1. Summary & Background
   1. On 30 September 2022 the Joint Committee on Public Accounts and Audit (JCPAA) adopted an inquiry into Commonwealth procurement. The inquiry had a particular focus on the matters contained in and related to the following five Auditor-General reports:

• No. 6 (2021-22) Management of the Civil Maritime Surveillance Services Contract
• No. 15 (2021-22) Department of Defence’s Procurement of Six Evolved Cape Class Patrol Boats
• No. 30 (2021-22) Procurement of the National Capital Authority
• No. 42 (2021-22) Procurement of Delivery Partners for the Entrepreneurs’ Programme, and
• No. 5 (2022-23) Digital Transformation Agency’s Procurement of ICT Related Services.
  2. The audit reports identified significant shortcomings in the procurement policies and practices at all of the audited agencies with the exception of the Department of Defence (Defence). In particular, the audits identified problems with:
• procurement planning and approaches to market
• the use of competition in procurement to deliver value for money outcomes
• contract management
• ethical procurement and the management of probity, and
• record keeping.
  3. During the course of the inquiry, a report into procurement at Services Australia and the National Disability Insurance Agency, the 'Watt report', was published.[1] The Committee subsequently adopted a second procurement inquiry to consider the issues raised by the Watt report separately.

Background

Previous procurement reviews

1.4Procurement is a topic that has engaged the attention of Parliamentary Committees with unfortunate regularity in recent years. In 2022 the House of Representatives Standing Committee on Infrastructure, Transport and Cities published its report Government Procurement: A sovereign security imperative, which looked at the Government's procurement of infrastructure.[2]

1.5A Joint Select Committee on Government Procurement was established in May 2017 to review the Commonwealth Procurement Framework and in particular the changes to the Commonwealth Procurement Rules that had just come into effect. The report identified problems with procurement capability and culture within the APS, including a focus on lowest cost rather than best value for money, and found that a lack of procurement expertise has led the Commonwealth to become an uninformed purchaser.[3]

1.6The JCPAA’s two most recent reports on procurement were report 472, published in October 2018 and report 465, published in September 2017. Both reports reviewed three procurement focused ANAO performance audits. In addition to recommendations directed at audited entities, the Committee highlighted issues which have arisen again in the course of this inquiry, in particular the management of conflicts of interest and the application of the Commonwealth Procurement Rules (CPRs) to corporate Commonwealth entities.[4] The JCPAA also conducted an inquiry into government contract reporting which lapsed at the end of the 45th Parliament.

1.7A report in 2014 by the House Standing Committee on Infrastructure and Communications also identified deficiencies in procurement processes, concluding that 'public sector procurement practices are not always serving the taxpayer well and need to be more efficient, cost-effective and flexible'.[5] This was one of three procurement focused reports published in 2014, the two others being a report from the Senate Standing Committee on Finance and Public Administration, anda Productivity Commission report on public infrastructure.[6] It is therefore evident that the issues relating to the design and implementation of Australia’s procurement framework are not new.

The Commonwealth procurement framework

1.8The Australian Government's expenditure on procurement is substantial. In the 2021‑22 financial year procurement accounted for $80.8 billion in expenditure, with 92,303 contracts awarded to 12,901 unique businesses.[7]

1.9At the core of the Commonwealth Procurement Framework are the CPRs. The CPRs are issued by the Finance Minister under section 105B of the Public Governance, Performance and Accountability Act 2013 (PGPA Act), and provide the basic compliance framework for the Commonwealth entities subject to them in undertaking procurements.[8]

1.10The Commonwealth Procurement Framework itself sits within the wider Resource Management Framework, the central pillar of which is the PGPA Act. The Resource Management Framework governs how officials in the Commonwealth public sector use and manage public resources, including proposals to spend relevant money.[9]

1.11The CPRs apply to a broad range of Commonwealth entities. According to the Australian National Audit Office (ANAO):

The CPRs set out requirements for procuring goods and services that must be observed by ‘relevant entities’. Appendix B of the CPRs defines ‘relevant entities’ as all non-corporate Commonwealth entities and corporate Commonwealth entities prescribed by the Finance Minister in section 30 of the Public Governance, Performance and Accountability Rule 2014 (PGPA Rule).[10]

1.12The ANAO noted that as of June 2022 there were 187 Australian Government entities governed by the PGPA Act, comprising 98 non-corporate Commonwealth entities, 71 corporate Commonwealth entities and 18 Commonwealth companies. The CPRs applied to 123 of these, including all non-corporate Commonwealth entities, and 24 of the 71 corporate Commonwealth entities.[11]

1.13AusTender is the government's procurement information system. It is a web-based platform that provides a wide range of information on procurements and contracts awarded. Entities are required to use AusTender to:

