Part 6: Our findings and recommendations
6.1
In this Part, we describe our concerns with how Oranga Tamariki managed the 2024/25 contracting round. In particular, we discuss:
- how Oranga Tamariki did not have good foundations in place;
- how its planning was inadequate and its decisions were late;
- its inconsistent decision-making criteria;
- the lack of evidence to inform its decisions;
- its poor documentation of the reasons for its decisions;
- additional concerns about its procurement and contract management practices; and
- how it did not consistently demonstrate a culture of integrity, transparency, and accountability.
6.2
Oranga Tamariki was entitled to make decisions about which services it wanted to purchase, including deciding to discontinue services or enter negotiations to vary contracts.
6.3
We also acknowledge that Oranga Tamariki wanted to significantly reduce its spending on contracted services to meet baseline savings targets, and to respond to the Minister's direction to refocus on its core purpose and avoid duplication of services. As such, it faced difficult decisions and trade-offs in the 2024/25 contracting round.
6.4
Oranga Tamariki also faced further challenges, including:
- it was effectively reviewing its entire spending on contracted services, including contracts that were not expiring on 30 June 2024, rather than the one-third of contracts that it would normally review in its annual process;
- it was taking a different approach to reconciliations at the same time as it needed to plan and complete its contracting round; and
- it carried out the contracting round in parallel with a significant organisational restructure that occupied senior leaders' attention, created uncertainty for staff, and resulted in reduced capacity (at both regional and national levels) to support the contracting round.
6.5
Several staff members also noted that they or their colleagues often had to have difficult conversations with providers despite having little insight into, or understanding of, the decision-making process.
6.6
Staff shared their frustration that commentary in the public domain has, at times, been inaccurate or unfair. They described a sense of frustration at their inability to respond to some of the criticisms being made. We appreciate that the matters at issue have been a personal and professional challenge for many staff, as well as for providers and the community.
6.7
That said, many aspects of the 2024/25 contracting round were not in line with good procurement or contract management practice.
6.8
Taken as a whole, these failures have significantly harmed trust and confidence in Oranga Tamariki – in particular, from the social services sector, which Oranga Tamariki relies on to provide services to vulnerable children and their families.
Good foundations were not in place
6.9
Oranga Tamariki did not have robust procurement and contract management systems leading into the 2024/25 contracting round.
6.10
As mentioned in paragraphs 2.9-2.19, Oranga Tamariki and providers generally agreed that:
- its previous practice had been poor;
- it routinely made contracting decisions with little analysis and late in the financial year;
- its contract performance measures did not focus on outcomes; and
- it did not monitor performance in a meaningful way.
6.11
We also consider that an annual contracting cycle that reviews about a third of contracts each year puts significant pressure on Oranga Tamariki.
6.12
Successive audit reports have found that procurement and contract management in Oranga Tamariki have not reached the standards of practice we expect, given the significance of external providers to achieving its objectives. Other independent evaluations have also highlighted weaknesses in the approach to social sector procurement and contract management.
6.13
Although Oranga Tamariki knew that it needed to improve its processes and lift its capability, and despite various work programmes, new frameworks, and restructuring, practices at Oranga Tamariki do not appear to have materially improved.
6.14
Oranga Tamariki is a large organisation and change will take time. However, if Oranga Tamariki does not take decisive action to improve its systems, it will continue to perform procurement and contract management poorly.
6.15
A priority for attention is the lack of a clear strategy for procurement and contract management. An organisation's strategic procurement and contract management plan might include, for example, its vision of the outcomes it wishes to achieve, the types of procurement it does, the value and risks associated with the procurement, and an analysis of the market it procures from.28
6.16
Oranga Tamariki had many documents, in various stages of implementation, that set out its strategy and policy framework for procurement and contract management.29 It had also begun developing an Oranga Tamariki Investment Strategy, but it had not completed this work and its status was unclear when we carried out our inquiry.
6.17
The proliferation of frameworks and policies inevitably introduced the prospect of inconsistency. It does not present a coherent organisational vision of what Oranga Tamariki wants to achieve through its procurement and contract management. It can also be a source of confusion about what is expected of staff.
