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Contracting practices and outcomes

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Government purchasing is a topic of considerable public interest. This appendix focuses on:

More information on each of these issues follows.

Purchasing Practices

Our purchasing policies and practices reflect the principles set out in the Commonwealth Procurement Guidelines and Better Practice Guidance (CPG):

  • value for money
  • open and effective competition
  • ethics and fair dealing
  • accountability and reporting
  • national competitiveness and industry development, and
  • support for other Australian Government policies.

Our Chief Executive Instructions on procurement emphasise these principles and the need for compliance by all staff who decide procurement methods, source potential supplies or enter into contracts. As part of this, in 2003-04, we:

  • listed details of all publicly available business opportunities with a value of $2000 or more on AusTender http://www.tenders.gov.au/ 1
  • conducted probity reviews of proposed contracts which are of high risk, including all proposed contracts worth $50 000 or more
  • published details of all contracts or standing offers awarded with a value of $2000 or more in the Purchasing and Disposals Gazette www.contracts.gov.au/, and
  • published a detailed list of all contracts with a value of $100 000 or more on our website www.dotars.gov.au/ as required by Senate Order 192.

Requests for access to contracts are considered in line with the Freedom of Information (FOI) Act 1982. For more information about FOI issues, see Appendix F.

Note: While some contracts involve a fixed price, the value of others depends on the level of demand for the goods or services involved. In these cases, we report the best available estimate of the value of the contract based on expenditure to date and likely demand over the remainder of the contract. All values shown include goods and services tax (GST) unless annotated to the contrary.

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Competitive Tendering and Contracting

Competitive tendering and contracting (CTC) is the process by which responsibility for services previously performed in-house is transferred to an outside body 5. We have contracted out:

  • certain services delivered on behalf of the Australian Government, and
  • a range of corporate services.

More information on contracts valued at $100 000 or more follows. All such contracts routinely include a requirement for Australian National Audit Office access to contractor premises.

Services delivered on behalf of the Australian Government

We deliver a number of services on behalf of the Australian Government. Services that we have contracted out relate to:

  • management of leased airports
  • management of properties at the Sydney West airport site
  • noise insulation of eligible properties around Sydney and Adelaide airports
  • air services to remote communities
  • transport safety research and information services
  • the Commonwealth Regional Information Service (CRIS), and
  • services to non self-governing territories.


Did you know?

While our priority is to obtain value for money, we have a strong record of giving smaller regional enterprises a chance to win our business. Roughly 60 per cent of all the contracts we award go to small-to-medium enterprises (SMEs) 2. In 2003-04, for example:

  • our new IT services contract went to the Australian small-to-medium enterprise Ipex 3, and
  • we achieved 29 per cent usage of smaller airlines on the Canberra to Sydney route between October 2003 and May 2004 4.

What's more, we promote CPG principles to bodies that receive government funding, particularly local government:

  • We have promoted Australian Government help for employers to maximise indigenous employment under the Roads to Recovery Programme (page 81).
  • We also collect data and report on the services local councils provide to their indigenous residents as part of our annual report on financial assistance for local government (page 123).

1 Business opportunities have been advertised on http://www.tenders.gov.au/ since 3 May 2004. Before this date tenders were advertised on the previous gazette site www.ads.gov.au/
2 Department of Finance and Administration analysis received mid 2003 for our 2001-02 contracts.
3 In early 2004 Ipex merged with Volante to form Australia's largest domestic IT services provider in terms of revenue.
4 Department of Finance and Administration data.
5 This definition is in the Requirements for Annual Reports issued by the Joint Committee for Public Accounts and Audit.

Management of leased airports

Airport building control, environmental protection and parking control services at federally-leased airports are provided by private contractors.

Eight existing contracts for airport building control services and seven existing contracts for airport environmental services were put in place following open tender processes and will continue until 30 June 2005 6. Another open tender process will start in early 2005 for services required from 1 July 2005.

Parking control services are contracted out to airport lessee companies (ALCs) annually. Only five contracts were valued at $100 000 or more in 2003-04. These contracts related to parking at Sydney, Brisbane, Melbourne, Perth and Coolangatta Airports. Contracts cannot be offered to bodies other than ALCs under the Airports (Control of On-airport Activities) Regulations 1997.

