The New South Wales corruption watchdog has reminded government agencies to conduct due diligence checks to improve procurement practices and prevent misconduct.
The Independent Commission Against Corruption on Wednesday released new guidance to help state public sector agencies conduct due diligence checks on potential suppliers.
The report argued doing so would allow agencies to achieve value for money, prevent corrupt conduct, and maintain trust in public administration — all while complying with legal and regulatory expectations.
It has offered five questions for agencies to consider based on whether the supplier is: genuine; capable and reliable; financially viable; of good repute and integrity; and whether they have the required authorities, licences and status.
ICAC chief commissioner Peter Hall said it was important for due diligence to be at the forefront of the procurement process.
“The ICAC has conducted many investigations concerning procurement which have shown that poor due diligence has contributed to corrupt conduct,” he said.
“By getting it right from the start, through conducting appropriate checks, public sector agencies can help prevent their organisations from being subject to corrupt behaviour.”
One previous ICAC investigation — conducted after a NSW agency reported the theft of more than $50,000 — was used as an example of why due diligence checks were important from the very beginning.
“The agency had appointed a contractor to perform some minor building works, which were considered to be low risk. After being appointed, but before completing any works, the contractor requested a pre-payment to meet the cost of obtaining materials,” the report stated.
“The agency agreed to the request for pre-payment but, ultimately, the contractor simply failed to perform any of the work. A subsequent investigation found that the contractor had provided details for a fictitious referee and a false address, and was facing regulatory action. A search on Facebook revealed numerous customer complaints and warnings about the contractor.”
Checks may also need to be conducted further along the supply chain, should it extend into countries where human rights abuses were more common.
“Public sector agencies have a responsibility to take reasonable steps to ensure their purchasing decisions do not inadvertently support illegal or unethical business practices,” the guidance stated.
“An organisation’s supply chain can extend into countries where practices such as forced labour, trafficking in children and sexual servitude are common occurrences.”
ICAC said the guide may be helpful for other jurisdictions outside of NSW, and could also be adapted for use in activities such as recruitment, grant allocation and acquittal, and sponsorship arrangements.
Hall said the guidance could also be useful to potential suppliers.
“It can help them understand the information they might need to provide should they wish to be engaged by government agencies, and to build a reputation as being competent, ethical and reliable,” he said.