6.18
Oranga Tamariki needs a clear organisational approach to its social sector investment, and staff need to understand which policies and frameworks should guide their actions. We did not see evidence that policies and procedures guided decision-making in the 2024/25 contracting round.
6.19
In our view, Oranga Tamariki needs to urgently review and consolidate its suite of relevant policies and frameworks to provide clarity for its staff.
| Recommendation 1 |
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| We recommend that Oranga Tamariki – Ministry for Children prepare and implement a clear strategy for procuring services from, and managing contracts with, social service providers. |
Planning was inadequate and decisions were late
6.20
We did not see evidence that Oranga Tamariki had a clear plan for the contracting round. It consistently pushed back time frames and reassessed its decisions, which left little time for considered decision-making.
6.21
There was no detailed reporting against milestones. It was difficult to see how the team responsible for leading most of the contracting round measured, monitored, and reported on progress. Trying to review the entire contracted services budget line by line at the same time as running a significant organisational restructure exacerbated these planning issues.
6.22
Although the Central Contracting Team attempted to introduce more discipline and planning to the contracting round, it was under extreme pressure by the time that responsibility was transferred to it.
6.23
Staff also said that an annual contracting cycle made planning difficult. They were effectively in a constant cycle of planning and implementing contracting.
6.24
We understand that, in 2024/25 and previous years, Oranga Tamariki had been reluctant to make contracting decisions until the Budget had been delivered and it knew the amount that could be spent.
6.25
We recognise that conventions about Budget secrecy might have constrained what Oranga Tamariki could say publicly about potential changes in its appropriation. However, because the Budget is traditionally delivered in May, delaying decisions about contracts that are due to expire in June clearly runs significant risk. Oranga Tamariki also knew early in the process that it needed to make savings and that this would mean significant changes in contracted services for 2024/25.
6.26
Even if Oranga Tamariki could not make final decisions about contracts before the Budget was delivered, it should have been able to make material progress earlier. For example, Oranga Tamariki could have considered:
- identifying the core services that it needed to purchase (or continue purchasing) in 2024/25 and those services that it definitely did not need any more;
- testing the market to see which providers might be able to offer the services that Oranga Tamariki needed most effectively and at a fair price; and
- scoping different purchasing options based on different Budget scenarios.
6.27
Providers noted that other public organisations sometimes provided letters of comfort (contingent on Budget decisions). They also gave significantly earlier notice that they were likely to discontinue a contract and would encourage providers to start contingency planning.
6.28
The issues with planning also contributed to Oranga Tamariki not completing some related projects – namely, rolling out revised terms and conditions in providers' contracts and providing social sector pay equity funding.
6.29
Overall, given the contracting round's importance – both financially and in terms of potential outcomes for children and whānau – we expected Oranga Tamariki to plan and monitor the contracting round with more rigour and structure.
6.30
Oranga Tamariki needs to consider having a standardised process for contracting rounds to promote consistency and certainty for both it and providers. This process needs to have clear decision-making milestones that allow it to engage with providers early and give them adequate notice of its decisions. It also needs to have clear reporting and accountability mechanisms if these processes are not followed.
6.31
We encourage Oranga Tamariki to work with the social services sector, including representative bodies such as Te Pai Ora SSPA and its Tiriti partners, to set up this process.
| Recommendation 2 |
|---|
| We recommend that Oranga Tamariki – Ministry for Children engage with the social services sector to prepare and implement a standard process for contracting rounds, including consistent time frames for when it will make decisions about Outcome Agreements and notify providers. |
Decision-making criteria was inconsistent
6.32
Oranga Tamariki did not consistently set out its aims or decision-making criteria for the 2024/25 contracting round. It had multiple formulations of what it was trying to achieve, and we could not see a settled, coherent vision to deliver on its strategic direction from the Minister.
6.33
For example, we identified at least four ways that the decision-making criteria were framed – in the Regional Investment Guidance in April 2024, the Cabinet paper in May 2024, the criteria on the whiteboard that the Deputy Chief Executives used in June 2024, and the decision-making principles that the Central Contracting Team set out in July 2024.
