August 9, 2023

Public service puts taxpayer billions at risk by fumbling major contracts

By Shane Wright
Updated August 9, 2023 — 4.27pmfirst published at 10.11am
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Billions of federal taxpayers’ money is at risk of being wasted across the public service by the poor way bureaucrats buy vital goods and services, a bipartisan parliamentary committee has found while calling for a far-reaching overhaul of tendering processes.

The committee, headed by Labor MP Julian Hill, found there were “consistent failures” across key departments and agencies to get value for money for taxpayers through “substandard contract management”.

A bipartisan committee says billions of dollars is potentially being wasted by federal government departments failing to get value for money from major contracts.Credit: Alex Ellinghausen

Some of the biggest winners from the current contract system are the five major consulting firms who, in many cases, were found to have contract extensions or favourable access to new contracts.

In the 2021-22 financial year, more than $80 billion worth of work and goods were bought by the federal government through 90,000 contracts with more than 12,000 businesses.

The committee, which examined auditor-general reports into five separate major government purchase programs over recent years, stretching from the Defence Department to the activities of the National Capital Authority, found agencies and departments systemically failed to comply with contract rules and demonstrate value for money.


Hill, the chair of the parliament’s joint committee of public accounts and audit, said the federal government’s tender process had to change.

“Public servants need to get far more comfortable and skilled with playing the field and sharpening their pencils on suppliers, even if this leads to difficult conversations and rejection,” he said on Wednesday.

“Action is needed to ensure that taxpayer dollars are not being wasted as a consequence of poor public sector procurement practices.”


Hill said some of the biggest winners from the lack of competition for government business were the five large consulting firms: Accenture, KPMG, Deloitte, PwC and Ernst & Young.

He said in 2021-22, the consultancies had secured almost $2 billion worth of contracts. Of that, $300 million was from contract extensions or variations.

The Home Affairs Department came under heavy criticism from the committee about its oversight of a contract with aviation company Surveillance Australia to supply 10 aircraft to patrol the country’s coastal and sea border areas.

The $2.6 billion contract, not put to tender since it was first awarded in 2006, was extended for six years in 2021 at a cost of $1 billion despite the auditor-general finding just months earlier that it had “not been effective”, with surveillance services not provided as required under the contract.

The committee also found that because of the contract extension, Australia had been “lumbered with suboptimal out-of-date technology” rather than much improved surveillance systems already in use among other countries.

“It is unacceptable to the committee that the audit found deficiencies in almost every aspect of the department’s management of a contract intended to protect Australia’s maritime zone from illicit activities,” it found.

The committee made a series of recommendations it says would increase transparency around contracts and force the public service into taking decisions based on value for money.


Contracts on the AusTender website would show how many quotes were sought, why a contract was varied while the information on the site should be “consistent, properly structure and easily accessible”.

Many departments use so-called “panels” of potential contractors rather than broad, open tenders. The committee said the panel process had to be overhauled, by refreshing each panel at least once every two years.

New companies should be able to join a tender panel at any time to ensure there are growing numbers of competitors for particular government business.

Hill said the Finance Department had to address what he described as a “lack of procurement expertise and capability” across the public service, by lifting training standards of bureaucrats whose job is to vet contracts.

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Shane Wright – Shane is a senior economics correspondent for The Age and The Sydney Morning Herald.Connect via Twitter or email.


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