Splitting hairs and staying fair: Managing value for money in Commonwealth procurement

Ever run a procurement process where the difference between tenderers has been marginal and one tenderer was an incumbent? The Australian National Audit Office (ANAO) has recently had a close look at an example of this and has emphasised how important it is in that case to maintain detailed procurement decision records and have a robust approach to conflicts of interest. Entities who fail to do so will face difficulties demonstrating their procurement achieved value for money and adhered to probity requirements. These are the core messages coming out of the ANAO’s performance audit report into Geoscience Australia’s procurement of the Southern Positioning Augmentation Network (SouthPAN).

The upshot? Make sure you can produce documents verifying that the successful tenderer was in fact the best value for money and protect yourself against claims that incumbency alone was an advantage. Read our top tips to help navigate these issues.

Background

In September 2022, the Australian Government awarded a 19-year, $1.18b contract to Lockheed Martin Australia to deliver SouthPAN; a satellite infrastructure project designed to improve the accuracy of location data. Lockheed’s success came at the expense of one other tenderer and followed their 2017 technology trials with the Australian and New Zealand governments.

Key Findings

The ANAO made the following findings:

Geoscience Australia’s procurement process complied with 5 out of 7 Commonwealth Procurement Rules (CPRs)
Partial compliance was identified for the following CPRs:
- Value for money (pt 4); and
- Efficient, effective, economic, and ethical procurement (pt 6)
The performance framework adopted by Geoscience Australia has rendered it difficult to demonstrate value for money over the life of the contract
The contract management framework in place was fit-for-purpose

Staying Compliant!

The ANAO’s findings of partial compliance hinged on Geoscience Australia’s value for money framework, and their mismanagement of a perceived conflict of interest.

So, how can you comply with the value for money and probity requirements under the CPRs? We have put together our top tips coming out of the report.

Tips	Implementation	Example uses 2
#1 – Develop a consistent and transparent methodology to assess value for money	It’s important that the selected value for money framework (and associated metrics) facilitate clear comparison and ranking between tenderers. When devising your evaluation criteria, consider the type of information you are hoping to elicit. “Generic” evaluation criteria won’t usually get you what you want. The same standards and metrics ought to be applied to all tenderers. Transparent metrics are especially important where there are large variances in tenderer bids. For example, Lockheed’s total cost projection was significantly ‘more expensive’ than the other tenderer’s bid, with an average variance of $82.94m or 9.54%. The ANAO queried why this information was not included in the Tender Evaluation Report, despite being identified as a weakness in the price analysis assessed by the Tender Evaluation Board. If you select a more expensive tenderer, ensure you can demonstrate value for money in other areas (eg, quality, experience, risk) in the Tender Evaluation Report.
#2 – Clearly link your selected evaluation criteria to your procurement objectives	The value for money framework needs to accord with the objectives of the procurement. Identify and document how individual criteria advance the objective(s) of the procurement. In this procurement, the criteria evaluation template used by the Tender Evaluation Board to assess tenders was ‘overly detailed and not easily linked to the procurement objectives described in the Procurement Plan.’ Remember that if it isn’t in the evaluation criteria, it can’t be used to evaluate tenderers. Ensure that the planned approach is the one documented in the Tender Evaluation Plan.
#3 – Use the Department of Finance’s guidance on assessing value for money	Access this guidance here.

Tips	Implementation	Example uses 2
#1 – Maintain robust documentation of decisions that can withstand scrutiny	Detailed decision-making records provide assurance that a Tender Evaluation Board’s conduct was not overborne by past relationships with a tenderer. The documents may also combat criticism that a tenderer’s incumbency proved pivotal to their success.
#2 – For significant procurements, consider appointing independent monitoring/observation for core Tender Evaluation Board meetings	The presence of an independent party before a Tender Evaluation Board encourages ethical conduct and evaluation of tenderers in accordance with the value for money framework.
#3 – Diversify your Tender Evaluation Board with additional members	Prior disclosed interests may hold greater influence where there are fewer members on a Tender Evaluation Board. If previous interactions and interests with tenderers have been disclosed, consider adding additional members to your board to dilute any perceived influence.

Splitting hairs and staying fair: Managing value for money in Commonwealth procurement

Background

Key Findings

Staying Compliant!

Value for money

Perceived conflicts of interest

Governance Solutions

Crisis Management

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