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
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
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,
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
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
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,
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.
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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