Are you confident your organisation is protected from costly procurement scandals?

The recent Australian National Audit Office (ANAO) audit of the Australian Passport Office (APO) is a harsh lesson in the importance of having a dedicated probity advisor. The audit scrutinised the APO’s procurement process, uncovering extensive ethical breaches, including uncompetitive bidding and undeclared conflicts of interest.

Between 1 July 2019 and 31 December 2023, the APO managed 331 contracts totalling $1.58 billion. Of the 73 procurements examined in detail by the ANAO, none involved the engagement of an external probity advisor, highlighting a significant gap in procurement processes. With over $1.5 billion in contracts under the microscope, ANAO have identified at least 18 individuals as persons of interest (meaning they were or are being considered for investigation) for misconduct, with the number potentially increasing as inquiries continue.

The audit revealed that the APO did not employ open and competitive procurement processes. In fact, “there were no procurements conducted by way of an open approach to the market” between July 2019 and December 2023. Only 29% of the 73 procurements examined involved competition where the department had not already chosen a preferred supplier prior to inviting quotes.

Further, the audit highlighted that over half of the procurements examined had favoured incumbent suppliers. Whilst previous experience can be considered, had APO engaged probity advice, the integrity of the procurement process could have been more transparent, avoiding issues arising from the perception or reality of favouritism towards incumbent suppliers.

The APO was also found to either incorrectly estimate the value of contracts or failed to conduct this assessment altogether. One example of significant cost underestimation was in a contract with Randstad, where the value increased nearly 7 times the original estimated total cost, amounting to $60.3 million. The audit found APO managed procurements failed to comply with CPRs and “did not demonstrate it had achieved value for money”.

A probity advisor would have identified:

• the risk of underestimation
• addressed the need for proper evaluation and advised on transparent reporting to prevent discrepancies; and
• future scrutiny over any foreseeable cost increases.

The audit also uncovered at least 16 instances of undeclared conflicts of interests in APO procurements. This included a contract worth $1.4 million with Peoplebank where the evaluation panel’s chair, who had previously employed one of the assessed personnel, failed to declare a conflict of interest.

The report emphasised that accountability requires officials to be responsible and decisions they take in relation to procurement and for the resulting outcomes. It notes transparency “involves entities taking steps to enable appropriate scrutiny of their procurement activity, including by maintaining appropriate levels of documentation for each procurement and complying with the publishing and reporting requirements as set out in the CPRs”.

The audit’s findings underline the critical need for probity advisors in procurement processes. By ensuring that ethical standards are maintained and conflicts of interest are properly managed, probity advisors can help support your adherence to the CPRs and principles of fairness, transparency and accountability.

Could your procurement processes benefit from independent oversight? Noble Shore offers a comprehensive range of probity services, from insightful probity advice to rigorous probity auditing. Our goal is to guide you through complex decision-making processes, helping you deal with ethical challenges and ensuring your actions will stand up to scrutiny.