Following its recent examination of NSW Government procurement, the Independent Commission Against Corruption (ICAC) “has identified procurement as a major risk area for corruption in the New South Wales public sector”.

According to the ICAC, in its 22 year history of investigations and public inquiries, procurement has been found to be the most common area for corrupt behaviour to occur. Approximately 12% of complaints received by the ICAC each year include allegations of corruption in NSW Government procurement and approximately 30% of its public inquiries make findings of corrupt conduct related to NSW Government procurement activities.

During July 2010, suppliers to NSW Government were asked to provide their perceptions of corruption in NSW state and local governments by responding to a survey that had been prepared by the ICAC. The ICAC surveyed 1,515 government suppliers in relation to their perceptions of corruption of which 42% believe corruption is a moderate or major problem when doing business with government with 32% indicating that they did not bid on a contract because of corruption concerns.

As part of its research into procurement corruption risk, the ICAC analysed NSW Government’s procurement policy, the regulatory and legislative framework, undertook a survey of 153 state and local government organisations, conducted interviews and focus groups with public sector procurement specialists and suppliers to government, analysed the ICAC investigation and complaint data, invited submissions to a consultation paper as well as undertaking the survey of government suppliers discussed above.

The ICAC released two reports which contain its research and recommendations:

  1. Corruption risks in NSW Government procurement: Suppliers’ perceptions of corruption, and
  2. Corruption risks in NSW Government procurement: Recommendations to government.

The ICAC’s examination of NSW public sector procurement “has revealed a system that has grown and evolved over time without any clear leadership or direction”. As a result, the ICAC made seven recommendations aimed at establishing clear leadership, a clear structure, a simplified regulatory environment and effective assistance to operational agencies in NSW.

The seven recommendations are outlined below:

Recommendation 1: Establish a procurement leadership role in NSW

The ICAC recommends that a single, administrative NSW Government entity be given explicit leadership responsibility for:

a. formulating and maintaining the state procurement policy framework, including standards of conduct or practice

b. building the capacity of the sector

c. promoting the policy and compliance with its provisions

d. monitoring and reporting on compliance and performance standards.

Recommendation 2: Undertake a comprehensive review of the NSW approach to procurement

The ICAC recommends that, as part of the reform program already commenced, the NSW Government, under the leadership of the relevant Ministers, conducts a broad-based review of the system of public sector procurement in NSW that specifically includes the issues discussed and recommendations made in this report.

Recommendation 3: Simplify the regulatory framework in NSW

The ICAC recommends that the NSW Government develops a simplified regulatory framework for procurement that is contained in a single source, clearly distinguishes between mandatory obligations and advisory guidelines, has minimum exemptions and includes an explicit role to monitor procurement compliance of agencies.

Recommendation 4: Align local government and state procurement policy

The ICAC recommends that the NSW Government takes steps to unify elements of the local and state government procurement policy frameworks and associated procedures.

Recommendation 5: Improve information, advice and support

The ICAC recommends that, as part of the process of sector-wide procurement reform, the NSW Government reviews the central procurement information, advice and support functions and tests these activities in order to ensure that they effectively meet the identified needs of end users. As part of this review, the relevant central agency should take steps to ensure that it:

a. fully understands the needs of end users (agencies and suppliers)

b. implements client-centred advice and support services

c. obtains feedback from end users and implements a program of continuous improvement.

Furthermore, during the review process, the relevant agency should take into account the need for:

d. simplified, user-friendly processes and support materials, including best practice guidelines, tools and templates

e. more accessible information about how the DFS is organised, the services it provides and the value of using DFS services

f. the provision of experienced procurement advisers to agencies

g. advisory services to be efficient, timely and user-focused rather than serving the achievement of central-agency business objectives.

Recommendation 6: Build procurement competence

The ICAC recommends that the NSW Government introduces a sector-wide procurement education and training assurance framework that provides for:

a. mandatory minimum standards linked to levels of procurement responsibility

b. auditing of agency procurement capabilities and associated training initiatives

c. a system for mandatory certification of procurement policy and process awareness and compliance by agency staff.

Recommendation 7: Oversee policy compliance

The ICAC recommends that the NSW Government establishes a centralised investigation/complaint management function with the capacity to receive, assess and manage reports about breaches of compliance with the regulatory controls that form part of the procurement policy framework.

For further information in relation to the ICAC’s recent research see:

  • Corruption risks in NSW Government - Suppliers' perception of corruption - (June 2011)
  • Corruption risks in NSW Government – Recommendations to government – (June 2011)