Audit exposes ethics concerns over industry program procurement

By Melissa Coade

June 28, 2022

David Fredericks
DISER secretary David Fredericks said his department would take seriously the recommendations and issues raised. (AAP Image/Lukas Coch)

An entrepreneurs’ program run by the Department of Industry, Science, Energy and Resources (DISER) has been critiqued by the auditor-general for its procurement standards, leading to a new department-wide contract-management framework.

The Australian National Audit Office (ANAO) scrutinised the $484.2 million federal industry policy program, finding a grants process for the National Innovation and Science Agenda that fell short of the appropriate standards of transparency, consistency and fairness.

A redesign of the entrepreneurs’ program in 2019, estimated to procure $182 million over five-year contract terms, led to the department issuing a Request for Tender (RFT). From RFT 55 responses, DISER entered into seven contracts.

‘Inappropriate’ was the word most frequently reached for in the audit, used to describe the management of delivery-partner contracts, the contract-management framework itself, and contracts that were missing an effective performance management framework.

Among the shortcomings of the grants process identified by the auditor-general were a failure to appropriately manage signed contracts, and a failure to demonstrate achievement of value for money.

“The department’s approach was deficient in significant respects such that there was not open and effective competition for the delivery-partner roles. In particular, the significant majority of tenders received were not fully evaluated against each of the published criteria,” the audit report read.

“The department’s conduct of the procurement process also fell short of the ethical requirements set out in the Commonwealth Procurement Rules (CPRs), with key aspects of the approach employed either not outlined in the RFT or inconsistent with the RFT, competing tenders not being treated fairly or equitably, and probity risks not being appropriately managed.”

The audit recommended 10 changes in response to three major problems concerning the grants process for choosing delivery partners.

DISER has moved to expedite a ‘more comprehensive and rigorous’ probity framework and ‘capability uplift’ in response to the findings. These steps, which have been in effect since early last year, have focused on lifting performance across due diligence, contract management, record keeping and the use of probity advisers.

In a statement acknowledging the ANAO findings, DISER secretary David Fredericks said his department would take seriously the recommendations and issues raised. He noted the approach to procurement for the program between late 2019 and early 2020 ‘fell short of the appropriate standards’ concerning transparency, consistency and fairness.

“The department also accepts that its management of those contracts requires improvement,” Fredericks said

“The department is actively working to address all recommendations, and any cultural or systemic improvements necessary, as a matter of priority, including adopting a formal change program approach,” he added.

Despite these challenges, the department claims its program achieved important government objectives in supporting new companies. Since its inception in 2014, the entrepreneurs’ programme has supported more than 22,000 Australian companies to strengthen and grow, the department said.

“Businesses participating in the growth element of the program have experienced average increases of 3.5 new jobs and an additional $1.47 million in turnover,” the statement read


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