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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.


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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28 thoughts on “Rudd & Oz Network saga: everyone cast ‘in a poor light’

  1. bluepoppy

    Just one more reason why Rudd had to go as PM.

    I for one am mightily sick of gameplaying, manipulation and chessboard style of politics. The public is over it and expect more from a sitting PM. That is, good and fair policy in representing the best interests of the electorate. Enough of this celebrity US style perpetual electioneering and manouvering. Is that too much to ask for?

  2. shepherdmarilyn

    Actually it was a good thing in light of scandal after scandal surrounding Murdoch or has everyone forgotten that already.

    We did not need Sky telling Asia who we are when Sky hire wall to wall racists.

  3. twobob

    I have in the past been scathing of the deposition of Rudd by Gillard.
    I don’t feel that way anymore.
    Rudds role in this has diminished him very much in my eyes.

  4. shepherdmarilyn

    Twobob, you are an idiot.

    It was right not to give the bloody tender to Sky News.

  5. John64

    “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”

    Now that is dodgy.

    Incidentally, why does the Australian Government want to re-broadcast Chinese TV material? I mean, isn’t this supposed to be an “Australian” Australia Network?

  6. PK93

    Bluepoppy, you’ve nailed it.

  7. PK93

    Shepherdmarilyn, are you a child, perchance?

    Rudd skewed the process so that Sky WOULD be awarded the tender. Apparently to either spite the government he was a part of or to reward the forces that helped bring him down in the hope that they would support his long drawn out campaign to undermine Gillard.

    Is there anyone left who thinks Rudd was of suitable character to remain prime minister?

    Perhaps only those with inadequate critical thinking skills who cannot discern between democracy and rank populism

  8. klewso

    That’s our Kevin – he seems to enjoy being bitch-slapped, as long as he gets to choose who does it, and to him, size does seem to matter …. and is there bigger slapper around than his?

  9. shepherdmarilyn

    Rudd could not do anything of the kind, he was one man in the cabinet and the claims that he wanted some part of Murdoch in the tent are ludicrous because by then the relationship between Murdoch’s and Rudd was utterly toxic.

    That is just a claim made up by the author of this rant.

    Claims are not facts, they are claims and anyone who has read Robert Manne’s essay on Murdoch is well aware that by the time of the SKy process the fact is Rudd hated the Murdoch lot and would not do them a single favour.

    And no I am almost 60.

  10. Delerious

    Boy this is the biggest argument I’ve had to despise Rudd but sadly it falls flat. It still doesn’t explain the dirt that was constantly being spun on Rudd during his time as PM. If Labor ‘fessed up and outed the guys who had been doing this I may consider moving forward but they won’t so Rudd still gets the benefit of the doubt.

  11. bluepoppy

    I agree with you that the contract should not go to Sky, it should have been left with the ABC in the first place – why even go to tender at all. It is afterall a national TV network chartered with broadcasting the best of Australian TV. Something the ABC does well.

    The problem was Rudd and DFAT seeking to influence programming. This is against ABC policy of editorial independence (separation of powers between government and media – a good thing), hence the tender as it was written would automatically exclude the ABC.

    Not that governments are not good at getting around tender arrangements when it suits (on both sides of politics) but in this case there was clearly something rotten in Denmark. True, we, the broader public will probably never know all the players or all the shuffling behind the scenes, but the whole affair certainly looks suspicious.

  12. Stiofan

    Geez, talk about the Crikeytariat’s double standards!
    You do all realise that SBS broadcasts unfiltered Chinese Government propaganda every day? Where are the demands it lose its licence and/or Government funding?

  13. Nearlythere

    The sad thing about this whole debacle is that people have lost sight of how seriously sh*t Australia Network is. Re-runs of Home and Away anyone? Is this gormless, but essentially harmless image really the image of Australia that the Government wants to project (remembering that the AN is meant to be a form of ‘soft diplomacy’)? When I travel I routinely watch someone else’s network – usually BBC or CNN. AN is only good for catching up on soaps and the footy.

  14. Michael de Angelos

    Crikey is blaming Rudd without proof when the article makes it clear that public servants made the decision. We would need to know whether Rudd had influence over them to support crikey’s claim.

    The ABC should have always been the providor, why a private corporation and one with a history like Sky or news corp be considered is bizarre.

