An ICAC investigation found corrupt conduct in relation to construction and maintenance procurement undertaken by the NSW Department of Justice (DoJ). A DoJ asset manager ("the manager"), who was later appointed a senior manager in the Department of Corrective Services (CSNSW), engaged in corrupt conduct by receiving payments and other benefits from a contractor and the contractor's wife. The projects were managed by the DoJ’s Asset Management Services (AMS) unit. Some of the systemic issues uncovered as a result of the investigation are outlined below.
Inappropriate management of external relationships: As an asset manager, the manager worked closely with a small number of contractors, including the contractor referred to above. This allowed a personal relationship to develop, which facilitated the corruption.
Unfettered discretion or authority: The manager was considered by many within CSNSW and AMS as a resident expert and “go-to man” due to his asset management experience and record of delivering. This lead AMS and CSNSW staff to rely on the manager, who used that reliance to informally influence procurement decisions.
Poor risk awareness or mitigation: AMS did not appreciate or manage the risks associated with the very high rate of turnover in its asset managers and consequent reliance on short-term contractors.
Lack of staff capacity or capability: Due to the high rate of turnover in asset managers, staff often lacked the necessary skills and experience for the role and so, in some cases, relied on the manager for advice on which contractors to engage.
Poor change management: AMS had only relatively recently become responsible for asset works for CSNSW properties. The transition was fraught with confused roles, responsibilities, accountabilities and reporting lines, incompatible computer systems, and significant ongoing tension between CSNSW and AMS. In the confusion, resident experts, such as the manager, became more influential and more poorly overseen.
Poor consultation or engagement: Project scoping was poorly executed and often duplicated between CSNSW and AMS. Contracts were typically awarded to the lowest-price contractor, regardless of other considerations, meaning the manager could reasonably predict which contractors would be awarded work.
Poor performance management and poor budgetary management: Minor capital works budgets had to be spent by June 30 each year, creating pressure (or a perverse incentive) on asset managers to quickly engage contractors and have them paid, rather than follow due process. This again lead to asset managers' reliance on the manager to help them more quickly perform their work. There were delays in commencing minor capital works due to inefficient processes in the program, leading to frequent budget underspends and therefore an increasing backlog of minor capital works. Minor capital and maintenance works were funded from multiple funding sources. This made overall program oversight and governance more complicated and created perverse incentives to misclassify work to access funding sources that had fewer controls on expenditure. AMS directly paid subcontractors who were engaged by head contractors at CSNSW correctional centres, creating little incentive for head contractors to seek value for money when engaging subcontractors.
Governance failings: AMS did not have a system for managing the performance of its minor works contractors, which meant poor performance was not detected.
Lack of due diligence or planning: The project scoping process was inefficient, with frequent duplication and variations, leading to project delays. There was a limited pool of suppliers prepared and available to perform the works, leading to further reliance by AMS asset managers on the manager to identify available contractors.
Structural weakness: AMS asset managers were primarily responsible for verifying satisfactory completion of works but there was often no formal involvement of staff in the correctional centres that owned the assets.
Poor formal frameworks: There were no clear policies or a service level agreement governing whether AMS or CSNSW had carriage of specific works, leading to confusion over who was responsible for what work. Senior CSNSW staff were found to have engaged CSNSW and AMS contractors to perform work at their homes, which was not explicitly against CSNSW policy.
Poor information management: Due to incompatible computer systems, CSNSW had no access to AMS project information, and vice versa.
Poor recordkeeping: Both CSNSW and AMS asset records did not contain a level of detail that facilitated efficient and effective management of assets and some financial controls. Information on projects and associated expenditure was held across multiple organisational systems that did not reconcil.
Source: Investigation into the conduct of a former NSW Department of Justice officer and others, August 2017.