A private health company with links to the Liberal National Party (LNP) won a multi-million-dollar medical contract last year without a tender, amid serious concerns about the integrity of the process and poor value for taxpayers.

The ABC can reveal Vanguard Health, which is also registered as a lobbying firm federally and in every state and the ACT, was the sole contender when it won a $13 million, three-year contract to provide doctors to Yeppoon Hospital in what hospital administrators called a "quick fix".

Vanguard has donated $21,000 to the Queensland LNP since 2009. The company's general manager, David M Russell, was until 2013 a member of the LNP's State Council and on the editorial team of the party's in-house magazine.

Documents obtained by the ABC under Right To Information show the Central Queensland Hospital and Health Service (CQHHS) awarded Vanguard the contract to supply six rural doctors in February 2014 because of an "urgent" need to improve relations with the local community.

"It is estimated an open tender process would delay the project by up to three months," the board wrote in a document signed off by its chairman, Charles Ware, who commissioned the Vanguard proposal.

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But the contract to provide doctors, meaning an additional $7.5 million would have to be funded from savings elsewhere, was awarded in the face of warnings from senior hospital administrators that the deal was rushed and an expensive response to problems they did not recognise.

Chief financial officer Nik Fokas wrote to chief executive Len Richards on February 3 warning the Vanguard proposal would cost over $400,000 more per doctor than existing locum arrangements.

"I do not propose we engage with this arrangement," wrote Mr Fokas.

Mr Richards responded saying he agreed with the calculations but there was "little in the way of choices".

"We have not established confidence in the local people, politicians or our staff out there that we have this under control," he wrote.

CQHHS executive, hospital board member rejected report, process

The same day, Rodney Hutcheon, executive director of the CQHHS rural health services division, complained to Mr Richards.

"As I read the [Vanguard] report a number of times last night, I became even more disillusioned with both the report itself and the process surrounding the report," he said.

"[The report] presents an unsubstantiated claim in a poorly researched document," Mr Hutcheon went on. "As the Executive Director of this facility, I have not even had the courtesy of a phone call from [Vanguard managing director Kerry Gallagher]."

Mr Hutcheon warned that the $13 million cost did not take into consideration the unbudgeted expense of housing the doctors once their three-year terms expired and they were rolled over into the public system.

"In my view there is no clinical nor medical reason to consider the Vanguard proposal. However, I do acknowledge that there is a perception by the local State member that a problem for medical staffing exists."

The single dissenting member of the hospital board, Sandra Corfield, told fellow board members that she could not support the "quick fix" that was being proposed.

"I do not approve of the recommendations and do not endorse the appointment of an external consultancy to address the current workforce situation for Yeppoon," she wrote in an email to board members on February 12, the day the contract was signed.

"There are many contributing factors to this lack of leadership and planning and I feel this issue should lead us to addressing those issues rather than a bandaid response as a result of political pressure."

Health authority sought legal advice over contract's integrity

The documents also show that the day the contract was signed, the health authority sought external legal advice on whether chief executive Len Richards and board chairman Charles Ware had breached Queensland's Integrity Act because Vanguard had listed the hospital board as one of its clients on the Federal Lobbyists' register.

By the time the advice was received from law firm Corrs Chambers Westgarth in April, the deal was already a month old.

Corrs told CQHHS it was not correct to assume that because it was a statutory authority it was exempt from the Integrity Act.

The board chairman was required to declare any conflicts of interest to the Integrity Commissioner and the Minister of Health under the Act, the firm said.

It noted that Vanguard and Kerry Gallagher were registered as lobbyists in Queensland. But in relation to the consultancy agreements with CQHHS, they were not acting as lobbyists "because they have acted in their own interests and not in the interests of a third party client".

"However, as you are aware, there are also requirements governing procurement by CQHHS ... we assume that CQHHS has followed these requirements and policies in all respects ... and that there is an appropriate 'paper trail' which evidences compliance."

At the time of the February 2014 deal, Vanguard already had two other contracts to provide "advisory services" to the CQHHS board, worth more than $500,000. The firm also provided advice to CQHHS in 2010 following an inquest into a patient death and did a review of the medical workforce in central Queensland for Queensland Health in 2008.

In a statement to the ABC, CQHHS chairman Charles Ware said the local community had become disengaged and lost confidence in its hospital in late 2013 and the Yeppoon Hospital had had difficulties recruiting doctors.

"The Board identified the rebuilding of health services from the Capricorn Coast Hospital as a priority and determined an urgent need to stabilise the medical workforce and reduce unsatisfactory patient care," Mr Ware said.

"Under these circumstances, Vanguard Health was engaged under a sole-source procurement arrangement which does not require an open tender process."

CQHHS chairman not aware Vanguard was LNP donor

He said he was not aware Vanguard was a donor to the Queensland LNP or that any of its executives were on the LNP State Council.

The board had not consulted the Integrity Commissioner or sought further legal advice after being told Vanguard representatives had not acted as lobbyists during the deal, Mr Ware said.

Len Richards, CQHHS chief executive, told the ABC: "The contract was not for a duplication of the service we had been offering, but delivered six medical officers when the health service was sometimes unable to provide three locums. It delivered a superior, larger and safer service."

According to Vanguard managing director Kerry Gallagher, five permanent doctors were working at the hospital as a result of the contract, with a locum expected to join them.

Mr Gallagher told the ABC his firm had donated to both the Liberal Party and Labor Party, although the ABC could find no record of donations to Labor.

He said Vanguard had received money "from a various number of individuals" to support the campaign of Dr Bill Glasson, who stood in the Federal seat of Griffith against Kevin Rudd in the 2010 election and again in a byelection when Mr Rudd stepped down in 2013 - and Vanguard had passed this money on to the LNP.

When the ABC pointed out that Queensland Electoral Commission returns showed Vanguard donations in earlier years, Mr Gallagher said: "I think you'll find they're donations through the Australian Society of Opthamologists where I am nominally the CEO ... and that would've been in support of the campaign to secure a better outcome for patients."

Mr Gallagher told the ABC that the $10,000 donation was lodged by Vanguard in the name of the Australian Society of the Ophthalmologists. But when the return was made public he said the donation was incorrectly listed as coming from Vanguard.

Vanguard's general manager David M Russell told the ABC he had left the LNP State Council in 2013, adding that he never discussed "health, health issues or Vanguard with anyone from the LNP".

A spokeswoman for former Health Minister and now Leader of the Opposition in Queensland Lawrence Springborg said Vanguard had had contracts with the former Labor government well before the LNP was in government.

Mr Springborg had discussed the matter on the public record in Parliament and again extensively during the Parliament estimates, she said.

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