Alleged fraud related to Commonwealth IT contracts under investigation

Revealed by the Australian National Audit Office in a review that also finds the Digital Transformation Agency fell short on complying with the commonwealth procurement rules where its digital marketplace panel is concerned.

In publishing the results of a review into particular procurement activities of Commonwealth entities, the Australian National Audit Office (ANAO) has revealed allegations of fraud are currently being investigated.

"During the course of the audit, the ANAO was advised by the Department of Finance of allegations of fraud related to the supply of information technology contractors," it said. "At the time of publishing this report investigations are ongoing."

The objective of the audit was to "assess the extent to which entities' establishment and use of three IT-related procurement panels and arrangements supported the achievement of value for money outcomes".

The ANAO probe looked into the now-shuttered IT services panel established by the Department of Infrastructure, Transport, Regional Development and Communications (Infrastructure); the digital marketplace panel established by the Digital Transformation Agency (DTA); and the AU$1 billion IBM whole of Australian government arrangement, managed by the DTA.

The combined reported value of the contracts under the arrangements is over AU$2.8 billion.

The ANAO examined a sample of 15 procurements: Five from each of the two panels and five procurements made under the IBM arrangement by the Australian Electoral Commission, Australian Taxation Office, Department of Home Affairs, Department of Industry, Science, Energy and Resources, and Services Australia.

"In establishing the three selected ICT related procurement panels and arrangements, Infrastructure and DTA could not fully demonstrate that the arrangements supported the achievement of value for money outcomes," the ANAO said.

"In their use of the 15 selected ICT related procurement panels and arrangements, entities could demonstrate that the majority of procurements supported value for money outcomes, however in three cases it was difficult for entities to demonstrate this due to the absence of competition."

The review found Infrastructure complied with the commonwealth procurement rules (CPRs) and adopted related guidance when establishing its panel but could have adopted a more robust approach to the consideration of price, quality, and risk.

The ANAO said the DTA, however, did not comply with the all of the CPRs but that it did adopt a number of "sound practices" outlined in Finance guidance when establishing the digital marketplace panel.

"Its approach did not support the achievement of a value for money outcome or treat suppliers equitably," ANAO wrote.

The DTA has since fixed its deficiencies to comply with the minimum CPR requirements, the ANAO said

"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," it added.

The DTA should have been more active in identifying and managing key risks and probity arrangements in the establishment process, the ANAO said.

"DTA documented clear objectives for establishing the panel and approached the market to conduct an open tender which encouraged competition. However, DTA's request documentation did not require suppliers to provide price information and DTA was therefore unable to conduct a value for money assessment in accordance with CPR requirements," it wrote.

"Additionally, suppliers were able to join the panel based on different requirements -- this resulted in not all suppliers being treated equitably, which is inconsistent with the CPRs."

Where the billion-dollar IBM contract is concerned, the ANAO said the DTA largely complied with the requirements of the CPRs, supporting the achievement of a "value for money outcome."

As the IBM arrangement was only conducted with one supplier, the approach naturally supported the achievement of a value for money outcome in the circumstances.

The ANAO said the five entities documented the objective of the IBM procurement but called out the ATO for its documentation not fully demonstrating that the conditions for limited tender were met.

According to previous information provided by the audit office, in 2018-19 there were 78,150 contracts published on AusTender with a combined value of AU$64.5 billion. Contracts in the information technology, broadcasting, and telecommunications category accounted for 6.1% of the total value of reported contracts, representing over AU$3.9 billion.

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