6.34
Although these four sets of decision-making criteria had some overlap, they varied in their emphasis and specificity. Sometimes, the criteria were specific that areas were exempt from funding reductions (such as services relating to family and sexual violence).
6.35
Some versions of the criteria clearly set out that early support and prevention services were being deprioritised, but other versions made no mention of this. Early versions of the decision-making criteria were framed around what Oranga Tamariki wanted to invest in but the focus of criteria changed back to what Oranga Tamariki would not fund.
6.36
Oranga Tamariki needed a consistent organisational view of what it wanted to achieve throughout the contracting round.
Evidence to inform decisions was lacking
6.37
Decisions made during the contracting round were not adequately informed by evidence of how they would affect children and their families and what they would mean for the social services sector's sustainability.
6.38
Oranga Tamariki has said publicly that it centred its decisions on the needs of children. It had some data and insights available, including from regional staff. However, its records do not demonstrate how it used this evidence in its decision-making, and it is unclear how much regional staff's advice informed the final decisions.
6.39
Overall, we found no evidence that decision-making was informed by good information or evidence to help Oranga Tamariki understand:
- the number of children and whānau that would be affected by decisions made in the contracting round;
- how those children and whānau would be affected and, in particular, whether they would be able to access the services they needed; or
- whether there were enough levels of service (nationally or regionally) to compensate for any changes, whether funded by Oranga Tamariki or someone else.
6.40
Staff told us that they did not understand exactly how many children or whānau the changes to contracts in 2024/25 would affect. During our interviews, we heard about a range of consequences that were or could be occurring. They included increased waiting lists, an inability for whānau to access services, distress at seeing the news that trusted providers might close, and the prospect of more tamariki going into state care.
6.41
The lack of evidence or analysis of benefits or risks to children casts doubt on the ability of Oranga Tamariki to demonstrate that its purchasing decisions:
- were informed by an understanding of children's needs;
- were consistent with its strategic direction and legislative obligations; and
- would achieve value for money by ensuring that public resources achieve the best possible outcomes for children and young people.
6.42
Similarly, decisions do not appear to have been informed by a clear understanding of how they would affect the social services sector's sustainability – and, in turn, the sector's ability to provide services to children and their families.
6.43
For example, decision-making documents did not include any information about whether funding reductions could jeopardise providers' financial viability, staffing levels, or their ability to provide contracted services for other public organisations.
6.44
Staff acknowledged during interviews that the reductions would have a significant impact, but this was not reflected clearly in any decision-making documents provided to us.
6.45
Oranga Tamariki acknowledged that it relied heavily on quantitative performance data that could be affected by a range of factors unrelated to performance and did not actually relate to the outcomes providers were achieving.
6.46
Likewise, Oranga Tamariki focused heavily on making decisions based on, and communicating to the sector about, the state of providers' reserves. There was an assumption that reserves (as shown on the Charities Commission website) meant that providers had under-delivered or had improperly retained funding that Oranga Tamariki had provided, or both.
6.47
However, providers do not appear to have been given a reasonable opportunity to respond to these assumptions. Oranga Tamariki appeared to have given little, if any, consideration or recognition to:
- the possibility that providers might have received revenue from a variety of sources, including other public organisations, private fundraising, and income derived from long-held assets (that they had not purchased with funding from Oranga Tamariki intended for services); or
- the prudence of maintaining reserves, as is consistent with good financial management, and the need to be financially viable to meet social services accreditation standards.
6.48
We do not see how Oranga Tamariki could have confidence in its understanding about providers' financial reserves.
6.49
Fundamentally, Oranga Tamariki needs good information to inform its procurement decisions. It must have reliable evidence about the outcomes for children and their whānau to inform its future contracting rounds. It also needs to clearly document its use of this evidence to demonstrate to the public and to Parliament that its use of resources achieve value for money.
| Recommendation 3 |
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We recommend that Oranga Tamariki – Ministry for Children ensure that, in future contracting rounds:
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Decisions were not properly documented
6.50
Oranga Tamariki did not properly document its decisions in the 2024/25 contracting round – in particular, its rationale for decisions or advice about their risks and benefits.
