A proposed plan to ban “unethical” private companies from winning government contracts for up to five years would have a major impact on tech work and “may jeopardise continuity of essential services”, the Digital Transformation Agency has warned.

Greens Senator Barbara Pocock last year introduced a private members’ bill to the Senate that would introduce a federal debarment regime for government contracts, meaning that companies may be banned for five years if they engage in “unethical conduct”.

The bill was introduced in response to the PwC scandal, which saw the accounting giant provide advice to its client on avoiding tax laws that it was also providing advice on to the federal government.

In the wake of this incident, PwC entered into a voluntary agreement with the Department of Finance to not bid for any government work for one year.

This time has now elapsed.

“The Commonwealth does not currently have a clear power to ban a firm that monetised confidential Treasury information – this needs to change,” Pocock told the Senate.

“There is currently no effective deterrent.

“This government has betrayed the Australian people who had very rightly held the expectation that the rogue consulting firm PwC would be held to account.”

‘The bare minimum’

Under the proposed scheme, contracts would not be entered into with suppliers or tenderers who have engaged in unethical conduct, which it defines as recent convictions or pecuniary penalties, or a proven record of poor labour practices or tax avoidance, or other conduct that may have an adverse impact on the integrity of the Commonwealth.

A number of other countries, including Canada, the United Kingdom and the USA have similar debarment schemes in place, and there has been a long-running campaign for Australia to introduce one.

“This should be the bare minimum – we need a national debarment regime,” Pocock said.

“Australia’s Commonwealth Procurement Framework is weak in comparison to similar countries. A national debarment regime is not a radical or untested concept.

“A debarment regime would help to maintain public confidence in procurement by preventing irresponsible suppliers and tenderers from securing government contracts.”

‘Significant operational risks’

In a submission to the Senate committee now investigating the bill, the government’s Digital Transformation Agency (DTA) raised concerns that such a scheme would come with “significant operational risks and unintended consequences”, particularly when it comes to IT work.

“In the digital market, where unique or highly specialised services are often supplied by a limited number of providers, a permanent exclusion of a supplier may jeopardise continuity of essential services and escalate costs and risks,” the DTA submission said.

“The dynamic nature of the technology sector – with frequent mergers, acquisitions and changes in subsidiary and reseller relationships – means that a blanket ban may inadvertently restrict access to critical or innovative capabilities that subsequently become available through previously debarred organisations.”

DTA pointed to the Queensland government’s previous ban on IBM for several years after an incident.

“While this action addressed immediate concerns about accountability, it also reduced competition in the market for large-scale IT services and contributed to a contraction of the local workforce,” it said.

“Even after the issues were resolved and the ban was eventually lifted, the effects on competition and capability persisted, highlighting the enduring impact of such measures on government procurement and the broader technology sector.

“Permanent or indefinite bans without periodic review can limit the government’s access to emerging solutions, especially in fast-evolving technology markets.”

Potential confusion

The Department of Finance also criticised the debarment bill in a submission to the inquiry, saying that there were “several issues” that would “likely create confusion for both suppliers and officials”.

The Department said that the definition of “unethical conduct” in the bill was “ambiguous and will create confusion for procuring and contracting entities and suppliers”.

In its own submission, the Community and Public Service Union (CPSU) backed the proposal, and said it had campaigned for such a scheme for several years.

“The PwC saga highlights the need for a more systemic approach rather than relying on a more discretionary ad hoc approach,” the CPSU submission said.

The CPSU also said that the five-year ban length was “modest” and less than many similar jurisdictions, such as Canada’s 10-year ban.