Canberra’s $15 billion tech panel is being routinely exploited by officials, who use it as a veneer of competition when handing hundreds of millions of dollars to their preferred suppliers, a horror audit shows.
Exploits of the Digital Marketplace Panel are littered throughout the auditor general’s latest report, which exposes years of broken procurement rules and unethical engagements at the Department of Foreign Affairs’ Passport Office.
The damning report has triggered formal investigations of officials and contractors at the department who mix under a heavily outsourced model for processing passport applications and building the underlying technology.
The audit report makes clear that Canberra’s preferred panel for technology and labour hire buying was keeping much of work insulated from genuine competition and outside scrutiny.
More than 3,500 suppliers have joined the Digital Marketplace since 2017 when it was established through an open but not competitive process. The initial openness means contracts let through the Marketplace — now valued at at least $14.9 billion – can carry the ‘open’ tender tag even when only one supplier is used.
It’s anything but competitive, the auditor general says.
“Becoming an approved seller on the Digital Marketplace does not involve a competitive process,” it’s latest audit said.
“Direct sourcing from the Digital Marketplace therefore means that both the Deed and the Work Order were established without competitive pressure being applied.”
At the Australian Passport Office (APO) the tech panel obscured years of anti-competitive procurements and unethical behaviour by officials and contractors.
Panel beaters
Passport Office deals that started with coffee catchups and solicitations were later run through the panel, giving the direct sources a shield of open competition to outsiders.
The designation is crucial for both the agencies reporting the contracts and the suppliers landing them, especially when deals balloon by millions as scope and length are bolted on with amendments.
In one incident at the Passport Office, a director of one of its favoured consultancy and IT body shops, Customer Driven Solutions, instigated a deal by inviting a senior official out for coffee in early 2022.
Within two days the director had a request for quotation. But based on the Passport Office’s expectation, would exceed the $80,000 threshold and require it to advertise the work publicly.
The deal was approved at $77,000 with a note that “any further funding can be approved” with legislative authority and a contract extension. Dividing procurements to avoid threshold requirements is explicitly prohibited by Commonwealth Procurement Rules.
Another $110,000 was tacked on within three months of the work starting. Over 15 months the convenient $77,000 deal grew by 276 per cent to $290,000.
DFAT recorded the deal as occurring through the Digital Marketplace. It wasn’t, but the record means a direct sourcing solicited by the supplier gets the open and competitive badge.
The panel also provided cover when Customer Driven Solutions was engaged for ICT labour hire even though it is not approved to provide it on the Digital Marketplace.
In what the audit office described as a “breach of probity”, DFAT handed the firm internal documents used to approve its approach to market for a “commercial relationship manager”.
The documents included the estimated procurement value and hourly rate — crucial information for tailoring a competitive bid.
Of the 71 candidates put forward for the work by 52 potential suppliers on the Digital Marketplace panel, only the two nominated by Customer Driven Solutions were assessed as “suitable”.
One of the firm’s nominees got the job, despite lacking the required security clearances, netting the company a $704,948 contract through an “open tender”.
Similar inaccurate claims that the Digital Marketplace Panel was used also helped obscure a directly sourced work order with Deloitte that leapt almost 1,000 per cent to $3.6 million.
These weren’t isolated incidents, the audit office found.
“Overall, the department had already identified its preferred supplier or candidate prior to approaching the market for 52 contracts totalling $305.5 million, which equates to 71 per cent of the 73 [APO] contracts examined by number or 75 per cent by value.
The Digital Marketplace wasn’t the only panel being exploited at the Office, but it was clearly a convenient mechanism for obscuring the lack of genuine competition.
Misuse and abuse of the panel and others like it is rife across government and enabled by loose official guidance from procurement policy owners the Department of Finance. It advises buyers to approach multiple suppliers on a panel to maximise competition “where possible”.
After multiple reports exposing the practice, the Australian National Audit Office convinced Parliament’s Audit Committee to recommend explicit guidance to approach multiple panel suppliers for work.
The Department of Finance agreed to the recommendation in January and says it expects to release the clearer guidance by the end of the year.
The Digital Transformation Agency is in the process of launching an updated Digital Marketplace in response to concerns about its lack of competition.
But the settings also need to come with a culture change, according to Labor MP Julian Hill, who chaired the audit committee when the recommendations were made last year.
At the time he warned panel buying has descended into an “uncompetitive rort”.
“It goes to culture,” Mr Hill said. “Don’t just take the first quote even if you’re procuring from a panel, ask for a better quote, push on price. Get comfortable with rejection.”
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