6.51
The spreadsheets and briefings we saw set out the decisions about each contract (such as terminate, reduce, or continue). However, they did not usually explain how Oranga Tamariki made decisions about any given contract or service.
6.52
Although Oranga Tamariki had high-level criteria for assessing contracts (such as whether they duplicated services in a region), none of the documentation showed how its final decisions about contracts aligned with those criteria.
6.53
The lack of documented rationale meant that staff did not have a record to refer to when responding to queries about why decisions had been made. This made it difficult for staff to justify decisions publicly or in negotiations with providers.
6.54
Not documenting the rationale for decisions also means that those decisions cannot be easily understood or scrutinised, particularly when they were made late and at speed.
Additional procurement and contract management concerns
6.55
We identified a range of other poor procurement and contract management practices in the 2024/25 contracting round. These show that Oranga Tamariki urgently needs to improve its systems and processes.
Lack of market testing or opportunities for competitive tender
6.56
With limited exceptions, the contracts that Oranga Tamariki awarded in 2024/25 were not subject to any open, transparent, and competitive procurement process.30 We were told that Oranga Tamariki had not formally tested the market for many years.
6.57
The opt-out provision in the Government Procurement Rules that Oranga Tamariki relied on allows public organisations a degree of flexibility. However, Oranga Tamariki needed to:31
- consider options and use good judgement to decide whether opting out of the Rules was the best way to meet its needs; and
- keep a record of each opt-out decision and the reasons for it.
6.58
We saw no evidence that Oranga Tamariki used good judgement in applying the opt-out rule. In future contracting rounds, we expect to see Oranga Tamariki:
- actively demonstrate that it considers how to apply the Government Procurement Rules; and
- explore opportunities for open, transparent, and fair procurement processes.
Performance measures were not linked to outcomes
6.59
Oranga Tamariki describes its contracts with providers as Outcome Agreements. However, the contracts generally set performance measures based on inputs (such as the number of staff) or outputs (such as the number of visits), rather than outcomes.
6.60
These types of performance measures are simple to track. Some outputs, such as visits to provide whānau with support, might well have a link to a positive outcome for tamariki.
6.61
However, the performance measures that Oranga Tamariki generally uses do not provide a clear, measurable way of assessing providers' contribution to the outcomes Oranga Tamariki wants to achieve.
6.62
We acknowledge that measuring outcomes for social services can be complex and might need significant work. We encourage Oranga Tamariki to prioritise work on improving the performance measures it includes in providers' contracts, with a particular focus on linking them to tangible, positive outcomes that align with its purpose.
Performance monitoring and reconciliation practice
6.63
As we mentioned in paragraphs 3.15-3.29, Oranga Tamariki went from not adequately monitoring performance or routinely asking providers to return funding if they did not meet their target measures to seeking to fully recover funding.
6.64
It is essential that public organisations such as Oranga Tamariki carefully scrutinise providers' performance to ensure that they are using public money in keeping with their contract. However, public organisations need to raise issues in a timely, considered way as they arise, and providers need a reasonable opportunity to understand and address performance issues. We did not see evidence that this was happening.
6.65
Oranga Tamariki also clearly needed to improve its approach to reconciliation with providers. However, the changes to reconciliation were not driven by a desire to improve its contract management practice but rather by the need to achieve savings. That these changes took providers by surprise also demonstrates poor contract management practice.
6.66
We encourage Oranga Tamariki to take a consistent, predictable approach to monitoring performance, providing feedback, and reconciliation.
Unilateral approach to variations and lack of negotiation strategy
6.67
Oranga Tamariki appeared to consider that it could unilaterally vary contracts. However, the parties needed to agree variations.
6.68
Providers told us Oranga Tamariki had limited willingness to negotiate – even where they provided evidence that questioned assessments by Oranga Tamariki or offered alternative solutions to help meet its needs.
6.69
We were also concerned to hear that, in some instances, Oranga Tamariki appeared to use payments that it owed to providers as leverage against them when it was agreeing reconciliation, attempting to impose unilateral variations to contracts, and completing transition plans (see paragraphs 5.36-5.46).
