Chapter 2Australian Government Procurement Framework
2.1The Australian Public Service (APS) currently manages the procurement and engagement of consultants via contract management within the Commonwealth Resource Management Framework.
2.2In Australia, there is no standard definition of the term 'consultant' nor any consistent understanding of what services they can be engaged to provide. However, in general terms, a consultant is a person who provides professional advice, either to the public or to those practising a profession.
2.3According to the Department of Finance consultants are contracted to provide services which:
involve specialist professional knowledge or expertise that may not be maintained in-house;
require independent research or assessment; or
involve the development of an intellectual output, e.g. research, evaluation, advice, and recommendations, to assist with entity decision-making.
2.4This chapter will examine the Commonwealth Resource Management Framework and discuss whether it is appropriate as a tool for the engagement of consultants by the Australian Government.
Commonwealth Resource Management Framework
2.5The Commonwealth Resource Management Framework consists of legislation and policies that govern the management of the Commonwealth's resources. The Public Governance, Performance and Accountability Act 2013 (PGPA Act) is the cornerstone of the Commonwealth Resource Management Framework.
2.6In addition to the PGPA Act, the framework includes the Public Governance, Performance and Accountability Rule 2014 (PGPA Rule), the Commonwealth Procurement Rules, Accountable Authority Instructions and various Resource Management Guides.
2.7The Department of Finance (Finance) is responsible for the policy stewardship of the Commonwealth Procurement Framework, which forms part of the wider Commonwealth Resource Management Framework. Under this framework, each government entity is responsible for its own procurement processes and decisions. Under this devolved framework, it is the responsibility of the procuring entity to undertake due diligence activities commensurate with the scale, scope, risk, and nature of the procurement. Finance does not have a compliance role in Commonwealth procurements—this is managed by each entity via contract management.[7]
2.8Additionally, the Australian Government Contract Management Guide (the Guide) provides guidance to support contract management for entities. This includes:
general advice related to contract planning;
key contract management activities; and
managing performance.[8]
2.9This framework places duties and obligations on Commonwealth officials engaging consultants, rather than on the consultants. The obligations and duties on the consultants lie within their individual contracts with the government entity.
The Management Advisory Services (MAS) panel
2.10The Management Advisory Services (MAS) panel was established by Finance in 2021 as a coordinated panel arrangement to streamline the engagement of consulting services, increase transparency and improve contract management. In a panel arrangement, suppliers have been appointed to supply goods or services for a set period, under agreed terms and conditions, including agreed pricing.Once a panel has been established, an entity may then purchase directly from the panel by approaching one or more suppliers on the panel.[9]
2.11The MAS panel covers three main service areas: financial, corporate and commercial. The use of the MAS panel for procurement is mandatory for non-corporate Commonwealth entities that are subject to the PGPA Act, and optional for corporate Commonwealth entities and Commonwealth companies, including Government Business Enterprises. Finance advised that it is considered 'better practice to undertake regular refreshes of panel arrangements, with the MAS Panel to be refreshed approximately every two years'.
2.12More recently, the MAS Panel Head Agreement (the 'template' contract to be used when engaging services from the panel) has been amended to include clauses that require 'active disclosure', where a service provider is required to notify Finance immediately on becoming aware of any adverse findings made by a court, commission, tribunal or other statutory or professional body regarding the conduct of the service provider or its capacity to deliver the agreed services.
2.13Compliance with applicable laws and legislation, including the Crimes Act 1914(Cth), also apply to suppliers delivering services under the MAS Panel. Finance advised that potential breaches of the Head Agreement are considered on a case-by-case basis and will be dependent upon the nature and seriousness of the breach to determine whether the right to terminate a contract should be exercised.
2.14In relation to these new clauses in the Head Agreement, Mr Andrew Jaggers, Deputy Secretary, Commercial Group of the Department of Finance advised:
What it means is that, if an event like the one with the Tax Practitioners Board happened today, there would be a requirement for that entity to advise Finance under our contracts, under the Management Advisory Services Panel contracts. Then they would need to do that immediately if they became aware of an adverse finding that's made by a court, commission, tribunal or any other statutory or professional body regarding the conduct of the service provider. That would enable the Commonwealth to terminate the contract for material breach, or, if there's an adverse event, the contract manager might ask for a remediation plan. If they're not satisfied with that remediation plan, there's potential for that procuring agency, if it's Finance, under the Management Advisory Services Panel, to cancel or terminate those contracts.
2.15While the establishment of the MAS panel provides a more coordinated approach to procurement in the APS, it relies on effective contract management by government departments and on service providers to self-report adverse findings.
Australian Government Contract Management Guide
2.16Noting the predominant way that the APS currently manages the conduct and performance of external consultants is via individual contract management, Finance publishes and maintains the Australian Government Contract Management Guide (the Guide) to assist government officials.
2.17The Guide supports effective contract management at a practitioner level for entities. The Guide contains:
general advice related to contract management planning;
key contract management activities;
managing performance;
closing a contract; and
contract management for standing offer arrangements.
2.18The Guide describes the obligations of procurement and contract management officials to behave ethically, including complying with relevant laws, declaring conflicts of interest and not acting fraudulently.
2.19It provides that if a supplier does not uphold their obligations within the relevant contract, it may result in a termination of the contract due to a breach. Finance has advised that the Guide is currently being updated to support further capability development of contract management officials.
2.20The Guide contains some sections about behaving ethically – however this is targeted at the government officials conducting procurement activities, rather than the contractors engaged.
