4.1
Chapter 4 sets out the findings of the Joint Committee of Public Accounts and Audit (JCPAA) inquiry into Commonwealth procurement, based on Audit Report No. 61 (2016-17), Procurement of the National Cancer Screening Register. The Department of Health (Health) was the audited Commonwealth entity.
4.2
Health funds screening programs to facilitate early detection of cancer and reduction of cancer mortality rates. The National Cancer Screening Register (NCSR) is intended to:
create a single electronic record for each Australian participating in cervical and bowel cancer screening;
be capable of supporting additional population screening programs into the future;
provide a single, cost-effective service that will record and report screening data in a nationally consistent manner and inform timely clinical decisions; and
allow participants access to their screening records from wherever they reside.
4.3
Health commenced the NCSR procurement process in late 2014, adopting a competitive open tender process. Health issued a Request for Tender (RFT) in August 2015 and the tender process, published on AusTender, commenced on 10 August 2015, with a closing date of 8 October 2015. The preferred tenderer was selected on 23 March 2016, and on 4 May 2016, Health entered into a contract with Telstra, valued at $220 million over five years, to deliver and support the NCSR. It was noted in the public hearings that the contract was signed very soon after selection, a few days before the election caretaker period commenced. Subsequent to the election, very strong views were put to the Parliament that the legislation needed to be passed in late 2016 to enable the register to commence by 1 May 2017. If the NCSR is fully implemented the Commonwealth will manage a national cervical register, previously funded and managed by states and territories, and a national bowel cancer screening register, previously operated through the Department of Human Services (DHS).
4.4
The audit objective was to assess whether Health effectively procured services to operate a NCSR. To form a conclusion against the audit objective, the Australian National Audit Office (ANAO) adopted the following high-level audit criteria:
did Health appropriately manage the procurement of services for the NCSR?
did Health effectively consider value for money, consistent with the Commonwealth Procurement Rules (CPRs) in the procurement process?
Committee conclusions and recommendations
Committee conclusions and recommendations
4.6
The Committee notes the Auditor-General’s finding that, in its procurement of services for the NCSR, Health ‘complied with the Commonwealth Procurement Rules, effectively managing an open tender process and considering value for money’. Health also complied with internal procurement guidance and the ICT (Information and Communications Technology) Investment Approval Process, and documented all stages of the procurement and retained appropriate records, as required by the CPRs.
4.7
However, the Committee is disappointed that the effectiveness of the NCSR procurement was substantially reduced due to ‘inadequate consideration’ of risk during planning and ‘poor management’ of probity and conflicts of interest’, and that the objectives sought by the Government were not achieved in the agreed timeframe and additional costs were incurred as a result.
4.8
In terms of Health’s risk management, the Committee notes that the ‘full extent’ of the NCSR’s complexity, risk and the potential consequences of project failure or delay were ‘not communicated to the Government at the point in time the funds were allocated’. Health’s First Pass Business Case acknowledged that complexity risk was present in the recommended option, but the complexities of combining additional screening pathways into a single national register and the number of interfaces required were ‘not presented’, alternative viable implementation approaches such as staging the implementation of the NCSR were not explored and the risk of not achieving the NCSR ‘Go-Live’ date was ‘not discussed’.
4.9
Health has failed to achieve the original NCSR ‘Go-Live’ date for either the cervical cancer register (1 May 2017) or the bowel cancer register (20 March 2017) and is now ‘staging’ its implementation of the NCSR, by ‘bedding down’ the cervical cancer screening register transition before recommencing the bowel cancer screening register transition. Health was not able to nominate a start date for the bowel cancer register, advising the Committee that ‘there isn’t a target date for the bowel cancer screening’ and that it is ‘more likely later in calendar year 2019’. More broadly, with reference to future procurement activities, the Committee points to the need for Health to significantly improve its consideration of risk during future procurement planning.
4.10
The Committee recommends that the Department of Health report back to the Committee on how it is improving consideration of risk during future procurement planning, with reference to the Australian National Audit Office findings in Audit Report No. 61 (2016-17)—in particular, so that the full extent of a procurement’s complexity and risk, and the potential consequences of project failure or delay, are communicated to the Australian Government at the point in time funds are being allocated.
4.11
The ANAO noted that all risks identified for the preferred tender were considered by Health during the contract negotiation phase and treatment strategies were proposed prior to executing the contract. Further, throughout the procurement process, Health’s tender evaluation teams identified a number of pricing issues and risks relating to the tenderers and these were considered by the Tender Evaluation Committee in forming its assessment, with the Delegate being ‘appropriately informed’ of the perceived strengths and weaknesses of each tenderer, along with the key risks identified during the evaluation process.
4.12
However, the Committee notes that, while Health identified risks during the procurement and the Tender Evaluation Plan established an approach for managing risks, the department ‘did not fully implement the approach set out in the plan, as untreated risks of the tenders were compared during the evaluation rather than treated risks, potentially compromising value for money outcomes’. The two final tenderers each had very different risk profiles: one tenderer had a ‘stronger demonstrated clinical registry capability based on experience’ but with ‘higher cost and higher ICT and financial sustainability risks’, and the other tenderer had a ‘stronger demonstrated capability to provide scaled up national technical solutions’ but with ‘higher implementation risk’.
4.13
Health maintained that the outcome it got with the untreated risks was the ‘same as the outcome that you would get with the treated risks. So all of the risks were treatable’. However, the Auditor-General observed: ‘we didn’t see any evidence of that analysis’.
4.14
The Committee was concerned about some confusion evident in Health officials at the public hearing as to how the department had implemented the approach set out in its Tender Evaluation Plan and documented its approach—noting that what was at stake here was whether a different approach might have affected the tender evaluation. One Health official responded:
‘I think I would have to go back and look at our notes and records to try and answer that question’
‘the comparison of the treated risks between the tenderers may not have been documented’
‘We might simply be talking about a documentation issue … The treatments for those risks and what could be possible treatments for those risks for both tenderers was also discussed and compared, but there was no evidence that was able to be provided to the ANAO about what might have been written down’
‘Sorry; clearly, there are no records because the Auditor-General didn’t find them
4.15
At the very least, these statements point to a need for Health to improve its procurement documentation and record keeping. However, the reference to the possible existence of further ‘notes and records’ that could be checked is of serious concern in that it raised questions about whether all relevant departmental records had been provided to the Auditor-General—albeit noting that the same Health official later assured the Committee: ‘I don’t think it’s possible the records exist; otherwise, they would have been provided to the ANAO’. The Committee takes most seriously the requirement that entities make available all records to the Auditor-General.
4.16
The Committee recommends that the Department of Health report back to the Committee on:
whether the Auditor-General had access to all of the departmental records relevant to Audit Report No. 61 (2016-17)
how the department is improving its procurement documentation and record keeping, including at the tender evaluation stage, to ensure that relevant matters are documented
how the department is ensuring, for future procurements, that it fully implements the approach set out in the Tender Evaluation Plan, to ensure value for money in its procurements and probity in the assessment process to ensure full confidence in the outcome of tenders
4.17
In terms of Health’s implementation of the NCSR, the Committee notes the Auditor-General’s finding that the ‘objectives sought by the Government were not achieved in the agreed timeframe and additional costs were incurred as a result’. As a result, value for money outcomes have been ‘compromised’ and the savings anticipated to be achieved from the NCSR operations have been delayed.
4.18
Due to delayed implementation of the project, the original NCSR ‘Go-live’ date of 1 May 2017 was not met. The Committee notes that the revised implementation date of 1 December 2017 was partially achieved as some aspects of the delivery of the national cervical cancer screening register transition under the NCSR were delivered and work continues. Nevertheless, it is concerning that the delivery of the national bowel cancer screening register transition under the NCSR does not currently have a ‘Go-live’ date.
