1.1
The Joint Committee of Public Accounts and Audit (JCPAA) inquiry into Commonwealth procurement was based on the following Auditor-General reports:
Procurement of the International Centre for Complex Project Management to Assist on the OneSKY Australia Program, No. 1 (2016-17)—administered by Airservices Australia (Airservices)
Delivery of Health Services in Onshore Immigration Detention, No. 13 (2016-17)—administered by the Department of Immigration and Border Protection (DIBP)
Offshore Processing Centres in Nauru and Papua New Guinea: Procurement of Garrison Support and Welfare Services, No. 16 (2016-17)—administered by DIBP
1.2
Procurement is an integral part of the way the Australian Government conducts business and provides services, and is therefore core business for Commonwealth entities.
1.3
Procurement by most Commonwealth entities is governed by the Commonwealth Procurement Rules (CPRs), issued under the Public Governance, Performance and Accountability Act 2013 (PGPA Act). The CPRs combine Australia’s international obligations and good practice, and enable agencies to design processes that are robust and transparent. Compliance with the CPRs is mandatory for all non-corporate Commonwealth entities and some prescribed corporate Commonwealth entities. The DIBP is a non-corporate Commonwealth entity under the PGPA Act and is therefore subject to the CPRs. Airservices is a corporate Commonwealth entity under the PGPA Act and is not subject to the CPRs; instead, as is the case with most corporate Commonwealth entities, Airservices develops and implements its own procurement policies and procedures. These policies and procedures are required to meet obligations under the PGPA Act that entities promote proper use of resources and employ effective internal controls.
1.4
Achieving value for money is expected to be a central consideration of Commonwealth procurement activities. Competition in procurement is important for a number of reasons, including the benefits that competitive pressure brings to demonstrating probity and value-for-money outcomes. Procurement approaches that reduce competitive pressure will require additional attention and/or measures to ensure that value for money is achieved. However, as the Auditor-General noted during the Committee’s inquiry, ‘it remains quite commonplace for entities to adopt approaches that reduce competitive pressure’:
For example, Airservices Australia made extensive use of ICCPM to assist with the delivery of the OneSKY Australia program, with 42 engagements of ICCPM employees and subcontractors through 18 procurement processes, but each of the 42 engagements were sole-sourced. The ANAO’s analysis was that the approach to contracting ICCPM was ineffective in providing value-for-money outcomes. The Department of Immigration and Border Protection, in consolidating the offshore detention contracts and conducting a tender, used approaches which reduced competitive pressures. Those two audits also highlighted significant skill and capacity gaps among personnel undertaking procurement activities, persistent shortcomings in planning and conduct of procurements—including in relation to record keeping and the assessment of value for money—and inadequate attention being paid to management of probity risks.
1.5
By taking a thematic approach to some of its Commonwealth public sector inquiries, the Committee seeks to encourage improvements and shared learning in key areas of public administration. Effective Commonwealth procurement will continue to be a strong focus of the JCPAA in its role in scrutinising the governance, performance and accountability of Commonwealth agencies.
1.6
On the procurement of the International Centre for Complex Project Management (ICCPM) to assist on OneSKY, the Committee was disappointed to note that Airservices had ‘routinely failed’ to adhere to its procurement policies and procedures, and concluded that Airservices’ approach to this procurement was problematic on a number of fronts. The Committee noted that Airservices agreed to all of the Auditor-General’s recommendations and had made progress in implementing these recommendations. However, to demonstrate the requisite organisational cultural change, the Committee recommended that Airservices provide a post-implementation progress report for each of the audit recommendations. The Committee also recommended that Airservices report back on the findings of its independent probity audit, and that the Department of Finance and the ANAO consolidate procurement guidance for corporate Commonwealth entities to ensure more strict application of the CPRs.
