Commonwealth IT procurement review—lambs to the slaughter

Tom Burton—Government editor of the Australian Financial Review—on Friday 6 Jan 2023 reported on the advice given to the Commonwealth the parliamentary public accounts committee in late December by procurement expert Catherine Thompson and former public servant and consultant for lobby firm National Advisory, Andrew Smith. (Please note the AFR articles are behind a pay wall).

The public accounts committee is reviewing Commonwealth procurement practices after the Australian National Audit Office made a series of adverse findings against several agencies’ poor procurement practices.

Governments across Australia purchase more than $300 billion a year of goods, and services, according to an Australian Bureau of Statistics 2017 survey. Of this $80 billion is purchased annually by the Commonwealth through the tendering process, with up to $9 billion on technology.

Catherine Thompson’s appraisal was damning of Commonwealth IT procurement buyers. She suggested that lack of “professionalisation and modernisation meant Commonwealth buyers were like ‘lambs to the slaughter’ when dealing with savvy corporate vendors.”

She went on to make several observations about Commonwealth IT procurement:

  • the Australian Public Service does not prize procurement experience and she suggests the buyers “got into procurement because you weren’t smart enough to make the grade in warehousing”
  • procurement is seen by Government agencies as a narrow “process of acquiring goods and services” which unfortunately is a tactical definition that “accurately reflects the role and expectation of ICT procurement in government today”
  • Government expectations and implementation of procurement lag decades behind leading private sector practice—the process issues the audit office had focused on had largely been automated in the private sector where procurement teams spend more focus on supply efficiencies, market development and managing procurement cycles
  • Commonwealth IT procurement is difficult to track due to inconsistent data practices that has created poor transparency around federal procurement—the wide range of estimates about the level of federal technology spend is $4 billion to $9 billion
  • both the Digital Transformation Agency and the Department of Finance have had opportunities to reform but they have failed to do so because “they’re mired in the existing way of doing things”

Consultant, Andrew Smith also suggests

  • the use of multiple ABNs and trader names makes analysis difficult—“one of the problems I find with AusTender is that even supplier names are reported in different ways by different agencies and even by the same agency”
  • agencies are choosing to use panels to single-select the supplier, and then often rewarding that supplier with amendments that take contracts out to 10 years or more—”this leads us to conclude that incumbency is the greatest determinant of future supply contracts in the public service”.

They made a number of recommendations on Commonwealth IT procurement:

  • A new commercially driven central procurement agency should be created to overhaul the government’s tendering system
  • Reform to the federal system could reduce technology procurement costs by between 5 and 10 per cent
  • A data custodian should be engaged to enforce a simple taxonomy to be used by all agencies in the public tendering process—to include if contracts are fixed price or capped, originals or amendments, and split multiyear contracts into annual spends