4.19
On the national cervical cancer screening register transition under the NCSR, the Committee sought to confirm whether all aspects of this area had been fully implemented by the ‘Go-live’ date of 1 December 2017. Health confirmed the ‘aspects that need to be supporting women to be able to undertake the test, the aspects that require the pathology laboratories to report their test results in the new way and in the new form, are complete. The new MBS items have been implemented. The register call centre operations are up and running’. However, the Committee notes that the remaining register functions are still being supported by the state and territory cervical screening registers. As to whether the NCSR function to send reminders had been implemented yet, Health explained that ‘all of the reminder functions for tests conducted pre 1 December are being performed and continue to be performed by the state and territory registers. All of the reminders from the new test, other than the high-grade results, which are followed up very quickly, are due to start being sent in February, March, April—that kind of time frame this year’.
4.20
When fully operational it is expected that the new screening program would ‘prevent an additional 140 cervical cancers each year’, and decrease ‘the mortality and morbidity [of cervical cancer] by at least 15 per cent’. The register is a critical component of the new regime intended to provide a more reliable and efficient system to support the new, more effective test. The register is intended to help improve monitoring and contribute to improved participation rates over time, enabling earlier detection and intervention. Consideration was given during the public hearings to the possible impact of delay in establishing the registers on the program’s objectives.
4.21
Health advised the Committee that ‘between the Commonwealth and states and territories full register services are being provided today’, such that ‘there is no gap in service and there is no gap in register functions today’. However, this advice relates to the old register, not the improved register enabling the many expected benefits outlined at the public hearing.
As to any impact on patients from the delayed ‘Go-live’ date (1 December 2017, instead of 1 May 2017) for the national cervical cancer screening register transition under the NCSR, Health explained that:
the ‘new register is intended to perform the safety net function for the new cervical screening test’, in a similar way that the cervical screening registers in the states and territories provided a safety net function under the previous Pap smear test regime, noting the difference between a register and a primary clinical care program
‘in that interim period, the then Pap test regime was continuing and those tests were continuing to be performed … So it’s not like there wasn’t a screening test regime in place in Australia for those seven months. There was a screening test regime. It was the previous Pap test regime’
As to how many cervical cancers might have gone undetected because of the delayed transition, Health confirmed ‘advice was sought from the Chief Medical Officer and we can assure the Committee that there are no cervical screening participants whose cervical cancers would have gone undetected during the period 1 May to 1 December 2017. The [old] Pap test program was in place throughout this period and for women actively screening and due for the test, they would have had the Pap test, and any cervical abnormalities would have been identified and the appropriate next steps taken for further diagnosis and treatment’
As to whether there was any expectation of improved participation, that more people would participate in the national cervical cancer screening program, as a result of the transition to the register under the NCSR, a Health official noted: ‘I’m not sure that the register was ever quoted as being the mechanism for increasing participation in screening. It will perform as a more effective safety net because it will be a national register … In the current registers and in the old pap test regime, reminders and follow-ups were occurring as part of that program as well … We’re aiming to see no drop in participation rates because of the transition’ … ‘The point of introducing the renewed cervical screening program is to give women access to the better test … the register is there to create the national register and the information database for how we can be informed about participation rates. The register on its own will not increase participation. That’s not its purpose’
4.22
The above discussion points to a difference between two of the key elements of the new system, which together are expected to improve participation and save lives—the screening program and the screening register. Accordingly, the Committee maintains that it would be useful to more clearly communicate the objectives of the register as distinct from the program. As to whether participation rates had started to improve under the new cervical cancer screening program, Health noted it did not have the information yet to be able to determine that, but the ‘expectation is that participation rates will be maintained and that we won’t see a drop through this transition period and that, over time, we can implement more and more strategies to increase participation in cervical screening’. This also underscores the potential that despite the evidence received that women continued to receive screening there was, for the period in which the ‘Go-Live’ was delayed, a gap in level of service to be delivered by the screening program and screening register for those women who otherwise may have anticipated access to the new program and test.
4.23
To provide clear information to the Australian public and the Parliament on a significant area of public health, the Committee recommends that the Department of Health provide the Committee with a statement of the objectives and planned performance information of the National Cancer Screening Register (including the National Cervical Cancer Screening Register and the National Bowel Cancer Screening Register) as distinct from the objectives and planned performance information of the national cervical and bowel cancer screening programs.
4.24
On the national bowel cancer screening register transition under the NCSR, the Committee heard that planning for this transition will ‘recommence at a point in time’ when Health had ‘fully delivered the registered services for cervical’—‘all our focus is on ensuring that we can complete the National Cancer Screening Register to support cervical screening, and, for that reason, we and Telstra Health have moved our resources into that, in order to ensure that that occurs. Once that is implemented, bedded down and stable, the planning will recommence for bowel cancer transition’. The Committee is concerned that Health was suggesting delivery ‘more likely later in calendar year 2019’ for this register (noting that it was originally due to ‘Go-live’ on 20 March 2017) but could provide no specific date.
4.25
Importantly, Health assured the Committee that, while there was not a target date for the NCSR bowel cancer screening register transition, the National Bowel Cancer Screening Program is ‘operational’ and being supported by the National Bowel Cancer Screening Register in DHS, with these arrangements to continue ‘until such time’ as the transition of the National Bowel Cancer Screening Register goes into the NCSR.
As to any impact on patients from the delay, Health maintained that this was an ‘administrative shift’; it was ‘not introducing a new test or a more effective test for the bowel cancer regime … So there shouldn’t be an impact on patients because the Bowel Cancer Screening Program continues under DHS’
As to what improved outcomes could be expected as a result of the transition to the NCSR, Health explained that ‘there is an intention to gain some efficiencies and move from a paper based process’
As to any health consequences in maintaining the ‘inefficient’ paper based processes, Health explained that the ‘Bowel Cancer Screening Register, just like the cervical screening register, performs a safety net function and is not actually primary clinical care’, and ‘inefficiency is what is intended to be corrected with the introduction of that transition to the National Cancer Screening Register’
As to whether there was any expectation of improved participation, that more people would participate in the National Bowel Cancer Screening Program, as a result of the transition to the register under the NCSR, Health explained that this was a matter related to the ‘difference between the register and the program. The National Bowel Cancer Screening Program has absolute aspirations to be able to increase participation in bowel cancer screening’, with the register supporting the ‘information exchange … that allows the program to make decisions about how we might improve participation in the future’
4.26
The Committee acknowledges the distinction that Health makes between the register and the program. However, the Committee is concerned that, although the register is seen primarily as an administrative improvement, it is also expected to make a contribution to improved participation rates in the program and that timely delivery must remain a priority. Overall, the Committee emphasises that more active contract management and ongoing monitoring of progress will be required if value for money is to be achieved in the establishment of the NCSR.
4.27
In terms of the two registers that were contracted to be delivered by 1 May 2017 and 20 March 2017, the Committee recommends that Health give consideration and report back to the Committee as to whether, in the circumstances of such serious underperformance by Telstra Health, it may be in the Commonwealth’s interests to terminate the contract and consider other options for either or both registers. If Health is of the view that this is not the best course of action then the Committee requests advice as to: penalties the Commonwealth could consider seeking from Telstra Health, given the significant extra costs incurred as a result of this delay, and what advice Health has sought regarding these issues.
4.28
Further, given the ongoing delay in delivery of this $220 million contract, the Committee recommends that Health provide a progress report to the Committee on a six-monthly basis until both registers are fully operational or the contract is terminated or concludes. The reports should be comprehensive and outline progress, cost impacts, risks and benefits, including changes in participation rates and expected implementation dates.
