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National Audit Office Says Morrison Government Wasted Millions on Entrepreneurs’ Program Tenders

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In 2019, the Ministry of Industry, Science, Energy and Resources (DISER) extended the services of its Entrepreneurial Program to tender.

Under the program – which was DISER’s largest single purchase in 2019-20 – companies can get expert advice on how to scale and grow, bring an innovative new product to market and apply for government grants.

These experts are called ‘facilitators’ and in some cases guide companies for up to two years.

Companies like Quantum brilliancethat are recently room temperature quantum system to a supercomputer at the Pawsey Supercomputing Center in WA, have received support from the Entrepreneurship Program.

Facilitators’ expertise doesn’t cost the companies they advise, but it does cost the taxpayers.

Unfortunately, when DISER sought tenders to hire these business experts, it failed to “get value for money,” the main tenant of the government’s procurement rules, according to the ANAO.

DISER’s market approach was “inadequate”, it “didn’t meet the ethical requirements” of the procurement rules, lacked transparency and the subsequent handling of contracts was messed up.

Pick and choose

Major consultancy Deloitte took advantage of DISER’s clumsy tendering process.

When it offered to be a national provider for the ‘growth servicesFlow of the Entrepreneurial Program — which offers state and territory facilitators, not national ones — ANAO’s procurement panel compared its national approach to tenders for specific regions.

Deloitte, along with Ai Group and the NSW Business Chamber, were also given the special opportunity to review or improve tenders with different service models and pricing information.

“While Deloitte — an established supplier — was not identified as the best candidate in any given region, DISER tailored arrangements to select Deloitte to provide growth services in Queensland based on its ability to provide additional ‘ national specialist roles,” the ANAO report notes.

The department’s tender, it further explains, didn’t even ask for the national specialist roles it bent the rules for.

In March 2020, Deloitte signed a $31.8 million contract to provide ‘growth services’ in Queensland, but the contract value rose to $37 million, an increase of 16 percent.

DISER underreported Deloitte’s contract variance by more than $165,000.

All but one of DISER’s providers saw costs rise after signing their contracts. The NSW Business Chamber was the worst offender with a 39 percent increase in the contract that went from $20.8 million to $29 million.

The Commonwealth Scientific and Industrial Research Organization (CSIRO) was the only one to see the value of the contract fall from $16.9 million to $16.2 million, a 4 percent drop.

In all, the original contracts worth $144 million cost taxpayers more than $163 million.

Conflict of interest

Other issues noted in the ANAO report include DISER’s ad hoc change to the procurement process (it used a phased approach where candidates were shortlisted, although it was never said it would), and poor handling conflicts of interest.

Once, a manager of i4 Connect – a company that provided facilitators under the Entrepreneurship Program – made an offer to invest in a company advised by i4 Connect as part of the taxpayer funded scheme.

The conflict of interest was not expressed until the company submitted a grant application after working closely with i4 Connect for nine months.

“While the conflict of interest was not resolved, the Program Representative approved the Declaration of Interest without requiring any management action to mitigate the conflict of interest, except that i4 Connect would be reminded of its contractual obligations when using information they may in their jobs for personal benefit. ,” said the ANAO report.

“The company was awarded a $398,350 grant for accelerated commercialization (the full grant amount requested).”

In its audit report, the ANAO made 10 recommendations related to managing the risk of favoring incumbent suppliers, developing contract management plans and adopting a “proactive approach” to conflicts of interest.

DISER agreed with all ten recommendations.

†[The report] concludes that the execution of the procurement process did not meet the ethical requirements in the [Commonwealth Procurement Rules] and that the supply partner contracts are not being properly managed,” said David Fredericks, DISER secretary, in a response to the national auditor.

“The department recognizes that its approach to this tender in late 2019 and early 2020 was flawed in significant ways and did not meet applicable standards of transparency, consistency and fairness.”

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