The murky world of government contracting

Cormann reportedly accepted free overseas travel for himself and his family from Helloworld soon after the company renewed a lucrative government contract with his department. Cormann later said he was unaware that Burnes, to whom he had given his credit card details, had charged the travel to the business's own family and staff travel account rather than his personal card. Helloworld's decision, he said, was part of the company's internal administrative arrangements – a view Burnes and the company's chief financial officer later substantiated.

Cormann, who repaid the account immediately once he was alerted by journalists, is almost certainly innocent of any wrongdoing, apart from carelessness. To knowingly accept (and fail to report) free travel from such an interested party would have been an egregious breach of ministerial conduct – and clearly not worth the political risk for a few thousand dollars.

Journalists and opposition politicians obsessed with claiming a scalp were therefore disappointed. Nonetheless, the investigations of Cormann and Hockey illustrate important, wider issues about the interactions of politicians and their political mates, as well as the public service's crucial role in maintaining the integrity of government contracting and procurement.

While Cormann's close friendship with a Liberal Party donor and office-holder is unexceptionable, one could ask whether he should have kept more distance from Burnes when the latter was renewing a contract to organise accommodation for his department. In particular, regardless of who ended up paying, should Cormann have allowed Burnes personally to look after his own travel arrangements rather than apply as a customer in the normal way? Though Cormann may have kept the awarding and implementation of the contract officially at arm's-length, would his ties to Burnes give others the impression that Burnes had the inside track with the minister and should therefore be extended particular courtesies?

Burnes himself seems to have behaved as if his access to Cormann allowed him to press his views on how the contract process had proceeded. He became dissatisfied in negotiations with the relevant departmental official, John Sheridan, whom he reportedly considered to be trying to cut margins and save money (which is the proper function of any Finance Department officer). A few weeks later, Sheridan was moved sideways in the department and relieved of responsibilities for procurement.

While Burnes denied complaining to Cormann about Sheridan specifically, he said he provided "some feedback about aspects of the [tender] process to Cormann", who referred him to the department. At this stage, Burnes' company had already been selected as preferred tenderer and negotiations over the details had effectively concluded.

In such a situation, where a close friend of the minister is known to be seeking financial benefits from the department and is known, or widely presumed, to have communicated these concerns to the minister, it is incumbent on senior public servants to play the straightest of bats in dealing with any communication with the individual concerned.

On this score, the department has questions to answer, some of which were pursued in recent estimates hearings. The department's secretary, Rosemary Huxtable, confirmed that Burnes phoned her office soon after his conversation with Cormann and that she returned the call a few days later. Surprisingly, she took no notes of the call's contents. Her answers to senators' inquiries therefore depended on her memory of a conversation 1½ years earlier.

Huxtable recalled that Burnes had complained that the negotiation had been very "robust". She also recalled asking Burnes whether he wished to make a formal complaint, in which case she would refer the matter to the probity adviser. Burnes said he did not wish to complain about probity; he just wanted to give feedback about the process.

Huxtable's deflection of the issue to one of probity can be seen as a polite way of insisting she could only consider issues of process and not the substance of negotiations. However, on the critical issue of whether Burnes had complained specifically about Sheridan, Huxtable failed to give a reliable answer.

"My recollection is that he had concerns about the way in which negotiations were conducted," Huxtable said. "Whether he raised Mr Sheridan directly, to be honest, I don't have really strong recollection of that."

She did admit that, at a subsequent meeting months later, Burnes "probably did say" he thought Sheridan was very "forthright". But how strongly Burnes complained in his initial call about the outcome of negotiations in general and Sheridan in particular remains unclear.

So doubt must remain about whether Burnes was instrumental in securing Sheridan's transfer to other duties.

Broader questions also arise. Was it appropriate for a department head to take a private call from such an interested party in the first place? Or did Huxtable feel obliged to talk to Burnes because of his known closeness to her minister? Unfortunately, senators in the hearing were so fixated on Cormann's unpaid travel bill that they didn't find time to explore these important issues of public service propriety. On the evidence available so far, the department and its secretary do not emerge unscathed.

Meanwhile, the Department of Foreign Affairs and Trade appeared to act firmly and transparently to limit any damage to due process caused by Hockey, its occasionally wayward ambassador to the United States. Hockey certainly acted outside normal public service procedures in facilitating and then attending a meeting between embassy staff and representatives of QBT, a Helloworld subsidiary in which he is a major shareholder.

The embassy's minister-counsellor immediately reported back to Canberra on the potential conflict of interest, which Hockey had declared. When questioned in estimates, DFAT secretary Frances Adamson implied that former ministers who are ambassadors will always play by a somewhat different rule-book from career diplomats. The key is to avoid serious impropriety, and she asserted that this had happened in this case.

The Cormann-Hockey scandals underline several general points about public sector ethics.

First, the contest for government contracts, a growing slice of government spending, operates within an ethically compromised world of special interests, lobbyists and political donors. Such a milieu is inevitable given the current policy and legislative frameworks, and the potential profits to be made.

Second, to safeguard probity, senior public servants need to keep politicians, who are deeply enmeshed in this world, at arm's-length from procurement decisions.

Third, public servants themselves are not immune from improper pressures and must be held publicly to account for how well they uphold the exacting standards set for them.

At present, much public service administration of procurement flies under the radar, notwithstanding excellent efforts by the Auditor-General and other watchdogs. Senate committees and journalists should not need to wait for the whiff of ministerial scandal before they take an interest.

Richard Mulgan is an emeritus professor at the ANU's Crawford school of public policy. richard.mulgan@anu.edu.au