4.29
The Committee recommends that the Department of Health give consideration and report back to the Committee on:
whether, in the circumstances of such serious underperformance by Telstra Health, it may be in the Commonwealth’s interests to terminate the contract and pursue other options for either or both registers
advice as to what penalties the Commonwealth could consider seeking from Telstra Health, given the significant extra costs incurred as a result of this delay
what advice Health has sought regarding these issues
4.30
To provide clear information to the Australian public and the Parliament on significant area of public health, the Committee recommends that the Department of Health provide the Committee with six monthly updates on the implementation of the National Cancer Screening Register (NCSR), with particular emphasis on:
the implementation date for the national bowel cancer screening register transition under the NCSR and, if that has been met, whether all aspects of this initiative have been implemented—including details of what has/has not been implemented
an update on whether all aspects of the national cervical cancer screening register transition have been implemented and, if so, when they were implemented—including details of what has/has not been implemented
an update on when the NCSR national cervical cancer screening register function to send reminders was implemented, noting that, at the time of the Committee’s inquiry, all of the reminders from the new test (other than high-grade results) were due to start being sent from February-March-April 2018
on participation rates, by quarter, under the new national cervical cancer screening program, including as a percentage of the eligible age group, and what initiatives Health is undertaking to increase participation rates
4.31
Noting that achieving value for money is expected to be a central consideration of Commonwealth procurement activities, the Committee recommends that the Department of Health report back with details of how it is pro-actively managing the National Cancer Screening Register (NCSR) contract and monitoring progress to ensure that value for money is achieved in the establishment of the NCSR, including:
details of any savings achieved from NCSR operations and/or any additional costs to the Budget
whether the process of providing NCSR Medicare data to Telstra has concluded, and whether that data is complete and reliable
a summary of the deliverables status, including contract documentary deliverables, as per Table 2.1 and Appendix 2 of ANAO Report No. 61 (2016-17)
4.32
In terms of probity management, the Committee notes that, while Health ‘established a framework to manage conflicts of interest and probity issues’, the Auditor-General found the effectiveness of the NCSR procurement was reduced due to ‘poor management of probity and conflicts of interest’. Further, probity issues were ‘not adequately documented’ and this ‘weakened the effectiveness of the otherwise well designed governance framework’.
4.33
In one instance, there was evidence of provision of early RFT related documents to Victorian Cytology Service (VCS), prior to Health issuing the probity separation guidelines. (VCS and Telstra were the two shortlisted tenderers for the NCSR procurement.) The separation controls implemented by Health were therefore only ‘partially effective’. As to whether there had been probity concerns regarding any possible communication between Health, Telstra and VCS during the NCSR tender period, the Committee notes the Auditor-General’s assurance that, ‘in this case, we did extensive searches of the documents held by the department, and on the basis of that we decided that undertaking any more work wasn’t required … the evidence didn’t generate to us a reason to pursue that’.
4.34
Health was also ‘unable to demonstrate’ that declared conflicts of interest were ‘adequately considered and treated appropriately’. While a number of key decision-makers complied with Health’s framework to manage conflicts of interest by completing the relevant form, ‘not all decision-makers declared existing conflicts’, and seven out of 11 Senior Executive Service (SES) officers identified as being involved in the procurement had not completed annual conflict of interest and personal interest disclosures. The ANAO noted that a senior officer at Health was a voting member of the NCSR Project Board and voted for Telstra as the preferred tenderer, at the same time as owning undeclared Telstra shares. The Committee notes with approval the one officer who did disclose ownership of Telstra shares to the probity adviser, and the advice to adopt a test of materiality (including the nature of the shares, size and value). Health did not apply the test of materiality to other officers who owned Telstra shares, nor considered whether families owned shares, or whether shares were traded during the tender period.
4.35
The Committee notes with concern the seriousness of these findings, and also the compounding effect, whereby the financial and other interests of these SES and senior officers’ immediate family had also not been annually updated.
4.36
The Committee notes that, in accordance with section 13(7) of the Code of Conduct under in the Public Service Act 1999, an Australian Public Service employee must take reasonable steps to avoid any conflict of interest (real or apparent) in connection with their employment and disclose details of any material personal interest in connection with their employment. Accountable Authorities and SES level employees are required to declare in writing, at least annually, their own and their immediate family’s financial and other interests that could cause a real or apparent conflict of interest.
4.37
The Committee acknowledged Health’s update on its progress in implementing the ANAO recommendation that it ensure actual, potential and perceived conflicts of interest records are maintained, up-to-date and appropriately addressed, and that SES employees declare in writing, at least annually, their own and their immediate family’s financial and other interests. In particular, Health had implemented an online form based on guidance from the Australian Public Service Commission (APSC), to improve tracking of completion rates and documentation; the sorts of conflicts required to be declared had been ‘expanded’; and additional staff guidance had been provided. At the time of the public hearing, Health confirmed ‘100 per cent compliance’ as regards SES completion and updating of conflict of interest declarations.
4.38
The Committee recommends that Health seek advice from the APSC as to the adequacy of the department’s response and provide further advice to the Committee on this matter and the additional steps it will take to ensure such actions do not occur in the future.
4.39
The Committee recommends that the Department of Health provide the Committee with an update on:
compliance with conflict of interest requirements, including ensuring actual, potential and perceived conflicts of interest records are maintained, up-to-date and appropriately addressed, and that Senior Executive Service employees declare in writing, at least annually, their own and their immediate family’s financial and other interests
when mandatory conflict of interest training for all departmental staff was delivered, to support the revised conflict of interest arrangements
4.40
The Committee recommends that the Department of Finance, together with the Australian Public Service Commission, write to all Commonwealth entities reminding them of their obligations as regards full compliance with conflict of interest requirements—including reference to the findings of Audit Report No. 61 (2016-17) and the value of providing mandatory training in this area for all staff.
4.41
The Committee recommends that the Department of Health seek advice from the Australian Public Service Commission as to the adequacy of the department’s response to a senior departmental officer having voted for a company as a preferred tenderer while owning undeclared shares of that company, and provide further advice to the Committee on this matter and the additional steps it will take to ensure such actions do not occur in the future.
4.42
The Committee notes that Health provided an update on implementation progress against a number of mechanisms to manage data and privacy in relation to the NCSR, including that the NCSR had been assessed against the Australian Government Information Security Manual (ISM) as having ‘excellent levels of ISM compliance’, with formal certification/accreditation having been granted.
Review of evidence
4.43
This section reviews the evidence received by the Committee regarding Health’s procurement of services for the NCSR in terms of:
compliance with Commonwealth Procurement Rules
procurement effectiveness and value for money outcomes, including with regard to:
project implementation—timing and cost issues
management of data and privacy
Compliance with Commonwealth Procurement Rules
4.44
The ANAO reviewed whether the procurement process for the NCSR was conducted in accordance with the following procurement frameworks:
the ICT Investment Approval Process (formerly known as the ICT Two Pass Review process)—part of the Budget process required of ICT enabled proposals;
the CPRs—establishing procurement principles that apply to all Australian Government procurement processes; and
internal Health procurement guidance—additional Health guidance supporting compliance with the CPRs.
4.45
In conducting the NCSR procurement, the Auditor-General concluded that Health ‘complied with the Commonwealth Procurement Rules, effectively managing an open tender process and considering value for money’. Health had also complied with internal procurement guidance and the ICT Investment Approval Process. Health had ‘documented all stages of the procurement and retained appropriate records, as required by the CPRs and Health’s internal guidance’, with records covering each aspect of the procurement, including the process followed, how value for money was considered, relevant approvals and key decisions.
4.46
On a separate point, the ANAO noted that, while Health consulted with key stakeholders, it ‘did not undertake a request for information stage prior to opening the procurement tender’. Tenderers indicated that ‘a stronger response from the ICT sector would have been possible if a request for information process had been undertaken by Health’.
Procurement effectiveness and value for money outcomes
4.47
This section reviews the evidence received by the Committee regarding the effectiveness of Health’s procurement of services for the NCSR and value for money outcomes, including with regard to:
project implementation—timing and cost issues
management of data and privacy
Risk management
4.48
The Auditor-General concluded that the effectiveness of the NCSR procurement was ‘reduced due to inadequate consideration of risk during planning’.
4.49
In particular, the ANAO found that the ‘full extent of the project’s complexity, risk and the potential consequences of project failure or delay were not communicated to the Government at the point in time the funds were allocated’. The ANAO noted that Health’s recommended option in the First Pass Business Case for the procurement acknowledged complexity risk was present, but the complexities of combining additional screening pathways into a single national register and the number of interfaces required were ‘not presented’. Similarly, the risk of not achieving the NCSR ‘Go-Live’ date and resulting impact on the pathology sector and public confidence in screening was ‘not discussed’.. Further, the First Pass Business Case ‘did not explore alternative viable implementation approaches, such as staging the implementation of the NCSR’—a staged approach ‘could have included establishing the national bowel screening register and demonstrating its capability, prior to the inclusion of cervical screening functions’, reducing complexity risk.
