Complaints - Please scroll to the bottom of the page
Search
« Comments on Procurement | Main | French Supports "District Funding" For Beach Erosion Solutions - What Next? »
Wednesday
Aug312016

Lid Lifted on Council's Procurement Policies

A KPMG Report presented to the 31 August Infrastructure Committee Meeting raises several disturbing isues surrounding our Council's procurement and tendering policies.

The first must be why this report was 'buried' in an Infrastructure agenda rather than sent to the Audit Committee which surely is responsible for overseeing these most blatant breaches of policy that are standard in every public institution in this country. Somehow during this term of Council, sloppy if not corrupt practices have crept into the manner in our Council operates, but who would know, given these breaches. 

KPMG can only point to the non-standard practices - they do not actually accuse Council of corruption. Because of the manner in which contract tendering has been handled, and highlighted on this blog on several occasions, they have no way of knowing. But clearly the manner in which it has now been highlighted leaves questions unanswered - including the time and method of presentation just prior to an election.  

Here are the most blatant "high risk" activities highlighted in the KPMG Report in regard to these contracts as "High Risk":

1) Conflict of Interest declaration and management:

Four of 11 (36%) procurement activities which were sourced via a tender process failed to conduct a conflict of interest declaration as required under the current Procurement Policy (s 7.0 & 18.3). Declaration of conflict of interest assists in identifying any actual or potential conflict of interests situations and timely management of the actual/perceived risks. The contract value for each of these contracts exceeded $100,000.

2) Supplier due diligence

2.1) Due diligence not performed as per the Procurement Policy Two of three $5m+ procurement did not include appropriate due diligence as required under the current Procurement Policy (s 18.3). Although the Veolia procurement was a contract renewal, the previous contract had specified that the renewal is to be conducted in line with the Procurement Policy. While the Procurement Policy is silent on additional expectations in relation to contract renewals, good industry practice is to perform a certain degree of due diligence for contract renewals in order to satisfy the operational viability of the contractor to continue to serve the contract.

2.2 Degree of due diligence The current Procurement Policy does not provide guidance on the types and extent of due diligence checks to be performed. For example, only partial due diligence was performed on the $3m contract for construction of the Thames Indoor Football Facility – no credit/financial risk check was performed. Furthermore, requiring due diligence checks to be performed only for contracts over $5m in value and at the time of the initial procurement may expose TCDC to failure of contract due to the contractors inability to deliver the contract.

3) Use of Probity Officers

The current Procurement Policy does not specify the requirements on when the appointment of a Probity Officer is to be considered by the procurement team. It only stipulates that the Chief Executive may approve appointment of a Probity Officer for high value, high risk procurement (s 20.0).

The use of a Probity Officer provides an independent sounding board to ensure there is sufficient accountability throughout the entire procurement process and should at least be a mandatory consideration for all high value, high risk procurement. Furthermore, the Procurement Policy does not provide guidance on how this decision is to be brought to the Chief Executive’s attention (e.g. key risk elements, potential benefit of a Probity Officer, etc.).

The lack of guidance in this area was illustrated through our sample testing which identified two of five (40%) high-value procurement did not utilise a Probity Officer to oversee the procurement process. Both of these contracts were valued at above $3m and there was no evidence of the procurement team considering the use of a Probity Officer

Risks 

  • Poor procurement outcomes in the absence of good risk mitigation applied during the procurement processes.
  • Conflicts of interests situations are not identified and managed in a timely manner. 
  • Project failures or disruption to services arising from contractors becoming insolvent. 
  • Reputational damage if TCDC is found to be non-compliant with robust, transparent procurement processes and there is justifiable challenges made on the tendering processes by unsuccessful tenderers.

4)  TCDC does not have a Contract Management policy in place to govern how TCDC engages with contractors. This includes: 

  • Scoping of projects/contracts
  • Contractor selection
  • Induction of contractors
  • Governance and management of contract
  • Supervision and performance monitoring
  • Handover and post evaluation reviews
  • Contract management risk mitigation tools that are to be utilised such as use of probity officers and due diligence requirements.
  • Processes over contract renewal, variations or terminations
  • Health and safety considerations when engaging contractors, such as contractor health and safety induction or an incident notification system.

Guidance is currently limited to the Procurement Policy which stipulates contractor selection requirements and specifies that regular monitoring should be performed to ensure adherence to the contractual terms (s 19.2).

Our review identified that due to a lack of formal contract management tools and guidance, Contract Managers have adopted different practices for managing contracts which may not be in line with best practice.

Risks 

  • Lack of consistency on how contracts are managed across TCDC resulting in inefficiencies, inconsistency in reporting contract performance and incorrect contracting decisions being made.
  • Inadequate management of contracts resulting in poor contract performance not being detected.
  • Contract agreements are not robust and designed appropriately potentially exposing TCDC to unwarranted risks in the future.

There are a great number of other less critical areas outlined in the Report, but anyone familiar with the manner in which reports of this nature are provided to public institutions by the 'big five' accounting firms will surely understand just how serious these conclusions are in the overall scheme of things. Our Council has been 'called out' in no uncertain terms, and in normal circumstances, heads would roll.

Readers will recall the sudden interest taken in the Indoor Court contract (Stanley Construction Ltd) when attention was drawn on this blog to Stanley's apparent insolvency - suddenly the Mayor, the Deputy Mayor, the TCB Chair and CEO met to impose new restrictions on the contractor - too late to restore confidence in the Council's procedures, but better late than never. Can we ever forget the written reply to my question about 'due diligence' - "Yes, it was undertaken, but not financial"! Wow. Great - it's all okay then!

You will note that this instance has been high-lighted above, but the recent pontentially multi-million dollar  IT contract awarded on the say-so of Ben Day remains in place, and would have post-dated the completion of this KPMG Report - no doubt another that will raise real questions when the next "internal Review" takes place.

This is simply another example of the manner in which our Council has operated during this and the previous term, and another reason why incumbents - particularly those on the Audit Committee should be held to account. They could not even manage this simple and well established procurement procedure, even with 'professional' advice amongst its ranks - it is not simply a case of 'amateurs' being 'played' by cynical staff. 

The Audit Committee meets on Monday 5 September, and this matter does not appear on its agenda - One must ask - why?! It is not as if its members are over-worked - the entire agenda seems to revolve around requests for "water charge credits" - a five minute job.

 

 

 

PrintView Printer Friendly Version

EmailEmail Article to Friend

Reader Comments

There are no comments for this journal entry. To create a new comment, use the form below.

PostPost a New Comment

Enter your information below to add a new comment.

My response is on my own website »
Author Email (optional):
Author URL (optional):
Post:
 
Some HTML allowed: <a href="" title=""> <abbr title=""> <acronym title=""> <b> <blockquote cite=""> <code> <em> <i> <strike> <strong>