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Apr 3, 2012

Rudd & Oz Network saga: everyone cast 'in a poor light'

No sensible observer could deny that the protracted and aborted tender process for the Australia Network contract was a schemozzle from start to finish. The Auditor-General agrees, writes David Salter.

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No sensible observer could deny that the protracted — and eventually aborted — tender process for the contract to provide the Australia Network satellite TV service was a shemozzle from start to finish.

This was Labor administrative ineptitude at its finest, and they’re not getting off lightly. Today came word the government will pay the legal bills (around $2 million, according to The Australian) of the unsuccessful tenderer, the part Murdoch-owned Sky News.

The Commonwealth Auditor-General was in no doubt Sky had been left out of pocket. Its report on the affair, tabled this morning, said the process presented the government “in a poor light” and “cost the two tenderers time and money”. Essentially, it says, governments should be able to manage a process like this — and Labor failed to do so:

“The manner and circumstances in which this high profile tender process was conducted brought into question the government’s ability to deliver such a sensitive process fairly and effectively. This is despite the fact that many other tender processes are employed in all areas of government, some involving decisions by ministers, on more substantial and complex proposals, and are concluded satisfactorily.”

On compensation, it reports:

“The ANC [Sky owner Australian News Channel] has estimated the direct costs of participation in the tender at around $1.4 million plus additional preparation and indirect costs; the ABC has estimated around $475,000 in direct costs; and DFAT’s costs to March 2012 were around $770,000.”

Public perceptions of this whole bizarre episode have largely been framed by News Limited coverage and commentary. They had a $223 million axe to grind, and ground it remorselessly.

Twice they claimed Sky had “won” the tender, and twice the government set that decision aside. The ABC was then granted the contract indefinitely. Sky and their spear-carriers within News were understandably aggrieved, but there are some persistent myths buried as assumptions within the reporting of the saga that we need to examine.

From the outset, the tender process had little to do with ensuring “value for taxpayers”, as Dennis Shanahan blithely asserts in The Oz. It came as a political response to concerted pressure from Sky and News Limited to open up the Australia Network contract to commercial bids.

This was pure politics (since when have governments really cared about “value for taxpayers”?), and one politician in particular saw it as a huge opportunity — Kevin Rudd.

Freshly dumped from the prime ministership, Rudd was quick to use his power as the new foreign minister (Australia Network comes under DFAT) to confront his enemies in cabinet. The government favoured the ABC, who’d been providing the Australia Network service for the past decade, but an “independent” committee of public servants (chaired by Rudd’s own department head) recommended the Sky bid.

Try again, said cabinet. Cue: editorial outrage in News Limited outlets.

For Rudd, the advantages of keeping Sky in the game were obvious. By bringing a company part-owned by News inside his tent, he hoped to lock in Murdoch press support for his inevitable bid to regain the Lodge. Cynics may remember that around this time the News Limited papers were surprisingly gentle on Rudd and kept noting what a fine foreign minister he was making. Funny that.

But when leaks to The Australian suggested that a second public service assessment of the bids had again recommended Sky, cabinet and the PM didn’t need to be told Rudd was pulling the strings. Conroy abandoned any pretence at running a genuinely competitive process and just handed the contract to the ABC. Live by the leak, die by the leak. As the Auditor-General saw it:

“Despite the government agreeing to a tender process, key ministers did not hold a common view of the approval processes, including any role for government in being consulted on, agreeing to, or making the decision in relation to the preferred tenderer. The approval arrangements were changed four months after the initial RFT was published, and the addition of a new evaluation criterion for the tender necessitated retendering, but did not alter the views of the TEB as to the preferred tender — the ANC. This additional step added almost five months to the process and additional costs. Further, there were indications of possible leaks of information as early as May 2011, and following further ‘significant leaks of confidential information to the media’, the government decided, on the basis of legal advice, that the tender process had been compromised and should be terminated.”

The Auditor-General makes no recommendations in light of the termination, but notes:

“… where it is intended that ministers or cabinet have a formal role in a tender process, that this be made clear; departments have a role in assisting government to be explicit about this. Secondly, information security is critically important to effective tender arrangements and there are accepted ways within government of managing this, namely, by not circulating confidential tender information to any departmental officers, ministers or their staff, unless they are part of the tender decision‐making process or have a demonstrable need for such specific information. Finally, all parties involved in the management of a tender process should have regard to the importance of adhering to conventional procurement arrangements and effectively managing the range of risks involved, given they can change significantly over time …

“The government may also wish to reflect on ministers performing the role of an approver, in situations where the minister’s portfolio bodies may be submitting tenders for services to be determined by government. In such circumstances, any perception of a conflict of interest could be mitigated by the government agreeing to another Minister, or more than one Minister, approving the tender outcome.”

Perhaps more importantly, there’s been a careless — or maybe deliberate — misrepresentation running through the News reporting of the AN tender debacle.

To uninformed readers (and this is pretty complicated territory even for media buffs because so much of the process is kept confidential), the tender was presented as if it were just like two construction companies competing over a contract to build a bridge. It was never that simple. Rudd and DFAT wanted an active role in programming the content of AN. They also wanted the service to open up large tranches of air time for re-broadcasts of official Chinese TV material.

Sky, as a commercial operation, had no problem dropping its editorial pants in that way to secure the deal. But the ABC, as it repeatedly explained to DFAT and the Chinese, was constrained by its statutory obligations to retain editorial independence.

The tender process had therefore been skewed so that only one bidder was able to meet some of its key requirements. The Australian has finally acknowledged that situation in the final par of its coverage today: “Sky was understood to have promised to establish special programming services for China.” Special indeed.

Meanwhile, the thunderingly ironic coincidence behind all this is that the boss of Australia Network (within the ABC) is Bruce Dover. In a previous life, Dover was the News Corp executive whose job was to get Murdoch a satellite TV foothold in China. The story of this very expensive failure is told in his book, Rupert’s Adventures in China.

Now, Dover has somehow held the fort for the ABC and kept his old employer out of the Middle Kingdom.

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