4.50
The ANAO also found that, while Health identified risks during the procurement and the Tender Evaluation Plan established an approach for managing risks, the department ‘did not fully implement the approach set out in the plan, as untreated risks of the tenders were compared during the evaluation rather than treated risks, potentially compromising value for money outcomes’. However, the ANAO did note ‘all risks that were identified for the preferred tender were considered by Health during the contract negotiation phase and treatment strategies were proposed prior to executing the contract’. Further, ‘throughout the procurement process Health’s tender evaluation teams identified a number of pricing issues and risks relating to the tenderers’—these were ‘considered by the Tender Evaluation Committee in forming its assessment and the Delegate was appropriately informed of the perceived strengths and weaknesses of each tenderer along with the key risks identified during the evaluation process’.
4.51
By way of further background on this ANAO finding, the Tender Evaluation Plan set out three stages:
Stage 1: Compliance Assessment—to eliminate responses that did not meet minimum conditions for participation or minimum content and format requirements.
Stage 2a: Interim Evaluation Process—a detailed evaluation against the evaluation criteria, providing for potential clarification with tenderers and shortlisting of tenderers.
Stage 2b: Final Evaluation Process—to result in the recommendation of a preferred tenderer, and to involve further assessment, due diligence and negotiation with shortlisted tenderers.
Stage 3: Contract Negotiation and Finalisation—final contract negotiations with the preferred tenderer to address any outstanding issues, finalise pricing and address remaining assumptions.
4.52
Six tenderers responded to the RFT, three of which were compliant with the minimum RFT content and format requirements. As a result of the Stage 2a Interim Evaluation Process, finalised on 30 November 2015, two of the three compliant tenders were assessed as competitive and representing value for money and progressed to the next evaluation stage. In December 2015, Health commenced negotiations with the two shortlisted tenderers in order to determine which presented the best value for money outcome. The two tenderers were: ‘VCS, an experienced clinical registry operator which had upgraded its ICT capability in anticipation of the Renewal’s requirement for national register functionality, and Telstra, a national firm with significant ICT and call centre capability which had purchased a number of entities with health related capabilities’.
4.53
Telstra’s initial bid was lower than VCS’s and, as a result of the Tender Response Refinement and Cost Reduction Refinement processes, Telstra’s price reduced by 24 per cent and VCS’s price reduced by 21 per cent. At the end of the Stage 2b Final Evaluation Process, the Tender Evaluation Committee was unable to reach a consensus and referred the matter to the Project Board. The Tender Evaluation Committee was ‘unable to determine a preferred tenderer, with key issues and risks remaining for both tenderers that the committee wished to address’. One tenderer was assessed as having a ‘stronger demonstrated clinical registry capability based on experience’, and the other tenderer was assessed as having a ‘stronger demonstrated capability to provide scaled up national technical solutions’. The Board accepted the findings of the Tender Evaluation Committee that ‘one tenderer presented higher implementation risk and the other presented higher cost and higher ICT and financial sustainability risks’. On 18 March 2016, the Project Board recommended Telstra as the preferred tenderer. The ANAO found that the Project Board’s recommendation was ‘based on Telstra’s lower cost bid and the lower overall (untreated) risk profile as assessed by the Tender Evaluation Committee to achieve value for money’.
4.54
The purpose of the Tender Evaluation Plan is to minimise risks to the Commonwealth and achieve the best possible value for money outcome, requiring risks be identified and a treatment for each identified risk be considered to arrive at a residual risk profile for each tender. However, the ANAO noted that ‘risk treatments and strategies were not developed for all risks until Stage 3 Contract Negotiation and Finalisation’, once a preferred tenderer had been selected. At Stage 2b Final Evaluation, the ‘two final tenderers’ untreated risk profiles were compared, rather than their treated risk profiles’. Accordingly, the ANAO found that, while Health identified risks during the procurement and the Tender Evaluation Plan established an approach for managing risks, the department ‘did not fully implement the approach set out in the plan, as untreated risks of the tenders were compared during the evaluation rather than treated risks, potentially compromising value for money outcomes’.
4.55
There was interest at the public hearing in further exploring why Health ‘did not fully implement’ the approach set out in its Tender Evaluation Plan and compare treated risks rather than untreated risks, particularly noting the Tender Evaluation Committee and the Project Board were ‘aware that the “extreme” financial viability risk associated with one tenderer could have been treated by Health’s application of mutually agreeable commercial arrangements’. Ms Bettina Konti, First Assistant Secretary, National Cancer Screening Taskforce, Health, stated: ‘I think I would have to go back and look at our notes and records to try and answer that question’. Queried further about this matter, Ms Konti responded that ‘the treatments for those risks and what could be possible treatments for those risks for both tenderers was also discussed and compared, but there was no evidence that was able to be provided to the ANAO about what might have been written down. So I would need to confirm this’:
There was discussion in the tender evaluation teams and board meetings about how you might treat some of those risks. I think what we may be discussing, and this is where I suggested I might need to go back and check, is the way in which those risks might be treated and the comparison of the treated risks between the tenderers may not have been documented. We might simply be talking about a documentation issue ...
4.56
This matter was then examined in more detail. For clarity, the full discussion on this matter is set out at Box 4.1, noting that:
Ms Konti, Health, stated that the ‘extent to which the untreated risks could have been treated for each tenderer and the outcome that that would give you was the same as the outcome that you would get with the treated risks’—however, the Auditor-General observed that ‘we didn’t see any evidence of that analysis’
Ms Konti stated that the ‘comparison of the treated risks between the tenderers may not have been documented … The treatments for those risks and what could be possible treatments for those risks for both tenderers was also discussed and compared, but there was no evidence that was able to be provided to the ANAO about what might have been written down’, and also that ‘I think I would have to go back and look at our notes and records’—however, if all relevant departmental records had been provided to the Auditor-General and other matters ‘may not have been documented’, arguably there were no further ‘notes and records’ that could be checked. Ms Konti later conceded: ‘I don’t think it’s possible the records exist; otherwise, they would have been provided to the ANAO’.
Box 4.1: Extract from public hearing
Mr HILL: … If you took a different comparator of treated risk, could this have affected the evaluation and could it have affected your selection of the preferred tenderer?
Ms Konti: My understanding is, no.
Mr HILL: And what’s the basis of your understanding, given you’ve just told us you’d have to check the notes for the related questions?
Ms Konti: The extent to which the untreated risks could have been treated for each tenderer and the outcome that that would give you was the same as the outcome that you would get with the treated risks. So all of the risks were treatable. The extent to which they were treatable and what picture you’re left with at the end of that is what we need to understand.
Mr HILL: Auditor-General?
Mr Hehir: We didn’t see any evidence of that analysis.
Mr HILL: So you’re going to go back and look at your records, which, if they exist, means you didn’t give them to the Auditor-General, which is a serious matter—a very serious matter—[and] if you didn’t have access to all of the documents, or the records don’t exist that you’re going to go back and look [at,] that backs up what you just told me. Don’t worry about it. Even if we had treated them we’d get the same answer. What do you say to that?
Ms Konti: Sorry; clearly, there are no records because the Auditor-General didn’t find them.
Mr HILL: So what are you going to go back and look at?
Ms Konti: People who may have been there; I don’t know.
Mr HILL: To see what—have they got a smile on their face? I mean, what you say, really, with respect, is making no sense. You’re going to go back and look at records that don’t exist, which the Auditor-General didn’t see.
Ms Konti: Okay. The question that you asked me was one that I can’t answer, which was why did we only look at untreated risks. I was trying to help.
Mr HILL: Therefore, it is possible that if you had assessed treated risks you may have got a different result. I don’t logically understand how you can say that’s not the case if you have no records of having done so. Sorry, is that a nod?
