ICAC sniffs vendors in NSW for ICT procurement corruption

The Independent Commission Against Corruption in New South Wales (ICAC) has singled out the state government’s sprawling technology estate as a prime target for a dragnet, citing systemic system vulnerabilities and an uptick in complaints and adverse findings.

In its first comprehensive report on the “state of corruption in NSW”, government technology purchasing – which is now worth around $3 billion as year – has been singled out as a weak spot as public sector digitisation efforts continue apace.

Citing “control weaknesses” ICAC said “there are characteristics of ICT procurement that appear to make it more vulnerable to corruption.”

The degree of corruption in either agencies or vendors is a bit of an open question, with the watchdog noting a “growing share of public sector expenditure devoted to ICT” may be one of the reasons for growth in tech complaints and graft.

This said, the increase in spend is as good a reason as any for ICAC to have a good nose around, especially given the significant efforts by suppliers to either secure government work or effect outcomes through the use of government relations staff or firms.

One area of interest is whether cost overruns could be masking malfeasance.

“ICT projects often run over time or over budget for reasons unrelated to corrupt conduct. Consequently, corrupt conduct on an ICT project is less likely to stand out,” ICAC said.

Government’s love of a custom build also creates price padding opportunities.

 “While some ICT products are commoditised and easy to price (for example, new hardware), many need to be customised to the agency’s needs and operating environment. This lack of homogeneity makes it easier for corrupt over-scoping and overcharging,” ICAC says.

“To the extent that the deliverable is non-standardised, the gap in knowledge between the buyer and seller widens and the potential for corruption increases.”

The there’s the people doing the ICT work – like contractors and consultants – that can leave agencies vulnerable.

“Public sector agencies cannot afford to employ in-house experts for the many ICT solutions they require. Consequently, there is often a gap in knowledge between public sector buyers and private sector sellers of ICT products (also known as information asymmetry),” ICAC said.

“This means agencies often lack the in-house expertise to design the scope of work, set an accurate budget, question the need for variations and manage the contractor.”

The fact that a lot of tech staff are not government employees has also cocked an eyebrow. It’s here ICAC notes it’s detecting graft in terms of who gets a start or awarded a gig. Contractors and body shops are a key focus, especially because it’s expensive to run a ruler over them.

“By custom or choice, many ICT staff work as part of the gig economy. This means many work as freelancers or independent contractors using their own company, or via one of many ICT labour hire/ recruitment firms,” ICAC said.

“Among other things, this makes it expensive to conduct due diligence on what could be a large number of micro companies. The Commission has also identified that numerous ICT workers have either ownership in, or an association with, an ICT labour-hire company. On several occasions, this has caused staff to corruptly favour the relevant company.”

ICAC’s head reckons there’s plenty of innovation being shown in the government graft game.

“The nature of corruption is that it does not stagnate,” ICAC Chief Commissioner Peter Hall QC said.

“As the report says, if systemic and operational weaknesses are not addressed, corruption can take hold and cause significant damage to an agency’s finances, productivity and reputation.”

Watch this space.