Has the Commonwealth Auditor-General been unfairly prejudged? Verona Burgess explores what to make of one of the public service’s most influential, and feared, individuals.
The Commonwealth Auditor-General, Grant Hehir, was appointed in June 2015 and was soon ruffling feathers in Canberra.
The Australian Public Service had grown used to a conciliatory behind-the-scenes approach from his predecessor, Ian McPhee.
Current and former public servants, somewhat unfairly, started comparing Hehir’s approach to the combative style of an earlier auditor-general, John Taylor.
In his pre-Christmas address in December, the secretary of the Department of the Prime Minister and Cabinet, Martin Parkinson, took a swipe at both the Australian National Audit Office and Senate estimates committees for “gotcha games” that “may give everyone a thrill but they fail miserably at improving the quality of public service and instead, what they end up doing is encouraging inertia and mass risk aversion.”
There’s a risk in bagging an auditor-general — they tend to have the last word. The scathing performance audit, tabled last September, of the Turnbull government’s high-profile $1.1 billion innovation agenda must have really hurt.
Effective, sure, but at what?
Yet back in March 2016 Hehir flagged realigning his office’s approach to performance audits, asking departments to provide much better performance information.
In a speech, Hehir said his office had recently examined 277 of its own performance audits tabled between 2010 and February 2016.
“In a performance audit,” Hehir said, “the auditor’s objective is to express an opinion whether, in all material respects, the operations of government administration has been carried out economically, efficiently, effectively, in compliance with legislation and accompanying instruments and to recommend ways in which the operations may be improved.”
The ANAO had wanted to see whether the objectives or criteria in previous audits had allowed for an assessment of effectiveness, efficiency and/or economy.
“The predominant focus of audits tabled during this period was effectiveness,” he said.
These “effectiveness” audits had examined entities’ existing program strategies and assessed the extent to which programs were implemented as intended. “There was less focus on whether the strategies themselves had been effective in achieving the desired outcome.”
The underlying reason, he said, was a combination of the interpretation of the performance auditing standards’ requirements and the quality of performance information.
He made it clear the audit work program would be extended to examine more regularly the full spectrum of effectiveness, efficiency and economy.
He repeated his call for better performance information in another speech last December and also flagged shifting from the Australian to the new international standard for public-sector performance reporting.
Procurement under the microscope
On December 17, Hehir tabled a no-holds-barred audit into the delivery of the $1.9 billion Moorebank Intermodal Terminal in south-western Sydney, spanning the Moorebank Intermodal Company — a Commonwealth government business enterprise chaired by Kerry Schott — and two federal departments, Infrastructure and Finance.
Hehir initiated a new audit into MIC staff use of credit cards, hospitality, consultants and other matters last week (he’s hot to trot on transparency — he publishes his own personal expenses on the ANAO website).
The report is a complex and by no means wholly negative audit of this heinously difficult project (see a ‘simplified’ 2015 transaction structure depicted on page 40).
A key dispute was over MIC’s decision to pick a preferred tenderer to build and operate the much-needed freight hub.
In a nutshell, the report said the procurement process was not sufficiently competitive and value for money had progressively eroded during contract negotiations. “Negotiating directly with one respondent, rather than the original plan of maintaining competition during the second stage of the procurement process, gave rise to a number of risks. Those risks were recognised and mitigation strategies identified but those strategies were not implemented. This situation makes it difficult to conclude that value for money has been achieved.”
MIC rejected this. It had called for expressions of interest; five companies had responded. One — the private-sector joint-venture Sydney Intermodal Terminal Alliance, known as SIMTA — was strongest, it said.
“Faced with a situation where one submission was significantly stronger than others and was considerably more aligned to the relevant objectives, and following lengthy and detailed deliberation and examination of the potential options (including taking the advice of our probity adviser), MIC proceeded to direct negotiations with one respondent. Given the substantially lower value offered by the other respondents, the board was concerned at making an implied representation to the ‘under bidders’ that they had a commercially realistic possibility of succeeding at a bid cost anywhere near their expressions of interest, and the board did not wish to induce [them] to expend further bid costs on the basis that it could be construed as being a materially misleading omission.”
But the auditors were undeterred. “The ANAO has recently examined two other procurement processes [the OneSKY tender and the replacement Antarctic vessel] where direct negotiations were undertaken instead of maintaining competitive pressure. Similar to the MIT, there were significant delays in finalising the procurement along with challenges in demonstrably obtaining value for money.”
This has been an area of passionate conflict in federal procurement over many years (think submarines).
It also points to Hehir’s renewed emphasis on efficiency and economy as well as effectiveness.
With an eye-watering $200 billion worth of defence spending coming up, including Turnbull’s bid this week to make Australia one of the world’s top ten arms exporters via a worrying $3.6 billion loans scheme, there will be more.
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