What one bent procurement official can do: public servant helped mate win $2.6m worth of work

By Stephen Easton

November 4, 2019

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The Tasmanian government wants to make it easier for local businesses to tender for “technology services” contracts, while the state’s Integrity Commission reports one public servant made it a bit too easy for a friend to win contracts for “digital education resources” worth $2.6 million.

A manager in the Department of Education “improperly awarded” contracts directly to benefit his friend and “attempted to influence” decisions to award other contracts, according to a report signed off by chief integrity commissioner Greg Melick on Thursday.

He failed to adequately declare or explain the details of this conflict of interest, and got around the value-threshold for a competitive tender process through the common trick of breaking up the procurement into multiple small deals. The job was effectively “one combined project that would have been subject to tender processes” if the rules were followed.

One program of work, worth about $1m over three years, was broken up into a series of briefs for jobs worth $50,000 or less. The Education official directly awarded his friend’s company 21 contracts during 2016.

“The manager had either provided or attempted to provide financial gain to the friend through projects that included interactive digital resources worth $139,770; an online learning hub for $547,500; multi-media projects from 2016-2018 directly sourced from the friend’s business to a total value of $1.1m; and four further multi-media projects worth $871,100,” the commission reports.

The unnamed Education manager began funnelling work to his mate in 2015 after alerting the friend to the “potential for production of significant digital media products” on behalf of the department. “The company was paid almost $140,000 for interactive digital resources, with a series of invoices issued for figures just under $10,000.”

“The manager subsequently engaged the company’s representatives to develop tender specifications for an online learning hub when he was aware the company would submit a tender. The company won the tender, for a price twice that of other tenderers.”

In 2016, the friend on the outside broke away from the company that won the overpriced contract, amid disagreements with his business partners, and formed a new company with a third party. The man on the inside tried to get them to make amends and do the double-priced job together.

“Despite the manager insisting on a joint venture between the company and the friend’s new business, negotiations broke down between the parties and a new procurement process was initiated. Ultimately, the department’s Procurement and Review Committee became involved, recommending the establishment of an evaluation panel chaired by an independent person.”

The new company hit the ground running because it had one especially valuable asset: a mate inside the department. The dubious deals channelled $500,000 to the new business in its first month alone, $889,000 in the 2016 calendar year, and well over $200,000 in 2017 and 2018.

The commission’s board chose not to name and shame the public servant or their friends for several reasons: the manager was not senior enough to be a “designated public officer” under Tasmania’s Integrity Act; people outside the public sector are not covered by the legislation at all; and the manager has resigned from the State Service.

They also felt “the potential privacy and health implications for the public officers and private individuals involved” weighed against naming them.

The commission has referred its findings back to Education secretary Tim Bullard and any action as a result is up to him

Meanwhile the state’s Minister for Science and Technology, Michael Ferguson, has called for submissions ahead of technology services procurement reforms that aim to speed up the process and make it easier for local IT businesses to win contracts.

“The current version of the Government Information Technology Conditions (GITC) framework has not kept pace with the rapid pace of change and some suppliers have noted that current procurement processes for technology services are overly complex and difficult to transact,” Ferguson said in a statement.

“The aim of the review is to ensure procurement processes for technology services reflect the principles of transparency, impartiality and effectiveness and are flexible so new technology services can be efficiently adopted by Government agencies.”

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