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The Australian National Audit Office’s (ANAO) audit of The Department of Foreign Affairs and Trade (DFAT) has found that the Department didn’t appropriately plan the procurement activities for its Australian Passport Office, including ICT procurement.
This includes its multi-million dollar contracts with service providers like Datacom.
ANAO’s audit process focused on procurement activities by the APO relating to contracts and contract variations that had a start date of between 1 July 2019 and 31 December 2023.
During the audit, ANAO found that for one of the 40 contracts established following a multi-supplier approach, DFAT released the request for quote via the BuyICT portal to all 1,620 approved sellers of ICT labour hire services on the Digital Marketplace panel.
The original request was for the services of a commercial relationship manager. From this, 52 approved sellers responded with a combined total of 71 candidates. However the report found this “was not a genuinely competitive procurement process”.
One of the most significant cost underestimations made by DFAT involved a contact centre contract with Datacom Systems.
This contract, as of 31 December 2023 totalled of $91.2 million, was nearly seven times the estimated total costs. Further, the contract with Datacom has extension options remaining.
For example, an amendment published on AusTender in July 2024 increased its value to $133 million for the first three years and two months, 10 times the five-year estimate of $13.2 million.
Deloitte was also referred to in the report and responded to the ANAO in a letter stating “its engagement with DFAT was subject to a work order under the Digital Transformation Agency – Digital Marketplace Panel … that was varied eight times with the value increasing by 989 per cent for a total of $3,592,589 … and the term increasing from 12 months to 30 months”.
The consultancy firm stated that the “cumulative impact of the variations for a second request for quote under the Department of Finance Panel … for management advisory services to assist in the development of a new policy proposal of passport services resulted in potential contracted fees of $2,482,139, however the total amount of $2408,204 was invoiced”.
“There was no overarching procurement strategy,” the ANAO said. “The department engaged a contractor to develop a multi-year procurement strategy that was never completed.”
The report also found that DFAT engage with unapproved sellers like Customer Driven Solutions, a Brisbane-based CX consulting service providing customer, workforce, knowledge management and omni channel cloud solutions, despite not having the proper security clearance.
“Further, in a breach of probity, the department had emailed a contractor from that firm a copy of the approval to approach the market containing the estimated procurement value and hourly rate. The firm put forward two candidates,” stated the report.
“These two were the only ones out of the 73 potential candidates that the department assessed as ‘suitable’, with one then contracted into the position despite not holding the required security clearance.
“The process had not involved checking compliance with the security requirement, assessing quotes against the evaluation criteria or interviewing potential candidates. DFAT reported the $704,948 contract as let by open tender from the Digital Marketplace panel.”
“Overall, only 15 per cent of the 62 approaches to market examined by the ANAO met the minimum requirements at planning stage.”
Specialist IT and digital recruitment specialist Peoplebank was another supplier without the right security clearance that was invited to quote but had not been informed by the department as to the basis on which the contract would be awarded.
Peoplebank was awarded a $1,369,438 contract. However the “different criteria applied were substantially more favourable to the department’s desired candidate and, as that candidate did not meet the specified security requirement, the security requirement was downgraded,” the report noted.
This is despite the DFAT’s AusTender reporting indicates the APO procures by open tender from a panel arrangement 71 per cent of the time, noted the ANAO report.
The ANAO determined that procurement decision-making was not sufficiently accountable and was not transparent.
“Procurement practices have fallen short of ethical standards, with DFAT initiating inquiries of the conduct of at least 18 individuals, both employees and contractors, in relation to Australian Passport Office procurement activities examined by the ANAO,” the report stated.
The ANAO concluded that ultimately not one of the 243 contracts totaling $476.5 million the Australian Passport Office entered between 1 July 2019 and 31 December 2023 were let via an approach to the open market.
The auditor made three recommendations aimed at addressing the inappropriate use of contract variations, at strengthening the department’s oversight and controls over its procurement activities and examining whether ethical and integrity failures have occurred in procurements not examined in detail by the ANAO.
“The ANAO also identified as areas for improvement that DFAT should improve the timeliness of its AusTender reporting across the department and also improve its arrangements for identifying and reporting instances of non-compliance with the finance law,” stated the report.
“DFAT is responsible for issuing passports to Australian citizens, as well as Australia’s international trade agreements.”
“The agency is subject to Commonwealth Procurement Rules incorporate the requirements of Australia’s international trade obligations and government policy on procurement into a set of rules.”
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