NDIA “large ICT” procurement falls short of Commonwealth rules

IT service providers must prioritise ethical conduct, transparency, and compliance with procurement rules to maintain trust and integrity in their relationships with government clients, according to the final report into procurement projects at Services Australia and the National Disability Insurance Agency (NDIA).

The final report, Inquiry into procurement at Services Australia and the NDIA, stemmed from an audit conducted out of the issues raised during the Watt review.

In March last year, the government welcomed the findings from the Independent Review of Services Australia and the National Disability Insurance Agency (NDIA) Procurement and Contracting which examined the procurement processes leading to contract wins to Synergy 360 and other entities.

Former public servant Dr Ian Watt AC led the Independent Review established by the CEOs of Services Australia and the NDIA.

The final report focused on NDIA awarding a large contract to Salesforce for a new customer relationship and management software platform known as the PACE system.

“Evidence received indicates that PACE has been working appropriately. Unfortunately, however, aspects of this procurement conducted by NDIA fell short of the Commonwealth Procurement Rules and ethical requirements,” wrote Julian Hill, member of parliament and chair of the joint committee of public accounts and audit.

While The final report, Inquiry into procurement at Services Australia and the NDIA, didn’t uncover misconduct concerning the PACE contract award, it identified deficiencies in NDIA’s procurement management, an internal review has been initiated by NDIA and remains ongoing.

Originally the Watt review examined 95 procurements undertaken by Services Australia and NDIA from 2015–16 to the present and found that 19 procurements with an approximate value of $374 million showed inconsistencies with the Commonwealth Procurement Rules or did not show good practice.

According to Hill, “the Committee was surprised to find that no explicit price weighting was included in NDIA’s value for money assessments when ranking the tender proposals for this procurement and makes a recommendation regarding this”.

“Very significant contract variations were examined closely by the Committee,” he wrote. “Variations saw Salesforce’s contract value rise from an initial $27 million at inception in April 2020 to $135 million by October 2023.”

While some of this was explicable by a necessary expansion of user licenses, a substantial proportion was due to significant changes in scope. Particularly concerning was that other “vendors had no opportunity to tender for the product that was ultimately it delivered as these variations in scope occurred after the contract had been awarded”.

In addition, more than $20 million was added to the Salesforce contract for ‘professional services,’ raising questions about cost control and value-for-money assessments. However, the most egregious issue to arise from this procurement activity is what appears to be clear breaches of the NDIA’s Gifts and Hospitality policy by officials over a long period of time.

NDIA informed the Committee that any gifts or benefits of over $100 in value must be preapproved and then recorded in a compliance log but that no such disclosures had been made in relation to the Salesforce contract.

The Committee then received a detailed itemised list from Salesforce containing more than 100 instances of hospitality and/or gifts passing to NDIA officials over an almost five-year period both before and after the PACE contract bid and award and throughout the periods of the contract variations.

These included nearly 50 items above $100 in value per person, including meals, drinks and golf outings. The premise stated by NDIA for its hospitality policy is that none of its officials should accept gifts that could be seen to compromise their integrity. NDIA further stated in a hearing for the inquiry that ‘it would be hard to see how a contract manager could maintain their integrity whilst accepting gifts from a vendor.’

The NDIA also gave evidence that officials are obligated not to accept gifts the moment a procurement starts to be planned. The Committee concurs fully with these principles. Breaches of disclosure requirements and gifts and hospitality policies are simply unacceptable.

It is understood that NDIA officials would need to engage with counterparts at Salesforce during the operation of this substantial contract. Some social elements to this may be reasonable, but such interactions must be carefully conducted and managed to maintain probity and integrity standards.

“The Committee is not privy to, nor has it sought, the identities and roles of the NDIA officials who accepted gifts from Salesforce and does not have a remit to investigate these individuals,” wrote Hill. “It is understood that NDIA is taking this matter seriously and the Committee welcomes this.”

According to the report this episode raises further serious questions about how widespread this sort of practice and culture may be in other Commonwealth entities by Salesforce and other major ICT vendors.

The Committee has sought additional information from Salesforce regarding the operation of its self-styled ‘Office of Global Ethics and Integrity’ which is supposed to have individually approved every instance of hospitality to government officials worldwide.

“Given concerns regarding potential systemic inappropriate cultivation of public servants by Salesforce over a long period of time the Committee is requesting a further report on all hospitality Salesforce has provided to Commonwealth officials in all entities over the past three years,” wrote Hill. “The evidence to the inquiry has shown overlap over a long period of time between the aforementioned hospitality events and gifts, undeclared meetings between former Minister v Stuart Robert, Synergy 360, and Salesforce, and major and ongoing procurement activity and contract management by NDIA in relation to the PACE system.”

The Committee has already substantially addressed issues relating to former Minister Robert and consulting firm, Synergy 360 in its Interim Report but finds it concerning that no records of discussions at three separate meetings with Salesforce are available.

However, the report concluded there was no evidence that other tenderers or potential vendors who were not clients of Synergy 360 were afforded the same opportunity to engage with the then Minister.

“Ultimately, it was Salesforce that had this access, secured a major government contract and later benefited from a series of lucrative variations and provided undeclared hospitality to government officials,” stated Hill.

The final report, Inquiry into procurement at Services Australia and the NDIA made a number of findings and recommendations pertaining to NDIA’s procurement practices, most notably:

• Properly documenting and monitoring the use of limited tenders due to claims of urgency
• Publicly reporting on the number of suppliers invited to respond to a procurement offer
• Requiring all procurement staff to declare any conflicts of interest Reviewing procurement templates to ensure clarity in determining value for money and the preferred tenderer
• Ensuring that internal probity and legal advice is accessible and consideration of external advice for larger high-risk procurements
• Ensuring adequate record-keeping
• Supporting adequate procurement training and professionalism.