Outsourcing Commonwealth activities is part of the reality of doing business for government agencies. Most agencies will outsource some aspect of their IT requirements, property management functions and legal services. Similarly, contractors often fill key roles within an agency and are often integrated so well into the agency that they are indistinguishable from employees. However, a recent Victorian Ombudsman's report has questioned the wisdom of allowing key government positions to be filled by contractors, particular those with responsibility for procurement and human resources functions.

The CenITex example

CenITex, or the "Centre for IT Excellence", is a shared services agency established as a Victorian State-owned enterprise in 2008 to centralise information and communications technology (ICT) support to government agencies. Following a tip-off about the conduct of two CenITex project officers, the Victorian Ombudsman conducted a detailed investigation culminating in the publication of his report, Investigation into allegations of improper conduct by CenITex officers, which was published in October 2012. A copy of the report is available on the Victorian Ombudsman's website.

The report paints a damning picture of outsourcing gone wrong. Among the failings listed in the report were:

  • appointments made on the basis of fabricated documentation
  • invoices paid for services that were not actually rendered
  • CenITex officers awarded contracts to their own companies, and
  • in one instance, a document was prepared attesting to the conduct and outcome of a competitive market testing process that the author knew had never actually taken place.

What went wrong?

The Ombudsman's report found failings in three key areas of public administration: governance and oversight, conflict of interest management, and recruitment and procurement practices. However, it also notes that "from the time of its establishment, CenITex was an organisation at risk of developing poor procurement and recruitment practices."

This risk is attributed largely to the high proportion of contract staff who lacked knowledge of public sector ethics. The report suggested that the appointment of contractors with little or no understanding of probity or procurement policy, coupled with a high-pressure and results-driven environment, were key factors contributing to culture of short-cuts, nepotism and fraud, which resulted in more than $4 million worth of government contracts being awarded improperly.

How could it have been avoided?

While a number of the Ombudsman's recommendations relate to specific remedial action, including audits and police referrals of particular conduct, four out of the 14 recommendations relate to the implementation of proper probity awareness training for staff members, which becomes particularly important where contractors make up a significant proportion of the workforce.

In particular, the report suggests that all staff members and contractors should receive regular training on:

  • conflicts of interest, including what circumstances may constitute a conflict
  • agency policy on outside employment and financial interests
  • receipt of gifts and hospitality, and
  • relevant public sector codes of conduct.

The recommendations suggest that simple measures, if taken by agencies, can be effective in preventing the types of serious and systemic failings that plagued CenITex. Some steps that can be taken readily by all agencies include:

  • reviewing internal policies and work practices for currency and suitability
  • considering what checks and balances are in place to identify any inappropriate conduct before it can escalate—where possible, a contractor should never be responsible for engaging other contractors on behalf of the agency
  • reviewing the content of induction training for employees and contractors to ensure that probity and ethics feature prominently, and
  • considering regular refresher training in these areas for all staff members and contractors. Agencies should keep the issues fresh by offering case studies or hypotheticals to encourage all staff to test their own probity judgment.

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