B. ANAO Conclusions and Recommendations

Audit Report No. 1 (2016-17) Procurement of International Centre for Complex Project Management to Assist on OneSKY Australia Program

Conclusion (p. 8)

A key shortcoming in Airservices’ procurement policies and procedures is that they do not give appropriate emphasis to the use of competitive processes. In addition, Airservices routinely failed to adhere to its policies and procedures in procuring services from ICCPM. As a result, Airservices’ procurement of services from ICCPM, on an exclusively sole-sourced basis, did not deliver value for money.
Airservices demonstrated a lack of organisational commitment to the effective implementation of probity principles in respect to the ICCPM arrangements. It was reasonably foreseeable that Airservices’ contracting of ICCPM to assist with the OneSKY Australia project would give rise to perceptions of conflicts of interest and, potentially, actual conflicts of interest. But the ICCPM engagements were not effectively managed so as to ensure the OneSKY tender process was free of any concerns over conflict of interest that could impact on public confidence in the outcome.

Recommendations (pp. 11-12)

Recommendation No.1

The ANAO recommends that Airservices Australia address systemic failures in the adherence to the organisation’s procurement policies and procedures and the cultural underpinnings of those failures.
Airservices Australia response: Agreed.

Recommendation No.2

The ANAO recommends that Airservices Australia improve the value for money it obtains from major and strategic procurement activities by:
a.
requiring that, except in genuinely rare circumstances, competitive procurement processes are to be employed; and
b.
on those rare occasions when competitive procurement processes have not been able to be employed:
documenting the reasons why a competitive approach was not employed;
benchmarking the quoted rates/fee and making records of the basis on which it was decided that the contracted rate/fee represented value for money; and
reporting any such instances to the Airservices Australia Board.
Airservices Australia response: Agreed.

Recommendation No.3

The ANAO recommends that Airservices Australia improve its procurement framework by including enhanced guidance in relation to:
a.
the different roles performed by probity advisors and probity auditors;
b.
determining the circumstances in which the engagement of an independent probity auditor would be appropriate; and
c.
the manner in which such decisions are to be documented.
Airservices Australia response: Agreed.

Recommendation No.4

The ANAO recommends that Airservices Australia proactively manage probity in procurement activities by:
a.
ensuring conflict of interest declarations are updated regularly or their ongoing currency confirmed;
b.
reviewing existing declarations when the role being performed by an individual changes; and
c.
regular review of program participants’ reporting of contact with industry respondents in order to monitor compliance with reporting obligations.
Airservices Australia response: Agreed.

Recommendation No.5

The ANAO recommends that Airservices Australia’s governance arrangements address:
a.
whether individuals proposed to be employed in key probity management roles possess the understanding and capabilities required to undertake the role effectively; and
b.
the appropriate separation of duties between key probity management roles associated with a procurement activity.
Airservices Australia response: Agreed.

Recommendation No.6

The ANAO recommends that Airservices Australia enhance its procedures for managing probity in procurement processes to require documented consideration of the potential for actual or perceived conflicts of interest to arise when engaging external contractors to participate in tender evaluations and contract negotiations and, where relevant, the management strategies that are to be applied.
Airservices Australia response: Agreed.

Audit Report No. 13 (2016-17) Delivery of Health Services in Onshore Immigration Detention

Conclusion (p. 8)

The department’s administration of health services in onshore immigration detention has been improved by the strengthening of contractual arrangements with the selected provider of health services. The current contract, which was developed by the department based on a strategic analysis of shortcomings that had arisen under earlier contracts, includes: mechanisms to control the risk of over-servicing and uncontrolled cost escalation; clearly defined deliverables; and a performance monitoring regime containing provisions for the application of penalties and incentives. However, to be able to give assurance that contract objectives are being achieved, there is further scope for the department to improve its administration of health service delivery, primarily through strengthening arrangements for monitoring:
the quality of the health services that are being delivered; and
key areas of health service delivery risk (such as services to detainees with mental health conditions).

Recommendations (p. 10)

Recommendation No. 1

That the Department of Immigration and Border Protection strengthen its performance monitoring framework and monitoring practices, based on an assessment of the risks to the effective delivery of health services in onshore detention.
Department of Immigration and Border Protection response: Agreed.

Recommendation No. 2

That the Department of Immigration and Border Protection analyses health service delivery related complaint and incident reports data and uses this information to inform management and operational decision-making.
Department of Immigration and Border Protection response: Agreed.

Audit Report No. 16 (2016-17), Offshore Processing Centres in Nauru and Papua New Guinea: Procurement of Garrison Support and Welfare Services

Conclusion (pp. 8-9)

The Department of Immigration and Border Protection’s (DIBP) management of procurement activity for garrison support and welfare services at the offshore processing centres in Nauru and Papua New Guinea (Manus Island) has fallen well short of effective procurement practice. This audit has identified serious and persistent deficiencies in the three phases of procurement activity undertaken since 2012 to: establish the centres; consolidate contracts; and achieve savings through an open tender process.
Of most concern is the department’s management of processes for contract consolidation and the open tender. The Australian Government intended that these procurement processes would rein in the growing expense associated with managing the centres. In both cases, the approach adopted by the department did not facilitate such an outcome. The department used approaches which reduced competitive pressure and significantly increased the price of the services without Government authority to do so. The open tender process was cancelled by the department on 29 July 2016 and consequently had no outcome.
The conduct and outcomes of the tender processes reviewed highlight procurement skill and capability gaps amongst departmental personnel at all levels. Procurement is core business for Commonwealth entities and the deficiencies have resulted in higher than necessary expense for taxpayers and significant reputational risks for the Australian Government and DIBP. The audit’s two recommendations are intended to address:
the significant skill and capability gaps identified amongst personnel at all levels in the department, including within the central procurement and budget units; and
persistent shortcomings in the planning and conduct of the procurements, including in relation to record keeping, consistency and fairness in the treatment of suppliers, and the assessment of value for money.

Recommendations (pp. 14-15)

That the Department of Immigration and Border Protection address, as a priority:
a.
through training and staff selection—the significant procurement skill and capability gaps identified in this audit amongst personnel at all levels, including:
the central procurement unit;
budget unit;
program area staff; and
delegates;
b.
through guidance, training and staff selection—an approach to ensuring that officials have appropriate seniority and experience to undertake key procurement roles, such as chief negotiators and delegates, and effectively manage procurement risk; and
c.
through guidance, training and a strategic approach to records management—persistent shortcomings in record keeping for procurement activities.
Department of Immigration and Border Protection response: Agreed
That the Department of Immigration and Border Protection take practical steps to ensure adherence to the requirements of the resource management framework when undertaking procurements, including:
a.
the obligation to manage all aspects of a procurement process in accordance with the Commonwealth Procurement Rules;
b.
compliance with Government approved scope and contract value;
c.
in respect to open tender processes, adopting a value for money assessment which compares tenderers against other bids;
d.
the application of documented eligibility criteria in line with the Request for Tender and consistent with the Commonwealth Procurement Rules, with any modifications advised to all potential suppliers;
e.
the need for ethical conduct throughout the procurement to ensure consistent and fair treatment of suppliers;
f.
the need to recognise and manage actual, potential and perceived conflicts of interest; and
g.
the maintenance of clear and complete records of all tender bids, key actions, decisions, conflict of interest and SES disclosure declarations.
Department of Immigration and Border Protection response: Agreed

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