Confidentiality in government contracts still too common: audit

By Stephen Easton

Wednesday September 30, 2015

Grant Hehir

Federal agencies are still falling short of full compliance with a Senate Standing Order introduced in 2001 to improve the public transparency of government contracting, according to the auditor general Grant Hehir.

The order requires ministers to table lists of all significant contracts and agreements in their respective portfolio areas, highlighting those that contain confidentiality clauses of any sort and outlining the justifications for them.

The Australian National Audit Office’s report explains the reporting practices it observed are “not always adequate or reliable enough to meet the requirements of the Order” despite it being in place for well over a decade and audited every year. “Transparency of contract information can be affected as a result,” the report warns.

In 2014, there were confidentiality provisions in 1855 of the 41,469 Commonwealth contracts reported in the lists. The opaque deals were worth $30.1 billion, or 13.9% of the $216.3 billion total.

In 2001, there were elements of confidentiality in 24% of all contracts, while this year’s figure only equates to 4.5% in terms of the number of deals.

The audit, released today, looked at the 2014 lists provided by the Department of Finance, Department of the Prime Minister and Cabinet, Department of Social Services and Department of Veterans’ Affairs.

Compliance among entities has declined to 24% since last year’s report on 2013 contracts and agreements, and none of the four departments that were audited in detail fully complied with the publishing demands of the Senate Order, mainly due to tardiness. The ANAO adds that “specific confidentiality provisions in contracts continue[d] to be incorrectly used and reported in 2014”.

From a sample of 101 contracts with confidentiality provisions, 80% did not comply with the Department of Finance’s guidance on the use of confidentiality provisions, or were misreported. The “level of inappropriate use” went up 17% from 2013 to 2014. The report warns:

“Confidentiality provisions in government contracts can impede accountability and transparency in government purchasing. A request for specific information to be kept confidential must be assessed against the Confidentiality Test criteria and entities should make sure decisions to include confidentiality provisions are documented.”

The four audited departments could not provide documentation supporting their assessment of suppliers’ claims against the Confidentiality Test, and their own reasons for agreeing to keep the information hidden from the public.

In its own deliberately measured way, the ANAO gently reminds APS agencies that they have all been here before:

“The ANAO has previously observed shortcomings both in the application of the Confidentiality Test and in the accuracy of Senate Order and AusTender reporting. The results of this audit show that there continues to be scope for entities to improve their assessment of suppliers’ claims for confidentiality of contractual information and implement more rigorous quality assurance processes for reporting confidentiality provisions in contracts.”

It makes three recommendations, which were all agreed to by the relevant audited entities as per usual:

  • That the Department of Finance revises guidance for confidentiality in procurement by including: (a) reference to the Confidentiality Test in the Commonwealth Procurement Rules; and (b) strengthening current guidance to include examples of entity assurance mechanisms.
  • That entities considering requests for confidentiality in contracts and implement procedures that require: (a) a case-by-case assessment of supplier requests against the Confidentiality Test; and (b) adequate documentation of the reasons for agreeing to keep specific information in contracts confidential.
  • That entities implement appropriate quality assurance processes upfront at the point of contract creation to confirm the completeness and accuracy of reported contract information.

All four agencies also responded in the usual manner. The Department of Finance said:

“The audit process was a valuable exercise and the feedback provided by the ANAO will assist Finance to implement measures to improve future compliance with the Senate Order.”

The Department of the Prime Minister and Cabinet pledged to “continue to work towards strengthening knowledge and governance measures when assessing confidentiality provisions” as a result of the audit.

The Department of Social Services told the ANAO:

“The Department has already completed, or is in the process of completing, a range of enhancements to the ESSentials procurement system, guidance and training materials which will address a number of issues raised within the report.”

The Department of Veterans’ Affairs simply said it had “procedures in place” but also pledged to “take further measures to ensure compliance”.

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