Timid procurement board failed to press CIT on questionable tenders

The body tasked to review ACT Government procurement decisions was kept in the dark about the Canberra Institute of Technology’s preferred choice for a $5 million contract until it was too late, according to an audit that used the ill-fated contracting of “complexity and systems thinker” Patrick Hollingworth as a case study.

ACT Auditor-General Michael Harris has submitted a report on the activities of the Government Procurement Board, finding that it was often pressed for sufficient time to do its job, was not clear about its role, did not ask enough questions and was too timid in its advice.

The CIT procurements were one of three case studies it conducted in its probe into the board’s work.

CIT awarded contracts worth nearly $9 million to Mr Hollingworth’s companies Think Garden and Redrouge Nominees Pty Ltd from 2017 as part of its organisational change program.

The scandal resulted in the referral of the contracts to the ACT Integrity Commission and the standing down of CIT CEO Leanne Cover for the duration of the investigation.

The audit report found that CIT failed to inform the board that Mr Hollingworth was an incumbent contractor and did not provide evidence of the performance of previous contracts.

It also ignored concerns the board raised.

Three procurements – in 2018, 2020 and 2021 – were examined and it was only in December 2021 that it became apparent to the board that Mr Hollingworth had been the beneficiary of five successive contracts worth a total of $3,786,300 since 2017.

In 2020 and 2021 when questions were asked, CIT had already jumped the gun and gone to market.

In the final procurement, there were three tenders – $805,183, $1,979,000 and Redrouge Nominees’ $5,680,000, which the Tender Evaluation Team said “represented the best value for money outcome for CIT”.

This came to $4,999,990 thanks to the contractor offering CIT a preferred client discount of 12 per cent if it agreed to an upfront payment.

The report also queried why the board do not press harder on the lack of information about contractor performance and the unclear, complex and restrictive language used to describe the requirements, which would have favoured Mr Hollingworth.

“To encourage or support an open tender process where there was no reasonable prospect of any outcome other than the incumbent being contracted is highly problematic,” the report said.

It noted how CIT stressed the urgency of the procurements, saying such “serial urgency indicates the likelihood of a systemic problem”.

“Matters relating to urgency, redundancy and omission in the CIT proposals needed exposure, more extensive examination and more timely discussion, none of which were afforded to the board,” the report said.

“However, the board could have been more assertive in articulating its concerns, and these could have been escalated. Without satisfactorily resolving these matters, and the board was best placed to do so, doubts will be raised about procedural integrity of the procurement process and outcome.”

The audit also found similar themes in its other case studies, stating that overall the board was insufficiently sceptical and probing, and its advice unassertive and equivocal.

It said the board’s effectiveness was compromised by the lack of clarity about what its primary role is, and by its “insufficiently challenging review of, and advice for, higher risk procurement proposals”.

The board should focus less on low-risk proposals and review fewer, higher-risk ones, the report said.

Auditor-General Michael Harris said the Government Procurement Act 2001 and Government Procurement Regulation 2007 inhibited the board from being more effective and more efficient.

“Actions that will support greater efficiency and effectiveness of the board are: a more independent board; an express authority to advise and, if necessary, approve and give directions; and an ability to focus on specific proposals and matters for its review,” he said.

The report makes 16 recommendations.

Canberra Liberals frontbencher Peter Cain said Special Minister of State Chris Steel should be held to account for the board’s shortcomings.

“The Minister, who directly appoints board members and writes the policy that informs the board’s function, is wholly responsible for contracts that have egregiously wasted taxpayer money,” he said

“Procurement is vitally important to the fiscal wellbeing of the Territory. Getting it right is the first step on a path towards surplus.

“With hundreds of millions of taxpayer dollars already lost in contracts that do not follow procedure under this minister, it is clear we are sailing a ship destined to sink.”