Case study: how not to hire a public service leader from the private sector (or: How a highly respected CEO of a venerable NGO learned about politics the hard way)

By Stephen Easton

Monday December 2, 2019

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South Australia’s Labor opposition is keeping the pressure on SA Health chief executive Dr Chris McGowan, peppering the government with questions about his involvement in deals with his former employer, allegedly misleading statements to parliament, how he was appointed, and his attendance at Liberal Party fundraisers. At the very least, the controversy is a case study in how not to hire a public service executive from the private sector — especially when you are poaching the CEO of a major supplier of services to the department.

There is no obvious smoking gun, but that isn’t the point. It’s about how things look. And when things even look slightly wrong in the public sector, the result is very often that lots of people in government are tied up responding to the controversy and diverted from getting more important things done.

When the SA Liberals, looking forward to the end of a long period in opposition, decided the CEO of the giant non-profit nursing service Silver Chain would be a good fit to lead the department, they should have seen the risk a mile off. McGowan’s employer had provided the department tens of millions of dollars worth of services over many, many years, and was likely to continue doing so, no matter who was in charge of either organisation. Silver Chain and its SA arm, Royal District Nursing Service (RDNS), have been providing healthcare in Western Australia and SA for well over a century.

If McGowan had reported this fairly minor oversight to the minister right away, and the minister had then reported it to parliament, it would probably have passed with little fanfare.

It should have been obvious to the new government and McGowan that this career move had to be handled very carefully to avoid any suggestion that Silver Chain was getting an unfair advantage.

Now, the government and the department are bogged down in controversy, forced to respond to relentless scrutiny from the media and the opposition, when the department was already under fire on multiple fronts and facing a special investigation by the anti-corruption commissioner, whose report is expected to be tabled in the next month.

The government is standing by McGowan, while Commissioner for Public Service Employment Erma Ranieri arranges an inquiry into an accidental conflict of interest early in his troubled tenure. This minor bungle was revealed to the public — and, apparently, to the government — by news website InDaily last week, over a year after it was discovered. If McGowan had reported this fairly minor oversight to the minister right away, and the minister had then reported it to parliament, it would probably have passed with little fanfare.

That information came from Freedom of Information requests by the opposition, which have since led to a series of additional questions about McGowan’s troubled transition.

The contracts

One of the opposition’s key lines of attack is the suggestion that McGowan misled a parliamentary committee by saying he did not get involved in business with Silver Chain.

On Tuesday in question time, shadow health minister Chris Picton fired a series of questions at Premier Steven Marshall based on FOI releases. He asked Marshall if the SA Health chief might have breached the public service code of conduct and whether he should stand down pending the outcome of the commission’s inquiry.

The Premier said Ranieri had not advised him that McGowan should stand down while the inquiry runs its course, and noted the CEO had self-referred the matter — “in an abundance of caution” and to aid transparency, in McGowan’s words.

Ranieri recused herself from the investigation, after Labor pointed out the public service commissioner played a key role in recruiting McGowan, and agreed to appoint an independent investigator but two weeks later nothing had happened. Picton also used question time to suggest the process was taking too long, Marshall could only agree and soon it was announced that John McMillan, a former Commonwealth Ombudsman, would handle the probe.

In October, the SA Health chief perhaps did not pay enough attention to the precise words used by his interrogators in the Budget and Finance Committee. Asked if he was involved in any transactions with Silver Chain or RDNS “in any way” and if he had ever “signed a recommendation to the minister for goods or services” provided by the organisation, he unequivocally said he had not.

He then reviewed all contracts with Silver Chain since his appointment and got back to the committee in writing, giving the opposition more ammunition (emphasis added):

“From the documents I have reviewed, there has been one contract extension and two briefings for the Minister involving RDNS Silver Chain. In all three, RDNS Silver Chain was one member of a panel of providers. I can advise that:

“On 30 November 2018, I endorsed a request for authority to expend funds for the execution of sexually transmissible infections and blood borne viruses program. The authority covered eight suppliers, including RDNS SA. The agreement with RDNS SA was for a 2.5-year contract extension with a value of $1.28m.

“On 27 May 2019, I endorsed the continuation of an existing contract for a panel of four suppliers, including RDNS SA, for the delivery of the SA Community Care program. I was not involved in the procurement of the original contract, which was over a five-year period and involved a one year, plus one year, plus three-year extension. The 2019/20 budget for the program, across all four suppliers, is $24.98m.