6.70
We did not see evidence that Oranga Tamariki understood the power imbalance between it and providers in these negotiations. Oranga Tamariki would have benefited from a clear, fair negotiation strategy that was informed by a good understanding of the service(s) in question, the specific reasons why change was needed, consistent terms of engagement, and a robust understanding of the contract's terms.
Oranga Tamariki did not consistently pay providers on time
6.71
Oranga Tamariki did not consistently pay providers on time. In some instances, payments were weeks or months overdue and involved significant amounts.
6.72
Delays meant that providers had to pay staff or provide services out of their reserves, which Oranga Tamariki criticised them for holding, while waiting for Oranga Tamariki to pay them. This was exacerbated by ongoing delays in providing pay equity funding to eligible providers (whether as a grant or by embedding the pay equity funding into contracts).
6.73
Some delays in payments appear to have been caused by issues with systems in Oranga Tamariki. In other instances, Oranga Tamariki appeared to have actively decided to withhold payments until contract variations were signed off or transitional plans were provided.
6.74
There will, of course, be legitimate circumstances where contracts allow for Oranga Tamariki to suspend or withhold payments in full or in part – most obviously, for a failure to provide the contracted services. However, we do not consider that pressuring providers into accepting contract variations or completing transitional plans by withholding payment for services that have been provided is an appropriate strategy.
6.75
We expect Oranga Tamariki to take whatever action it needs to ensure that it promptly pays all providers the amounts that it legitimately owes them.
Failure to adequately plan for the transition of services
6.76
Oranga Tamariki did not adequately anticipate and plan for expiring contracts, those where it wanted to reduce service volumes, or those that it wanted to terminate for convenience.
6.77
We consider that, although providers had an important role to play in transition planning, it was ultimately the responsibility of Oranga Tamariki to ensure that there was a smooth transition of services for children and their whānau.
6.78
We acknowledge that Oranga Tamariki set aside about $39 million in transitional funding for services it was ceasing to purchase, which it was not always contractually required to do. In our view, however, Oranga Tamariki placed the onus for transition planning on providers and, with some exceptions at regional level, did not give providers enough information or support.
6.79
We were also concerned to hear about situations where Oranga Tamariki continued to refer clients to services that it was discontinuing. Oranga Tamariki needs to ensure that its referrals to, or requests of, providers fall within the scope of an existing Outcome Agreement and that it funds the provider accordingly.
No system for identifying or managing conflicts of interest in the contracting round
6.80
We were concerned that Oranga Tamariki did not have a specific process to identify or manage conflicts of interests in its decision-making on the 2024/25 contracting round.
6.81
Oranga Tamariki gave us a register of declarations that senior staff had made and told us that conflicts were declared at the start of Te Riu meetings. However, it confirmed that it did not have a specific register or system for identifying conflicts of interest in the contracting round. Minutes from Te Riu meetings for key decision-making stages were also not available.
6.82
Given the scale of the contracting round, it is not difficult to conceive of a situation where one or more decision-makers could have a real or perceived conflict of interest. In our view, Oranga Tamariki needs to implement a system to help it identify and manage conflicts of interest in future contracting rounds.
Communication and engagement were not open or timely
6.83
We did not see evidence of Oranga Tamariki engaging with providers openly, constructively, and in a timely way. The terms and conditions that form part of its contracts with providers require Oranga Tamariki to do this.
6.84
We acknowledge that there were efforts by some people within Oranga Tamariki to increase the level of communication with the sector at various stages of the contracting round. However, delays in responding to queries or concerns from providers were common throughout the contracting round. Sometimes, the delays would be weeks or months, even when providers followed up with Oranga Tamariki multiple times. We also consider that at least one provider feeling the need to submit an Official Information Act request to understand decisions about its contract indicates poor communication by Oranga Tamariki.
6.85
Further, notifying providers of decisions to exit contracts with effectively hours of notice – as happened on 27 June 2024 – was unacceptable contract management practice. Although there was not, to our knowledge, any formal requirement that Oranga Tamariki notify providers that it was not going to renew a contract, the lack of earlier communication was unfair to providers.
