Industry department won’t look into procurement ‘bias’

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Joseph Brookes

The Industry department has never checked the books of a supplier it awarded a $31 million commercialisation services contract to, despite an independent audit finding “bias” in the decision and the supplier’s subsequent conflicts of interest not being effectively managed.

The concerns came from a damning federal audit of delivery partners for the Entrepreneurs’ Programme, which in 2022 revealed i4 Connect was chosen over a higher scored and far cheaper bid.

The Victorian company went on to miss contractual deadlines by months and added more controversy when it provided the commercialisation services to a startup its management had invested in, helping it win a related government grant.

But the Department of Industry, Science and Resources (DISR) said it has never exercised its contractual right to examine the records of now defunct supplier or examined the bias finding internally, because other external reviews did not find evidence of fraud or corruption.

The concerns stem from the 2019-20 procurement of delivery partners for the government’s Entrepreneurs’ Programme, the department’s largest value procurement that year.

A damning review of the $144 million procurement by the Australian National Audit Office (ANAO) in 2022 revealed it broke tender rules and fell short of ethical standards, including a finding of bias in the i4 Connect selection.

i4 Connect was established specifically for the program’s commercialisation service tender and when it won it had only a handful of staff. It ceased operation when its contract ended last year.

The ANAO found there was “bias evident” in the analysis of shortlisted tenders by a three-person evaluation panel that recommended i4 Connect. The panel failed to satisfactorily address the $13.7 million price difference between i4 Connect and a higher ranked and cheaper bid, according to the audit.

Asked by Senator Barbara Pocock why the department had selected the higher cost, lower scored bid, DISR conceded the overall procurement had fallen short of fairness standards but noted “price is not the sole factor when assessing value for money”.

DISR also told Senator Pocock it has never conducted its own investigation into the bias finding or the source of it because external reviews it commissioned had not found cause for concern

The Greens senator reignited scrutiny of the procurement last year when she aired an allegation one of the tenderers had paid another contractor, involved in earlier iterations of the program, Northgate Australia, a large success fee for help with its bid.

“…the department is aware of a claim made by an unsuccessful tenderer that a ‘success fee’ was paid to a former contractor by a winning tenderer,” the department told the Senator in responses provided in late December.

“However, the particular company that was paid was not identified when the allegation was originally made.”

Northgate has denied it was paid a “service fee”.

DISR said it engaged an “independent integrity consultant” to assess an allegation of fraud made by an unsuccessful tenderer in February 2022. It found “no evidence of fraud or corruption”.

The department had also commissioned an independent review of the wider procurement in 2022 when it received an advanced copy of the ANAO audit. This review also found no indications of misconduct by department staff, DISR said.

DISR said that because of the lack of evidence of dishonest non-compliance it has not moved to more serous fraud investigations.

The Greens Senator has also raised questions about i4 Connect management investing in a startup that went on to secure a maximum near-$400,000 grant from the Entrepreneurs’ Programme. This conflict of interest was real and not appropriately managed by the department, the ANAO audit found.

DISR confirmed i4 Connect’s owner Norm Jenkins, who made the investment, had attended meetings with the Entrepreneurs’ Programme Committee (EPC) that conducted grant merit assessment and made final recommendations to the department.

“i4 Connect representatives, including Mr Jenkins attended EPC meetings for the portion of the agenda where grant applications were discussed by the Committee, but delivery partners had no role in providing advice on the merit of grant applications to the departmental decision maker or approving grant applications,” DISR’s response said.

“Mr Jenkins declared an interest to the department prior to the Smart Oysters grant application being considered by the EPC. The department determined the disclosure to be material and required Mr Jenkins to recuse himself from the discussion of this application.”

The Entrepreneurs’ Programme delivery partner procurement shortcomings have triggered more than a dozen compensation claims from unsuccessful tenderers. Some are understood to still be ongoing 18 months after the audit findings.

The department has been paying top law firm Minter Ellison more than $1200 a day since July 2022 for advice on the claims.

The Entrepreneurs’ Programme was scrapped by the Albanese government. Its replacement, the Industry Growth Program, retains several of the same features and has employed many of the individuals involved in the Entrepreneurs Programme.

DISR was contacted for comment but did not provide a response by time of publication.

Do you know more? Contact James Riley via Email.

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