Probity Advisers: Fairness commandos or simply sign-offs?

The Federal Government purchased at least $3.4 billion of IT products and services in the past 12 months.

Image of spectacles over a spreadsheet

These purchases have to satisfy a published set of conditions. Purchasing decisions have to be made on the basis of value for money. They require a competitive, open and fair procedure.

But apart from iregular audits, usually only conducted by the national audit office after a long period of public complaint, how do procurement decisions withstand questions about conflicts of interests?

For example, did a late change to the terms of the tender favour one contractor over another? Were there barriers to entry that discouraged some suppliers over others? Did one party get access to information that helped them tweak their bid to win the contract?

Introducing the Probity Advisor

It is often the little known and misunderstood "probity advisor" that is employed to help Governments ensure procurements are fair and efficient and that the best offering got up only on its merits.

A probity advisor is an individual engaged by government to observe, review and report on the bidding and selection process in government procurement projects, and advise on all probity issues.

In the jargon of the public sector, they offer a "risk-transfer function". That is, they reduce the risk of major bungles or scandals in procurement and advise agencies of ways to get the best deals through fair and open means.

Government use of probity advisors is fairly unique to Australia and New Zealand. US and UK agencies don't have them, although the underlying legal fairness principles are similar. The Canadian Government seems to have probity advisors though they are dubbed more accessibly as "fairness monitors".

In practice, it is a quasi-legal advisory function driven by legal precedents (see Hughes below). 

Accounting firms tend to get much of the work, as they charge lower rates than legal firms. Rates can vary between $200 to $1000 an hour.

"I find puzzling that most probity work goes to accounting firms. There tends to be an unjustified assumption that it's an audit issue and therefore they go to an accounting firm. They have a grip on the market even though it's not really an accounting process," says Len Withers, a probity advisor with Walter Partners.

"The profession of probity advisors is still quite novel. No formal qualifications are required to be one. In practice it is a matter of expertise and experience - often with former senior public servants - with legal or procurement experience getting the nod."

Here comes the judgement

The demand for probity advisers can be traced to one of the more appalling IT procurement disputes ultimately settled in the Federal Court some 14 years ago.

Known as Hughes Aircraft Systems International v Airservices Australia [1997] FCA 558 (30 June 1997) the case was run by Hughes, the unsuccessful tenderer in a two-party bid for the award of a multi-million contract for an Australian Advanced Air Traffic System (known as TAAATS). Hughes sued Airservices Australia for breach of contract as well as several other legal breaches.

Justice Paul Finn found the Government's processes leading to the award of the TAAATS contract were governed by a "process contract", the principal terms of which were contained in the RFT.

An "implied" term of that contract was that the CAA would conduct its tender evaluation fairly and that CAA acted in breach of its contract with Hughes in that it:

• failed to evaluate the tenders in accordance with the priorities and methodology prescribed by the RFT
• failed to ensure that confidentiality of information in tenderers' proposals per the RFT, and
• accepted an out of time change to the rival bid.

The case offers a legal assurance to potential Government suppliers. It binds every agency that puts out an RFT to be "procedurally fair".

Interest in understanding procurement fairness issues is on the rise, according to Don Walter of Walter Partners. The company's probity seminar  in Sydney last week, held at the Institute of Chartered Accountants, attracted a host of acceptances within hours of its announcement.

No procurement botches, please

But employing a probity advisor is not a panacea for avoiding procurement stuff-ups.

In 1999 an unidentified probity advisor featured in a $351 million IT outsourcing decision for the Health IT group – a compelling case study of a now classic IT procurement blunder.

IBM 'inadvertently' received competing bids from other tenderers for the deal. The audit report into the affair also noted that IBM lodged its ultimately successful offer after the deadlines. Documentation of decisions and options was patchy.

"When the disc containing all three bids was delivered to IBM GSA in error, my reaction on being informed directly by OASITO (a predecessor of AGIMO) was to cancel the tender," the previous Finance Minister reportedly said.

... At the conclusion of the tender I was both disappointed and annoyed at the limited role of the Probity Auditor and the absence of a separate report on this issue."

Nevertheless, the procurement proceeded and the probity advisor, then referred incorrectly to as Probity "Auditor", on 3 September 1999 offered only a statement of 'negative assurance'.

That is, it stated that the Probity Auditor (Advisor) was '...not aware at this time of any circumstances arising out of the evaluation and parallel negotiation phases of the Health competitive tender process which present unresolved probity issues or concerns'

More Confusions, War Stories and Ethical Dilemmas read on