'Uncompetitive rorts': federal government procurement not delivering value for money

Delivering a damning judgement on the ability of major departments and agencies to ensure taxpayers are getting value for multi-billion dollars worth of contracts awarded every year, the Joint Committee of Public Accounts and Audit has called for major changes to the way procurement is handled.

"AusTender is no AusTinder and it needs reform," committee chair, Labor MP Julian Hill said.

"Public servants need to get far more comfortable and skilled with playing the field and sharpening their pencils on suppliers, even if this leads to difficult conversations and rejection."

Mr Hill said some of the biggest concerns arise from the use of panels of approved providers as a way to streamline procurement.

Such arrangements create "clubs" of major suppliers like the big consulting firms which are able to "grab the lion's share of work", the Labor MP said, noting that Accenture, KPMG, Deloitte, PwC and Ernst & Young secured almost $2 billion on contracts in 2021-22 after facing only limited competition.

"When departments and agencies conduct procurements using taxpayer money, they should be able to demonstrate that money was spent effectively and appropriately," Mr Hill said.

"Action is needed to ensure that taxpayer dollars are not being wasted as a consequence of poor public sector procurement practices."

The committee's report, tabled in the House of Representatives on Wednesday, draws in part on five Australian National Audit Office inquiries into procurement practices at the Department of Home Affairs, the Defence Department, the National Capital Authority and the Digital Transformation Agency.

Mr Hill noted that four of these five audit reports identified non-compliance with Commonwealth Procurement Rules.

It comes amid heightened scrutiny of the government's extensive use of, and reliance upon, external providers to undertake much of its work.

Analysis by The Canberra Times found departments and agencies between them spent $49.4 billion on contracts last financial year, more than half of which came from Defence.

The use of external consultants, contractors and labour hire firms exploded in the past decade as the previous government imposed staffing caps and other restrictions on the public service.

Recent revelations have highlighted some of the consequences of a reliance on outside providers, including the leaking of confidential tax changes by PwC staff, claims of overcharging by KPMG and the award of Home Affairs contracts to a company linked to a foreign bribery case.

Among its 19 recommendations, the audit committee called for multiple quotes to always be obtained, greater transparency about quotes sought and the reasons a supplier was chosen, making value for money and record keeping overriding priorities, making all agencies subject to Commonwealth procurement rules, building up APS procurement skills and capacity and adopting holistic approach to procurement.

The report highlighted "a considerable capability deficit with respect to procurement in the APS" leading to widespread non-compliance with rules and frequent failures to show value for money.

A procurement professional stream should be set up in the APS to develop a workforce which can specialise in the area, with the committee urging systemic change across the APS given the sums of money being expended on procurement per year.

Procurement rules should also be updated to apply to Corporate commonwealth entities, with Mr Hill arguing that the exclusion of entities such as the National Disability Insurance "makes no sense".

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Any exemptions to the rules should be decided by the Finance Minister, the committee reported, after finding agencies relied heavily on clauses allowing rules to be overridden in certain public interest cases or for "reasons of extreme urgency".

The procurement rules should also emphasise the core principles of achieving value for money and conducting procurement in a a fair, transparent and accountable manner.

The committee also pushed for agencies to be more transparent about how they conduct procurement.

The Department of Finance should begin publishing annual reports on compliance with the rules across relevant agencies, and exercise "greater curatorial oversight over the information on AusTender" by ensuring data is consistent, structure and accessible.

Mr Hill said procurement should be "more than a conveyor trucking money out and goods and services in. More active management of of key supply chains and markets [is needed]".

He called for the Finance Department had to take a lead role in strengthening the government's procurement capabilities.

"Finance needs to have more clue what's actually happening in the system," Mr Hill wrote in his foreword.

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