The 3 a.m. Contract: A Ministerial Phone Call, a Delegation Limit and a Conflicted Board Member

Defects

1. No authority to sign. The board's resolution caps the CEO's delegated authority at $250,000. A $410,000 commitment is outside the delegation, and the Deputy CEO does not hold a larger power than the CEO. Signing would commit public money without authority - a breach of the financial management legislation and a likely auditor-general finding, with personal liability exposure for the officer who signs.
2. A phone call is not a lawful direction. Unless the enabling Act empowers the Minister to direct individual procurement decisions (unusual), the call is at most a policy preference. Even where a direction power exists it must be in writing, within power and consistent with the Act's objects.
3. No evaluation or value-for-money record. A direct award of this size with no justification, no market testing and no probity sign-off cannot be defended.
4. Conflict of interest. The shareholder member must declare the interest and be excluded from the decision and, depending on the Act and board constitution, from the quorum.
5. Improper criterion. Year-end fund lapse pressure is not a lawful basis for choosing a supplier.

Next 24 hours

Do not sign. Make a contemporaneous file note of the call (time, caller, words used). Seek the direction in writing. Brief the board chair and request an out-of-session meeting. Notify internal audit and the CFO of the request. Reply to the Minister's office in writing, politely recording the constraint and offering compliant options.

It depends on three things, and the chair must check each against the enabling Act and the board's own standing orders before relying on the outcome.

1. Is the process authorised? Many boards permit circular or out-of-session resolutions only if the instrument allows it, if all members are notified, and if no member objects. If standing orders require a properly convened meeting with notice, a phone-and-email canvass is not a meeting and the 'resolution' is void.

2. Is the conflicted member counted? If quorum is four and five responded, and one is conflicted, the correct approach is to exclude the conflicted member from the quorum and the vote. That leaves four - valid only if four is the quorum and the governing instrument requires exclusion from quorum and not merely from deliberation. If quorum is five, excluding the member destroys the quorum and the meeting cannot proceed.

3. Did the board actually decide the merits? A resolution that simply endorses the Minister's chosen firm, without a procurement assessment, is still a breach of the board's own procurement policy and of the value-for-money duty, even if procedurally valid.

Recommended action: the chair should obtain written declarations of interest, exclude the conflicted member from the papers and discussion, record the exclusion in the minutes, ensure the remaining members receive a written procurement options paper, and record the reasons for whatever decision is taken - including, if a direct award is genuinely justified, the specific grounds (sole supplier, emergency, capability) and the price reasonableness evidence.

A lawful direction has these features: it is given under a specific statutory power; it is in writing and signed by the Minister; it concerns policy, general application or a matter the Act reserves to the Minister, not the disposal of an individual procurement; it is within the objects of the Act; and it is recorded, and tabled or published where the Act requires. If the enabling Act permits the Minister to direct the board on this particular decision, the board must comply - but the board still executes the decision lawfully, which means an accountable procurement process, not a bare signature.

An unlawful direction - a verbal instruction to award $410,000 to a named firm, three days before year end, outside the board's delegation - is not a direction the CEO or Deputy CEO may obey. Following an unlawful instruction is not a defence; the officer who commits the funds is personally answerable, and the contract may be unenforceable. Political neutrality obligations also point the same way: the officer serves the government of the day through lawful means, not by bypassing the Act.

The advice to give: acknowledge the request; state in writing that the proposed commitment exceeds the CEO's delegation and that no compliant procurement assessment exists; invite the Minister to put any direction in writing and identify the power relied on; offer three lawful paths - an urgent board meeting before 30 June, a compliant limited tender if a genuine sole-source or emergency ground exists, or a request to carry funds forward; and confirm that the file, including the calls, will be recorded and reported to the audit committee.