A-G finds no fault in Niue hotel contract award

The Auditor General has published a letter to Labour leader Andrew Little detailing its inquiry into the awarding of a contract to manage a hotel in Niue.

Mr Little is being sued for defamation by NBR Rich Listers Earl and Lani Hagaman, owners of contract winner Scenic Hotel Group, over comments linking the deal to a political donation they made during the tender process.

The letter from Auditor General Lyn Provost responds to questions from Mr Little about the contract. It reports that the process to award the management contract was standard and that proposals for a $7.5 million government funded resort upgrade were known to all bidders and were consistent with New Zealand’s strategy for Niue.

Ms Provost said she did not have the mandate to inquire into any potential links between the political donation and the contract award.

“We have found, from the available information, that there was a standard procurement process, with reasoned and documented analysis for the selection of Scenic Hotel Group as the hotel operator for the resort and for the subsequent investment of New Zealand international development assistance funds in expanding the resort,” she said.

The Scenic Matavai Resort is the only hotel on Niue and is owned via Nuie company Matavai Niue by a trust which will vest the asset in the Niue government in 2021.

The trustees of the trust are Ross Ardern (New Zealand High Commissioner to Niue), Mark Blumsky (past New Zealand High Commissioner to Niue and former Wellington Mayor), and a senior Ministry official.  

A contract to run the hotel, which had been running at a loss, was put out to tender in 2014 and won by Scenic Hotels in October that year.

The NZ government’s further investment in the hotel has begun to be drawn down and construction work began in June this year.

The Auditor General said although she had authority to audit Niue government finances and those of its public bodies, she had no authority to audit or inquire into the trust or its holding company.

The complexity meant she did not have access to all the required information and could not answer Mr Little’s questions fully, she said.

Donation to National Party
In April Mr Little published a press release drawing attention to the contract and noting that Mr Hagaman had given more than $100,000 to the National Party during the tender process.

He said he had written to the Auditor General asking her to investigate the circumstances of the deal.

“We must have questions answered on how the tender process worked, who knew about links between donations and the tenderer and whether Niuean people will ultimately benefit from the resort’s funding. The perception of propriety is key.”

The Auditor General’s letter said the issues raised by Mr Little were:

• whether the tender for a hotel operation to brand and operate the resort followed due process and whether all potential and actual conflicts of interest were declared;

• who knew about links between political donations and the tenderer, and what influence, if any, the donations may have had on the tendering decisions;

• why the resort was prioritised for $7.5 million of development funding and whether that funding fitted within the funding criteria;

• how the $7.5 million funding will be spent and where most of the benefits will accrue; and,

• to what extent the Niuean people will ultimately benefit from this funding.

The Auditor General’s letter reported that the tender was managed by Horwath HTL and was well documented.

The further investment in the resort would be spent on water, wastewater, conference and spa facilities and power supply infrastructure.

“The information available from the Ministry shows that expanding the resort was envisaged at the time of the procurement of a hotel operator and that there has been consideration of the benefits from further investment in the resort as part of a business case process. The business case identified financial benefits to the resort, private tourism operators, other service providers in Niue, and the Niue Government from expanding the resort.”

The benefits of the investment would include higher net earnings for the resort, better returns for other private sector tourism operators and higher tax revenue for the Niue government.

Although the specifics of the financial benefits were commercially sensitive, Ms Provost said, “we can confirm that the terms proposed by Scenic Hotel Group involved it receiving a lower gross operating fee on a percentage basis if the resort was expanded by 20 or more rooms.”