6 Some of these contracts are less than $100 000 in value.

Management of properties at Sydney West airport site

Management of properties owned on and around the proposed Sydney West Airport site (Badgerys Creek) has been contracted out to Zeckendorf Asset Management following an open tender process. This contract was signed on 1 January 2003 for an initial term of three years with an option to extend for two years. For more information on this activity, see Chapter 4.

Air services to remote communities

We administer the Remote Air Services Subsidy scheme, which ensures weekly air services to a number of otherwise isolated communities. We called for tenders for new two year contracts in May 2004. For more information on the scheme, see Chapter 4.

Transport safety research and information services

We have contracted out a range of services relating to on-road research and evaluation, data collection and analysis, warehousing and distribution of transport safety information, and design and development of training for safety investigators. Most of these contracts were set in place between 1999 and 2002, and are due to expire in 2004-05.

In 2003-04, we made one material change to these contracts: we contracted out road fatality database management to Directions Management and Consulting Pty Ltd. This contract was signed in January 2004. It has an initial term of three years. For more information on transport safety research and information, see Chapter 4.

CRIS

Call centre services were contracted out to Cooma Monaro Technology Centre Ltd following a select tender process. This contract was signed on 20 August 2001. It had an initial term of six months and now operates on a month-to-month basis. Market research and advertising associated with the service is also contracted out. Few payments were made against these contracts in 2003-04 (see market research and advertising). For more information on CRIS, see Chapter 5.

Services to non self-governing territories

We provide a range of services to the residents of non self-governing territories in the absence of a state government. While we continue to provide some of these directly, others are provided through the private sector or nearby state governments such as the West Australian Government in the case of the Indian Ocean Territories (IOTs). A number of existing arrangements are due to expire in 2004-05 and are currently under review.

In 2003-04, we made one material change to these arrangements: we engaged National Jet Systems to provide regular air services between Perth and the IOTs, following an open tender process. This contract commenced on 1 August 2004. It has a term of five years, and will ensure certainty of air services to the territories.

For more information on services to territories, including services we provide directly, see Chapter 5.

Corporate activities

We have carried out detailed analysis of our corporate activities in line with government requirements for market testing of these activities. Corporate activities that have been contracted out fall into three broad areas:

  • information and communication technology (ICT) services
  • professional services, and
  • property and office services.

Like most organisations, we also have a range of contracts and standing offers in place for the supply of energy, office equipment, stationery and other consumables.

ICT services

Desktop, help desk and related information technology services were contracted out to Ipex ITG Pty Ltd following an open tender process. The contract was signed in late 2003. It has an initial term of four years. For more information on contract outcomes, see Chapter 1.

Wide area network, data communications and voice communications services were contracted out to Optus Networks Pty Ltd following a select tender process. These contracts were also signed in late 2003. They have an initial term of two years.

We also have a range of contracts and standing offers in place for other specialist ICT services such as software development and support, internet security and cabling. These contracts were generally signed between 2000 and 2002 and are due to be reviewed in 2004-05.

Professional services

A panel of communications service providers has been set up following a select tender process and is used where sufficient capacity or specialist expertise is not available in-house. The panel arrangements took effect in early 2004 and will continue for three years. For details of all payments made during 2003-04 of $1500 or more including GST, see table 7.3.

A panel of legal service providers has been set up following a select tender process and is used where sufficient capacity or specialist expertise is not available in-house. The panel arrangements took effect in late July 2003 and will continue until June 2006 with an option to extend for two years.

A panel of accountancy service providers has been set up following a select tender process and is used where sufficient capacity or specialist expertise in not available in-house. The panel arrangements took effect in late 2003 and will continue until October 2006.

Internal audit services were contracted out to KPMG following a select tender process. The contract was signed on 6 December 2002. It has an initial term of two and a half years, with an option to extend for one year and then another year.

Other services

Property and security services were contracted out to United KFPW Ltd following a select tender process. This contract was signed on 11 December 2002. It has an initial term of five years, with an option to extend for two years and then another two years.

Office services were contracted out to Pickfords Pty Ltd following a select tender process. This contract was signed on 4 April 2003. It has an initial term of five years, with an option to extend for two years and then another two years.