“On 19 July 2019, I authorised financial approval for the Long Stay Patient: Short Term Transition to Discharge Project. This Project was jointly funded by the Commonwealth and State Governments, providing funding over two years to a panel of providers. Subsequent to my authorisation, and without my involvement, the Project progressed to procurement and RDNS SA was among the selected providers.

“In this process I did not amend any recommendations on any of these authorisations.

“All of the relevant documentation regarding these authorisations has been provided to the Commissioner for Public Sector Employment for her review.”

The meetings

On Tuesday Picton put it to Marshall that McGowan had agreed to meet Silver Chain executives to “discuss potential partnerships” with SA Health in early July 2018, having the FOI documents that indicate this. Marshall pled ignorance and said if Picton thought something untoward went on, he was obligated to report it to Ranieri.

The FOI releases show McGowan met his former colleagues at their Perth offices for 1.5 hours on February 15 this year, to discuss the Silver Chain Integrum program. Silver Chain was later awarded a $2.9 million government contract to deliver the program.

“I don’t have details on the travel plans or the meeting agenda for every member of the public service or even just the chief executives who report directly to me, but if the member has an issue, well, I suggest he takes it up as per my previous answer,” the Premier said when asked if he could confirm the meeting.

Marshall pointed out the century-old organisation has had a “long and lengthy relationship” to SA Health under successive governments. In the face of successive questions, he maintained he had no idea about McGowan’s role in its recent deals with the department but said he would look into the matter.

Picton asked if McGowan was “accompanied by any other staff or probity advisers” on the trip to Perth, and if he had any discussions with other public servants or the Health Minister about the meeting, or ever wrote a report about it. The government had few answers to give on the spot.

The documents also show McGowan met the CEO of Wellbeing SA, Lyn Dean, on June 12 this year to discuss the Integrum program, two weeks before SA Health and Dean herself signed the $2.9m deal. “I have no knowledge of that transaction,” said the Premier.

The appointment and the Liberal Party links

On Wednesday in the upper house, Labor MLC Clare Scriven began a new barrage. She suggested the CEO had also given another misleading answer in July, 2018, in saying he had “certainly not” attended any Liberal Party fundraisers in the lead-up to the March 2018 election that brought the Marshall government to power.

The opposition has now successfully linked McGowan to the Liberal Party, through his attendance at several of its fundraisers. He has previously revealed that Minister for Health and Wellbeing Stephen Wade sounded him out as a potential SA Health CEO before the Liberals were elected, and he had expressed strong interest in the role, which was never advertised.

Wade was forced to take a series of prickly questions on notice, something politicians generally loathe to do in question time. Scriven’s colleague Emily Bourke followed up:

“Is the minister aware that his Chief Executive of SA Health, Dr Chris McGowan, joined the Premier and the Speaker at a fundraiser on 22 October 2013 in a private room at The Robin Hood Hotel, Norwood, at a cost of $500 a ticket?”

Labor MLC Ian Hunter then sought to confirm McGowan had gone to at least three other Liberal fundraisers with federal ministers — two in 2013 and one in June, 2017 — and that Silver Chain had confirmed this for McGowan last September, two months after his denial in the committee. Now the argument comes down to the question of whether these were in the “lead up to the election” or not. Hunter concluded:

“Will the minister now explain why his Chief Executive of SA Health did not correct the record for the last 14 months, from when he was informed by Silver Chain staff of the correct information regarding attending Liberal Party fundraisers?”

Labor’s Russell Wortley then asked Wade about the process of McGowan’s appointment.

“Will the minister explain why, after attending a Liberal Party fundraiser for the Premier, Dr McGowan was appointed as the highest paid chief executive of any government department within weeks after the Liberal Party formed government?

“How does the minister explain that it took just one month to hire Dr McGowan as SA Health chief executive but it took the Liberal government 4½ months to hire a new chief of the CFS?”

Wade’s response was to point out that technically the Premier appoints chief executives and to maintain that a “selection process” was used, so Wortley asked about Wade’s unofficial job offer prior to the election. “I am not accountable to this parliament for my operations in opposition,” he replied.

The opposition argues McGowan’s position is untenable but the government is resisting its calls for him to be sacked. For now.

Update: SA Health boss to keep job after conflicts of interest investigation

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