Andrew Podger | APS procurement failures demand Finance Department steps in

In a searing foreword, the committee chair, Julian Hill, refers to "consistent failures to demonstrate value for money, conduct procurements in line with ethical requirements or keep adequate records, and substandard contract management".

"This report", he says, "is the latest in a conga line of reports addressing aspects of procurement but this time recommendations for systemic change are made".

Former Finance and Prime Minister and Cabinet head, Ian Watt, told the committee that past solutions attempting to deal with procurement problems on an agency-by-agency approach have not worked and called for a systematic whole-of-government approach.

He and the committee are no doubt right. In effect, they are challenging aspects of the public sector reforms of the 1980s and 1990s that continued into the 2000s and beyond. These shifted financial and HR management away from central prescriptive controls to a principles-based approach aimed to give agencies more management flexibility. The quid pro quo was to be increased accountability for results. The approach can be seen in the FMA and CAC Acts of the late 1990s, the 1999 Public Service Act and the 2013 PGPA Act (which replaced the FMA and CAC Acts taking the principles-based approach further).

It is now apparent that the increased accountability for results has not occurred and that many agencies have proved not to be up to scratch in exercising their increased flexibility to improve overall efficiency and effectiveness.

At the very least, as the committee recommends, Finance needs to step in more firmly to oversee procurement by agencies and to promote a service-wide procurement profession.

As the committee also recommends, significant improvements to AusTender are required. These should include more timely information on contracts and more details on what precisely is being bought and the criteria by which success will be evaluated (with those evaluations being made public on agency websites).

Another of the New Public Management reforms of the 1980s and 1990s that is being challenged is the use of competition to drive improved efficiency and effectiveness. There is little doubt that the early use of competition did achieve significant gains as Productivity Commission reports in the early 2000s revealed.

For example, the shift away from the central provision of corporate services like cars and property by the Department of Administrative Service's monopolies did lead to more careful resources management by most departments and agencies. Similarly, the Defence Commercial Support Program allowed Defence to reduce the cost of services such as canteens and supply depots, and to redirect resources to the sharp end.

The scale of contracting has increased dramatically in the years since, however, while APS capacity to be an informed buyer has reduced. Compulsory IT contracting proved to be a disaster, and ideological pressure to make more use of consultants and contractors (and labour hire) undermined APS capability.

Moreover, many more staff have become involved in procurement with too few having the necessary professional skills and too few knowing enough about the functions the procurement is intended to support.

There is a lot of money involved in procurement - perhaps around $80 billion a year across the Commonwealth. I doubt recent suggestions, however, that improved procurement offers the government scope for big budgetary savings. More likely, and no less importantly, improved procurement would lead to the redirection of resources within agencies, helping to address declines in APS capability and to improve the level and quality of services.

There remain advantages in the "running cost" reforms of the 1980s and 1990s allowing agencies to shift money within their administrative expenses budgets including between staff expenses and expenditure on contracts. Those overall budgets have already been constrained by ongoing efficiency dividends, but it is now clear that the damage from those constraints has been greater than necessary because agencies have not obtained value for money from contracting.

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A more professional approach to procurement might also challenge the old model of waterfall ICT projects based on a fixed budget to achieve clearly defined outcomes, an approach often favoured by Finance and accountants. For many agencies heavily reliant on IT systems, a more agile approach is needed involving continual incremental enhancements. In addition to the various ANAO and Finance guidelines on procurement is an excellent guide by former statistician, Dennis Trewin, written a couple of years ago. The ABS is one of the agencies most reliant on IT, but these days nearly all agencies are heavily reliant on IT and could learn from ABS experience.

Trewin identified a set of principles for good management of IT including:

As (hopefully) Finance picks up the audit committee recommendations including for more professional procurement, agencies' executive teams should look carefully at Trewin's advice about their responsibilities to deliver value for money and thereby improve services and productivity.

No less important is Finance's role to ensure greater accountability of Commonwealth agencies for their procurement management.