Full tenders also require agencies to specify their requirements upfront. The Thodey review of the Australian Public Service said this encouraged large one-off change programs, rather than more flexible and agile delivery models.
The preference to work with known vendors often puts departments and agencies at odds with the key objective of the Commonwealth Procurement Rules (CPRs) which set out the procedures agencies must follow for purchasing.
“Achieving value for money is the core rule of the CPRs,” the ANAO report said.
“Generally, the more competitive the procurement process, the better placed an entity is to demonstrate that it has achieved value for money and so competition is a key element of the procurement framework.
“Competition encourages respondents to submit more efficient, effective and economical proposals. It also ensures that the purchasing entity has access to comparative services and rates, placing it in an informed position when evaluating the response.
“Open tender and prequalified tender promote competition, whereas limited tender, as its name suggests, limits competition. While the CPRs emphasise the benefits of open and effective competition, limited tender is the most commonly used procurement approach.”
The federal government has a variety of agencies with differing accountability and procurement rules. The major group are formally known as Non-Corporate Commonwealth Entities (NCCEs), and include the big portfolio departments and agencies such as Service Australia and the Australian Tax Office.
The Audit office found these used limited tender approaches even more than corporate agencies, such as Australia Post and the ABC.
Among the non-corporate agencies with highest use of limited tendering are the Australian Office of Financial Management (76 per cent of all contracts by value), the Future Fund Management Agency (62 per cent), and the largest purchaser in the Commonwealth, the Department of Defence (53 per cent).
Among the corporatised agencies the highest users of limited tendering were the Murray-Darling Basin Authority (62 per cent of all contracts by value), Australian Pesticides and Veterinary Medicines Authority (58 per cent), Australian Digital Health Agency (54 per cent) and CSIRO (50 per cent).
Around a third of Australian government entities are not included in the AusTender system, meaning there is no consolidated data on the amount of open tendering these agencies are using.
Many of these agencies have significant procurement activity. This includes the Australian Rail Track Corporation which is responsible for the delivery of the $9.3 billion Inland Rail project; WSA Co Limited, which is developing the Western Sydney airport with a budget of $5.3 billion; and Airservices Australia, which in February 2018 signed an acquisition contract with a ceiling price of $1.3 billion for a new air traffic control system.
A digital market place has been established in an attempt to open up the federal government’s annual $6 billion digital transformation program to smaller providers. Since its inception in 2016 more than $1.1 billion has been awarded to mostly smaller vendors.
The Thodey review called for a more strategic approach to procurement, commissioning and contracting as part of a focus on delivering better outcomes by working closely with partners and service providers.
“Rather than start with an assumption about which services should be delivered by the government or other providers, the APS should objectively decide which services and products to deliver itself and which should be purchased from or delivered by other providers, and how they should be bought or delivered – in order to deliver the best services or outcomes for the public,” the Thodey report said.
