“Procurement is a topic that has engaged the attention of Parliamentary Committees with unfortunate regularity in recent years,” says a new report from the Joint Committee of Public Accounts and Audit, very early on. In fact, procurement has been a vexed issue in the Australian Public Service (APS) going back a lot longer than just recent years.
So there’s a sense in which the committee — chaired by Labor MP Julian Hill, whose brilliant foreword to the report summarises its content in vivid terms — isn’t telling us much new in its bipartisan Report 498: ‘Commitment issues’ — An inquiry into Commonwealth procurement. But it is nonetheless one of the most important parliamentary committee reports of recent times, drawing back from individual examples of bad procurement by Commonwealth agencies to look at what is a whole — there are no other words for it — fucked up procurement system.
Around $80 billion a year of fucked up.
Public sector procurement is a wonky subject. Hell, even public servants’ eyes glaze over when it comes to procurement. But it’s where tens of billions of taxpayer dollars are spent every year buying goods and services for government, and then managing the contracts for those goods and services. There are the “parent” contracts — nearly $50 billion a year — and there are extensions to pre-existing contracts — another $30-odd billion. And contracts are getting bigger: over the past decade, the median value of procurement contracts has increased by 50% in real terms.
Defence is the biggest procurer, of course, and its inability to procure any major project without delays and cost overruns is well-known. But even if you omit the $200 billion spent by defence over the last decade, that still leaves hundreds of billions of dollars spent by the rest of the APS.
The core problem with procurement — I speak from direct experience — is that doing it well is not a priority for public servants. It’s not their money; demonstrating value for money is merely a requirement placed on them by the Commonwealth procurement rules. And those who are charged with doing it properly — procurement and internal audit areas within agencies — are seen as impediments to getting the job done by everyone else, finicky pedants more interested in box-ticking and process than in getting that much-needed contract or consultancy out the door.
As the committee report — go read it, or at least Hill’s wonderful preface — makes clear, however, it’s not just about the lack of priority accorded to doing procurement well. It’s the lack of capability to do it well at all; the lack of recognition that good procurement is a specific skill that the APS lacks almost completely. As former secretary Ian Watt noted in his evidence to the committee, “There’s no solution short of doing this systematically, across the board, for agencies as a whole. Unless that happens, I think you will be here for a long while to come, dealing with auditor-generals’ reports you’d rather not have”.
Another key factor — and an area where the report does present a new insight — is that the bureaucrats charged with overseeing procurement, the Department of Finance, are asleep at the wheel. Notionally, finance has “policy stewardship of the Commonwealth Procurement Framework”, but in practice it’s “devolved” to agencies. And finance doesn’t like to actually monitor procurement by agencies because “this would potentially damage finance’s strong relationships with procuring entities and place additional burden on procuring entities”.
What horrific outcomes would happen if these “strong relationships” were damaged? There’d be “less transparency and information sharing between entities”! Except, as the report notes, there’s minimal information-sharing now. And even when the auditor-general exposes appalling procurement practices, finance doesn’t do anything. Finance is even reluctant to ask agencies to comply properly with the information requirements for Austender, (as Crikey has recently noted, some agencies treat Austender as a joke) because it doesn’t want to add to their compliance burdens.
The other big target for the committee is panel procurement, when firms make “standing offers” or are pre-vetted to form a panel of preferred suppliers, streamlining procurement processes for departments. A decade ago, just 12% of the value of all procurement was via panels. Now it’s more than a third. And whatever the savings from “streamlining”, procurement panels might be the biggest rort in the Commonwealth.
The abuses are legion: if an agency approaches just one member of a panel, it gets to claim it has conducted an “open tender”, when it plainly hasn’t. Panels usually end up being dominated by one or a few providers (in one case, a panellist took 80% of all work given to the whole panel). It means departments simply hand out contracts (and extensions to contracts) to the same firms over and over. And panels can last up to a decade without being refreshed, meaning new competitors are frozen out.
And you’ll never guess who were the biggest beneficiaries of these dodgy panels: the Australian National Audit Office (ANAO) found “that the top four suppliers, by number, of standing offers were KPMG, Ernst & Young, PricewaterhouseCoopers, and Deloitte.”
While the committee makes some excellent recommendations, it doesn’t really get to grips with the core problem behind procurement in the APS: there are no consequences for bureaucrats and departments that waste taxpayer money on poor procurement. Until that happens — and until there is real professional procurement capacity in the public service, until finance starts doing its job, and until the use of panels is dramatically reined in — we’ll be stuck where Ian Watt predicts we’ll be.
