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Wednesday, August 6, 2014

Not so straight-laced procurement in Victoria, Australia

We begin this post with the following articles. You can and should read the articles in full at the links associated with their headlines. I tend to selectively cut, paste and rearrange them to suit myself in this blawg, and there is a lot of additional information and context that gets left on the cutting room floor.

Office of Living Victoria broke procurement rules, says Ombudsman
Victoria's recently abolished water agency deliberately flouted procurement rules and back-dated documents to award contracts worth millions to consultants in a manner which implied a "jobs for mates" culture, the Ombudsman has found.

In a major setback for Water Minister Peter Walsh, Ombudsman Deborah Glass has found the agency he created, the Office of Living Victoria, to be rife with undeclared perceived conflicts of interest and having lacked respect for "public sector values and accountability for its use of funds". Mr Walsh told the Ombudsman he was not told of the procurement breaches by Mr Fennessy. But Mr Fennessy told the Ombudsman he last year advised Mr Walsh he needed to audit OLV and that more recently he told the minister ''we've got some procurement problems ... this is why I have been saying for the last six months that I need to audit OLV''.

Mr Waller and Mr Want initially reacted strongly to Ms Glass' draft report, rejecting many of the findings. They commissioned legal advice that stated the OLV was not bound by procurement rules because of its status as an administrative agency. Their advice conflicted with other legal opinion held by the government.

The pair later accepted that the OLV should have paid more attention to ensuring compliance with Victoria's purchasing policies. "I accept OLV made some poor decisions," Mr Waller told the Ombudsman. Mr Walsh said on Tuesday that all government departments had to adhere to procurement rules. He said despite allegations against OLV being raised publicly in recent months it was not appropriate for him to interfere.
Victoria's water agency ignored government policies, the ombudsman says.
The underlying attitude at the Office of Living Victoria (OLV) seemed to put procedures and principles second to urgency, Ombudsman Deborah Glass found. "From the earliest days of OLV, the inclination and focus have been on the end, not the means," the report said.

Ms Glass said the prevailing attitude at the office had been that it needed to "crash through" a bureaucracy that would stymie effective and timely change. "Government procedures exist to protect the public purse," Ms Glass said. "Poorly managed conflicts of interest fundamentally undermine the integrity of public policy."
Ombudsman finds water agency, Office of Living Victoria, mishandled conflict-of-interest concerns
The office was established by Water Minister Peter Walsh in May 2012 to manage the change in the way water services are managed in Victoria.

"Conflict of interest was poorly understood and badly managed by OLV."

The ombudsman was also critical of procurement practices in the agency. In one example examined by the ombudsman, three companies provided quotes for events management services. The ombudsman found OLV accepted the most expensive quote without explaining why.

The report found OLV rushed a number of project briefs, quotations and other documents. "In some cases they were prepared after the contract was in place, to give some semblance of credibility to the arrangement," the ombudsman said.

Mr Walsh acknowledged mistakes were made in the management of the water agency but said the OLV had operated effectively. "Good governance and effective and timely policy reform are not mutually exclusive, but having said that, OLV has delivered some significant benefits."
By the way, you can read the whole "Investigation into allegations of improper conduct in the Office of Living Victoria" here, and an earlier 2014 report on "Investigation into allegations of improper procurement of services by the Department of Education and Early Childhood Development" here.

Well now.

First observation, those last comments of Mr. Walsh in the last article above are routine, de rigueur responses typical of government comment when caught with its pants down in procurement.  I call it the "no harm, no foul" defense, even though there is always obvious harm when good governance is given short shrift whilst the means is meant to justify a result.

Second observation, this smacks of a procurement regime that has no real-time procurement police on the beat. It relies on ex post facto reviews, well after the horses have bolted, with the hope that someone will uncover the stuff-up and fix it (or, as is most often the case, with the hope that it will pass unnoticed at all).

I do not believe that ex post facto discovery is any kind of effective prophylactic or deterrent, and is a blunt instrument when error is found that could be corrected. Rather, what we see too often, as in this case, is that the whole baby is thrown out with the bathwater; here, the whole department was shuttered due to failure of its leadership.

For mine, the most effective way to police procurement is to encourage real-time critique and intervention by the people with most real interest in a fair and equitable system, which is commonly called a "protest" procedure. 

Hell hath no fury like a competitor scorned, and that is exactly the cop on the beat you want, provided you have a fair and expeditious procedure for assessing and resolving the protests. It has to be fair or no one will engage the process, which puts you right back where you started from. It has to be expeditious because the government must quickly and effectively address the issue or get sidelined by the controversy.

On Guam, the law requires that all new elected or appointed officials and department heads undertake and every 4 years re-take a one day course in ethics and or administrative safeguards, which includes an introduction to conflicts of interest and procurement. See 4 GCA §§ 15409 and 15410. At least they can't say they weren't told.

That said, consider the following article: Australian government must take ‘great care’ over public procurement rules
The Australian government needs to take “great care” in the policy, practice and operation of public sector procurement rules to work in the interest of the country’s citizens.

That’s the view of senator Kate Lundy, chairman of the Finance and Public Administration References Committee, which has published its conclusions following an inquiry into the operation and effectiveness of the country's procurement rules. Lundy added: “Government procurement decisions may well be a significant determinant of the social and economic health of many Australian communities and regions. As a result, great care needs to be taken in the policy, practice and operation of the Commonwealth Government procurement rules if they are to operate in the interests of the Australian people.”

Recommendations included calling on the Department of Finance to establish an “independent and effective complaints mechanism” for procurement processes. But the department said that it does not support this because there are a “number of opportunities” for people with complaints and there have been a “very low” number of complaints received.

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