Corruption Matters - November 2021 | Issue 58
Investigation into the procurement of an acting executive director
A report released by the NSW Ombudsman’s Office in October 2021 detailed how a government department procured the services of a contractor to act in a senior executive role for almost a year, paying substantially more than a person employed in the role would have been entitled to.
When government departments procure goods and services, they are spending public funds. For this reason, procurement must demonstrate value for money and be conducted in an ethical and transparent manner. Procurement legislation and other safeguards (such as the NSW Procurement Board’s policies and directions) are in place to prevent waste or misuse of public funds and corruption.
For example, the NSW Government Procurement Policy Framework mandates that government departments must use whole-of-government contracts and specified prequalification schemes to purchase goods and services, and keep appropriate records of procurement planning, management and decision-making.
The NSW Ombudsman has recently made findings of wrong conduct by the former NSW Department of Planning and Environment (DPE) in procuring the services of a contractor to “act in” a vacant senior executive role for a period of around 11 months.
In the matter investigated, the DPE had engaged the services of a contractor (through a company associated with the contractor) after a vacancy arose in a band 2 senior executive role. The DPE engaged the contractor’s services initially for six months under “emergency procurement” provisions in the Public Works and Procurement Regulation 2014. The fact the procurement was ostensibly undertaken as an emergency procurement meant that some of the usual safeguards set out in procurement legislation and Procurement Board policies and directions did not apply. The DPE paid the contractor’s company substantially more than a person employed in the role under the Government Sector Employment Act 2013 would have been entitled to.
Following the initial six-month period, the engagement was extended for approximately five months. This was achieved by interposing a prequalified executive recruitment firm between the original company (for whom the contractor worked) and the DPE. The DPE then contracted with the executive recruitment firm for the services of the contractor as contingent labour hire. This arrangement added additional cost to the previous arrangement.
The Ombudsman made findings of wrong conduct by the DPE under s 26 of the Ombudsman Act 1974, including that the department acted unreasonably by treating the initial contract (and an extension a few months later) as “emergency procurements”, and that it had acted contrary to law by not notifying them to the NSW Procurement Board.
The findings are included in a special report of the Ombudsman’s investigation, which was tabled in the NSW Parliament in October 2021.
The report raises potentially broader systemic issues for the public sector regarding the use of both contingent labour and other contractors to effectively fill employment roles – especially senior management roles. Recruitment to such roles usually requires a competitive, merit-based process. The holders of such roles are also normally delegated agency functions, including to make human resources and financial decisions; however, contractors cannot be delegated those functions.
The NSW Public Service Commissioner has agreed to consider these issues, and whether any further action is required, including whether enhanced guidance is required about if and when it is appropriate for contractors to “act in” senior public sector roles.