6.86
Our experience talking with te Tiriti partners and providers suggests that they would prefer open, direct communication about the challenges that Oranga Tamariki is facing and what action they need to take as a result.
6.87
Providers told us that they understood that Oranga Tamariki was in a difficult situation and that it could not guarantee them funding. However, providers wanted clear, accurate, and timely information to understand funding decisions. In our view, Oranga Tamariki could have mitigated many of the issues that emerged during the contracting round by engaging with providers in an open and timely manner.
Failure to account for obligations to te Tiriti partners
6.88
We also did not see Oranga Tamariki factor its Tiriti relationships into its decision-making or how it engaged with kaupapa Māori, iwi, and hapū providers.
6.89
Te Tiriti partners told us that this – in particular, the lack of consultation or engagement before decisions – had undermined their trust and confidence in Oranga Tamariki. They were at pains to emphasise that they had worked hard at building respectful, trusting relationships with Oranga Tamariki and that these relationships were particularly healthy at local levels. However, as with providers, they considered that keeping the relationship constructive needed a significant, and sometimes one-sided, investment of their time.
6.90
In our view, Oranga Tamariki needs to take the commitments that it has made to its Tiriti partners into account in future contracting rounds and actively demonstrate to its partners how it has done so.
| Recommendation 4 |
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We recommend that Oranga Tamariki – Ministry for Children urgently improve its contract management practice, including by:
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Oranga Tamariki did not consistently demonstrate a culture of integrity, transparency, and accountability
6.91
We expect public organisations to act with integrity when using public resources. This requires sound ethical judgement, demonstrated accountability, and transparency. In this context, Oranga Tamariki needed to actively demonstrate that it could act as a trusted partner – particularly given its stated intentions to decentralise funding to providers through its Enabling Communities project.
6.92
This means doing what it says it would do, accepting where it made mistakes, and taking steps to improve. On balance, we consider that Oranga Tamariki did not consistently meet our expectations.
6.93
Providers told us that their interactions with Oranga Tamariki did not show respect for their contribution or foster trust in the organisation. During our interviews with Oranga Tamariki, it became apparent that the organisation's attitude towards providers was not always respectful or constructive. For example, we heard providers' legitimate concerns about the process characterised as "noise".
6.94
In our view, Oranga Tamariki was slow in, or resistant to, acknowledging responsibility for errors. It made assertions about its decision-making process that we have found difficult to reconcile. At its worst, public statements about providers were ill-considered. Oranga Tamariki appeared to blame providers for a situation that was fundamentally its responsibility.
6.95
A general theme in the 2024/25 contracting round was the emphasis on the importance of meeting the organisation's goals. However, Oranga Tamariki did not have the requisite focus on fostering relationships and acting consistently with its obligations.
6.96
We saw a narrow focus on contractual provisions that would allow Oranga Tamariki, for example, to terminate contracts for convenience. However, we did not see an equal focus on considering how those actions accorded with the overarching legal principles embedded in the contracts – such as acting honestly and in good faith and working collaboratively and constructively.
6.97
The lack of regular involvement of the legal team – apart from when the Central Contracting Team operated – exacerbated these issues. We also heard that staff who sought legal advice or support did not routinely follow that advice. Several interviewees, including senior staff at Oranga Tamariki, raised this as a concern.
6.98
Oranga Tamariki did not resolve issues at an early stage and it did not take concerns seriously and address them until disputes escalated. This is a matter that Oranga Tamariki needs to urgently address.
28: See "Procurement" in the Good practice and Publications sections of our website, at oag.parliament.nz.
29: For example, Oranga Tamariki Commissioning Framework (working draft updated 28 June 2017), Social Service Procurement Policy (July 2020), Social Services Procurement Guidance (July 2022), Funding Policy and Guidance for Shared Care (July 2022), and Contracting Policy (November 2023).
30: We understand that Oranga Tamariki used closed competitive procurement processes to procure several contracts relating to Fast-track services, mentoring services for rangatahi in the Military-Style Academy, and court support services for young people who have experienced sexual violence.
31: See "Rule 12: Opt-out procurements" at procurement.govt.nz.