Australian Government Procurement a Time for Reform?

From paper clips to fighter aircraft to cleaning services, governments across Australia acquire goods and services on a daily basis. ‘Calls for tender’ have appeared in daily papers for as long as we can remember. Today, tendering via the internet is becoming the norm and with increased volume thanks to the Commonwealth Government stimulus packages in response to the Global Financial Crisis.

Governments are naturally concerned to ensure probity in the tendering process. Probity is one of those elusive words: We generally know what fails the test, but beyond that it is not easily defined. At its core lies a requirement for fairness, impartiality and ethical dealing, open competition, transparency, integrity, uprightness and honesty. Conflicts of interest must be properly managed, tenderers treated equally and rules and procedures complied with, without capriciousness. Of course there is also a strong imperative to prevent corrupt practices, though history shows even the best system devised by man is not “fail safe”.

To identify, promulgate and enshrine probity principles, governments have published guidelines and/or have established tender and contracting boards. A rich variety of these measures exists across Australia. At a Commonwealth level, detailed and comprehensive Commonwealth Procurement Guidelines have been established under the Financial Management and Administration Act 1997 and supported by best practice guides.

So at a time when governments want to simplify red tape and facilitate business and engagement with government, we ironically find ourselves with an excessive focus on the rules and procedures surrounding probity. This results in cumbersome, inflexible and prolonged procurement processes and many principles that fail the test of common sense, almost to the point of prejudicing the procurement itself or its timetable. Those processes can include mandatory attendance of independent probity advisors at every meeting, videotaping of meetings and full probity checks of all staff, no matter how incidental they are to decision-making or the size of the procurement.

It’s hard to see much common sense in these measures. For the tenderer, it just adds to the cost and length of the process. It comes as no surprise that major international contractors have described Australia as one of the hardest jurisdictions in which to do business with government.

Some OECD countries take a simpler approach, especially for run-of-the-mill procurements that are not particularly sensitive. Usually there are no separate probity advisors. In some jurisdictions an independent statutory office is available to advise governments and statutory authorities. The right of unsuccessful tenderers may be limited by statute, such as restricting the time when a challenge can be lodged, or by the available remedies. A useful example is the United Kingdom where a ten day ‘standstill period’ exists between the announcement of the preferred tenderer and the award of the contract.

Procurement procedures should minimise problems and criticism. Even with the best probity processes, mistakes, delays and disputes can still arise. Excessive procurement procedures don’t guarantee an improved outcome. Instead a common sense probity culture should be fostered so government employees understand the principles and are able to apply them in a useful and consistent way on a day to day basis.

In the United Kingdom, the Office of General Commerce is an example of how government can clearly, effectively and independently provide advice on the procurement process to simplify and demystify the probity process.

Project managers and others acting for government can be given ongoing training on ethical and fair dealing and the different consequences of using words like “may”, “shall”, “will” and “must” using case studies and examples.

There are always complex procurements in which caution should be exercised, particularly if the goods to be supplied require innovative solutions. In such cases, it would be appropriate to appoint a probity advisor to ensure that the tender process allows tenderers to submit differing solutions and enables the government to select the solution that achieves best value for money. For example, a two stage process involving an expression of interest followed by a request for tender might be the best procurement strategy. The selection criteria will need to be drafted carefully to clarify mandatory criteria. But in unexceptional cases, the appointment of a probity advisor may well offer no benefit and should not be the norm.

Probity is an important consideration in all government procurements, but if we allow it to become an industry within itself, potential suppliers may be deterred from tendering. If the competition pool is reduced, it will become increasingly difficult for governments to obtain value for money. The current approach to probity prolongs the procurement process. This can lead to added costs and unnecessary delays in the procurement of new infrastructure.

Probity has become a runaway train. At the start of any procurement process, the relevant government should take a common sense approach in determining the level of probity rules that need to be applied, including whether complex probity requirements generate real and tangible benefits and whether the procurement would be materially jeopardised without them.

The clock needs to be wound back. This should be at the top of the agenda for reformist economic and finance ministers across Australia. As recent events have shown, the best processes in the world won’t help if the prevailing culture fails to support the ethical and commonsense environment that is, after all, at the heart of probity.