Procurement controversies -- Australia

Taxpayer rip-off on contracts: Auditor-General

On the heels of the federal government's bungled schools rebuilding program, its botched insulation scheme and the Green Loans debacle, the Australian National Audit Office revealed yesterday that government agencies failed to routinely compare prices when "direct sourcing" goods and services worth $10.2bn a year.

In direct sourcing, agencies can obtain oral or written quotes from one or several suppliers without going to an open tender.

Agencies could not demonstrate value for money in 74 per cent of the 285 untendered contracts analysed by the ANAO under Auditor-General Ian McPhee.

And government departments did not bother to get more than one quote in 85 per cent of "direct source" contracts, ranging from stationery to buildings, information technology and management consultancies. "Overall, agencies' quotation practices did not support competitive procurement," the ANAO says in a report tabled in federal parliament yesterday. "To apply the procurement principles of value for money and encouraging competition, it is prudent for an agency to seek submissions from more than one supplier, where practicable."

The ANAO based its analysis on 645 contracts, valued between $10,000 and $305 million, awarded by four government agencies: the Department of Families, Housing, Community Services and Indigenous Affairs; the Department of Innovation, Industry, Science and Research; the Department of Veterans' Affairs; and the Australian Crime Commission.

Of those, 285 were "direct sourced" and the audit identified 121 contracts, each worth more than $80,000 and totalling $183m, that had been awarded with one or no quotes.

The ANAO's questioning of public service purchasing follows its criticism of the government's $16.2bn Building the Education Revolution program -- a school building scheme marred by cost blowouts.

On Wednesday, the Auditor-General made a withering assessment of the Environment Department's administration of a $275m "Green Loans" scheme.

Next month, the ANAO is due to report on the home insulation program, which had to be axed after four insulation workers died and more than 120 houses caught fire.