Audit uncovers multiple failures in Federal Government's $484m Entrepreneurs' Programme

Audit uncovers multiple failures in Federal Government's $484m Entrepreneurs' Programme

A review of the Australian Government’s $484.2 million Entrepreneurs’ Programme (EP) has determined it failed to comply with Procurement Rules, did not achieve value for money and contracts were not appropriately managed, according to the Australian National Audit Office (ANAO).

ANAO’s report, published last Friday, sought to examine whether the design and conduct of the EP achieved value for money and whether services had been provided under the contracts to date - two benchmarks the Department of Industry, Science, Energy and Resources (DISER) fell short on.

Initially announced as part of the 2014-15 Budget with $484.2 million in Federal funding, and launched on 1 July 2014, the EP was established to help Australian businesses with monetary assistance as well as expert advice.

In 2019, DISER issued a request for tender (RFT) for the engagement of partners to deliver expert business advisory and facilitation services for the EP - the estimated value of which was $182 million for the maximum contract term of five years.

ANAO says 55 responses were received, of which 10 were from incumbent providers.

Seven tenderers (one to deliver commercialisation services nationally; one to deliver incubation support and innovation connection services nationally; and five to deliver advisory and facilitation services in nominated geographic areas) were awarded contracts for a term of three years from 1 July 2020 to 30 June 2023, with two one-year extension options. Five of the seven tenderers (71 per cent) awarded contracts were incumbent providers.

The procurement process made up DISER’s largest value procurement in 2019-20 and represented 37 per cent of the total value of contracts entered into by DISER for the year.

ANAO’s audit objective was to examine whether the design and conduct of the procurement process complied with Commonwealth Procurement Rules, and whether the contracts were appropriately managed.

To form a conclusion, ANAO asked two questions:

  • Did the procurement process demonstrate achievement of value for money?
  • Are the contracts being managed appropriately to achieve the objectives of the procurement?

On both questions, ANAO determined DISER failed.

“The design and conduct of the procurement did not comply with the Commonwealth Procurement Rules (CPRs), and the signed contracts are not being appropriately managed,” ANAO said.

“In its conduct of the procurement the department did not demonstrate achievement of value for money, the core rule of the CPRs. Although the Request for Tender (RFT) resulted in 53 compliant tender responses being received suggesting a competitive selection process, the department’s approach was deficient in significant respects such that there was not open and effective competition for the delivery partner roles.

“In particular, the significant majority of tenders received were not fully evaluated against each of the published criteria.”

Further, ANAO concluded that the partner contracts were not being appropriately managed.

“The contract management framework is inadequate, and the department’s approach has not resulted in contract deliverables being provided on time or required that service provision is to an appropriate standard before payments are made,” ANAO said.

“The contracts do not include an effective performance management framework.”

These failures were pervasive, beginning at the very commencement of the procurement process from the shortlisting stage, right through the evaluation of tenderers to the management of outcomes.

Of note, ANAO points to how DISER’s approach to the evaluation of tender responses did not allow for value for money to be demonstrably achieved.

ANAO said DISER’s approach lacked on a number of occasions, including how it shortlisted 39 of the 53 compliant tender responses on the basis of an assessment against just two of six criteria, although for six respondents an evaluation was conducted against only one of the those two criteria.

In addition, the approach involved only 14 of the compliant tender processes being evaluated against the price criterion, with a “significant error” made in the price evaluation for one of those responses, leading it to being ranked higher than it should have been.

This was for a contract signed with Deloitte, when DISER calculated the reported value of the contract being $165,517 higher than the actual value of the proposal.

Further transparency issues were highlighted by ANAO, which noted that incumbency advantages were not managed properly for companies DISER had previously entered into arrangements with.

“In particular, there were no specific contractural or payment arrangements in place to govern the department’s engagement of five of the ten existing industry partners to contribute to the redesign and payment for this work,” ANAO said.

In other glaring failures, ANAO said DISER selected a candidate on the basis of the commercialisation outcome even thought it was not top ranked for that criterion.

Ethical concerns also arose in ANAO’s audit, including findings that the procurements were not conducted in accordance with guidance provided by the CPRs about how to conduct procurements ethically.

Of note, ANAO says key elements such as a conflict of interest register were not implemented in its probity plan, and a list of key persons with access to controlled information was not maintained by DISER.

“The department’s conduct of the procurement process also fell short of the ethical requirements set out in the CPRs, with key aspects of the approach employed either not outlined in the RFT or inconsistent with the RFT, competing tenders not being treated fairly or equitably, and probity risks not being appropriately managed,” ANAO said.

As such, 10 recommendations were made to DISER, all of which have been accepted by the Department.

These range from recommendations about how DISER should conduct tender processes in the future, and that it improve its procurement framework.

In response, DISER told ANAO that it accepted its procurement “fell short of the appropriate standards of transparency, consistency and fairness, particularly in late 2019 and early 2020”, but noted the EP had “successfully supported over 22,000 Australian companies to strengthen and grow since its launch in 2014”.

“The department is actively working to address all recommendations, and any cultural or systemic improvements necessary, as a matter of priority, including adopting a formal change program approach,” DISER said.

“The department has already put contract management plans in place for the Entrepreneurs’ Programme. We are immediately developing performance metrics and standards for delivery partners, as well as a probity plan specific to the programme, which will comprehensively address conflict of interest.

“We are also establishing a robust department-wide contract management framework, and a centralised and strengthened approach to the management of probity and conflict of interest. Having successfully implemented a probity framework for grants management, we are now focused on strengthening our Probity Framework to cover procurements and contracts, with a clear line of sight by the departmental executive and our internal Audit and Assurance Committee.”

Release of the audit report comes after the new Labor Government announced it would cut just under $200 million from the EO, including $96 million in “uncommitted funding”.

A full version of ANAO’s report can be found here.

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