Ms Konti: It’s a—I understand the position you’re taking.
Mr GEE: It’s possible the records exist?
Ms Konti: I don’t think it’s possible the records exist; otherwise, they would have been provided to the ANAO.
Project implementation—timing and cost issues
4.57
Under the NCSR the Commonwealth will manage a national cervical screening register, previously funded and managed by states and territories, and a national bowel cancer screening register, previously operated through DHS. The National Cervical Screening Program (NCSP) commenced in 1991, with eight separate state and territory registers being managed by seven providers. The program targets Australian women between the ages of 18 and 69 years, and recommends a routine Pap smear every two years. In April 2014, the Medical Services Advisory Committee recommended that a five-yearly primary human papillomavirus (HPV) test for women aged 25 to 74 years of age replace the current two-yearly Pap smear. Changes to the method of screening for cervical cancer (the Renewal) were agreed by all states and territories. The National Bowel Cancer Screening Program (NBCSP) was established in 2006 and, to date, has been managed by Health through one central register operated by DHS. Under the NBCSP, Australians between 50 and 74 are invited to screen for bowel cancer once every five years using a Faecal Occult Blood Test that can be completed at home. In 2005, the National Health and Medical Research Council recommended screening at least once every two years for Australians over 50 years of age. Subsequently, in 2014, the Australian Government committed to accelerating the implementation of a biennial bowel cancer screening interval for all Australians who will be 50 to 74 years of age between 2015 and 2020. The rollout of biennial screening commenced on 1 January 2015, with new cohorts added each year.
4.58
On 23 February 2017, Health released a public statement confirming that, due to the complexity of assimilating and migrating data from eight state and territory cancer registers into one register, the NCSR implementation would not meet the ‘Go-Live’ date of 1 May 2017. On 27 February 2017, ‘Health announced a revised implementation date for the new cervical screening test of 1 December 2017 … contingent on the new national register being in place’. The ANAO report noted that ‘current cancer screening services will be maintained until the NCSR becomes operational’.
4.59
Against this background, the Auditor-General concluded that the objectives for the NCSR sought by the Government ‘were not achieved in the agreed timeframe and additional costs were incurred as a result’. At the time of the audit, the ANAO found that, while the contract included timeframes for a number of key deliverables, Health and Telstra had ‘not yet agreed on a project schedule, as well as the timing and content of some other key deliverables’, and ‘due to delayed implementation of the project, the initial ‘Go-live’ date was not met’. Over the course of implementation, ‘timeframes have generally not been met and key dates have been progressively rescheduled’. As a result, ‘value for money outcomes have been compromised’, and the ‘savings anticipated to be achieved from the NCSR operations will be delayed’. The ANAO noted that ‘ongoing monitoring of progress and strong pro-active management of the contract will be required if value for money is to be achieved in the establishment of the NCSR’.
4.60
There was interest at the public hearing in exploring these timing and cost issues associated with implementation of the NCSR. Asked for an update on the ‘Go-live’ date for the NCSR, Health responded that ‘on 1 December 2017 we implemented the National Cancer Screening Register to support the renewal of cervical screening. The national bowel cancer screening register planning will recommence at a point in time when we have fully delivered the registered services for cervical.’ Health confirmed that the delivery of the national bowel cancer screening register transition under the NCSR does not currently have a ‘Go-live’ date.
4.61
Turning firstly to the national bowel cancer screening register transition under the NCSR, the public hearing further explored a number of timing and cost issues.
4.62
Health confirmed that this register had originally been due to go live on 20 March 2017 but this had been delayed; the department had then advised that it would go live in the first part of 2018; and, more recently, at a Senate estimates hearing, the department had advised that it would more likely go live in 2019. As to whether a more specific ‘Go-live’ date could be provided, Health responded that it would be ‘more likely later in calendar year 2019’. Health explained that a specific date could not now be provided because ‘all our focus is on ensuring that we can complete the National Cancer Screening Register to support cervical screening, and, for that reason, we and Telstra Health have moved our resources into that, in order to ensure that that occurs. Once that is implemented, bedded down and stable, the planning will recommence for bowel cancer transition’. As to whether this meant it was not currently working on this area, Health explained:
It is important to know that the bowel cancer screening program is operational. It’s being supported by the National Bowel Cancer Screening Register in the Department of Human Services, and that will continue until such time as the transition of the National Bowel Cancer Screening Register goes into the National Cancer Screening Register. In addition to that, the move to … biennial screening by 2020 is continuing under the DHS provider.
4.63
Queried about whether the relevant minister had been advised of a proposed schedule or target date the department might be working towards, Health again confirmed that ‘there isn’t a target date for the bowel cancer screening, and part of the reason for that is we have a Bowel Cancer Screening Register that is up and operational and is supporting a National Bowel Cancer Screening Program today’. As to whether any improved outcomes were expected as a result of the change from the register being supported by DHS to the register being part of the NCSR, Health responded:
There is an administrative shift to consolidate. It is not introducing a new testing regime. So that’s the difference between bowel and cervical. But there is an intention to gain some efficiencies and move from a paper based process. Really, the outcome that we’re seeking with the bowel transition is reduction of reporting burden for clinicians, through integration and ability to report from within the GP software … To report to the register at the moment requires the clinician to fill in a paper form, envelope that, send it to the register and have that be keyed in … … … It’s more about being able to create a more efficient health system by being able to connect the healthcare system to its reporting database.
4.64
In terms of whether there was any expectation of improved participation from the national bowel cancer screening register transition to the NCSR, Health clarified that this was a matter related to the ‘difference between the register and the program. The National Bowel Cancer Screening Program has absolute aspirations to be able to increase participation in bowel cancer screening’.
4.65
It was noted at the public hearing that, at a Senate Community Affairs Legislation Committee inquiry into the National Cancer Screening Register Bill 2016, Health had stated: ‘the inefficient paper based processes that we have for the National Bowel Cancer Screening Register and the separate state and territory registers supporting the cervical program mean that, for example, when women move interstate their records and their capacity to be supported and followed up by a screening register can slip through the cracks’. On whether there was any consequence in maintaining these ‘inefficient paper based processes’, Ms Bettina Konti, First Assistant Secretary, National Cancer Screening Taskforce, Health, responded:
We know that, for every stage in a person’s bowel cancer screening pathway, the amount of information that is reported back to the register becomes less and less because it is a reporting burden for the clinicians. I remind the committee, though, that the Bowel Cancer Screening Register, just like the cervical screening register, performs a safety net function and is not actually primary clinical care … … … So that inefficiency is what is intended to be corrected with the introduction of that transition to the National Cancer Screening Register.
4.66
As to whether it could point to other outcomes from the national bowel cancer screening register transition to the NCSR, aside from efficiency, Health responded that ‘it is all around a better connected health system. Communication protocols and standards for pathology laboratories are part of what this National Cancer Screening Register has also implemented’. As to any impact on patients from the delay, Health confirmed:
We’re not introducing a new test or a more effective test for the bowel cancer regime. Patients will continue to be invited to participate at the appropriate intervals for bowel screening. The implementation of the measure that says that we will be bowel screening biennially by 2020 will continue. So there shouldn’t be an impact on patients because the Bowel Cancer Screening Program continues under DHS. We’re not making a change to a more effective test, as we are in cervical.
4.67
On the issue of costs, the Auditor-General observed that the business case for the initiative noted ‘there would be savings from the bowel screening program which would offset some of the costs … we refer to the fact that, in the business case, there wasn’t an alternative put forward to implementing the two programs at the one time, and we note that that added significant complexity to the delivery process.’ There was interest in the cost impact of the delayed implementation of the national bowel cancer screening register transition—whether the projected cost savings had been achieved. Health responded:
We’ve said that funding of $39.5 million over five years for interim arrangements to support the continuation of cervical screening under the Pap test regime and the continuation of the National Bowel Cancer Screening Register in DHS was announced in the 2017-18 budget. Of this, $33.3 million was for continuation of the National Bowel Cancer Screening Register and $6.2 million is attributed to the Medicare Benefits Schedule cervical screening items … … … The department is appropriated for continuing to provide National Bowel Cancer Screening Register services. That appropriation is intended for DHS in the next financial year rather than for Telstra Health. From a financial impact point of view, there is no requirement for us to be seeking additional funding this year because we have the appropriation for the bowel register.
