Contract Management in Haste

Last week the Australian National Audit Office released a most fascinating report into the contract management of the offshore facilities that Australia uses in their processing of refugees.

For the avoidance of all doubt this analysis of that report is not a commentary on the underlying situation.

The report itself is an excellent case study of what not to do in contract management.

As the background to the report notes:

In 2012 the Australian Government established offshore processing centres in the Republic of Nauru (Nauru) and Papua New Guinea (PNG) with the agreement of the Nauruan and PNG Governments. Under the agreements, the Australian Government was to bear all costs associated with the construction and operation of the centres

It continues:

To underpin operations at the centres, the Department of Immigration and Border Protection (DIBP or the department) entered into contracts for the delivery of garrison support and/or welfare services with a number of providers. Garrison support includes security, cleaning and catering services. Welfare services include individualised care to maintain health and well-being such as recreational and educational activities. The total combined value of the contracts at 6 December 2016, as reported on AusTender, was $3386 million.

It is in that context that the report examined the relevant contract management processes.

They concluded:

management of the garrison support and welfare services contracts at the offshore processing centres in Nauru and Papua New Guinea (Manus Island) has fallen well short of effective contract management practice.

Of great – and universal – note, the report observed:

The garrison support and welfare contracts were established in circumstances of great haste to give effect to government policy decisions and the department did not have a detailed view of what it wanted to purchase or the standards to apply.

There was no clear contract governance:

The department did not put in place effective mechanisms to manage the contracts. Other than the contracts, there was no documentation of the means by which the contract objectives would be achieved. In the absence of a plan, assurance processes such as the inspection and audit of services delivered, has not occurred in a systematic way and risks were not effectively managed.

The issue of authorisation was also addressed:

Substantial contract variations totalling over $1 billion were made without a documented assessment of value for money.

To lose this report into the cloud of the subject matter would be to miss an important contribution to auditing contract management.

For as the report observes:

Contract management is core business for (Commonwealth) entities.

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