has found “the conduct of the ERA during the tender period was not satisfactory” but that issues during the process had now been resolved.

The review, by Brenton Ellery of accounting firm Edwards Marshall, concludes that: “It is not common for a consultant to be engaged to advise on a project and to assist with drafting tender documents and contracts in the knowledge that the consultant is associated with a party that will be permitted to tender.

“I have not seen evidence of any consideration of whether another consultant could have been used to assist in the preparation of tender specifications and documents.

“Furthermore, it appears that a solicitor recommended by Williams was engaged to assist in drafting the draft contract. I am not aware why this was approved.

“In my opinion, these issues should have been addressed and documented at the time.”

The review finds that, during the tender process, documents were provided to some parties and not others, and that “some documents known to Williams were not provided to respondents [tendering companies] initially”.

Those documents were later offered by the ERA to tendering parties.

“A fundamental principle of probity for a tender process is that all respondents are provided with the same information with sufficient time to deal with the information,” the review reads.

“In this RFT [request for tender] one respondent is associated with a consultant who has likely had access to considerable information prior to the issue of the RFT.”

The review finds that there had been “issues” with the tender process, but that they have now been resolved, and suggests the tender process could be restarted.

“Nevertheless, given that Williams would not participate in or advise on the evaluation [of competing tender submissions] and would not be provided with access to responses, I do not consider the process to be affected to an extent that it should be abandoned,” the report reads.

“Ultimately … issues were resolved by the release of responses to questions and documents to all parties and the extension or the tender close date.

“In my opinion, the final treatment is satisfactory.

“… I do not consider that any specific probity issues arise from the RFT [Request for Tender].”

However, the ERA has agreed that: “Due to the perceptions of conflict of interest previously raised, the tender process will be discontinued.”

A statement from the ERA to InDaily today said that it was “out of an abundance of caution” that the decision to scrap the process had been made.

CEO of ENE.HUB and a director of ENE.HUB SA Kevin Brown said in May that “all potential conflicts were declared and managed appropriately”. InDaily has contacted Brown for comment on the review.

ERA chair Burnside Mayor David Parkin said the group of councils would continue to pursue “a collective approach to replace lighting across its member councils”, but that it would develop “a new strategy to bring about more cost-effective and energy-efficient delivery of street lighting”.

“This is a significant issue with a considerable cost burden to ratepayers presently,” Parkin said.

One of the councils in the ERA grouping, Tea Tree Gully, has left it.

Parkin said he believed the council had walked away “late last year”, but that he was unsure of the exact timing.

Tea Tree Gully Mayor Kevin Knight told InDaily the council’s exit, which he said occurred in February or March of this year, had nothing to do with concerns about the tender process.

He said his council had formally left the ERA before any concerns were raised and that Tea Tree Gully had cut its ties with the alliance in order to be closer with councils in Adelaide’s north, such as the City of Salisbury.

As InDaily revealed earlier this month, however, the CEO of the City of Norwood, Payneham and St Peters, Mario Barone, expressed concerns to other ERA councils about the “inside knowledge” of Complete Urban in the tender process as early as October last year, minutes of ERA meetings obtained under Freedom of Information laws show.

“ERA councils and the City of Tea Tree Gully will continue to work together on behalf of almost 300,000 residential, business and commercial ratepayers to achieve a satisfactory long term solution,” Parkin said.

Parkin told InDaily late last month that he had been briefed on the findings of the review and it had been his understanding that the review had “found no fault with the tender, and it’s my understanding that the tender will be restarted”.

“We’ll just press the start button again,” he said at the time.

However, he said that when he gave that prediction he had only been briefed on the results of the review, and had not read it.

According to chair of the ERA’s CEO Group, Paul Deb, the ERA mayors have now formally received the report and noted the author was satisfied that no probity issues had been left “unresolved”.

The review also makes findings about whether SA Power Networks (SAPN), which owns most of the streetlight poles and wires on which new LED technology was to be installed, would be placed at a commercial advantage if it chose to submit its own bid in the tender.

The review finds that the tender process “did not address arrangements with SAPN in relation to either ownership of existing luminaires [lights] and fittings, or access to poles” and that the responses from the ERA to companies interested in the tender were “not helpful”, adding that: “it is clear that councils had been in discussions with SAPN regarding changing lighting to LED, and a financial proposal was received from SAPN between September and November 2015”.

“Some responses [to questions from potential tendering companies] advised that discussions were occurring with SAPN, other responses indicated that the tender is open to get the views of respondents and that the issues of transfer of assets will depend on the arrangements organised with SAPN.”

The review concludes that SAPN “as the existing provider should be entitled to submit a tender”, however “it would have been preferable to agree the pose and access charge with SAPN before the issue of the RFT”.

“If that was not considered possible, the RFT should have requested tenders from all tenderers, including SAPN, on the basis that the access pricing be excluded and negotiated separately.

“Both alternatives would have afforded much greater transparency.”

SA Power Networks declined to comment.

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