The federal government is “closely monitoring” its tech agency after a scathing audit revealed a widespread lack of compliance with procurement rules and at times an approach which “fell short of ethical requirements”.

The Australian National Audit Office (ANAO) investigation of the Digital Transformation Agency’s (DTA) procurement of ICT-released services scrutinised nine procurements over the last three years and found that all nine were “ineffective”.

The audit found instances of the DTA’s procurement falling short of ethical guidelines, one contract increasing in value by 40 times across 10 variations, no consistent evaluations for value for money, no contract management plans and internal probity guidelines not being followed.

The highly critical report has placed the DTA in the crosshairs of the new Labor government, with Finance Minister Katy Gallagher saying that it has revealed “some very concerning issues with process and behaviour”.

“I take these matters very seriously and will closely monitor the way the DTA addresses these audit recommendations to ensure that the processes and behaviours that have been highlighted in this report are cleaned up and don’t happen again,” Gallagher said.

The DTA has accepted all eight recommendations from the ANAO.

“The DTA welcomes this review and takes seriously the ANAO’s focus on providing increased transparency over our internal procurement framework and practices with a view to ensuring contracts are managed effectively and value for money continues to be achieved,” DTA CEO Chris Fechner said in a statement.

“The combination of these opportunities and work already underway in remediating the recommendations are vital in ensuring continuous improvement of the DTA’s procurement framework and supporting processes.”

The ANAO investigated nine of the DTA’s procurements worth a total of $54.5 million across 2019-20 and 2020-21.

Of these procurements, one was open, seven were via panels, four involved only one supplier being approached, and one was a limited tender.

Out of these, four of the five most valuable procurements saw only one provider approached by the DTA.

The audit office found that the DTA’s procurement was “ineffective” across all nine of these projects examined.

“The DTA has not been following its internal policies and procedures, and there are weaknesses in its governance, oversight and probity arrangements for procurements,” the ANAO report said.

“None of these procurements fully complied with the Commonwealth Procurement Rules. The DTA did not conduct an approach to market or tender evaluation processes effectively, and it did not consistently provide sound advice to decision-makers.”

One of the procurements examined was for the myGov Horizon 1 project - a complete redesign of the myGov platform. This contract went to consulting giant Deloitte and was eventually worth $28 million.

Direct approach

The ANAO revealed that the DTA directly approached Deloitte for this work, and did not create a procurement plan, did not consider value for money, didn’t estimate the value of procurement, did not assess risk and didn’t maintain records of approach.

The watchdog also examined the DTA’s COVIDSafe project, which saw it hand a $6.1 million contract to Delv.

Delv was also the only company approached by the DTA for this “urgent” job.

The ANAO found that the DTA accidentally overpaid Delv $380,000 after making two duplicate payments in late 2020.

This was not identified by the DTA until it was informed by the audit office. While the DTA said Delv has acknowledged the overpayment, the agency said it is working on a payment schedule to “meet the needs of both the DTA and Delv”.

As of mid-August, no such agreement has been reached and the overpaid money has not been recovered.

Another of the procurements examined was for the myGov and Digital Identity charging framework, which involved a $2.3 million contract with ConceptSix.

The ANAO outlined how a senior DTA executive met with a senior executive at ConceptSix in January 2021 to discuss a potential tender for this project.

The next month, the same senior executive was engaged as a contractor following an approach to market on the DTA’s Digital Marketplace.

In May that year, four suppliers, including ConceptSix, were approached for six further contractors on the project.

“The opportunities were on the Digital Marketplace for three days, and there is evidence that ConceptSix had knowledge of the procurements before the opportunities were published,” the report said.

Out of the six consultants brought in by the DTA, five were from ConceptSix. The ANAO also found that one of the two members of the DTA’s evaluation panel had worked previously with two of the successful candidates, but no declaration of interest or probity assessment was completed.

The report also revealed issues around conflicts of interest and the accepting of gifts by the DTA.

It found that in 2019-20, a DTA executive received a $200 ticket to the Institute of Public Administration Event. In 2019-20 and 2020-21, 14 contracts were awarded to that supplier worth a total of $4.5 million.

And one of these contracts was awarded directly after the gift recipient suggested the firm for the set of work, something which doesn’t align with the DTA’s guidelines, according to the ANAO.

The ANAO also revealed that a DTA contract with consulting firm Nous for work on a myGov funding case was varied 10 times, increasing its value by 40 times from $121,000 to $4.9 million.