Single supplier procurements the norm in lobby-linked tech contracts

Government officials approached only one supplier in $472 million worth of technology procurements tainted by a developing lobbying scandal. Many of these were marked as “open tender” despite only one supplier ever being approached, while nearly a dozen failed to justify value for money.

The limitations of the procurements were uncovered in a review of technology buys by Services Australia and the National Disability Insurance Agency (NDIA) that was triggered by allegations of secretive lobbying of a government minister.

19 of the procurements, worth $374 million, need further investigation, according to the review, which was limited to officials direct involvement in the deals.

While a review found no “clear misconduct” of officials during the procurements, it has uncovered widespread poor procurement practices, with recommendations the agencies tighten rules and increase transparency.

A review of 95 Services Australia and NDIA procurements worth $618 million and potentially linked to an alleged lobbying scandal involving former Services minister Stuart Robert was released on Sunday. Mr Robert has denied any wrongdoing or involvement in the procurements.

The review flags 19 of the procurements as ‘red’ for further investigation because of problems with conflicts of interest, poor value for money consideration or inadequate records.

Of the 19 ‘red’ procurements, 14 were conducted using a single supplier approach. Of these, 10 were found to have insufficient value for money justifications.

According to the review, within the 19 procurements, it was “not always clear from the documentation that genuine consideration was given to alternatives to single supplier approaches”.

The suppliers are named in the review and include global giants like Adobe, Unisys and Infosys, but the specific procurements are not identified.

Another 60 of the total procurements reviewed also used a single supplier, meaning 74 of the 95 sampled procurements relied on a single supplier approach.

Most of these (51 of the 74) used a standing offer (panel) arrangement with a single supplier — a common procurement method for ICT buying when only a certain supplier can deliver the goods or services.

But it increases risk in what are often massive tax payer investments in technology, and there are signs the limited approach was used based on “urgency that seemed more contrived than necessarily real”, the review said

“The result [of approaching only one supplier] is reduced transparency, less competition, less equitable treatment of vendors, and reduced clarity in the procurements undertaken,” it said.

“It is harder to demonstrate value for money using a single supplier approach, and value for money is in itself likely harder to achieve. Accordingly, their use needs to be justified and properly documented. The reviewer also considers that this makes them poorly suited to large tenders and/or high risk tenders.”

The federal watchdog has also previously warned the underutilisation of open and competitive procurement processes is “inconsistent” with the principle of achieving value for money and at odds with procurement rules.

The risks of approaching only one supplier are also amplified by other common practices in ICT buys that can favour incumbency. This includes practices like an initial “keystone” contract leading to further contracts or significant contract alterations for the supplier when a certain platform is locked in.

Again, the ‘red’ procurements were found to have used significant variations on the contract of around $98 million – a 44 per cent increase on the original value.

“In one instance a single contract had costs varied 4 times, raising the total value and changing the scope of work. The taskforce found that the associated procurement documentation did not clearly articulate how each variation represented value for money,” the review said.

The review also found two procurements from across two programs of work which led to 12 further procurements with the same suppliers, while contractors had been rolled over from one project to another without documentation or consideration of other supplier on the market.

The review notes there is value on utilising suppliers and contractors which had built up expertise with an agency or type of work, but agencies must be mindful of a snowball effect, particularly when arising from limited or single supplier procurements.

“In cases where the first procurement is likely to lead to the same supplier being ‘locked in’, limited tender or a single supplier approaches may be less appropriate than a more competitive process,” the review said.

The NDIA and Services Australia should “tighten up” the use of limited tenders justified by claims of urgency and monitor their use with clear documentation, the review recommended.

Any use of limited tender or single supplier approaches must be “justified and fully documented”, with any procurements likely to trigger a subsequent chain of procurements should require a “particularly compelling” justification.

The agencies should also be required to publicly report on the number of suppliers invited to respond to a procurement, with data for high value contracts to be included in annual reports, the review recommended.

Several other recommendations are made to address conflicts of interest, approval process, probity, record keeping, procurement training and professionalisation, and contract variations.

The Albanese government is currently considering the report for a government response.

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