The Digital Transformation Agency failed to fully demonstrate value for money in the way it procures IT services and did not comply with Commonwealth Procurement Rules, according to an examination by the national audit office.

The Australian National Audit Office today released its report on the Establishment and Use of ICT Related Procurement Panels and Arrangements in which it examined three major government IT procurement arrangements: the IT Services panel, the Digital Marketplace panel and the IBM Whole of Australian Government Arrangement.

The DTA, which was set up to help government improve digital services, established the Digital Marketplace in 2017 and signed the IBM deal in 2018 to simplify the procurement of IT services by commonwealth entities.

According to the auditor’s review, the DTA could “not fully demonstrate” that its procurement panel arrangements “supported the achievement of value for money outcomes”. Nor did the DTA fully comply with all the Commonwealth Procurement Rules (CPR), according to the report.

The issues have since been addressed, the auditor said, but the Marketplace is “still not robust”. The DTA has agreed to the auditor’s recommendation of more equitable treatment of suppliers and better educated officials.

Panel problems

According to the ANAO, Government departments are increasingly using “panel contracts”, a form of coordinated procurement where more than one department uses the same procurement contract to save administrative costs and take advantage of scale.

Typically under a panel arrangement (also commonly referred to as a standing offer arrangement), multiple suppliers are appointed and each supplier is able to provide commonly used goods or services to an entity.

But the Audit Office is concerned about the efficiency, effectiveness and ethics of the panel approach which now accounts for 36 per cent of reported contracts, involving over 17 per cent of reported government contract values. The final report urges government entities to not default panel arrangements just because they are easier.

“Procurements from panels and similar arrangements are often perceived as requiring less time and effort to conduct, particularly when the cost and time involved in running an open approach to market is considered, or when engaging a new supplier. When using panels and similar arrangements, entities need to adopt processes that are not just technically compliant with the CPRs but are also consistent with their intent, which is to drive value for money through competition.”

For Government IT contracts, the Auditor General looked at procurement panels and arrangements in a sample of 15 procurements.

Overall, government entities had “largely” complied with CPRs to achieve value for money but there were some gaps in documentation in procurement and probity remains a concern.

“There were instances of entities not meeting requirements regarding the approval of variations to contracts, record keeping and AusTender reporting. There was also scope for some entities to strengthen their consideration and management of risk and probity.”

According to the report, The Department of Infrastructure, Transport, Regional Development and Communications also failed to demonstrate value for money in its panel arrangements used for IT services but had largely complied with CPRs. Also of concern to the Auditor General, The Department of Home Affairs and the Department of Industry, Science, Energy and Resources had not given enough consideration to suppliers, while the ATO had not fully demonstrated through documentation that the conditions for limited tender were met. 

DTA not following rules

But the DTA received most of the auditor’s criticism. In some arrangements the DTA had not been able to demonstrate value for money. It has since changed the procurement processes in question but risk remains, according to the ANAO. 

“[DTA’s] approach did not support the achievement of a value for money outcome or treat suppliers equitably,” the final report states. “Once DTA identified these deficiencies it changed its processes. DTA’s new approach complies with the minimum requirements of the CPRs, although DTA’s consideration of price, quality and risk could be more robust to better demonstrate that its evaluation of suppliers achieves value for money outcomes.” 

The final report directs two of its four recommendations at the DTA, with the remainder directed at the Department of Home Affairs, Department of Industry, Science, Energy and Resources and the Australian Taxation Office. 

Each of the entities have agreed to the recommendations, which include equitable treatment of suppliers and better educated officials at the DTA; greater consideration to competition at the Department of Home Affairs and the Department of Industry; and the correct use of limited tender arrangements by the ATO.

The DTA did not immediately respond to a request for comment.

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