Audit Committee Highlights Commonwealth Procurement Failures

Major changes are needed to procurement committing tens of billions of dollars every year, a new report by the Joint Committee of Public Accounts and Audit (JCPAA) has recommended.

Procurement is big business: over $80 billion in 2021-22, awarding more than 90,000 contracts to more than 12,000 businesses. Yet agencies systemically fail to comply with the rules and demonstrate value for money, lack compliance with ethical requirements, and demonstrate poor record keeping and contract management.

The Chair of the JCPAA, Mr Julian Hill MP, said "Put plainly, the Commonwealth has serious commitment issues with respect to procurement. Public servants need to get far more comfortable and skilled in sharpening their pencils on suppliers, even if this leads to difficult conversations and rejection.

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

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

Big winners from limited competition include the five biggest consulting firms (Accenture, KPMG, Deloitte, PWC and Ernst & Young) which secured nearly $2 billion in government contracts in the 2021-22 financial year, comprising more than $1.6 billion in new contracts as well as more than $300 million in contract variations or extensions.

The report makes 19 recommendations to the audited entities and to the Department of Finance, aimed at improving procurement standards in the public service, and also improving Finance's ability as a regulator. These include:

Panels are stifling competition and value for money: A growing share of procurement is occurring from suppliers listed on Panels. Yet too often Panels are limiting competition and value for money, particularly advantaging the 'Big Five' consulting firms. Rules should make clear that: sole sourcing is not cool and multiple quotes should be obtained; a separate value for money assessment must still be undertaken; and panels should be refreshed more often.
Fixing up AusTender: It should be made clear how many quotes were sought, even when procuring from a Panel, and why a contract was amended or varied.
Take a broader view: Procurement is more than a 'conveyor belt moving Commonwealth money out and goods and services in'. Modern professional practices are needed – more active management of key supply chains and markets to maximise value for money.
Value for money always: Things may be urgent – but value for money and record keeping requirements still apply.
Internal scrutiny: Internal Audit Committees should increase their scrutiny of procurement controls, and provide more assurance over major, complex or risky procurements.
One rule for all: All Commonwealth Corporate entities should be subject to the CPRs, reversing the current onus which sees entities like the NDIA excluded.
Re-professionalising procurement: Finance must address the lack of procurement expertise and capability within the Australian Public Service (APS) by prioritising the development of a procurement professional stream in the APS, and by updating the procurement framework to match the development the procurement profession has undergone outside the public sector in recent years.
Finance needs to lead: Finance is the system steward and regulator. To be effective, Finance needs to know what's happening in the system.

The audit reports inquired into by the Committee are linked below:

The report is available on the Committee's website.

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