Audit report highlights issues with federal government’s ICT procurement arrangements

By Shannon Jenkins

September 1, 2020


The Infrastructure department and the Digital Transformation Agency have fallen short in proving that their ICT-related procurement arrangements help achieve value for money, the Australian National Audit Office has found.

The ANAO’s latest audit report released on Monday noted that in 2018–19, federal government expenditure on ICT-related goods and services was more than $3.9 billion. In the same year, more than 36% of reported contracts were identified as having been drawn from a panel.

The audit examined whether entities have complied with the Commonwealth Procurement Rules (CPRs) and related guidance in regards to the Infrastructure department’s IT Services panel, the DTA’s Digital Marketplace panel, and the DTA-run IBM Whole of Australian Government Arrangement.

The two entities “could not fully demonstrate that the arrangements supported the achievement of value for money outcomes”, ANAO found.

The Infrastructure department complied with the CPRs and related guidance when establishing its panel, but it could have “adopted a more robust approach” in regards to price, quality and risk, the audit said. Meanwhile, the DTA failed to comply with all of the CPRs when establishing its Digital Marketplace panel, and its approach failed to “treat suppliers equitably”.

However, the DTA used “a number of sound practices”, and it changed its processes after identifying some deficiencies.

“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 report said.

The agency also largely complied with the requirements of the CPRs in establishing the IBM Arrangement, and adopted a number of sound practices to support the achievement of value for money.

Read more: Federal government’s digital procurement site hits $2b milestone

Both entities complied with CPR reporting requirements, but the auditor-general argued the DTA should have been more “active” in identifying and managing key risks and probity arrangements in the establishment process.

Infrastructure failed to conduct systematic monitoring to assess whether its panel arrangement was meeting its objectives, and its panel stopped operating in February 2020. The DTA, meanwhile, had conducted a range of monitoring activities.

“Monitoring indicates the Digital Marketplace panel objectives are largely being met and the IBM Arrangement is achieving some of its objectives although anticipated savings have not yet been achieved,” the report said.

The audit also assessed the use of the panels and the IBM Arrangement by the Australian Electoral Commission, the Australian Taxation Office, the Home Affairs and Industry departments, and Services Australia. It examined a total of 15 procurements, including five from each of the two panels examined and five made under the IBM Arrangement.

The majority of procurements supported value for money outcomes, ANAO found, but there were issues with three cases.

“For one procurement, documentation did not fully demonstrate that the conditions for limited tender were met. In two other procurements, there was limited evidence supporting value for money considerations,” the report said.

“In these three cases it was difficult for entities to demonstrate that the procurements achieved a value for money outcome. There were instances of entities not meeting requirements regarding the approval of variations to contracts, record keeping and AusTender reporting. There was also scope for some entities to strengthen their consideration and management of risk and probity.”

Read more: Analysis of ANAO audits reveals ‘systemic and unresolved deficiencies’ across APS

The auditor-general noted that past audits have identified shortcomings with respect to entities’ application of the CPRs, including panel arrangements. He encouraged entities’ procurement practices to be “efficient, effective, ethical and economical and suited to the size and complexity of the goods or services sought”.

Four recommendations were outlined in the report, including:

  • The DTA should ensure 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,
  • The DTA should ensure that officials undertaking complex procurements have sufficient understanding of the procurement requirements, the nature of the arrangement being established, and procurement related risks,
  • The Home Affairs and Industry departments should 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,
  • The ATO should ensure limited tender is used only where the conditions for limited tender outlined in the CPRs are met.

The relevant entities accepted all four recommendations.

ANAO noted that during the audit, it was advised by the Department of Finance of allegations of fraud related to the supply of information technology contractors.

“At the time of publishing this report investigations are ongoing,” it said.

Read more: What improving IT procurement in the public sector looks like: navigating, balancing, and initiating procurement conversations to avoid sprinting off cliffs


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