What the Auditor-General has revealed about the CIT 'systems thinker' contracts

CIT had awarded the contracts for organisation transformation to companies owned by "complexity and systems thinker" Patrick Hollingworth.

Since the Integrity Commission announced its investigation information on the contracts has been scant.

Freedom of information requests have been refused and questions have been left unanswered with parties involved unable to speak on the matter due to the investigation.

But a report from the Auditor-General has finally provided some insight into the matter, including that one of Mr Hollingworth's offers was accepted by CIT despite being more than $2 million higher than the next highest offer.

The contracts sparked uproar as they were difficult to understand, had unclear outcomes and deliverables and the CIT board was unable to guarantee the contracts represented value for money.

CIT chief executive Leanne Cover has been on paid leave since the investigation began.

There were six contracts awarded to Mr Hollingworth's companies between 2017 to 2022.

The audit examined the ACT government's procurement board and the actions it took in relation to providing advice to CIT around the tenders.

"There were missed opportunities for better procurement outcomes because the board was not assertive with its advice," the audit said.

The procurement board is responsible for providing advice on tender processes to ACT government agencies.

CIT is required to take any tender proposal expected to be higher than $1 million to the board to obtain advice. While the board can provide advice its actions do not ultimately have to be acted on.

The audit found the board was "insufficiently sceptical and probing" and while it had identified weaknesses with the contracts it had avoided saying the tender was "not endorsed".

But the audit also showed CIT did not provide important information about the contracts, did not follow the board's advice "satisfactorily on any occasion" and had overstated the extent to which it followed the board's advice.

The audit said the procurement board had concerns since January 2020 about CIT having a "predetermined outcome in mind from a seemingly open competition".

The procurement board reviewed three different tender processes, all of which eventually were awarded to Mr Hollingworth. These contracts were examined in the audit.

The three tender processes reviewed by the Auditor-General related to a November 2018 contract for $1.287 million, an April 2020 contract for $1.705 million and a March 2022 contract for $4.99 million.

The audit revealed in the $4.99 million contract that the offer from Mr Hollingworth's company, Think Garden, was more than $2 million higher than the next offer.

There were three applicants for that tender and the value of these tenders were $805,183, $1,979,000 and $5,680,000.

"The selection of Redrouge Nominees Pty Ltd as the preferred respondent... [$5,680,000] as representing the best value for money outcome for CIT," the audit showed.

THE STORY SO FAR:

However, Mr Hollingworth offered a 12 per cent discount if CIT offered an upfront payment of fees. Following negotiations, they agreed on "five time-based milestones" with the first to happen on the execution of the contract. Mr Hollingworth was paid nearly $1.7 million in April 2022.

In the 2018 and 2020 contracts, the final value awarded to Mr Hollingworth was higher than the maximum values of the contracts when they were put out to tender. But on each of these occasions there were applicants that put forward a higher price than the eventual amount awarded to Mr Hollingworth.

In 2018, there were 12 applicants ranging from $346,250 to $3.38 million and in 2020, there were 14 applicants ranging $254,260 to $2.9 million.

CIT originally wanted to proceed with the $4.99 million contract through a single-select procurement, as previously reported, but the procurement board warned against this, however, CIT's chief executive had already endorsed this approach.

The audit shows that members of the procurement board considered CIT's proposal for this contract "out of session" on December 21, 2021. Board members had shared their views via email.

"CIT should be transparent with the market and see what is available. The market or strategic consultancy services of the type they are seeking is not exactly limited," one member of the board said.

Another said: "It appears they are captured by this vendor - and the [request for tender] doesn't make clear deliverables or outcomes".

But the board did not provide an "overall endorsement or non-endorsement" of CIT's proposal.

The Integrity Commission investigation remains ongoing but integrity commissioner Michael Adams KC told budget estimates he was considering the possibility of holding public hearings into the matter.

The commission is working on an interim report and Mr Adams hinted there could be "submissions in reply" in early October.

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