‘Did not comply with rules’: Audit office lashes entrepreneur program

Denham Sadler
Senior Reporter

The awarding of $160 million worth of contracts to delivery partners under the Industry department’s Entrepreneurs’ Programme was “deficient in significant respects”, with large incumbents given unfair advantages and “significant errors” made, a damning audit has found.

The Australian National Audit Office (ANAO) tabled its scathing report on the Industry department’s procurement of delivery partners for the Entrepreneurs’ Programme late on Friday, criticising nearly every aspect of the process which saw seven delivery partners share in $160 million to assist with the delivery of the scheme.

The ANAO found that the 55 tenders in total received for the work were not treated fairly or equitably, that the large incumbents were given an unfair advantage and that a number of “significant errors” were made in the procurement process.

The Industry department also made “tailored arrangements” to select Deloitte for a $32 million contract.

Parliament House, Canberra

The ANAO found that the design and conduct of the procurement did not comply with the Commonwealth Procurement Rules, and the signed contracts were not being appropriately managed.

The department also failed to demonstrate value for money when entering into the contracts, and the contract management framework in place was “inadequate”.

The ANAO made ten recommendations to the department, all of which were agreed to at least in principle. The only recommendation the department did not agree to fully, was to not exercise any extension to current contracts in the scheme.

Industry minister Ed Husic has been briefed on the audit and the department’s response to it.

“The ANAO audit raised serious issues around the department’s procurement of delivery partners for the Entrepreneurs’ Programme in late 2019 and early 2020,” a spokesperson for Mr Husic told InnovationAus.com.

“The Industry and Science Minister had a lengthy briefing with the secretary and was reassured the department is taking the audit findings very seriously. The department is already implementing the ANAO’s recommendations as a matter of urgency.”

The new Labor government plans to cut just under $200 million from the Entrepreneurs’ Programme, about 75 per cent of its overall funding. This involves $96 million in “uncommitted funding” to the program cut in 2024-25 and $101.7 million cut in the following year. The Entrepreneurs’ Programme was the former Coalition’s government flagship industry program, with an aim to support businesses to grow, innovate and commercialise.

It included four service delivery elements: business management, innovation connections, incubator support and accelerating commercialisation.

The program was part of the 2014-15 budget as an Abbott government industry policy, and then included as part of the National Innovation and Science Agenda under the Turnbull government, with $484.2 million in funding.

The department of Industry, Science, Energy and Resources (DISER) issued a request for tender in 2019 for the engagement of delivery partners to provide expert business advisory and facilitation services for the Entrepreneurs’ Programme, in an effort to refresh its partners.

It received 55 responses in total, 10 of which were from companies already working on the program.

Fourteen of these applications were shortlisted after being assessed against only two of the six criteria, and seven contracts were entered into, worth $144 million in total.

The Australian Industry Group received $31 million to provide business advisory services in Victoria, Tasmania in Western Australia, the NSW Business Chamber landed $21 million to cover New South Wales and the ACT, Deloitte received $32 million to look at Queensland, Business SA was handed $8.5 million for South Australia and the Darwin Innovation Hub received a $4.9 million contract for the Northern Territory.

CSIRO also received a $17 million contract to act as the innovation connector, while i4 Connect was awarded $30 million to manage a network of business advisory to the Accelerating Commercialisation scheme.

These contracts all run for three years with an option to extend them by one year, twice.

In total, the program accounted for the department’s large value procurement in 2019-20, making up 37 per cent of the total contracts entered into.

Of the seven contracts, five were awarded to incumbents. The ANAO found that incumbency advantages were not transparently managed, and that these companies were given a competitive advantage as they were provided with information about the redesign of the program.

Deloitte was one of the incumbents that landed another contract. But the audit office found the consulting giant was not identified as the best candidate for any of the regions.

Instead, the department “tailored arrangements” to pick Deloitte to provide services in Queensland because it was able to provide a “national specialist role”, something which had not been listed in the approach to market.

The approach of the department was “deficient in significant respects”, the ANAO report said, with competing tenders not treated fairly or equitably and probity risks not appropriately managed.

“The significant majority of tenders received were not fully evaluated against each of the published criteria,” the ANAO said in the report.

Of the 55 responses, only 26 per cent were evaluated against the value for money criteria, one of which included a “significant error”.

According to the ANAO, the Darwin Innovation Hub’s application was ranked as the best tenderer for the growth outcome when it should have been ranked as 7th due to this error.

The Darwin Innovation Hub’s application was initially judged to be “non-compliant” and “non-competitive” by the department, the ANAO found, before eventually being shortlisted and awarded a $4.9 million contract.

The audit office also found significant flaws in the Industry department’s management of these contracts, saying that its approach led to deliverables not being provided on time, and had been unable to ensure work is to an adequate standard before payments were made.

The ANAO recommended that government not exercise the optional extension for any of the contracts, and conduct a new procurement process before they expire by mid-next year.

The department agreed in principle to this, and admitted that its administration of the procurement “fell short of the appropriate standards of transparency, consistency and fairness”.

“While the department supports this recommendation in principle, the programme is being evaluated and decisions about its future, including programme design, will be subject to government consideration,” the department said.

Do you know more? Contact James Riley via Email.

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