2.21The Guide also addresses managing supplier underperformance, noting that formal action may need to be taken if there is 'repeated or serious underperformance', including: withholding payments until performance returns to a satisfactory level, involving senior management from both parties in formal discussions, developing strategies to address the problem, formally documenting issues and implementing formal mechanisms written into the contract. Regardless of the severity of the underperformance, the guide stresses the importance of obtaining legal advice before taking any of these actions.
2.22The option of terminating a contract due to poor performance is briefly discussed, and the guide emphasises that the dispute resolution process set out in the contract must first be followed, and legal advice must be sought beforehand.
The Supplier Code of Conduct
2.23Finance has advised the committee that it is developing a Supplier Code of Conduct (the Supplier Code). Industry consultation on the Supplier Code closed on 1 March 2024, and it is anticipated to come into effect in mid-2024.[21]
2.24The Supplier Code will outline the Commonwealth's minimum expectations of suppliers, their personnel and their subcontractors while under contract with the Commonwealth. The Code will place a positive duty on suppliers to take proactive steps to prevent and discourage breaches of the Code. Failure to adhere to the Supplier Code could result in remedial action and/or termination in accordance with contractual provisions. Where a contract is terminated due to a breach of the Supplier Code, Finance may hold details of the termination centrally.
2.25In its draft form, broadly, the Supplier Code sets out expectations of ethical behaviour from consultants, including the requirement to actively manage conflicts of interest and protect sensitive, privileged and confidential information. It also sets out requirements such as the need for a supplier to meet its taxation obligations, maintain appropriate records and undertake and cooperate in audits and assessments, among other requirements.[23]
2.26The draft Supplier Code does not explicitly require Commonwealth suppliers to act in the public interest, explicitly comply with the APS Values or other existing standards like the APES 110 (the ethical standard for accountants). Given a Commonwealth supplier, including a consultant, is contracted to assist the Commonwealth fulfil its fundamental obligations to the Australian community, it is unclear why existing ethical frameworks have been omitted from the draft code. A more integrated system could be achieved if consideration were to be given to these existing frameworks when drafting the code.
AusTender
2.27AusTender was established as a centralised portal to connect government entities with suppliers and to provide transparency of contracts awarded. Commonwealth entities must also report their procurement contracts on AusTender to comply with the requirements of the Commonwealth Procurement Rules.
2.28AusTender is designed to be a centralised transparency tool, however some submitters have raised concerns with how it currently operates.
2.29The AusTender website has been described as 'difficult to navigate' with an 'unwieldy interface'. So much so, that a separate website was created in an open democracy project, 'Love me Tender', which states that it uses data from AusTender and presents the information in a searchable and user-friendly manner. Love Me Tender's website explains that:
In the government sector, procurement data is made freely available through AusTender but not in a readily usable form. Love Me Tender unlocks the value of this publicly available data by delivering insights relevant to particular sectors, agencies and suppliers, as well as the economy as a whole.
2.30The fact that a separate website was considered necessary due to the current useability of AusTender is concerning, particularly as it is mentioned as a tool for public servants to rely on to conduct additional checks regarding suppliers.
2.31In addition, submitters have raised concerns that there is not enough information on AusTender about each contract. For example, AusTender does not specify if concerns have been identified in relation to a service provider, or the nature of those concerns.
2.32Mr Jaggers submitted that in undertaking procurement activities, government officials, in their due diligence process, could check AusTender to see whether that entity has been engaged by another department and seek its view on the entity's performance. However, setting aside the website navigation issues raised that might impact on an official's ability to find this information, this check does not appear to be a required step in the procurement process so could be easily neglected without consequence.
2.33Mr Gareth Sebar, Assistant Secretary, Procurement and Discretionary Payments Branch in the Department of Finance, advised that there are a range of planned enhancements to AusTender that are being explored by the Department of Finance, including improving the data available on AusTender, for example, to standardise data on the reasons for a contract variation. Mr Sebar explained that at the moment, this is a free text field, and consideration is being given to standardise the reasons a variation was entered into. Further, Finance is considering collecting data on the number of tenders that were invited to respond, particularly on panel arrangements, so that there is more visibility of the level of competition.
2.34Additionally, Finance is working on training with the Future Made in Australia Office to ensure that individuals entering data into AusTender are including sufficient information in a consistent manner to provide readers with a greater understanding of the contract.
2.35Some submitters have advocated for further improvements to AusTender. For example, the Business Council of Australia recommended that AusTender data could be improved through:
clearer and more consistent definitions of consulting services, as well as identification of contracts;
more meaningful information on the scope of contracts by category and sub-category;
more detailed, consistent and meaningful descriptions of contracts; and
clarity on the nature of contract extensions.
2.36The Centre for Public Integrity submitted that when reporting on AusTender is required, the quality of information disclosed is not of sufficient detail to facilitate real scrutiny. Further, the way in which contracts are categorised makes tracking government spending 'more difficult'. They recommended the following improvements to address these issues:
AusTender categories be updated to better reflect the type of consultancy service solicited as well as the purpose of the external contract;
the use of categories and the manner in which expenditure is reported across departments should be evaluated, with a view to achieving consistent usage;
the 'reasons for consultancy' field on AusTender should be updated to make 'skills currently unavailable within agency' a separate yes/no flag.
2.37This chapter has set out the Australian Government procurement framework as background to the increased reliance on consultants by the Australian Government which is discussed in Chapter 3.