4.68
Turning secondly to the national cervical cancer screening register transition under the NCSR, the public hearing further explored a number of timing and cost issues.
4.69
Noting that the ‘Go-live’ date of 1 December 2017 for the national cervical cancer screening register transition under the NCSR had been met, there was interest in whether this meant that all aspects of this area had been fully implemented. Health confirmed that:
The aspects that need to be supporting women to be able to undertake the test, the aspects … that require the pathology laboratories to report their test results in the new way and in the new form, are complete. The new MBS items have been implemented. The register call centre operations are up and running. The remaining register functions are being supported by the state and territory cervical screening registers. So between the Commonwealth and states and territories full register services are being provided today.
4.70
Ms Konti, Health, further explained that, ‘at the moment, those elements of the National Cancer Screening Register that are required to support the new cervical screening test have been implemented’, but there are ‘some reminder and follow-up functions still being done in the states and territories’, with ‘register operations between the Commonwealth and the states and territories … being performed between the National Cancer Screening Register and the states and territories’. As to the exact functions still being performed by the state and territory registers and when each of those functions was due to transfer to the new arrangements, Health responded:
The state and territory registers are sending the reminders for women who are due for their two-yearly interval screening test. So it’s not a pap test anymore; it’s the HPV test. They are sending out those reminders to women. The National Cancer Screening Register is doing the follow-ups of cancer and high-grade results basically from 1 December onwards and will also then be starting with the reminders for women who have intermediate results to remind them to follow up, to see whether they’ve seen a GP and had their next stage in the diagnosis, if our records show that they haven’t yet. Some of the state and territory registers, in addition to sending out those results, are providing the complete cervical screening histories to the pathology laboratories, because the data for history for women is still with the state and territory registers. The data for the pathology tests that have come in since 1 December is with the National Cancer Screening Register. Some states and territories are performing a service for their pathology laboratories by giving a complete screening history when the test comes in as well.
4.71
On whether the NCSR function to send reminders had been implemented yet, Health observed that ‘this is part of the complexity of the transition’—‘all of the reminder functions for tests conducted pre 1 December are being performed and continue to be performed by the state and territory registers. All of the reminders from the new test, other than the high-grade results, which are followed up very quickly, are due to start being sent in February, March, April—that kind of time frame this year’.
4.72
Overall, Health emphasised that the NCSR provides a ‘safety net’ function for the HPV test, just as the state and territory cervical screening registers provide a ‘safety net’ function for the Pap smear test—further, the state and territory cervical screening registers have remained in place as the NCSR has been implemented:
The screening program and the detection of cervical cancer is something that is fundamentally part of usual care arrangements in the health system. What the register does, and the cervical screening registers in the states and territories have done under the previous pap test regime, and what this National Cancer Screening Register is doing for the current cervical screening regime, is actually performing as a safety net function to ensure that women who have tests and who do have high-grade results on those tests are actually followed up and all of those functions are being performed.
4.73
As Health further noted, while there was a ‘delay of seven months’ in delivering the NCSR national cervical cancer screening register transition (from 1 May 2017 to 1 December 2017), ‘in that interim period, the then Pap test regime was continuing and those tests were continuing to be performed. MBS items were changed to help the pathology laboratories be able to continue to perform the tests. So it’s not like there wasn’t a screening test regime in place in Australia for those seven months. There was a screening test regime. It was the previous Pap test regime’. Asked to further clarify the ‘safety net’ function and the differences between the new and old screening registers, Ms Konti, Health emphasised that:
the state and territory cervical screening registers were put in place and continued to evolve over a period of 25 years to support the Pap test regime pre 1 December. They, too, performed a safety net function. This new register is intended to perform the safety net function for the new cervical screening test … I think it’s important to note that there is no gap in service and there is no gap in register functions today. It will remain the case until the rest of the register functions come online to support that.
4.74
In terms of how many cervical cancers might have gone undetected because of the delay in meeting the original 1 May 2017 NCSR ‘Go-Live’ date, Health responded that ‘advice was sought from the Chief Medical Officer and we can assure the Committee that there are no cervical screening participants whose cervical cancers would have gone undetected during the period 1 May to 1 December 2017’:
The Pap test program was in place throughout this period and for women actively screening and due for the test, they would have had the Pap test, and any cervical abnormalities would have been identified and the appropriate next steps taken for further diagnosis and treatment.
The new cervical screening test detects HPV, which if persistent and unresolved over many years, is a risk indicator for cervical cancer. If a HPV test is positive, the sample is then taken to Liquid Based Cytology (LBC), which is a similar test for abnormal cells. The effectiveness of the new cervical screening test regime is a combination of a more effective test, and risk based screening pathway approach, where recommendations for screening interval and recommendations are made based on a woman’s history but also her HPV status …
4.75
It was noted the Explanatory Memorandum to the National Cancer Screening Register Bill 2016 stated that, ‘once implemented, the changes to the NCSP will prevent an additional 140 cervical cancers each year’, and that this initiative included a commitment to a screening register to support the new program. Based on the above figure, Health responded to a question on notice on whether a ‘six to nine months delay’ would therefore mean ‘at least an additional 70, 90, 100 cancers’, as follows:
The statistics referred to in the explanatory memorandum for the National Cancer Screening Register Act, is from a modelled evaluation. They do not represent actual predictions for the year 2017. They represent estimates of the cumulative protective effect from regular HPV tests over a lifetime compared to the cumulative protective effect from regular Pap tests over a lifetime.
4.76
There was interest in further exploring Health’s modelling for these statistics. Health explained the modelling showed that, ‘over a woman’s lifetime, the cumulative protective effect of the introduction of the HPV vaccine and regular screenings would, in fact, prevent that number of cervical cancers from occurring each year’.
4.77
In terms of whether it was envisaged that more women would participate in the cervical cancer screening program as a result of the register, Ms Konti, Health, responded:
I’m not sure that the register was ever quoted as being the mechanism for increasing participation in screening. It will perform as a more effective safety net because it will be a national register … … … The new cervical screening program has a register to support it. The new cervical screening program is a combined Commonwealth, state and territory program. Together, in addition to the functions and operations of the register, we implement strategies to ensure that we can monitor participation in screening as well as improve participation in screening … … … In the current registers and in the old pap test regime, reminders and follow-ups were occurring as part of that program as well.
4.78
As to whether participation and detection rates had started to improve under the new cervical cancer screening program, Health responded:
We don’t have the information yet to be able to determine that. This is a move to a new test and there is a combination of information from the register plus the behaviour of clinicians plus the extent to which people are being recalled. That will all go to determining the participation rates. For example, one of the things that we have learned through the program is that people are believing that they now no longer need to screen for five years, but the way that this program is intended to work is that every female whose last test was a pap test needs to come back at the two-yearly interval to have their first HPV test before they are then on that five-yearly interval. These are things that we’re addressing through education, talking to GPs and others …
The expectation is that participation rates will be maintained and that we won’t see a drop through this transition period and that, over time, we can implement more and more strategies to increase participation in cervical screening.
4.79
For clarity, Box 4.2 sets out the full discussion at the public hearing related to the matters referenced above.
Box 4.2: Extract from public hearing
Mr HILL: I know you’re talking about the transition, but I’m trying to get a sense of the longer term aim, which is that, over time, we will see improved participation, earlier detection and so on. Given that, I’m not clear how you can argue, as you did in the response to the question, that the seven-month delay has no impact?
