The Metropolitan Ambulance Services case study highlights the need to manage risks relating to conflicts of interest in the public sector.
Case study: Metropolitan Ambulance Service (MAS)
Source: Thwaites v Metropolitan Ambulance Service Victorian Administrative Appeals Tribunal 1995/4289.
Late in 1993, the Metropolitan Ambulance Service (MAS) decided to contract out its non-emergency stretcher transport services to the private sector so that it might focus attention on its core activities of emergency transport. It entered into short term contracts with six private providers for the provision of such non-emergency services.
In 1994, the MAS decided to enter into longer term contractual arrangements for the provision of these services and placed public advertisements seeking expressions of interest in providing these services. As a result of the shortlisting process carried out by consultants employed by the MAS to manage the tender process, eight companies were invited to tender. This included five of the six companies which were interim contractors. Eventually, four companies, all of which were interim service providers, were selected to provide the services and were offered long term contracts with the MAS.
All four of the successful bidders for long term contracts had a prior MAS connection. The MAS had encouraged existing employees to develop entrepreneurial proposals for the provision of non-emergency transport services, and several serving MAS officers had formed companies to bid successfully for the interim and long term contracts. In three of these cases, the companies were founded and/or staffed by long term MAS officers who had left the MAS to take up the contract opportunities.
In the fourth case, two current MAS officers founded the company. One of these officers, Mr C, remained as an ambulance officer for the MAS, whilst the other, Mr W, took leave without pay to administer the company during the interim contract. As a director of the company, Mr W had provided financial guarantees for the company by way of a mortgage over his family home. He also owned shares in the company. During his period of leave, Mr W was selected for and accepted the position of Manager, Metropolitan Patient Transport at MAS. Prior to appointment to this position, he was required by the MAS to resign as a director of the company. He did so and transferred all his shares in the company to the other director, Mr C, who remained an employee of the MAS. By oversight, Mr W forgot to discharge the mortgage over his home and to release his guarantee over the lease.
Mr W's responsibilities in his new position included regulating and monitoring the performance of private sector operators. In connection with the tender, Mr W spoke with the tenderers by telephone on many occasions in regard to operational issues. He also met with the tenderers, in the company of his supervisor, on several occasions. Mr W provided operational requirements briefings to the consultancy firm conducting the tender. These were used in developing the tender specification. He provided input into the formulation of contract clauses, including those relating to rates charged. Mr W and his supervisor jointly negotiated with all the successful tenderers for longer term contracts. The consultancy firm conducting the tender was not aware of Mr W's connection with one of the tendering companies.
One of the unsuccessful tenderers questioned Mr W about his known association with one of the other tenderers. Mr W denied that he had a conflict of interest in the matter and stated that the general feeling from tenderers was one of relief that an experienced manager had been appointed to the area.
These facts came to light during an AAT action for freedom of information release of documents relating to the tender process.
The tribunal found that: 'Whilst it is not the function of this tribunal
to determine whether or not the circumstances surrounding the engagement and functions of Mr W gave rise to a conflict of interest, such evidence as the tribunal has heard in relation to those issues
requires a release of relevant but otherwise exempt information in order to clear the air. In my view, in the particular circumstances of this matter, that would be in the public interest.'
Risk management issues conflict of interest
A conflict of interest is a situation in which a public servant has a private or personal interest in the matter sufficient to influence, or to appear to influence, the impartial and objective exercise of his/her powers.
Conflict of interest is one of the most common sources of risk and outrage in the public service, and is a topic in which the public tends to have a high level of interest. The primary reason for concern about conflict of interest is the potential for damage to the public's trust and confidence in the integrity and impartiality of the public sector.
It does not matter whether this loss of public confidence is motivated by a genuine commitment to high standards of public administration or whether it is simply an issue of envy of those able to use their position for personal advantage. There is no doubt that public expectations of ethical standards for public servants have been rising. In part, this is fed by media interest in any evidence of real or perceived wrong doing.
Actual conflict of interest
There are many different situations which can give rise to a real conflict of interest. These could include actions such as taking a second job, making unauthorised comment, improper use of public property or information and accepting benefits. A real conflict of interest exists when a private interest exists and this is known to the public servant. This private interest must have a connection with the officer's duties sufficient to influence the performance of those duties. In this case, the conflict of interest involved having access to privileged information and being in a position to take advantage of such information.
It seems that the actions complained of in this case do fit the definition of an actual conflict of interest and so represent a risk of sufficient magnitude to the good name of the Metropolitan Ambulance Service and to the probity of the tendering process that risk management approaches should have been applied to the situation. These might have included checking that all company obligations had been properly discharged before allowing Mr W to take up his new position, asking Mr W to stand aside from any involvement in the tender process and making sure that those people running the tender process were fully briefed on any matters that might have affected the probity of that process.
Apparent conflict of interest
There are just as many situations which do not give rise to any actual conflict of interest, but may give the perception that there is a conflict, or the potential for a conflict. This is known as an apparent conflict of interest, which can be observed from the circumstances. For example, a public servant who awards a contract to a company employing his or her relatives may appear to have a conflict of interest, even if there is absolutely no wrongdoing involved.
A test for determining whether an apparent conflict of interest exists is to ask: would a reasonably informed person, looking at this matter practically and having had time to think it through, think it more likely than not, that the public servant, either consciously or unconsciously, will be influenced in the performance of public duties by their private interests?
Again in the case study above, it seems that Mr W also had an apparent conflict of interest given his involvement with both the Metropolitan Ambulance Service as an employee and tender adviser and as an associate of a company tendering for the contract.
Dealing with conflicts of interest
Public servants should be aware of areas of private interest, both financial and personal, which could conflict with official duties. Financial interests may include directorships, share holdings, guarantees, real estate or trusts. A public servant should:
- Be alert to any actual or potential conflict of interests, financial or otherwise
- Disclose situations where private interests may conflict with official duties
- Take steps to avoid conflicts of interest
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