Audit Report No. 12 (2017-18) Management of the Contract for Telephone Universal Service Obligations
Conclusion (pp. 8-9)
The Telstra USO Performance Agreement (TUSOPA) supports the achievement of the stated universal service obligation policy objective of providing reasonable access to standard telephone services and payphones on an equitable basis to all Australians–specifically by establishing a contract with Telstra to deliver basic voice telephony services for a period of 20 years. In addition to the stated policy objective, the TUSOPA also played an important role in securing Telstra’s involvement in the rollout of the National Broadband Network (NBN).
However, key aspects of the TUSOPA do not reflect value for money principles. In particular, the contract’s term of 20 years with a fixed annual fee based on 2009–10 costs does not reflect the demonstrated decline in demand for standard telephone and payphone services over the relevant period. Further the TUSOPA limits flexibility in relation to how standard telephone services can be delivered in areas outside the NBN fixed line network.
The annual fixed payment of $297 million for standard telephone and payphone services provided under the TUSOPA is consistent with external advice commissioned by the Department in 2011. However there is no evidence that this advice was designed to provide guidance on Telstra’s likely costs to deliver the USO over the life of the contract, and therefore whether the value of the fixed annual contract payments to compensate Telstra for the provision of these services is appropriate. The contract further lacks a mechanism which would enable the Government to effectively manage the financial risks should it wish to end the contract before the scheduled 20 year term.
Since assuming responsibility for the TUSOPA in July 2015, the Department has been a relatively passive contract manager. The Department has not utilised the flexibility mechanisms within the contract which have the potential to reduce the annual payment amounts. The Department commenced work in May 2017, through the establishment of the USO Taskforce, to assess whether the annual fixed payments to Telstra continue to represent value for public money in the evolving telecommunications environment.
Existing performance reporting provides limited transparency as to whether contract services are achieving the stated policy objective. More specifically, because reporting provides no information on the quantity of standard telephone services that Telstra supplies solely on the basis of its universal service obligations, it is not possible to determine the extent to which the TUSOPA contributes to Australians having reasonable access to such services on an equitable basis. In relation to service quality, contract reporting indicates that, with the exception of some shortcomings in the first year of the TUSOPA in 2012–13, Telstra has met all service performance benchmarks. Neither the Australian Communications and Media Authority (ACMA) nor the Department undertake processes to verify the accuracy of the underlying performance data provided by Telstra, which is used to determine compliance with the standard telephone customer service guarantee and payphone benchmarks.
While the TUSOPA has played a role in facilitating the involvement of Telstra in the rollout of the NBN, there is a lack of clear evidence that a net public benefit has been realised as a direct result of the introduction of the TUSOPA.
Recommendations (p. 11)
Recommendation 1
The Department should:
a.
determine if any of the existing flexibility mechanisms can be utilised to improve value for money outcomes while the National Broadband Network is being rolled out; and
b.
develop options for an efficient transition to any potential alternative USO delivery arrangements.
Department of Communications and the Arts’ response: The Department did not state whether it agreed or disagreed with the recommendation.
Recommendation 2
The Department should review whether existing arrangements provide an appropriate degree of assurance that Telstra’s standard telephone service and payphone reporting is accurate and is an appropriate basis from which to assess Telstra’s performance under the TUSOPA and make annual payments. An initial review should be completed in time to allow for any resulting changes to be implemented before making any payment for the 2016–17 financial year.
Department of Communications and the Arts’ response: The Department did not state whether it agreed or disagreed with the recommendation.
Audit Report No. 9 (2017-18) Management of the Pre-construction Phase of the Inland Rail Programme
Conclusion (pp. 7-8)
In managing the pre-construction phase of the Inland Rail programme, the Australian Rail Track Corporation (ARTC) could have had a greater focus on achieving value for money in procurement activities. The ARTC identified the need to improve existing business functions and procurement practices throughout the pre-construction phase, and commenced initiatives to strengthen administration. These initiatives need to be fully implemented to support the ARTC in effectively managing the full Inland Rail programme in coming years and delivering value for money.
Governance arrangements for the pre-construction phase of the Inland Rail programme were appropriate, although there was not timely implementation of the Minister’s decision that a funding agreement be developed between the Department of Infrastructure and Regional Development and the Australian Rail Track Corporation. The Australian Government’s longer term intent with regard to the delivery and full construction of the Inland Rail was appropriately considered, including through the administration of grant funding. There could have been more emphasis on achieving value for money in procurement and contracting activities, including for the ARTC’s contracting of staff for the programme, and improved planning for the leasing of property.
Testing of a sample of 54 procurements for the Inland Rail programme found a lack of consideration given to competition in the early phase of the programme, where a considerable proportion of procurements (17 per cent of the sample) were sole sourced. Procurement activities improved during the sampling period, as new systems, processes and practices were implemented. The ARTC’s established Information and Communications Technology (ICT) systems and procurement and document management processes and practices were well short of the needs of the Inland Rail programme. The ARTC is further reviewing its procurement policies and procedures and supporting business functions for the full construction of Inland Rail.
Recommendations (p. 10)
Recommendation 1
To improve the management of risk, the Australian Rail Track Corporation accelerates the implementation of a fit-for-purpose risk management system for the Inland Rail programme.
Australian Rail Track Corporation response: Agreed in principle
Recommendation 2
To improve records management, the Australian Rail Track Corporation:
a.
revisits the scope and timeline of the Electronic Content Management review to incorporate the Inland Rail programme; and
b.
reviews and updates its records management policies and procedures.
Australian Rail Track Corporation response: Agreed in principle and underway
Recommendation 3
To support transparency and value for money in contracting arrangements for the construction of the Inland Rail, the Australian Rail Track Corporation:
a.
develops and implements policies and procedures that have suitable regard to Commonwealth procurement and contract management standards, recognising that the company is not bound by the Commonwealth Procurement Rules;
b.
implements full functionality and controls available in procurement and contract management systems modules; and
c.
monitors performance in procurement and contract management through increased internal audit activity and / or the implementation of a quality assurance process.
Australian Rail Track Corporation response: Agreed in principle with qualification.
Audit Report No. 61 (2016-17) Procurement of the National Cancer Screening Register
Conclusion (p. 8)
In conducting the procurement of the National Cancer Screening Register, the Department of Health complied with the Commonwealth Procurement Rules, effectively managing an open tender process and considering value for money.
The effectiveness of the procurement has been reduced due to inadequate consideration of risk during planning and poor management of probity and conflicts of interest.
The objectives sought by the Government have not been achieved in the agreed timeframe and additional costs have been incurred as a result.
Recommendation (p. 9)
Recommendation 1
Health should ensure that:
a.
actual, potential and perceived conflicts of interest records are maintained, up-to-date and appropriately addressed; and
b.
Senior Executive Service employees declare in writing, at least annually, their own and their immediate family’s financial and other interests.
Department of Health response: Agreed.