• publish annual forward looking procurement plans
• notify the market of current procurement opportunities, and
• report details of all procurement contracts awarded at or above the relevant threshold ($10,000 for NCEs) within 42 days of entering into the arrangement.[12]
  14. AusTender also provides a central location for the reporting of all procurement panels created by government agencies, enabling purchasers to more easily find and locate goods and services or seek quotes from approved suppliers on panels.[13]
  15. The ANAO reported that in 2021-22 there were 68,158 parent contracts entered into for a committed value of $47.1 billion, up from $33.9 billion in 2012-13. The median value of parent contracts has increased over the last 10 years from $35,568 to $68,064. The three entities with the largest number of parent contracts over this period were Defence, followed by Services Australia and then Health and Aged Care. The top three entities by value of parent contracts over the period were Defence ($201.2 billion) followed by Home Affairs ($16.8 billion) and the National Blood Authority ($16.0 billion).[14]
  16. A significant proportion of annual procurement spending comes via contract amendments. There were more than 200,000 contract amendments between 1July2012 and 30 June 2022, with a value of $182.2 billion. 26,651 variations were recorded in 2021-22, up from 18,747 in 2012-13. 64 per cent of contracts that recorded a variation recorded only one. Only three per cent of contracts were amended more than 5 times. Where an amendment to increase the value of a contract has been reported on AusTender, the increase has often been significant. In 49 per cent of value variations, the increase has been more than 100 per cent.[15]
  17. The top category by value of contract was ‘Commercial and Military and Private Vehicles and their Accessories and Components’ at $122.8 billion over the last 10 years, followed by ‘Management and Business Professionals and Administrative Services’ at $106.7 billion. Following that was Engineering and Research and Technology Based Services’ at $57.4 billion.[16]

Conduct of the inquiry

1.18The JCPAA has a statutory responsibility to examine all reports of the Auditor-General presented to the Australian Parliament (as per Section 8(c) of the Public Accounts and Audit Committee Act 1951).

1.19On 30 September 2022 the Committee resolved to inquire into five Auditor-General reports examining aspects of procurement at different Commonwealth agencies.

1.20On 4 October 2022 the Committee issued a media release announcing the inquiry and inviting submissions from interested parties. The Committee also invited submissions from the agencies included in the Auditor-General reports considered, from the ANAO itself, and from the Department of Finance as policy owner of the procurement framework.

1.21The inquiry received 20 submissions and 19 supplementary submissions, which are listed at Appendix A.

1.22The Committee held seven public hearings A list of witnesses and organisations that appeared is at Appendix B. Transcripts of the public hearings are available in HTML and PDF formats on the inquiry website.

1.23The inquiry focused primarily on public administration issues arising from the ANAO reports examined. Given the significant volume of issues in these audit reports the Committee elected not to examine broader policy issues such as social procurement as these have been addressed in other inquiries.

Footnotes

[1]Services Australia, Independent Review of Services Australia and NDIA Procurement and Contracting, 6 March 2023.

[2]House of Representatives Standing Committee on Infrastructure, Transport and Cities. Government Procurement: A sovereign security imperative, March 2022.

[3]Joint Select Committee on Government Procurement, Buying into our Future Review of amendments to the Commonwealth Procurement Rules, June 2017.

[4]Joint Committee of Public Accounts and Audit, Report 465: Commonwealth Procurement, September 2017; Joint Committee of Public Accounts and Audit, Report 472: Commonwealth Procurement-Second Report, October 2018.

[5]House of Representatives Standing Committee on Infrastructure and Communications. Planning, Procurement and Funding for Australia’s Future Infrastructure: Report on the Inquiry into Infrastructure Planning and Procurement, December 2014, p. 54

[6]Senate Standing Committees on Finance and Public Administration, Commonwealth Procurement Procedures, July 2014; Productivity Commission, Public Infrastructure, https://www.pc.gov.au/inquiries/completed/infrastructure/report, accessed 15 June 2023.

[7]Department of Finance, Submission 11, p. 4.

[8]Australian National Audit Office, Submission 12, p. 2.

[9]Department of Finance, Submission 11, p. 4.

[10]ANAO, Submission 12, p. 2.

[11]ANAO, Auditor-General Report No. 11 2022–23, Australian Government Procurement Contract Reporting ‑ 2022 Update, p. 13.

[12]Department of Finance, Submission 11, p. 7.

[13]Department of Finance, Submission 11, p. 7.

[14]ANAO, Auditor-General Report No. 11 2022–23, pp. 17-19.

[15]ANAO, Auditor-General Report No. 11 2022–23, p. 21.

[16]ANAO, Auditor-General Report No. 11 2022–23, p. 39.