    And if any media organisation didn’t employ ex-News Corp employees they would never have staff. Yet another reason Ltd news should not have so much influence.

  15. Schnappi

    Just thankful the ABC is not going to the manipulator.

    Sometime in the future it may be found that desiny had a role.

    But why would a labor government want to give murdoch anything.

  16. Suzanne Blake

    Political inference, just like HSU / Fairwork as noted by ALP member Kathy Jackson on 730 Report tonight

  17. David

    And the sit on the fence Crikey was all over Rudd like a lover in its first embrace at the time…

  18. GeeWizz

    Why the hell would you tender something out…. twice…. and then completely ignore the recommendation?

    What was the point of the tender process?

  19. Suzanne Blake

    @ Geewizz

    Sneaky Conroy and dishonest Gillard did not like the answer either time.

  20. shepherdmarilyn

    And David Salter goes on 7.30 and says “my information is” without offering one skerrick of proof.

  21. AR

    The tender was offered when Krudd was PM – please, somebody tell me that he wasn’t, even then, seeking to sup at Mudorc’s toxic table.
    Every other nation’s external radio or TV service serves their political interest. Footy & soap operas, though not my personal taste, are not necessarily inimical to this purpose.
    WTF is this talk of rebroadcasting Chinese news?

  22. Schnappi

    James murdoch is resigning from BSkyB ,just glad none of that mob is running the ABC ,although with some of howards ABC appointments in place ,rather hard to be sure.

  23. Suzanne Blake

    @ Schnappi

    Some breakfast reading for you on how your mates / power brokersoperate


    MOSES OBEID is a miracle of financial management. Despite having a taxable income of $100,000 a year, and his wife $80,000, the pair live a sumptuous lifestyle, drive his and hers Land Rovers, employ a maid and somehow meet their annual mortgage payments of $210,000 on their $4.5 million mansion.

    Mr Obeid, 43, the son of the controversial former Labor powerbroker Eddie Obeid, told the Court of Appeal he could not pay the $12 million he had been ordered to give the City of Sydney for selling the council’s SmartPoles overseas in breach of a licensing agreement.

  24. Schnappi

    SB ,
    Learn to cut and paste Html,or do you expect sane people to type your unhinged rants ,could not be bothered typing in irrevelent rubbish from your disturbrd mind.

  25. billie

    I am surprised that News Corp is being given $2.6 million compensation for the costs incurred in mounting the tender bid.

    My understanding of normal commercial practice is that the organisations that don’t win the tender don’t get awarded costs, they have to cover their tender costs through their normal commercial operations. I have worked for large Australian companies that absolutely screw their small supplies to the wall so that some insiders say that being awarded a contract with the group is a sure track to bankruptcy.

    Supports the old saying “you have to have money to make money”

    PS Agree with Marilyn Shepherd that Sky should never have been considered.

  26. Michael de Angelos

    SB : proof please of all your claims and why on esrth do you bring up matter about relatives of polticians and why is it relevant ?

  27. Toby Jones

    This is Government wastage and politics in the extreme and should be elevated but Murdoch’s control of the Australian media prevents such a scandal coming to light. Thank goodness Senator Steven Conroy had the balls to kill this stupidity.
    1. Why would a credible and important media voice to Asia ever be considered to be privatised. This would have made Aust a joke in the eyes of Asia let alone the lost impartiality.
    2. Rudd was pushing this process obviously for his own political gain. Buy favour with Murdoch, pay back for his support during election etc. This is criminal. Thank goodness he his gone. (keep in mind this tender was started when he was PM and long before he was deposed)
    3. The cost to tax payers of another ludicrous initiative of the Rudd government has now culminated in a auditors report that criticises process and white washes the corruption of how this came to be considered at all.
    It stinks and it is as serious as any pervious policy incompetency and scandal we have seen. Because it involves New Ltd and Murdoch and because Conroy has been smart enough and courageous enough to kill it (albeit in a costly process to taxpayers) a real investigation and national outcry is not going to happen. Pity as the corruption of Rudd may have come to light.

  28. Worrierqueen

    That is a bizarre post SB, a veritable Jackson Pollock of a blog. What on earth does the son of a former NSW state minister have to do with the tender process for the Australia Network? Got any more random thought bubbles for us?

    As to the actual topic, it does show how dysfunctional, narcissistic and incompetent Rudd was. Thank God they finally purged his malignant influence from Australian policy.


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