Ms Konti: The pap test regime was still in place. Women who were actively screening and became due for a cervical screening test would have had the pap test. Because they had the pap test, their next due date for a cervical screening test will be at the two-year interval, not at the five-year interval. So women were still screening. If there was a presence of cancer, the pap test would have found it. If there was a presence of abnormal cells, the pap test would have found it. The HPV test has a higher sensitivity. I need to be careful here because I’m not a clinician, but my understanding is the HPV test, because it can detect HPV, is able then to allow more accurate testing and put women on a pathway that means that if they’ve got persistent HPV over a number of years, that’s something that can be monitored and can be treated before it becomes a cancer.
Mr HILL: Just to conclude on this point then, I take your point that there’s a certain group of women who are getting a pap test, but you’ve also said that the new test is supposed to be better, it detects things earlier and the aim is to increase participation. And there’s a logic gap that nothing you’ve said breaches between saying that the new system is better and that it will save lives, as the government’s submissions say, and then to suggest that there’s no impact of a seven-month delay. In a longitudinal sense, if you’re bringing in a new system that’s intended to save lives and cut cancer, then a seven-month delay has to have some impact, otherwise why are we spending $220 million on Telstra Health doing a new register if it doesn’t have any impact?
Ms Konti: The question you asked was: how many women will die of cervical cancer in that seven months? If those women were actively screening, their cancer would have been detected and they would have been put on a treatment pathway.
Mr HILL: I think the answer—and I haven’t got it right in front of me—talked about ‘of the participants in the scheme’, and the point I’m trying to make and understand is the objective of this $220 million investment is to get more participants in the scheme so they get a better test. So I don’t actually think you’ve addressed the core point that I’m making, although we’ve played clever word games.
Ms Konti: The point of introducing the renewed cervical screening program is to give women access to the better test. The program that is jointly Commonwealth, state and territory-run does things other than operate the register. So the register is there to create the national register and the information database for how we can be informed about participation rates. The register on its own will not increase participation. That’s not its purpose. Hopefully, that helps to answer the question. The program will, as part of its ongoing work, look at better ways and different strategies to enable women to be encouraged to participate, particularly those that are not currently participating.
4.80
Health noted that the current participation rate for the Pap smear test regime, of the eligible age group that should be having the test, is ‘around 57 to 59’ per cent—the participation rate for a number of years now has been in that ‘high 50 percentile’—and the number of women who have had the new screening test, HPV, since it was implemented on 1 December is ‘up around 400,000’. Health pointed to the difficulties in comparing participation rates between the two schemes, as the Pap smear test was available to women aged 18 to 69 and the new cervical screening test starts at the age of 25 and continues until the age of 74. There was concern that the current participation rate for the Pap smear test regime seemed low, at 57-59 per cent.
4.81
With regard to the cost impacts of the delay in meeting the original 1 May 2017 NCSR ‘Go-Live’ date, the ANAO noted that Health had allocated an additional $16.5 million for pathology providers to continue to provide access to the current Pap smear testing until the new testing program commenced, to ensure the ongoing provision of cervical cancer screening services in all states and territories, including $3 million for pathology workforce retention.
Probity
4.82
The ANAO found that, while Health ‘established a framework to manage conflicts of interest and probity issues’, the integrity of the NCSR procurement was ‘weakened’ by Health staff acting ‘inconsistently’ with these arrangements. There was ‘evidence of provision of Health documents to VCS prior to the RFT being issued’; Health was ‘unable to demonstrate’ that declared conflicts of interest were ‘adequately considered and treated appropriately’; and, while a number of key decision-makers complied with Health’s framework to manage conflicts of interest by completing the relevant form, ‘not all decision-makers declared existing conflicts’. CPR requirements were emphasised in the NCSR Probity Framework and Health officers were required to declare conflicts pre and post RFT, but where conflicts of interest were declared, the ‘assessment of declared interests was not recorded in the probity register, or elsewhere’. Accordingly, the ANAO found that probity issues were ‘not adequately documented’ and this ‘weakened the effectiveness of the otherwise well designed governance framework’. Overall, the Auditor-General concluded that the ‘effectiveness of the procurement was reduced due to … poor management of probity and conflicts of interest’.
4.83
Firstly, the inquiry considered the ANAO’s finding concerning ‘evidence of provision of Health documents to VCS prior to the RFT being issued’—that is, ‘in one identified instance Health staff facilitated VCS access to early RFT related documents … prior to the separation guidelines being issued in May 2015’. (VCS and Telstra were the two shortlisted tenderers for the NCSR procurement, and VCS was the contracted operator of the cervical registers in two jurisdictions, Victoria and South Australia.)
4.84
By way of further background on this matter, prior to obtaining feedback from states and territories on the draft RFT, Health had required their adherence to probity separation guidelines. These guidelines, issued via letter between 19-21 May 2015, stated that states and territories and their subcontractors must identify any personnel who might directly or indirectly be part of a bidding team, with the identified people not to have access to any of the procurement information made available by Health. On 6 May 2015, prior to sending the guidelines to states and territories, Health emailed them ‘high level information’ about the proposed register, requesting input on the register’s ‘functional and service requirements’. In response, South Australia advised Health it ‘needed to consult with VCS in order to respond to the request; noted the prospect that doing so could compromise the procurement process; and sought advice on how to proceed’. An ‘officer of Health advised South Australia to provide the information to VCS’, noting that the probity arrangements would be in place once states and territories received the probity letter but ‘until then they could make their own decisions’. The ANAO noted that ‘this approach was inconsistent with the probity arrangements Health was establishing’. While the access of VCS to some information as an incumbent provider was ‘beyond Health’s control’, ‘access to RFT documentation pre-tender was within Health’s control’. As such the ‘separation controls implemented by Health were only partially effective’. Further, while this issue was raised with the Project Manager as a probity concern, these concerns were not recorded in the probity register.
4.85
There was also interest at the public hearing in whether any concerns had been raised with the ANAO regarding any communication between Health, Telstra and VCS during the NCSR tender period. The ANAO confirmed: ‘we received one submission that … indicated that there was a concern about some conversations that went on in the early part of the period. We did an extensive document search of Health systems, including emails, and nothing came to our attention that validated those concerns’. The Auditor-General noted that ‘it would be fair to say that the concerns [related] to probity in the process—we looked at that and didn’t find any evidence of it’, and further confirmed that:
if someone raises a concern with us in our audit work, depending on the nature of it, we will always have a look to see whether we come across anything which would lead us to do further investigation. In this case, we did extensive searches of the documents held by the department, and on the basis of that we decided that undertaking any more work wasn’t required … the evidence didn’t generate to us a reason to pursue that.
4.86
As to whether there may have been a concern one tenderer may have possibly known something to their advantage before the tender period finished, the Auditor-General responded that, ‘through our document search and looking at the evidence on the record of the department, we didn’t come across anything in that context that led us to have concerns with respect to those types of issues’. In response to a query about whether the audit had looked for evidence of possible ‘dialogue’ between tenderers as regards such matters, the Auditor-General further noted:
It’s difficult for us to look at dialogue between tenderers. We didn’t designate those entities and go in and search their systems. We searched the departmental systems. It would have to be on the departmental systems for that. Certainly, we look at the engagement between the tendering agency but, in this case, we looked at the evidence on the record between Health’s engagement with the tendering parties during the procurement process. We feel we did quite an extensive search of the evidence, in that respect.
4.87
In terms of searching records in the minister’s office, including any possible communications between the minister’s office and any tenderer or relevant external party, the ANAO explained that, ‘to the extent to which the emails would have been coming into or out of the department from the minister’s office, yes, they would have been captured, but we looked at domain—health.gov.au—names. It wasn’t the minister’s offices. We didn’t search the minister’s offices per se’. The Auditor-General also noted: ‘we needed to have evidence to chase down things like that, to extend our search beyond the designated entity. We tended only to do that if there was something that looked like it needed us to do it’. On whether the ANAO has the legislative powers to examine communications between tenderers, the Auditor-General advised that ‘under our act we can designate any partner with the government and access their records. That’s the “follow the dollar” power. I would need to get specific advice of whether we can do that for someone who hasn’t been awarded a contract’.