1.7
Given the probity findings in Audit Report No. 1, Procurement of ICCPM to assist on OneSKY, the Committee noted the ANAO’s conclusion in the companion audit, Audit Report No. 46, Conduct of the OneSKY Tender, that the OneSKY tender process was ‘appropriate’ and that the tender evaluation governance ‘guarded against the conflict of interest issues identified in Audit Report No. 1 … impacting on the tender evaluation process and outcome’. However, the Committee also noted the ANAO’s findings that: it was ‘not clearly evident that the successful tender offered the best value for money’ because adjustments made to tendered prices when evaluating tenders against the cost criterion were ‘not conducted in a robust and transparent manner’; there had been ‘significant delays’ in the conduct of the tender process; and it was ‘not clearly evident’ that the successful tender was affordable in the context of available funding. The Committee was particularly disappointed to note Airservices’ continuing issues with adequate record keeping and documentation to ensure that decisions and processes are able to be supported upon review—in other words, that a documentation trail is created and maintained.
1.8
Accordingly, the Committee recommended that Airservices report back on progress in implementing action to address the conclusion and supporting findings of Audit Report No. 46. Further, as criterion 3 of the ANAO’s audit objective in this audit was not able to be examined, the Committee recommended that the ANAO consider conducting a third stage audit into the conduct of the OneSKY tender and any associated matters, once the contract for the entire acquisition and support scope has been executed, to complete its audit objective on this matter. The Committee reserves its right to conduct a future inquiry into Airservices’ procurement practices with reference to OneSKY if it so determines.
1.9
Regarding DIBP’s management of its contract with International Health and Medical Services (IHMS) to provide health services for onshore immigration detention, the Committee noted that the contract was developed by the department based on a strategic analysis of previous shortcomings. However, the Committee was concerned to note that the ANAO found ongoing areas of concern, particularly in relation to the finalisation of performance measures and monitoring arrangements which were ‘not sufficiently robust’ to effectively ensure the quality of health services and reliably identify areas of health service delivery risk.
1.10
The Committee therefore recommended that DIBP report back on its progress in implementing its remediation plan, in finalising various performance measures, on the details of any targeted audits of IHMS’ performance it conducts, and on the role and performance of the department’s Health Services and Policy Division in the ongoing administration of the contract with IHMS.
1.11
In its review of the audit of procurement of Garrison Support and Welfare Services in Offshore Processing Centres in Nauru and Papua New Guinea the Committee noted the ANAO’s finding that there were significant deficiencies in all three phases of the procurement activity.
1.12
While concerned to note the substantive issues identified by the ANAO, the Committee acknowledged that DIBP was operating in a complex and rapidly evolving environment under exceptional time pressures during the initial establishment of the contracts. However, the Committee considers that DIBP ought to have taken steps to improve its procurement activities within a reasonable time, particularly in relation to the subsequent phases of consolidation of the contracts and retendering, considering the substantive and serious nature of the deficiencies identified by the ANAO.
1.13
The Committee supports the ANAO’s conclusion that DIBP’s management of processes for contract consolidation and the open tender did not facilitate the Government’s objective of reining in growing expenses. DIBP used approaches which ‘reduced competitive pressure and significantly increased the price of services’, despite the Prime Minister seeking a reduction in per head costs.
1.14
The Committee was particularly concerned to note the ANAO’s finding concerning ongoing issues with DIBP’s ‘porous’ record keeping practices, including in relation to conflicts of interest, assessments and performance management of contracts. The Committee has therefore recommended that DIBP provide a post-implementation progress report on the implementation of ANAO recommendations, and that the ANAO consider conducting a performance audit of the department’s next procurement process in this area. The Committee will continue to monitor DIBP’s record-keeping practices through reviews of future ANAO audits.
1.15
The conduct and outcomes of the tender processes reviewed by the ANAO highlighted procurement skill and capability gaps amongst departmental personnel. Procurement is core business for Commonwealth entities and the Committee welcomes DIBP’s acceptance of the recommendations of the ANAO and its stated commitment to improve its procurement processes. However, the Committee finds that a follow-up audit of DIBP’s procurement processes is warranted.