The procurement and contract management skills within the Australian Public Service (APS) were distinct matters raised during the committee's inquiry.
The Australia and New Zealand School of Government (ANZSOG) informed the committee that it believed there was a skills deficit in a broad sense in regard to procurement across the APS. As Professor Ken Smith, Dean and Chief Executive Officer, explained:
Our position is that there is a skills deficit or a capability problem with a coherent approach to procurement commissioning and contracting across the Public Service and that that issue needs some specific attention. Even though government might commission aged-care services or disability services et cetera, the government are still responsible for the end-to-end delivery of those services. They can't remove themselves from accountability for the quality of that delivery because the services are being delivered by [a] private or not-for-profit organisation, which is what we've seen through the range of royal commissions that have been in place on aged care and disability services.
The Australian National Audit Office (ANAO) informed the committee that it considered procurement to be a 'key capability' of the APS because so much of what the public service does involves a procurement component. As the Auditor-General explained:
Frameworks that are established for high-quality procurement set out an approach that you would expect entities to take when procuring any service...The expectation is that they would have a clear understanding of what they are trying to buy and why; they would have a performance framework in place within the contract to hold those who are delivering the service to account for achieving the results of that; and they would have a performance framework through the management of the contract to ensure the contract services are delivered. That applies to any contract, really.
The ANAO submitted that, through its audit program, it had identified procurement as an area for improvement within the APS. The ANAO noted that in 2019–20, the total value of procurement contracts entered into by entities that use AusTender was approximately $54 billion, through over 81 000 procurement contracts in the same period.
The Auditor-General advised that there was strong evidence from ANAO performance and financial audits that the public sector approach to procurement often fell short of the expectations set out in the regulatory framework.
He also noted that in many cases, APS entities found it difficult to demonstrate that they had obtained value for money when using public resources.
The Auditor-General further observed that the ANAO regularly finds entities 'complying with the letter of the procurement rules but not with their intent'.
Often the evidence suggests that the decision to exempt procurements from open competition has been based more on it being a less costly and easier process for the entity to undertake, rather than a focus on the overall value of taxpayer funds—for example, using the provision of extreme urgency brought about by unforeseen events. To grant an exemption from competitive tender simply because the procurement process was left too late points to poor management rather than the intent of the exemption.
The Auditor-General emphasised the importance of the necessary skills and guidance for employees to ensure that APS procurement processes were conducted appropriately:
It's important that entity officials have or are able to draw on guidance and training as well as relevant expertise, such as the central procurement unit, to enable them to carry out their procurement activities efficiently and effectively, and in compliance with the intended government and entity requirements. A key step in effective procurement is to have a clear understanding of the requirements of procurement, and to ensure officials undertaking complex procurements have sufficient understanding of the procurement related objectives, the procurement requirements, the nature of the arrangements being established and procurement related risks. It is important for entities to ensure risk management and probity considerations are commensurate with the scale, scope and risk of procurement, while procuring from existing arrangements.
The Auditor-General concluded:
Given the scale and value of public sector procurement activity, the ANAO undertakes performance audits every year in this area. The rules framework is well developed and mature, and it is designed to enable entities to demonstrate achievement of value for money. It's disappointing that we often see entities procurement and contract management efforts falling well short of expected standards. This is a capability area that needs ongoing focus within the service.
The committee is concerned by the ANAO evidence indicating that agencies often fall short of expected standards in their procurement and contract management activities. The committee commends the work of the ANAO on drawing attention to this deficit and identifying where improvements can be made.
In light of this, the committee considers that there is a need for an ongoing focus on improving APS capability in these areas to ensure that public money is managed judiciously.
The committee will continue to take an active interest in the findings of the ANAO in relation to procurement and contracting by APS agencies, and will continue to request that agencies show adherence to public sector procurement rules and guidelines as they are intended to be applied.
The committee recommends that the Department of Finance develop a comprehensive strategy to improve procurement and contract management capability across the Australian Public Service, with a particular focus on the areas of concern identified by the Australian National Audit Office.