Travel services were contracted out to American Express following a select tender process. The contract was signed after the collapse of the Ansett group of companies and was extended in January 2004 until 31 December 2006. For more information about contract outcomes, see the case study.

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Consultancies

We generally engage consultants to carry out research or provide professional or technical advice which cannot be provided by departmental staff. We select consultants in the same way that we procure other goods and services.

In 2003-04, we engaged fewer consultants and spent less on consultancies than in previous years (see table 7.2 below). This result reflects self-imposed expenditure restraint under the Work out/Work up plan. Details of consultancy contracts valued at $10 000 or more are available on our website www.dotars.gov.au/

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Market Research and Advertising

As noted below, advertising and market research organisations may be called on to support specific activities such as staff recruitment or projects such as the Green Vehicle Guide.

In 2003-04, we paid $1.7 million for market research and advertising - roughly the same as in 2001-02 (see table 7.2 below). Our main focus was on transport initiatives including driver education and the new Green Vehicle Guide ($1.3 million).

As required by section 311A of the Commonwealth Electoral Act 1918, a list of payments of $1500 or more made during the financial year is provided in table 7.3.

Table 7.2 - Trends in procurement

 
2000-01
2001-02
2002-03
2003-04
Purchasing outcomes
Contracts let to SMEs a
41.6%
61.8%
Not yet available
Not yet available
Consultancies
New consultancies valued at $10,000 or more
Number let
88
49
62
54
Total value over the life of these contracts
$10.4m
$5.3m
$3.8m
$3.7m
All consultancies including consultancies let in previous years
Total expenditure
$10.7m
not reported
$6.0m
$4.0m
Market research and advertising payments - not including payments less than $1500 b
Creative advertising
-
$0.8m
$0.0m
$0.4m
Market research/polling
$0.3m
$0.3m
$0.5m
$0.4m
Direct mail
$0.1m
-
$0.5m
$0.0m
Media advertising
$0.5m
$0.4m
$3.4m
$0.8m
Total payments
$0.9m
$1.5m
$4.4m
$1.7m

a As advised by Department of Finance and Administration
b Payments have been rounded to $0.0 million where payments were less than $50 000. Discrepancies in table between totals and sums of components are due to rounding.

Table 7.3 - Detail of market research and advertising payments of $1500 or more

Firm
Service provided
Payment made in 2003-04
Creative advertising agencies
Singleton Ogilvy and Mather Develop AusLink advertising campaign
$309 486
RCSC Services Pty Ltd Develop curriculum for a novice driver education course and design a large-scale trial and evaluation program a
$81 933
All creative advertising
$391 419
Market research/polling organisations
Quantum Market Research Market research and test the AusLink campaign
$98 010
Quantum Market Research Evaluate CRIS a
$89 540
Colmar Brunton Social Research Conduct market research for the Green Vehicle Guide c
$77 534
The Social Research Centre Pty Ltd Conduct national survey of community attitudes to road safety b
$72 128
Woolcott Research Pty Ltd Report on Perceptions of Regional Australia a
$27 940
Eureka Research Research the National Awards for Local Government a
$41 926
Solution Marketing and Research Pty Ltd Research and analyse the branding and logo for Area Consultative Committees a
$27 500
Alberton Consulting, Odd One Out Pty Ltd Analyse community health needs in the Indian Ocean Territories a
$11 520
All market research/ polling
$446 098
Direct mail organisations
Universal Express Group Distribute the AusLink White Paper
$13 236
Media advertising organisations
The following advertising was placed through the Central Advertising System as required to maximise the Australian Government's purchasing power and to ensure the department does not compete with other agencies for media time and space. For more information about this system, visit http://www.naa.gov.au/
HMA Blaze Pty Ltd Prepare and lodge advertisements for Roads to Recovery campaign
$487 383
HMA Blaze Pty Ltd Prepare and lodge advertisements on Scoresby Freeway (Victoria)
$116 702
HMA Blaze Pty Ltd Prepare and lodge advertisements for proposals to undertake specific projects and for job vacancies c
$198 605
All media advertising
$802 690

a Contract also listed as a new consultancy with a value of $10,000 or more
b Contract previously listed as a consultancy with a value of $10,000 or more
c May include payments under $1500

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