4.88
Secondly, the inquiry considered the ANAO’s finding that Health was ‘unable to demonstrate’ declared conflicts of interest were ‘adequately considered and treated appropriately’ and that, while a number of key decision-makers complied with Health’s framework to manage conflicts of interest by completing the relevant form, ‘not all decision-makers declared existing conflicts’.
4.89
By way of further background on this matter, the two most commonly declared potential conflicts of interest were: ‘having a working relationship with one of the tenderers; and owning Telstra shares’. The ANAO found that Health ‘did not provide specific guidance in relation to these potential conflicts and the declaration of conflicts was inconsistent’. Five officers ‘did not declare a past or current working relationship with a tenderer, pre or post RFT’, and one officer, who did not declare a working relationship with a tenderer, was ‘later identified to have an apprehended bias for one tenderer and was removed from the evaluation team’. As part of its ‘limited review’ of the Telstra share registry, the ANAO identified nine officers involved in the procurement who owned Telstra shares and had not disclosed this fact at the time of the procurement. One of these conflicts related to a voting member of the NCSR Project Board, and ‘review of the Project Board meeting minutes noted that this member voted for Telstra as the preferred tenderer’. Further, one officer with a declared conflict in this area contacted the probity adviser directly to discuss the conflict, but ‘Health did not retain a record of this discussion’, the recommended probity process was ‘not documented’ and the probity advisors’ advice was ‘not communicated’ to all officers who declared share ownership.
4.90
There was interest at the public hearing in further exploring these matters. In terms of the conflicts relating to the nine departmental officers, Health stated: ‘in some instances we had individuals that didn’t recall that they’d owned Telstra shares that they’d bought very small amounts of in the early nineties. A lot of the individuals in that nine were not specifically within the procurement itself but were external to the procurement doing advice on an ad hoc basis to the procurement’. As to whether any consideration had been given to share ownership of family members, the ANAO responded that, ‘at the time, it would not have been possible to identify that because we wouldn’t have known the names of the family members. Basically, an auditor went and physically inspected the share register and tried to match names and addresses, and then we verified that with the department’. On whether a test of materiality (ordinary shares, preference shares, shareholding value) had been applied and whether it had tested if any of the nine officers had traded in shares during the procurement period, the ANAO responded: ‘we have an understanding of how many shares they held because that was on the register, but it was a point-in-time situation about what names were on the register as opposed to what action there might have been’.
4.91
In terms of the conflict relating to the voting member of the NCSR Project Board, Health explained this officer ‘didn’t recall that they owned Telstra shares of a small amount of money … they’d purchased back in the nineties … until the ANAO identified that ownership, hence they hadn’t declared it in their overarching conflict of interest or their specific conflict of interest for this procurement’. Once this had been identified, the officer concerned had ‘been asked to declare that formally and … been put on notice on making sure that doesn’t occur again’. When asked about what kind of culture it set for the department, when there had been ‘no specific sanctions’ on that officer, Health responded: ‘we take it very seriously and, in fact, we are using that particular case study as an example for all of our senior executive about the pitfalls of not being conscious and aware of all of the conflicts that you might have, and that’s part of the work we are doing on our active training for all of our senior executives’. The ANAO further found that seven out of the 11 SES involved in the NCSR procurement did not complete annual conflict of interest and personal interest disclosures. Of the four disclosures reviewed by the ANAO, ‘two related to the period before the procurement (2012 and 2014) and Health was not able to locate more current declarations’. The ANAO noted that, ‘while the onus to identify and declare conflicts resides with individual staff members, the responsibility for maintaining the integrity of the procurement process remains with Health’.
4.92
Accordingly, the ANAO recommended that Health should ensure ‘actual, potential and perceived conflicts of interest records are maintained, up-to-date and appropriately addressed; and Senior Executive Service employees declare in writing, at least annually, their own and their immediate family’s financial and other interests’. Health agreed to the recommendation and provided an update on implementation progress, including that:
conflict of interest declarations are a mandatory requirement, and records are kept centrally and completion rates are tracked
additional guidance and advice has been incorporated into the conflict of interest declaration form to ensure officers have an understanding of what may constitute a conflict, and the updated conflict of interest declaration form requires that all declarations and proposed management strategies are discussed and agreed between staff and their immediate manager
the previous paper based SES Declaration of Interests form has been replaced by an online form based on guidance from the APSC—the form will also be available to non SES staff where a declaration is required
SES are required to review declarations annually, as well as when there is a change in circumstances and a change in roles
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At the public hearing, Health provided further information about these new arrangements, including that:
all officers are required to ‘reassess their potential conflicts if they change roles’—for example, there is an ‘obligation in the form and in the guidelines that, if their personal circumstances change, they need to update their conflict of interest declaration … if they change their share portfolio or whatever it might be’
the conflict of interest policy ‘looks at the financial interests of the SES officer and of their immediate family’—‘we’ve made recent changes to extend it to make sure it looks at their associations—so organisations with which they’re connected—whether that be a formal connection, for example a position on a board, or whether that be a less formal involvement as a member of an organisation’
the online form would improve ‘tracking and capture of that information’ and the department’s ability to follow up ‘if there are people who are not complying, as well as picking up on more recent guidance around expanding the sorts of conflicts that are captured’
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Health’s submission to the inquiry noted that, following the implementation of the online SES conflict of interest declaration form, the completion rate for substantive SES officers was now at 99.25 per cent. At the public hearing, Health explained that this figure was a ‘reflection of a point in time’ when the submission was finalised—‘we were trying to be very precise. We had a couple of people starting in the department that wouldn’t have had a chance to complete their conflict of interest declaration. They have subsequently completed that, so we now have 100 per cent compliance’. Health noted that a ‘central area’ of its HR was responsible for verification of the compliance—‘[it] looks after all matters pertaining to our senior executives and they follow up and review all conflict of interest declarations, notifying immediate supervisors if people haven’t completed it according to the guidelines we put forward’. Health also stated that it was planning to develop mandatory conflict of interest training for all staff, to support the rollout of the revised policy. However, while it was ‘in the process of developing some fuller training for staff around conflict to make sure that there is that strong awareness’, at the moment the focus was ‘very strongly on ensuring that SES officers fully understand the breadth of potential conflicts they need to declare and are routinely doing that as their roles and circumstances change’.
Management of data and privacy
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The ANAO observed that the management of data and privacy in relation to the NCSR had been noted as a concern to stakeholders. The Telstra contract included a number of mechanisms to manage data and privacy, with the ANAO assessing implementation progress against these mechanisms, as follows:
a requirement that Telstra submit a draft Commonwealth Data Protection Plan within 40 days of the contract being signed, to manage data privacy
The draft plan was formally rejected by Health on 9 December 2016 on the grounds that it did not comply with the requirements of the Contract. As at March 2017, the Commonwealth Data Protection Plan has not been accepted by Health
a requirement that Telstra submit its privacy policy or Security Risk Management Plan relating to the management of data and privacy
These documents were initially due on 11 November and 14 November 2016 respectively, but remain outstanding as at March 2017
a Deed of Confidentiality and Privacy be signed by Telstra and its subcontractors, with Health to monitor Telstra’s compliance with this requirement through a register
As at March 2017, Health’s register was incomplete
a requirement that Telstra staff with direct access to the register, data or a ‘Health Site’ have the appropriate security clearance
In September 2016, Health indicated that it was dissatisfied with Telstra’s progress in obtaining security clearances for Telstra personnel. As at March 2017 Health’s security clearance and confidentiality register was incomplete
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At the public hearing, Health provided an update on implementation progress against these mechanisms, confirming that the Commonwealth Data Protection Plan and the Security Risk Management Plan were ‘completed and signed off’ before going live with the NCSR on 1 December 2017. Health also noted that the NCSR had been assessed against the Australian Government Information Security Manual (ISM) by an independent Information Security Registered Assessors Program (IRAP) Assessor.
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The assessment was that the NCSR had ‘excellent levels of ISM compliance’, with the IRAP assessor reporting ‘high confidence’ in the security of NCSR and recommending the granting of ‘formal Certification/Accreditation’.
11 October 2018