Nothin’ suss: Defence denies ‘nepotism’ accusation in limited-tender procurement deal

By Stephen Easton

Wednesday October 23, 2019

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The Department of Defence says there was nothing wrong with a procurement official’s decision to bypass a competitive tender process and award a contract to a company that had employed their son in the past.

An anonymous public servant “with close knowledge of the contract” took a very different view and told the ABC’s defence reporter Andrew Greene it was clearly nepotism and a breach of the rules. “If he’d declared the conflict of interest prior, he would not have been allowed to be the financial delegate and approve the contract,” they told the ABC.

Greene’s source felt the situation was “the very definition of a conflict of interest” but the department says the public servant’s family member only ever did “casual, technical work” with the firm, Sinapse, in an area unrelated to the contract. Defence also argued they had no involvement in the procurement deal and gained no benefit from it.

Sinapse stands to be paid $371,800 under the contract for a “technical change review” after a non-competitive process. The department said all the relevant procurement policies had been followed and defended the decision not to call for tenders on the basis that a market review found there was no competitive market in this case.

Update: Defence chief information officer Stephen Pearson was revealed as the senior official who awarded the contract, in Senate estimates on Wednesday.

Pearson confirmed his son did “part-time casual work in a technology area for Sinapse now and again” but denied his son received any benefit from the contract. The CIO accepted that he should have declared a conflict of interest before the contract was awarded, instead of afterwards. Associate secretary Rebecca Skinner said other delegates could have made the decision and if she had known about Pearson’s relationship at an earlier point she would have asked someone else to handle the deal.

Defence also said none of the suppliers on its existing procurement panels, which are put together through competitive processes, were suitable.

“Specialist procurement officials within Defence’s commercial division provided procurement advice in support of this process,” the department told the ABC.

Such cross-overs between personal and professional lives are extremely common, as ethics expert David Burfoot noted in a recent article about why conflicts of interest matter, published by Victoria’s Independent Broad-based Anti-Corruption Commission.

“For example, you could be running a tender process for your agency when you are surprised to discover that one of the bidders is your cousin,” he writes (emphasis in original):

“This is an actual conflict of interest; you are confronted with a dilemma. You are in conflict between two social values — your professional duty to be objective and your duty to family.

“A potential conflict of interest is one that is not actual but, in time, could be. Let’s say you work in the IT section of an agency and your brother opens a computer store in the area. You have no tenders out now for IT equipment but it is possible you will hold one in the future which your brother might want to bid for.

“A perceived conflict is trickier. In these situations there may be no actual or potential conflict, but someone could think (reasonably, of course) there is one and this can have its own ramifications.”

In this case the department denies there was an actual conflict of interest but it would be harder to argue there is not a perceived conflict, given the perspective expressed by the anonymous public servant.

Burfoot notes that a perceived conflict can arise even when a public servant is totally innocent and unaware of the relevant facts, and says managing them is more complicated than dealing with actual conflicts of interest, firstly because there are usually more stakeholders involved. He says public servants need to “appreciate the significance of maintaining public confidence in their integrity and that of the government” at all times.

“Most of all, there is little keeping our society from falling into the abyss of chaos and lawlessness without the trust we have in our institutions to act justly and the belief we, and others, will be held accountable for transgressions. Understanding the importance and distinctiveness of perception conflicts is at the heart of public duty. People’s confidence and trust in public institutions has its own inherent value.”

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