Perhaps agency budgets should be docked a set amount each time the ANAO discovers poor procurement. Perhaps public servants responsible for poor procurement outcomes should be frozen at level for five years. But real accountability is needed.
Even so, Hill and his colleagues deserve praise for shining a light on the negligence that is costing us billions of dollars year in and year out.
The purpose of the past ten years of LNP Government was to line the pockets of the Big 4 and other consultancy businesses. Interestingly, they were seen as Australian small businesses!
Their business model is simple: consultants’ salary costs represent one third of the price, admin in the consultancy business represents the second third of the price, and the final third is the profit. I know I worked for one of them. I moved from the public service at about $85,000 a year (consultancy days $425 per day) and was charged out at $2,500 per day the following week. I did the same work in the same departments.
You make a fine point, Daly. The collapse of the respectful, worthy role of Government Service, independent and working for our Common Good is, and will be always be aborted under the LNP. Their philosophy collapses everything, in a preemptive way, under the head of private enterprise. And practically, they treat everyone and everything, as you say, as a business. Shame on them!
sad fact is the supposedopposing side is in on the lark too – wake up Australia
In fact, the purpose of the minor-parties coalition government was to completely dismantle government. That was THE policy. And they nearly got there. More mafia than government!
Why don’t we just hand the running of the country over to the top four consultancies?
What? What do you mean we already have?
I first joined the APS in year 2000, having come from the private sector. I remember well, meeting people who had come from an Agency which procured for the whole (federal public service), and the pride with which they spoke of their work.
Perhaps it is time to revisit that model of centralised procurement. I’d venture to suggest 20+ years of de-centralised procurement has shown itself to have become a shambles.
20+ years of de-centralised procurement has shown itself to have become a shambles … as it was designed to become – it was never about efficiency etc, and always about how best to get your mates’ snouts in the trough
Yep. Back in the 2000’s we had a centralised procurement area too who had to sign off on EVERY procurement over a fairly low $ threshold in order for the delegate to approve it. The people who worked there knew all the rules and made sure you stuck by them.
However, it was a lengthy process. Even without that kind of specialist oversight an open tender takes ages. And maybe that’s not a bad thing. But it does mean delays in doing whatever it is the procurement of services is supposed to produce. Often there was not an appetite for that. Over the years I was in the APS, the trade-off skewed more and more to doing a procurement quickly, rather than exhaustively. And standing panels were definitely the preferred go-to for the amount of time and effort saved.
Quality of work procured? It varied. I was mainly involved in procurement that sourced academics, but the Big 4 surfaced on occasion. The main reason for procurement was to obtain skills that couldn’t be obtained in-house. Sometimes this was justified because unless a person worked continuously in the particular specialist field their skills wouldn’t stay relevant. But sometimes – particularly for reviews or other short term projects – it was to plug staffing gaps because of the cap on APS numbers. And the Dept of Finance was much more likely to sign off on funding for a project that used consultants to staff it, mainly because they would stop being a cost after the project finished rather stay on as ongoing APS staff.
I do think there is a place for consultants, but their infiltration into policy spaces is problematic. There used to be much more reliance on InterDepartmental Committee processes that could run for months to tackle thorny policy issues, all staffed by short term teams of public servants seconded from their usual jobs (and as an inexperienced junior public servant it was the best process to be involved in to learn how to do policy – and many other things besides). I saw some great work out of those I was involved in, but their use had certainly died out in my department quite a number of years before I left it. Good policy takes some time to develop. I’m not sure Ministers have the patience for them anymore.
Instead of this stupid shemozzle of tendering for this and that, why shouldn’t we just grow the public service until it can do its job? Provide more proper jobs and take away the market for a bunch of bullsht overpaid jobs. After a decade or two of rebuilding public capacity, all kinds of synergies would emerge, and the massive investment would pay for itself over and over.
Assuming of course, a proper transparent system utilising modern methods is built around it. A bloke called Clay Shirky has an excellent TED talk about basing government on a system like GitHub, which makes total sense.
But we’d have to drag our rorting, nest-fethering scum off the top first; they don’t want a bar of anything that sounds like accountability.
Ministers hiring out is a vastardization of accountable government as they arent accountable to our govt body -tgey are exempt ; it is why we are bleeding our democracy and our public resources dry … dry including wadteing our finite mineral wealth and human resources including older women and workers with experience and memory of how its supposedly carried out with accountability – they seemed to only keep the shysters and get rid of the angels on a public wage
Ah. The wonders of winnowing out the public service to ‘save money’.
Until all the partners of the Big Four are all tossed into Goulburn Supermax by the NACC nothing will change.