The Australian National Audit Office has delivered a savage assessment of the way the Department of Immigration tendered for offshore processing facilities, in the most scathing audit report seen in years.
The report, Offshore Processing Centres in Nauru and Papua New Guinea: Procurement of Garrison Support and Welfare Services, covers years of bungling, poor decisions and questionable conduct by the Immigration Department under both sides of politics as the Department of Immigration rushed to set up offshore processing centres on Nauru and Manus Island and abandoned Commonwealth Procurement Rules (CPRs) — the long-established guidelines to ensure transparency, fairness, value for money and probity in government contracting — in the process.
The audit report is the story of a process that began badly and never recovered. In its rush to restart offshore processing in 2012, the Gillard government demanded Immigration establish detention centres on Nauru and Manus Island as soon as possible. The ANAO says Immigration was justified in not using traditional competitive tender processes — they require more time to set up — but its decision to abandon previous service provider Serco in favour of Transfield (now called Broadspectrum) had no apparent justification, and it was impossible to tell what value for money assessment, if any, had been undertaken.
Worse, there was no effort to ensure basic probity around the deals. That is, Immigration staff were not required to declare that they did not have conflicts of interest, there was no probity adviser (probity advisers, usually provided by major consulting firms, are not compulsory, but almost inevitable, for any large public service procurement process) and tenderers were not treated equally (Serco, in particular).
When the department sought to consolidate the various offshore contracts for facilities, security and other services in 2013 and 2014 — to the benefit of Transfield — probity issues again arose, and they were serious:
“[Immigration] decided not to continue with the existing provider (G4S), but did not clearly document its reasons. Advice prepared by the department’s Central Procurement Unit was not consistent with the CPRs and the Department of Finance (Finance) guidance on key issues. In seeking advice from Finance, the Unit made written statements implying underperformance by service providers which was not supported by the evidence. The department subsequently referenced Finance’s support in briefings for its Minister.”
This is extraordinarily serious: not merely does Immigration appear to have decided to dump an existing provider without evidence, it misled a central agency about it as well, and then used that agency as a crutch to support its briefing of the minister.
As it turned out, the effort to consolidate contracts in 2014 did not save any money, let alone the large amounts expected. However, the department appears to have misled the minister about those savings:
“Separate benchmarks were developed for Nauru and Manus Island, but the department determined ‘value for money’ and claimed savings (against the benchmarks) on a combined basis. This allowed the department to demonstrate ‘savings’ by offsetting higher costs for Manus Island against lower costs for Nauru. While Transfield’s bid for Nauru was lower than historical costs, the bid for Manus Island exceeded historical costs by between $200 million and $300 million.”
And again, there were probity problems around ensuring there was no conflict of interest, and due diligence checks.
When the department finally got around to conducting a genuine open tender process in 2014, there were again problems — in fact so many they can’t be listed here, but they included poor record-keeping, missing records and failure to comply with the CPRs — including, remarkably, “the department was unable to demonstrate that the original tender documents lodged through AusTender were used by evaluation team members for the tender evaluation”. And the department failed to play fair with other tenderers.
“During the course of negotiations the department amended its requirements and accepted enhancements and adjustments to services which flowed through to a $1.1 billion increase in Transfield’s overall price. The department did not seek clarification or repricing from any other tenderers and instead set out to determine value for money by comparing the negotiated price with a benchmark.”
So bad was the open tender process, in fact, that a belatedly engaged probity adviser warned Immigration the whole process raised “significant probity and process risks”, forcing it to be abandoned in favour of an extension of existing contracts.
In its response to the report, Immigration admitted that its processes were flawed, but suggests that if only it could find the documents from a couple of years ago, it might be in the clear:
“The Department acknowledges that its decision-making processes in this complex and rapidly evolving environment have not been adequately documented at each stage of the procurement process. The absence of appropriate records makes it difficult to adequately demonstrate that the judgements made were appropriate and that due process was applied.”
The ANAO’s report is, in public service terms, an absolute demolition of Immigration as it operated both under the Gillard government and then under the Abbott government. Undoubtedly the initial problems can be blamed on the Gillard government, which demanded that Nauru and Manus Island be reopened immediately, regardless of the cost — that appears to have been the basis on which the department engaged Transfield. Haste in public service procurement invariably leads to waste.
But Immigration’s failures in 2014 and 2015 were also serious, given they occurred in a less rushed environment that would have afforded greater probity and adherence to the CPRs. Instead Immigration, under successive secretaries Martin Bowles and Mike Pezzullo, seemed to continue the way it started out in 2012, to the cost of the Commonwealth.