The Australian National Audit Office (ANAO) has asked the Digital Transformation Agency (DTA) to ensure its officials brush up on federal procurement requirements after a review of IT panel arrangements.
The recommendation comes after the ANAO closely examined three procurement arrangements, the DTA’s Digital Marketplace panel and its $1 billion-plus IBM Whole-of-Australian Government Arrangement, along with the now defunct IT Services Panel established by the Department of Infrastructure, Transport, Regional Development and Communications.
“In establishing the three selected ICT related procurement panels and arrangements, Infrastructure and DTA could not fully demonstrate that the arrangements supported the achievement of value for money outcomes,” the ANAO stated in its Establishment and Use of ICT Related Procurement Panels and Arrangements report.
“In their use of the 15 selected ICT related procurement panels and arrangements, entities could demonstrate that the majority of procurements supported value for money outcomes, however in three cases it was difficult for entities to demonstrate this due to the absence of competition,” the report said.
According to the report, the DTA did not comply with all of the Commonwealth Procurement Rules (CPRs) — the basic rule set for all Commonwealth procurements — but did adopt a number of sound practices outlined in Department of Finance guidance when establishing the Digital Marketplace panel.
However, its approach did not support the achievement of a value for money outcome or treat suppliers equitably, according to the ANAO.
“Once DTA identified these deficiencies it changed its processes,” the report stated. “DTA’s new approach complies with the minimum requirements of the CPRs, although DTA’s consideration of price, quality and risk could be more robust to better demonstrate that its evaluation of suppliers achieves value for money outcomes.”
The Digital Marketplace was first announced in December 2015 as part of the Federal Government’s ‘National Innovation and Science Agenda’ and later went live in beta in August 2016.
Designed to help smaller IT providers to compete for government work, the Digital Marketplace had, as of August, awarded more than $2.2 billion in contracts over four years, with the value of deals doubling since the start of the coronavirus pandemic.
The ANAO, meanwhile, found that Infrastructure complied with the CPRs and adopted related guidance when establishing its IT Services Panel, which ceased operation in February 2020, but could have adopted a more robust approach to the consideration of price, quality and risk to better support the achievement of a value for money outcome.
“Given the scale and scope of its procurement arrangements, DTA should have been more active in identifying and managing key risks and probity arrangements in the establishment process,” the report stated.
However, Infrastructure and the DTA obtained relevant approvals and complied with CPR reporting requirements, it was found.
At the same time, the report said that Infrastructure did not conduct systematic monitoring to assess whether its panel arrangement was meeting its objectives.
Among the recommendations dished out by the ANAO to the DTA was the suggestion that the DTA ensures that officials undertaking complex procurements have sufficient understanding of the procurement requirements, the nature of the arrangement being established and procurement related risks.
It also recommended that the DTA ensures that when establishing procurement panels suppliers are treated equitably and are appointed on the basis of a value for money assessment in accordance with the requirements of the CPRs.
For its part, the DTA agreed with the ANAO’s findings and the above recommendations, and said it would continue to take steps to improve the establishment and management of its panels in line with the ANAO’s findings.
Broadly, the DTA supported the recommendations tabled by the ANAO.
The ANAO also recommended that the Department of Home Affairs and the Department of Industry, Science, Energy and Resources give greater consideration to competition when selecting suppliers from a panel, particularly in the case of high value procurements or where there is likely to be a substantial increase in the value of a procurement, to drive value for money.
Both departments agreed to the recommendation. While the IT Services Panel ceased operation in February, Industry said it would consider the findings of the audit report, particularly in regard to strengthening the consideration of price, quality, risk and monitoring of objectives for any future ICT related procurement panels and arrangements.
The report also noted that, during the course of the audit, the ANAO was advised by the Department of Finance of allegations of fraud related to the supply of information technology contractors. At the time of the report's publishing on 31 August, investigations were ongoing.
While the report provided no further detail about the fraud case, in June it was revealed that three Department of Finance workers were facing up to 10 years in prison for alleged fraud activity via IT contracts.
At the time, the Australian Federal Police (AFP) arrested and charged three Canberra men for allegedly conspiring to direct information technology contracts through preferred suppliers and thereby gain monetarily from it.