The Queensland Audit Office’s first report for the 2016-17 financial year is a scathing assessment of Government procurement practices, an assessment which should spur the State Treasury into action. After all, it is proverbial that, if you look after the pennies, the pounds will look after themselves. Actually, it is more than pennies to look after, as the QAO reports (p. 9) that “In 2015-16, Queensland Government departments and Hospital and Health Services (HHSs) spent about $10 billion on services and supplies provided by the private sector (excluding capital spend).”
The QAO finds that a recent attempt to save money on procurement, the Procurement Transformation Program (PTP) led by the Procurement Transformation Division (PTD) in the Department of Housing and Public Works (DHPW), failed to achieve its targeted savings over 2013-14 and 2014-15 by a long way, by around $226 million (p. 20):
A whole-of-government review set an expectation for the PTP, led by DHPW, to achieve a minimum of $417 million in procurement benefits within two financial years across all categories. PTD reported only $190.5 million was achieved over its first two years.
The PTP, which was introduced under the Newman Government, was abandoned in 2015 by the current Government. The QAO reports (on p. 3):
…the government is no longer tracking or aiming for the benefits target set in the State Procurement Plan 2014–18, which was developed by the PTD in June 2014. This is because it believes that target focused too narrowly on achieving financial savings rather than value for money.
The Government does have a point that it is value for money, rather than the pure financial savings themselves, which should be the target. But it is worrying that the QAO appears to suggest in its report that Government agencies have essentially given up on chasing savings in procurement. Indeed, they have no real incentive to achieve them because they will just end up with money taken out of their departmental budgets by the Treasury. Spend it or lose it is the guiding principle.
The QAO is highly critical of the capabilities that exists within Queensland Government agencies to achieve value for money in procurement. It questions why almost half of the plane flights taken by public servants are booked within seven days of the travel date, and hence have higher fares. Even taking into account the urgent nature of much Government business, the QAO suggests (on p. 25) that staff “do not adequately plan their travel.”
This report should prompt a Qld Treasury takeover of Government procurement
Part of the problem is that the wrong agency, DHPW, has oversight of procurement across Queensland Government. The QAO notes (on p. 19):
DHPW has been responsible historically for coordinating whole-of-government procurement in Queensland. However, in our view it is not best positioned to deliver this function. It does not have the authority to set policies for procurement processes, influence finance system designs, or monitor how effectively departments implement them.
The QAO suggests, although it does not formally recommend, that Treasury takes over responsibility for procurement from DHPW. It notes (on p. 33):
Queensland is the only Australian state where the responsibility for whole-of-government procurement does not sit with a treasury or finance department.
This is unfortunate, as saving money is core Treasury business. I hope the hard heads at the Treasury would relish the opportunity to take over procurement policy, and I hope, after it absorbs this QAO report, the Government gives the Treasury this responsibility.
The QAO report provides the Government with a huge opportunity to show it is serious about budget management and reducing Government waste. Let us hope the QAO report prompts some strong action, as there is the potential to save tens of millions (if not hundreds of millions) of dollars annually through more rigorous procurement practices.
Also see ARN coverage of the report: