Introduction

1.1 The Australian Maritime Safety Authority (AMSA) is a regulatory safety authority responsible for delivering services in relation to maritime safety, aviation and marine search and rescue and protection of the Australian marine environment.

1.2 AMSA was established under the Australian Maritime Safety Authority Act 1990. It is a corporate Commonwealth Entity subject to the Public Governance, Performance and Accountability Act 2013. The accountable authority is an Australian Government appointed Board.

Background

1.3 As part of its purpose, AMSA is responsible for providing the Australian Government’s network of marine Aids to Navigation (AtoN). The network administered by AMSA consists of 485 visual and electronic AtoN⁴ located at 380 sites around Australia’s coastline (see Figure 1.1). It includes: conventional lighthouses;⁵ radar transponder beacons; Automatic Identification System stations; unlit beacons; metocean equipment and supporting communication infrastructure.

Figure 1.1: Aids to Navigation network map

Source: AMSA.

1.4 The AtoN are used as tools by seafarers to support safe coastal navigation, prevent loss of life and marine pollution that could result from wrecked or stranded vessels. The AtoN supplement other navigation and safety systems on board vessels such as: onboard navigational lighting; radar systems; global positioning systems; and charts. Other external measures that contribute to navigation safety include: compulsory pilotage in specific areas; designated shipping routes; and broadcast of maritime safety information to alert mariners of AtoN outages and other hazards.

1.5 AMSA conducts maintenance and a program of capital works on its AtoN network to support reliable operation, including its target⁶ to ensure operation to meet international standards.

Contracting for AtoN maintenance

1.6 Since 2001,⁷ a significant part of the AtoN maintenance program has been implemented through an external contractor (Australian Maritime Systems Group Pty Ltd). According to AusTender reporting, the two most recent contracts ran from January 2006 to February 2014 at a cost of $118 million and then from February 2014 to June 2024 at a cost of $137 million for both the AtoN maintenance and the level 1 Emergency Towage Capability (ETC).⁸

1.7 In August 2022, AMSA issued an open Request for Tender (RFT) to identify suitably qualified contractors to deliver either, or both, AtoN maintenance and ETC Services. The one RFT⁹ covered two contracts: the first for maintenance of the AtoN network that AMSA is responsible for, and the second for ETC. The latter was to be delivered by a dedicated ‘emergency towage vessel’ for emergency towage and first response capability in the northern Great Barrier Reef (north of Mourilyan) and Torres Strait.¹⁰ The ETC contract requires that when not required for emergency response, drills or training, the ‘emergency towage vessel’ be made available to support AtoN maintenance within its area of operation.

1.8 One tender was received for the AtoN contract, from the incumbent contractor, Australian Maritime Systems Group Pty Ltd (AMS Group). The incumbent was also the only entity to tender to undertake both AtoN maintenance and provide ETC services. After completing a full evaluation of the AtoN tender that was received, a contract for the maintenance of the AtoN was not awarded. AMSA’s completed value for money assessment recorded that:

• in the absence of competition, and with an unclear tender response as evidenced by the low moderated score (of 65.3 per cent), it was not possible to confirm whether value for money had been obtained;
• the benefits from comparing the price to the pre-tender estimate was limited because the estimate was based on 100 per cent conformance to the terms of the draft contract whereas the tender response was not consistent with, or did not address to AMSA’s satisfaction, key aspects of the proposed contract. In addition to the pre-tender estimate, AMSA compared the tendered price to the amount it was paying under the existing contract, and identified that there was a significant increase in price; and
• given the nature and extent of the non-compliances and lack of information within parts of the tender, using the provisions of the RFT that permitted tender clarification would amount to bid repair rather than clarification, including a possible increase in price.¹¹

1.9 The RFT did not allow AMSA to terminate the procurement in part. Rather, the RFT allowed AMSA to award one rather than both contracts.

1.10 For ETC services,¹² eight tenders were received from four entities, including four tenders from the incumbent contractor. Four tenders from three respondents (including two from the incumbent) were shortlisted applying the three criteria for this contract set out in the RFT. Each was evaluated, with the tender submitted by Smit Lamnalco identified as offering the best value for money. A 10-year contract with Smit Lamnalco for the Torres Strait and Great Barrier Reef was announced on 20 December 2023.¹³ The contract includes extension options in AMSA’s favour of up to five years.

1.11 Separate procurement processes for AtoN maintenance commenced on 9 February 2024. Rather than one contract covering the whole of Australia as per the unsuccessful tender, the second procurement sought tenderers to fulfil eight separate regional area contracts, along with a contract for a central technical support and logistics contract.

1.12 Figure 1.2 summarises the key stages and key events in the conduct of the 2022–23 AtoN maintenance procurement.

Figure 1.2: Timeline of key events of the 2022–23 AtoN maintenance procurement

Source: ANAO analysis of AMSA records.

Rationale for undertaking the audit

1.13 This performance audit of the AtoN maintenance procurement was undertaken in response to a request from the Minister for Infrastructure, Transport, Regional Development and Local Government (the minister). The request from the minister referenced concerns about the conduct of the procurement from the unsuccessful tenderer (on 8 August 2023 the tenderer had made a complaint to AMSA under the Government Procurement (Judicial Review) Act 2018).¹⁴ This performance audit provides assurance to Parliament on the effectiveness of AMSA’s management of the 2022–23 AtoN maintenance procurement.

Audit approach

Audit objective, criteria and scope

1.14 The audit objective was to assess the effectiveness of AMSA’s management of the 2022–23 AtoN maintenance procurement.

1.15 To form a conclusion against the objective, the ANAO examined:

• Did AMSA take appropriate steps to encourage open and effective competition?
• Was tender evaluation planned and undertaken consistently with the Request for Tender?
• In its management of a procurement process and when dealing with complaints from the unsuccessful tenderer, did AMSA act ethically and has it been accountable and transparent?

1.16 The audit assessed AMSA’s management of the procurement against relevant parts of the Commonwealth Procurement Rules (CPRs). The audit scope did not include:

• the contract for ETC services contained in the same procurement;
• an assessment of how the maintenance of AtoN interacts with ETC services;
• the technical component of services provided (or required to be provided) for the AtoN network;
• the services and user satisfaction with the services provided by the AtoN network; or
• the procurements for the provision of AtoN maintenance which commenced on 9 February 2024.

Audit methodology

1.17 The audit team:

• examined relevant records relating to the procurement process;
• conducted meetings with staff involved in the procurement; and
• reviewed one submission from the incumbent contractor.

1.18 The audit was conducted in accordance with ANAO Auditing Standards at a cost to the ANAO of approximately $155,000.

1.19 The team members for this audit were Rowena Thomson, Kai Clark, Renina Boyd and Brian Boyd.

2.1 Competition is a key element of the Australian Government’s procurement framework set out in the CPRs.¹⁵ Effective competition requires non-discrimination and the use of competitive procurement processes.

2.2 Generally, the more competitive the procurement process, the better placed an entity is to demonstrate that it has achieved value for money. Competition encourages respondents to submit more efficient, effective and economical proposals. It also ensures that the purchasing entity has access to comparative services and rates, placing it in an informed position when evaluating the responses. Openness in procurement involves giving suppliers fair and equitable access to opportunities to compete for work while maintaining transparency and integrity of process.

Was there adequate engagement with industry in planning the procurement approach?

2.3 Under the CPRs when a business requirement arises, officials should consider whether a procurement will deliver the best value for money. The CPRs identify that stakeholder input is an important consideration to this.¹⁶ One area of possible stakeholder input involves the conduct of market sounding involving potential tenderers to inform the design of the procurement process.¹⁷

2.4 On 28 January 2022, a RFI was released by AMSA via AusTender to inform the Statement of Requirements and other procurement documentation. It provided ‘background information and preliminary considerations and ideas for discussion with interested parties in relation to performing the Services’ and outlined that AMSA was seeking information that:

• provided an understanding of market interest in providing AtoN maintenance and/or ETC services;
• indicated market capacity and capability to provide the services;
• enabled understanding of market initiatives and improvements to AtoN maintenance and ETC services; and
• clarified the risks and potential opportunities associated with delivery of the services.

2.5 There were 71 downloads of the RFI documents and 14 responses were received. None of the 14 submissions expressed interest in the provision of AtoN maintenance only. Seven were interested in providing AtoN maintenance and ETC services, while the other seven were interested in the provision of the ETC services only.

2.6 The findings were documented in the RFI Summary Report and included:

• increasing the contract term from the proposed 8 years to 10 years (with three extension options of two years, two years and one year);
• that AMSA should approach the market with two separate contracts; and
• there was a ‘fair amount’ of interested parties looking to provide services for both contracts.

2.7 AMSA finalised the approach to market documentation to reflect feedback on the length of the contract and splitting the AtoN Maintenance and ETC services into two contracts.

2.8 AMSA advised the ANAO in February 2024 that:

• none of the respondents to the RFI suggested that the contract be changed from covering the whole of Australia to a regional model and, while this had been discussed within AMSA prior to the procurement, this approach was not pursued due to the likely increase in administrative costs of managing multiple contracts (this is the approach AMSA is now adopting via a new approach to the market); and
• AMSA expected multiple submissions to the tender based on the response to the RFI.

Separate engagement with incumbent contractor

2.9 In addition to the RFI process, AMSA representatives met with the incumbent contractor on 19 January 2022 to discuss the existing contracts and identify from the contractor’s perspective where there could be improvements for future contracts (see paragraphs 2.20 to 2.21). AMSA recorded that ‘the scope of the meeting was to understand the soft, relational aspects of the contracts from the contractor’s perspective’.

Did the Request for Tender process result in a sufficient number of competing proposals being received?

2.10 AMSA conducted a single procurement seeking the provision of two categories of services, AtoN and ETC. Under this approach, AMSA issued a single Conditions of Tender with separate draft contracts for each service category and a separate statement of requirements for each service category.

2.11 The procurement approach involved AMSA issuing an open RFT on 23 August 2022. The tender period was set as nine weeks in the RFT, to close on 24 October 2022.

2.12 There were nine addenda to respond to, or clarify, potential respondents’ questions. Two of the addenda involved AMSA granting, at the request of potential tenderers, extensions to the tender closing date, initially to 28 November 2022 and then to 27 February 2023 (resulting in a 27 week tender open period, three times longer than the nine weeks originally offered). At the time of the second extension, AMSA also advised potential tenderers that it had extended the cut off time for requests for information under the RFT to 10 February 2023.

2.13 The tender was downloaded by 133 registered users and 15 went on to access the additional information that was available via a Secure File Transfer Protocol (SFTP).

2.14 Tenders closed on 27 February 2023. The RFT process resulted in competition for the ETC contract with eight tenders received from four entities,¹⁸ including four tenders from the incumbent contractor. The RFT did not result in competition for the AtoN contract.

2.15 There was not a high conversion of submissions to the RFI into tenders. Specifically, three of the 14 respondents (21 per cent) that provided a submission to the RFI proceeded to lodge one or more tenders, as set out in Table 2.1.

Table 2.1: Conversions of responses to the Request for Information into tenders

Source: ANAO analysis of AMSA records.

Criteria weightings

2.16 The CPRs require that request documentation include the evaluation criteria and, if applicable, the relative importance of those criteria (such as any weighting).¹⁹

2.17 AMSA’s tender evaluation plan identified the same four evaluation criteria for the AtoN services contract as had been included in the RFT. It also outlined the same staged approach to evaluation as had been set out in the RFT. A key difference between the evaluation plan and the RFT was that the evaluation plan outlined criteria weightings that had not been disclosed in the RFT (see Table 2.2). Not disclosing the relative importance of the criteria was inconsistent with the CPRs.

Table 2.2: AtoN maintenance procurement evaluation criteria

Source: AMSA Procurement Evaluation Plan.

2.18 Informing potential respondents of the evaluation criteria, and any weightings of those criteria, helps to promote competition as well as provide transparency.²⁰ By not identifying to potential tenderers the criteria weightings, AMSA missed the opportunity to communicate that the capability and capacity of tenderers was more important than experience and demonstrated expertise. This is valuable information for potential tenderers in circumstances where there is an incumbent contractor, noting that the earlier RFI process had identified a lack of market interest in the AtoN maintenance contract alone (see paragraph 2.5).

Changes in contractual requirements

2.20 AMSA undertook its own analysis of areas for improvement. In addition, as outlined at paragraph 2.9, in January 2022 AMSA met with the incumbent contractor to obtain the contractor’s perspective on possible improvements to the contracts as part of AMSA’s procurement planning.

2.21 The draft AtoN maintenance contract in the RFT package released in August 2022 included a number of changes from the existing contract. AMSA’s Value for Money Assessment Report of June 2023 identified ten ‘major²¹ differences’ from the current contract that may drive price changes (see Table 2.3). There would have been benefits in AMSA highlighting to potential tenderers that the draft contract included a number of changes from the existing contract, as part of its approach to encouraging competition by highlighting that the procurement was not limited to an exercise in rolling over the existing contractual requirements.²² This would not have been inconsistent with the RFT requirement that the tenderers inform themselves of the requirements and declare that they have not relied on anything else, including any representation made by AMSA.

Table 2.3: Major changes for the AtoN contract with potential cost impacts

Source: ANAO analysis of AMSA records.

3.1 Achieving value for money is the core rule of the CPRs. Officials responsible for a procurement must be satisfied, after reasonable enquiries, that the procurement achieves a value for money outcome.²³ The CPRs state that achieving value for money requires a consideration of the relevant financial and non-financial costs and benefits of each submission.²⁴ Unless it has been determined by the entity not to be in the public interest to award a contract (for example, because tender evaluation has concluded that none of the tenders received represents value for money), a contract must be awarded to the tenderer that the entity has determined:

• satisfies the conditions for participation;
• is fully capable of undertaking the contract; and
• will provide the best value for money, in accordance with the essential requirements and evaluation criteria specified in the approach to market and request documentation.

Were appropriate governance arrangements in place for the evaluation of tenders?

3.2 Following receipt and compliance checks, tender submissions progressed to one of two Procurement Evaluation Committees. One committee was responsible for evaluating tenders for AtoN services, the other was responsible for evaluating tenders for level 1 Emergency Towage Capability (ETC) services. The role of the Procurement Evaluation Committees was to undertake individual assessment against the criteria in the RFT (four criteria for AtoN, three criteria for ETC), convene for the moderation process and then draft an ‘initial summary and options report’. Each committee had three members and a ‘non-scoring chair’. All members were AMSA employees and two officers were on both committees.

3.3 Additional AMSA resources were made available to assist with evaluation of:

• quality, health, safety and environment compliance;
• non-compliance with the contract conditions; and
• commercial assessment of the offered prices.

3.4 The Procurement Evaluation Committees were also able to access advice from ‘Approach to Market personnel’ which comprised 12 internal staff from across AMSA. There were three external contractors that provided advice on probity, financial viability assessment and quantity surveying.

3.5 The evaluation assessments of the separate Procurement Evaluation Committees went to the Consolidation Evaluation Panel for review. The Consolidation Evaluation Panel comprised the chairs of each of the Procurement Evaluation Committees as members and was chaired by AMSA’s Executive Director – Response. Its role was to review the value for money options of the individual services, and to consider whether a single service provider for both AtoN and ETC was preferable to separate contracts. The Consolidation Evaluation Panel was not involved in the scoring of tenders.

3.6 In addition to reviewing draft evaluation reports, the external probity advisor Management Options Pty Ltd (see paragraph 4.7) invoiced AMSA for having attended 1.25 hours of the Consolidation Evaluation Panel meeting on 27 April 2023 and 45 minutes of the meeting on 26 May 2023.

3.7 Figure 3.1 summarises the evaluation governance arrangements.

Figure 3.1: Governance arrangements for tender evaluation

Note: ‘SME’ means subject matter expert.

‘CEP’ means Consolidation Evaluation Panel.

Source: AMSA’s approved evaluation plan.

Decision-making arrangements

3.8 As a Commonwealth corporate Entity, AMSA derives its power to enter into arrangements involving the commitment of relevant money from its enabling legislation and its body corporate nature. The accountable authority is the AMSA Board, appointed by the minister. Its role is to decide the objectives, strategies and policies to be followed by AMSA and to ensure AMSA performs its functions in a proper, efficient and effective manner.

3.9 AMSA’s Corporate Authorisation Summary documents the Accountable Authority’s Instructions²⁵ in relation to approval or commitment of relevant money. The Corporate Authorisation Summary that was in force during the procurement sets out that amounts less than or equal to $5 million were delegated to the Chief Executive Officer of AMSA. Any two members of the AMSA Board²⁶ could approve amounts less than or equal to $7.5 million, while amounts above this were to be agreed by the full Board. As the procurement value was above $7.5 million, this required the AMSA Board to agree to a procurement outcome that resulted in the approval of relevant money (as outlined in Figure 3.1). For the AtoN contract, this did not occur as the Consolidation Evaluation Panel concluded at the end of tender evaluation that a contract should not be awarded for the AtoN maintenance service.

3.10 As per its standard processes, the Board ‘noted’ at its 6 July 2023 meeting that ‘the AtoN maintenance component of this tender did not produce a value for money outcome as assessed by the evaluation team’ and that ‘AMSA intends to end the procurement process’.

Was an evaluation plan documented that was consistent with the Request for Tender?

3.11 An evaluation plan should be established before market responses are sought.²⁷ Drafting the evaluation plan and RFT together helps to avoid any inconsistencies between the evaluation plan and requirements specified in RFT documentation, and to ensure that the evaluation methodology proposed in the plan is consistent with the RFT.

3.12 AMSA planned to finalise the evaluation plan on the same day that the RFT was finalised (both planned for 22 August 2022). The evaluation plan was approved by the CEO of AMSA on 22 August 2022. It was updated and approved again on 12 December 2022 with clarified details relating to process and personnel. The RFT was released one day later than planned, on 23 August 2022, with a closing date of 24 October 2022 (nine weeks). At the request of potential tenderers, two extensions were granted by AMSA and the RFT closed on 27 February 2023.

3.13 The contents of the evaluation plan were consistent with the RFT, with the exception of AMSA not disclosing in the RFT the weighting of the four evaluation criteria (see paragraphs 2.16 to 2.19).

Did AMSA evaluate tenders in accordance with the Request for Tender?

3.14 Consistent with the CPRs, the RFT set out that the objective of evaluation of tenders was to: ‘identify the Tenderer which represents the best value for money.’

3.15 The RFT provided that AMSA may:

• shortlist tenders at any time during the evaluation process (10.4.3), without identifying the criteria that may be applied to any shortlisting; and
• ‘at any time exclude from consideration Tenders that in AMSA’s opinion are incomplete or clearly not competitive. However, AMSA may consider such Tenders and seek clarification’ (10.4.4).

3.16 There was no shortlisting undertaken as part of the AtoN procurement (one tender was received) and AMSA did not exclude the tender it received from consideration.

3.17 The RFT stated that the evaluation of tenders would initially consider responses for the AtoN maintenance service and ETC services individually in two stages and would be completed with AMSA considering overall value for money outcomes.

3.18 As it was conducted as one procurement with two contracts that permitted tenderers to submit a response for one or both contracts, the evaluation approach involved consolidated evaluation reports being prepared. Specifically, the conduct and results of the evaluation were documented in an Initial Evaluation Report (endorsed 8 June 2023), a Value for Money Assessment Report (signed by the six panel members between 8 June and 12 June 2023) and a Tender Evaluation Report (signed by the panel chair and all members of both evaluation committees between 15 June and 19 June 2023).

Stage 1: compliance assessment

Conditions for participation

3.19 The RFT identified two Conditions for Participation.

3.20 The tender for AtoN maintenance (as well as those for ETC services) was assessed to meet the first Condition (which required the tenderer and each of its proposed subcontractors not be bankrupt, insolvent or subject to external administration or have been in the last 5 years).

3.21 The second Condition related to the shadow economy and refers to dishonest and criminal activities that take place outside the tax and regulatory systems. The tenderer for AtoN maintenance, as well as two of the tenderers for the ETC services contract, was initially assessed to not meet the second Condition. The relevant Procurement Evaluation Committee and the Consolidation Evaluation Panel considered that because most tenderers missed this requirement, it suggested the omissions were unintentional and tenderers were provided the opportunity to provide the required documentation.

3.22 Following the provision of a valid Statement of Tax Record through tender clarification²⁸ the tender for AtoN maintenance services was assessed as compliant.

Minimum content and format requirements

3.23 The tender for AtoN maintenance services was assessed as compliant with the minimum content and format requirements.

Stage 2: evaluation against the four criteria

3.24 The quality, health, safety and environment compliance evaluation was completed on 20 March 2023. It resulted in a score of 19 out of 20. Each questionnaire was worth 10 points, with the tender receiving 10 points for the quality questionnaire and 9 points for the environment, health and safety questionnaire.

3.25 The individual evaluations of the three scoring members of the Procurement Evaluation Committee were completed on 16 March 2023, 20 March 2023 and 22 March 2023. The moderation process took place on 24 March 2023 and was recorded in a consolidated assessment spreadsheet. The chair of the Procurement Evaluation Committee recorded the moderation discussion.

3.26 The probity advisor’s invoicing recorded that he had attended, observed and provided probity advice at the first moderation meeting for the AtoN evaluation on 24 March 2023. The interim probity report stated that:

The Probity Advisor attended the evaluation moderation meeting of the PEC for the AToN component of the Approach to Market. It was evident that PEC members had a clear understanding of the evaluation methodology and their probity obligations. The Probity Advisor observed that each member had individually assessed and scored the tender responses against the criteria. The Probity Advisor observed open and sound discussions by PEC members in arriving at the moderated scores and supporting comments.

3.27 Figure 3.2 compares the median score of the three scoring members against the final moderated outcome. In seven instances the moderated score was lower and in twelve instances the moderated score was higher.

Figure 3.2: Median score of three scoring members and final moderated scorea

Note a: The overall score was 57.9 per cent (also referred to by AMSA as ‘marginal’).

Source: ANAO analysis of the Procurement Evaluation Committee consolidated assessment sheet.

3.28 Table 3.1 outlines the moderated overall scores converted to the weighted criteria. Adding in the 19 out of 20 assessment score for quality, health, safety and environment compliance (see paragraph 3.24) the total moderated scoring result for the evaluation criteria was 65.3 per cent. AMSA ‘did not set a threshold below which a moderated score would be unacceptable’ although the evaluation result was described as ‘low’. Specifically, in relation to the experience and expertise, capability and technical evaluation criteria,²⁹ the combined score of which was 46.3 out of 80 (or 57.9 per cent) AMSA’s Tender Evaluation Report stated this, ‘did not provide a level of confidence that the contract requirements (including all deliverables) will be met to the required standard’. The Tender Evaluation Report further concluded that ‘the non-compliances listed are major commercial exceptions that may increase the tendered price’.

Table 3.1: AMS Group Procurement Evaluation Committee moderated scores

Source: ANAO analysis of the Procurement Evaluation Committee consolidated assessment sheet.

Value for money assessment

3.29 The RFT clearly set out how AMSA would assess value for money, through an approach that was consistent with the CPRs, as follows:

The Value for Money assessment will include:

• Compliance and risk assessments for all tenderers against the conditions for participation and evaluation criteria, including relative ranking of tenderers against each criterion;
• Scores against weighted criteria;
• An explanation of the key areas for discrimination between the tenderers;
• An overall assessment of the risks associated with each Tenderer and their capacity to perform, including an indication of the risk management strategies that are considered necessary;
• Non-compliance to the draft contracts;
• Financial viability;
• An explanation of the actions that would be necessary to enter into a contract;
• Contracting risks and opportunities; and
• Total price and any discount arrangements offered.

3.30 AMSA documented its value for money analysis, consistent with the considerations outlined in the RFT. Invoicing from the probity advisor recorded that they reviewed a draft value for money assessment report on 24 and 25 April 2023,³⁰ and an updated version of the value for money assessment report on 7 June 2023.³¹

3.31 The finalised Value for Money Assessment Report of 12 June 2023 included a comparison of the tendered price to the pre-tender estimate (which was premised on full tenderer compliance with the draft contract, whereas the tender received was assessed to involve non-compliances) as well as to the amount it was paying the incumbent contractor to provide AtoN maintenance services.³² The value for money evaluation report recorded that:

In the absence of competition, with an unclear tender response evident by the low moderated score, it is not possible to confirm whether value for money has been obtained for the AtoN Maintenance Services.

3.32 In turn, the Tender Evaluation Report signed by the Consolidation Evaluation Panel chair on 19 June 2023 recorded as follows in relation to the AtoN contract:

The AtoN maintenance procurement resulted in a single tender from the incumbent provider (Australian Maritime Systems Group, AMSG). The subsequent value for money decision was not clear cut. The tender scores were marginal in a number of areas.³³ The tendered price was significantly higher than currently paid for a similar service, although close to the pre-tender estimate. Overall, the Consolidation Evaluation Panel (CEP) concluded that the AtoN component of the Tender did not deliver a Value for Money outcome.

Has AMSA clearly communicated the reasons for not awarding a contract?

3.33 The CPRs require:

• transparency in procurement activities, including by officials taking steps to enable appropriate scrutiny of their procurement activity; and
• following the rejection of a submission or the award of a contract, officials must promptly inform affected tenderers of the decision and that debriefings be made available, on request, to unsuccessful tenderers outlining the reasons their submission was unsuccessful.³⁴

3.34 AMSA’s communication of the reasons for not awarding a contract have not been consistent with records of its tender evaluation and so have not provided the transparency required by the CPRs. Specifically:

• AMSA’s record of the debrief it provided to the unsuccessful tenderer stated that the decision not to proceed was made on the basis of the technical score and, when pressed about whether the price was considered, there was insufficient information to inform a value for money assessment;
• in response to the procurement complaint from the unsuccessful tenderer, AMSA obtained legal advice with the advice recording that: ‘We are instructed that the delegate decided before the value for money assessment that the only tender submitted in relation to AtoN services was lacking in technical detail, and therefore scored too low to necessitate a formal value for money assessment’;³⁵and
• on 25 March 2024 AMSA gave evidence to the Rural and Regional Affairs and Transport Legislation Committee that: ‘We did not actually proceed to a value-for-money assessment on the basis of the marginal technical score.’³⁶

3.35 Value for money is the core rule of the CPRs. Consistent with the CPRs, the RFT required that the evaluation of tenders ‘be completed with AMSA considering overall value for money outcomes’. If AMSA had not conducted a value for money assessment it would have acted inconsistently with the RFT it released to the market, and also breached the CPRs. In a letter dated 9 April 2024 to the Chair of the Rural and Regional Affairs and Transport Legislation Committee, the CEO of AMSA corrected the evidence provided on 25 March 2024 including:

To be clear, the tender evaluation did proceed to a Value for Money assessment and concluded that the AtoN component of the tender did not deliver a Value for Money outcome.

3.36 AMSA’s statements that value for money was not assessed are inconsistent with its procurement records. Those records show that AMSA assessed value for money in the manner required by the RFT (see paragraphs 3.29 to 3.32). Reflecting that AMSA conducted one procurement with two contracts that permitted tenderers to submit a response for one or both contracts, consolidated evaluation reports were prepared, including in relation to value for money. The Value for Money Assessment Report was signed by the six members of the two Procurement Evaluation Committees (by three members on 8 June 2023, two members on 9 June 2023 and one member on 12 June 2023). The Value for Money Assessment report documented the value for money conclusion reached in relation to each of the two contracts, as follows:

• the one tender received for AtoN maintenance services ‘does not present AMSA with a value for money option’; and
• two tenders received for ETC services were assessed as representing value for money, with the preferred tender identified as the one assessed as offering the ‘greatest value for money’.

4.1 The CPRs require that procuring entities act ethically throughout the conduct of a procurement process. Ethical behaviour includes recognising and dealing with actual, potential and perceived conflicts of interest, dealing with potential suppliers, tenderers and suppliers equitably and carefully considering the use of public resources.³⁷ The CPRs also require that, if a complaint about a procurement is received, relevant entities must apply timely, equitable and non-discriminatory complaints handling procedures.³⁸

4.2 The CPRs also require accountability and transparency. Accountability means that officials are responsible for the actions and decisions that they take in relation to procurement and for the resulting outcomes. Transparency involves relevant entities taking steps to enable appropriate scrutiny of their procurement activity.

Was a probity management framework in place?

Risk assessment, including of probity risks

4.3 AMSA has an enterprise level Risk Management Framework which sets out that AMSA risk methodology ‘is aligned to, and based, upon the international standard on risk management (ISO 31000:2018)’.

4.4 The AMSA procurement area provides internal specific advice on risk in procurement to staff on AMSA’s intranet. This includes:

Throughout all stages of the procurement and contract management processes, it is necessary to be aware of risks, their sources or causes, and their potential impacts. Where the procurement is of significant size and complexity, overall risk is likely to be medium or high and so a risk assessment should be undertaken. Formally documented risk assessments should be undertaken for complex and covered procurements, and encompass the entire procurement and contract management lifecycle. Regular review/monitoring/controlling of risks and risk treatments should occur throughout the procurement/contract life-cycle.

4.5 A brief dated 21 July 2021 to the AMSA Executive outlined the procurement strategy. It included the advice that ‘a risk register will be developed and maintained throughout the procurement’. A paper to the 22 September 2021 AMSA Board stated the same. This did not occur.

4.6 As a result, there was no specific assessment of probity risk. Such an assessment would have been of value to inform decisions about the evaluation governance arrangements including, for example, the likely extent of any probity advice that might be required during the conduct of the procurement. The change in Chair of the AMSA Board during the latter stages of the tender process would have also required an update to any risk assessment.

Engagement of probity advisor and provision of probity reports

4.7 An external probity advisor, Management Options Pty Ltd, was engaged by AMSA. The external probity advisor reported to the Project Manager.

4.8 The probity advisor was engaged via a Request for Quote process in December 2021 with four firms invited to respond. In April 2024, AMSA advised the ANAO that:

AMSA selected candidate organisations with the appropriate skills based on the knowledge and experience of AMSA staff. The approach was consistent with AMSA’s internal procurement framework. How those four (4) specifically came to be selected as candidates was not recorded.

4.9 Two responses were received with the higher ranked candidate, with a lower hourly rate, successful. AMSA approved an engagement for a nine-month period, with a commencement date of 1 April 2022, an end date of 19 December 2022, and valued at $23,716 (GST inclusive). By November 2023, the contract had been varied four times, extending its duration out to 25 months (an end date of 31 March 2024) and increased the maximum fee to $28,193 (GST inclusive), which reflected an additional 10 hours of probity advice compared with the 98 hours originally contracted for.

4.10 The probity plan required the probity advisor to provide a written interim probity report on the procurement process. The interim report, addressed to the AMSA Chief Executive Officer (CEO), was provided on 15 June 2023, at the conclusion of tender evaluation. The interim report made no adverse findings. It stated that the probity advisor was of the opinion that:

• The processes developed and executed for inviting tenders were fair,
• The evaluation methodology facilitated the objectives of the ATM,
• Appropriate steps for identifying, clarifying and managing conflicts of interest were put in place,
• Probity advice was sought and considered,
• The methodology for the maintenance of confidentiality and security was satisfactory,
• The tender was consistent with the fundamentals of CPRs, and
• The Tender Evaluation Report and supporting documents provides a defensible record of the actions and decisions of the relevant PECs and CEP and supports the recommendations therein.

4.11 The probity plan also required that a written final probity report be provided following the completion of any contract negotiations and after tenderer debriefings.³⁹ The debriefing to the unsuccessful tenderer for the AtoN maintenance services contract was held on 25 July 2023 with the award of the ETC services contract announced on 20 December 2023.

4.12 The final probity report (dated 9 April 2024) included the findings from the interim report with the additional finding that: ‘the debriefing processes were consistent with the Probity Plan and the expected standards of probity under the Commonwealth Procurement Rules’.

Probity plan

4.13 A probity plan for the combined AtoN maintenance and ETC services procurement was developed, with the first draft prepared by the probity advisor. The probity plan was endorsed by the senior AMSA personnel responsible for the procurement, including the chair of the Consolidation Evaluation Panel, as well as by the probity advisor. It was approved by the AMSA CEO on 9 May 2022. The probity arrangements were incorporated into the approved Procurement Evaluation Plan.

Industry engagement activities prior to the procurement

4.14 The CPRs state that all potential suppliers must be treated equitably based on their commercial, legal, technical and financial abilities.⁴⁰ When an incumbent provider competes for new work, it may have (or be perceived to have) certain advantages, such as understanding of an agency’s needs, established relationships with agency staff, and knowledge that is not available to other potential suppliers.⁴¹

4.15 As the market sounding undertaken by AMSA, and AMSA’s engagement with the incumbent contractor to inform the procurement approach, was not defined as being part of the procurement process the probity plan did not apply to those activities. A separate probity plan was also not in place to govern the industry engagement activities that preceded the procurement.⁴²

Conflict of interest declarations

4.17 Department of Finance guidance to entities on ethics and probity in procurement states that ‘persons involved in the tender process, including contractors such as legal, commercial or probity experts, should make a written declaration of any actual, potential or perceived conflicts of interest prior to taking part in the process.’⁴³ Consistent with this guidance, each person involved in the procurement process was required to complete a confidentiality and conflict of interest declaration. Any identification of a real, potential or perceived conflict of interest was to be assessed by ‘the Consolidation Panel Chair and/or Project Sponsor, in consultation with AMSA’s procurement section and the [external] probity advisor’.

4.18 AMSA maintained a conflict of interest and confidentiality declaration register for procurement personnel. The register identified 33 declarations.

4.19 There were 31 declaration forms in AMSA’s records. AMSA advised the ANAO in March 2024 that, in relation to the two people who did not complete forms (although both were listed in the Procurement Evaluation Plan), one did not have a role in the procurement and the other did not provide expert knowledge nor was in a decision-making role. That individual was an administrative officer for the procurement, for example they authorised AusTender notices for publication and signed procurement correspondence.

4.20 Of the 31 declaration forms in AMSA’s records: one was not signed by a witness; two did not declare whether they did or did not have a conflict of interest;⁴⁴ and one declared they both did, and did not, have a conflict of interest.⁴⁵

4.21 The tender evaluation report stated that ‘a probity briefing on the management of probity risk was given to all participants in the tender evaluation (on 23 May 2022, 15 June 2022 and 23 February 2023 respectively) before evaluation of the tenders’. Inconsistent with this statement, the probity register recorded that seven of 25 procurement personnel (or 28 per cent) had not attended a probity briefing. Emails show that the external probity advisor advised the Project Manager: ‘I strongly suggest we hold two briefings to catch everyone’ and provided two dates for this. The Project Manager responded: ‘ … it is difficult to arrange a time with more than two attendees’. AMSA’s record of who received probity briefings and on what dates, did not align with an accepted invoice from the probity advisor for twenty staff (nine individuals received a briefing on 23 May 2022, four individuals received a briefing on 15 June 2023 and the members of the Procurement Evaluation Committee and Consolidation Evaluation Panel were briefed on 23 February 2023).

4.22 AMSA advised the ANAO in March 2024 that nine experts from three commercial businesses⁴⁶ were involved in the procurement. Of these, five completed declarations stating they had no conflict of interest which were correctly recorded in the register. The individuals were not recorded as attending a probity briefing and AMSA confirmed to the ANAO in April 2024 that they had not attended a probity briefing. Four others were not listed in the register and declaration forms were not on file.

Engagement with the incumbent contractor

4.24 The Procurement Evaluation Plan outlined that: ‘Personnel will need to declare any relationships or connections they currently have, or have previously had, with Tenderers, organisations related to Tenders, or the employees of Tenderers.’ There was one declared conflict of interest in relation to the officer being required to meet with the incumbent provider for current contract management of the AtoN and ETC contracts, including discussion of service delivery performance. External probity advice was sought on this matter with the advice being that the declarant:

• maintain a clear separation between business-as-usual activities with the incumbent supplier and the AtoN maintenance and ETC procurement project;
• refer any queries from the incumbent supplier to the single point of contact for the tender (the Project Manager); and
• ensure all meetings during the procurement period with the incumbent supplier were formal and where an agenda is not used that a record be taken as to the discussion points.

4.25 AMSA maintained a probity register in relation to the procurement from 10 May 2022. There was evidence that the individual with the declared conflict of interest had logged interactions with the incumbent provider, with mitigating actions recorded.

4.26 Prior to the tender release, AMSA received a complaint in July 2022 regarding a different AMSA officer who was performance managing the incumbent contractor due to key performance indicators not being met.⁴⁷ In August 2022, the external probity advisor outlined in an email to the Project Manager that the officer should: ‘update [their] Conflict of Interest declaration in light of the complaint and with a specific focus on [their] involvement in the management of the incumbent supplier over the current contract period and to obtain a statement as to whether [they] believe [they] can undertake the role of an evaluator in a fair and impartial manner’. Notwithstanding this advice, the conflict of interest form dated February 2023⁴⁸ for this individual and the conflict of interest and confidentiality declaration register did not record a conflict of interest. Inconsistent with this situation, the Tender Evaluation Report stated as follows:

All participants have declared (at any point during the entire procurement and Tender evaluation process) the existence of any real or perceived conflict of interest to the Probity Advisor and implemented his advice immediately.

What assurance activities did AMSA undertake to assure itself of procurement probity?

4.27 As discussed at paragraphs 4.7 to 4.12, a probity advisor was engaged by AMSA for the RFT process.

4.28 In addition, in April 2023, AMSA management decided that an internal audit of the procurement should be undertaken by AMSA’s contracted internal auditor, Ernst & Young Australia (EY). AMSA records outline that an internal audit was a mitigation strategy in the event a tenderer complained about the conduct of the procurement, which AMSA saw as likely, and that an internal audit would provide confidence to the Board. Advice to AMSA from its probity advisor was that they did not have probity concerns with an internal audit being undertaken and agreed it was a prudent step in the circumstances.

4.29 It took some time for the internal audit to be undertaken. Information was provided by AMSA to its internal auditor on 20 April 2023. A draft plan was provided by the internal auditor to AMSA on 30 May 2023.

4.30 EY’s scoping document identified an objective of assessing ‘AMSA’s compliance with procurement requirements for the tender for AtoN maintenance 22AMSA117’. There were four items scoped for inclusion:

• compliance with AMSA’s procurement policies and procedures;
• risk management strategies in place for the procurement;
• compliance with the Procurement Evaluation Plan; and
• documentation of the value for money assessment.

4.31 The deliverable was to be ‘a memo report detailing findings and recommendations will be prepared for submission to AMSA’s Board Audit, Risk and Finance Committee’. At odds with the reason why the internal audit was requested as well as the stated objective and items to be audited, the scoping document stated that the work ‘does not express any form of assurance’. EY advised AMSA that its internal audit took 6 days to complete and cost $8,000. EY did not bill for this cost.

4.32 On 13 June 2023, AMSA management inquired as to progress, with the report (in email format) provided to AMSA on 16 June 2023. The findings/conclusions comprised four dot points:

• AMSA’s compliance with its procurement policies and procedures – No issues were noted in our review of the ATM, TEP or TER. AMSA’s documentation of the procurement was well organised and available as needed.
• AMSA’s risk management strategies in place for this procurement – AMSA was aware of the risks associated with the tender and during discussions and review of the documentation it was noted that AMSA had articulated those risks and had plans in place to try and mitigate them. AMSA has considered the risks associated with not proceeding with the procurement and has a proposed way forward.
• AMSA’s compliance with the Procurement Evaluation Plan – Provision of Aids to Navigation Maintenance (AtoN Maintenance) & Level 1 Emergency Towage Capability (ETC) Services – Our review of the PEP and the TER did not note any issues of non-compliance or opportunities for improvement.
• AMSA’s documentation of the value for money assessment – The value for money assessment clearly outlines the process undertaken and the considerations in relation to the Tender. We provided feedback to AMSA that the value for money assessment could be made clearer to articulate the Technical Capability of the Tender separately from the cost.

4.33 AMSA’s Board Audit and Risk Committee was not provided with the report.

4.34 AMSA accepted the report of the internal audit as provided by EY. AMSA advised the ANAO in February 2024 that: ‘no formal report was written although [EY] did indicate they were happy to convert the email content into formal correspondence if required’.

4.35 AMSA’s 2023–26 Strategic Internal Audit Plan⁴⁹ dated May 2023 included the AtoN maintenance procurement as a proposed topic for 2025–26. The direction in the 2023–26 Strategic Internal Audit Plan was: ‘Where priorities change during delivery of the plan, there is scope to bring forward topics, subject to Board Audit and Risk Committee agreement’. While the internal audit was undertaken by EY in the context of AMSA’s internal audit program it did not appear on the schedule for the year it was undertaken and approval was not sought from AMSA’s Board Audit and Risk Committee to bring it forward.

4.36 The EY internal audit was described to the Board on 6 July 2023 as having been undertaken as a mitigation against the risk that ‘an unsuccessful tenderer could successfully challenge the decision’. The report of the EY internal audit was not provided, with the Board paper simply outlining: ‘the consultant (EY) has confirmed the procurement process was sound’. In addition:

• the letter prepared by the department for the minister requesting the Auditor-General undertake an ‘urgent assurance review’ stated that ‘an independent audit of the procurement, requested by the AMSA Board, supported the conclusion that the procurement met relevant legal requirements’;⁵⁰ and
• the procurement complaint investigation (see paragraph 4.44) placed reliance on the internal audit as follows:

Given the consequences that would arise for AMSA if no AtoN Maintenance Service was in place, AMSA initiated a review of AMSA’s compliance with its procurement policies and procedures (which include compliance with the CPRs) by Ernst and Young (EY) prior to the decision not to proceed to contract with any tenderer. EY raised no concerns with respect to compliance with the CPRs or the process more generally.

4.37 On 29 November 2023, AMSA’s Board Audit and Risk Committee (which did not see the internal audit and was not advised of the limitations) asked that the Board be given a copy of the findings. The findings as outlined in paragraph 4.32 were provided to the Board on 13 December 2023.

Were complaints handled appropriately?

4.38 A well-handled complaint can help generate supplier satisfaction and confidence in Australian Government procurement and administration. If an entity receives a complaint about a procurement, then it is required to apply timely, equitable and non-discriminatory complaint-handling procedures.⁵²

4.39 Accountable authorities of relevant entities also have complaint handling obligations under the Government Procurement (Judicial Review) Act 2018 (GPJR Act).⁵³ The GPJR Act applies to contraventions, or proposed contraventions, of the relevant CPRs relating to covered procurements by relevant entities. The GPJR Act allows suppliers to make an application to the Federal Court or the Federal Circuit and Family Court of Australia (Division 2) which may grant an injunction and/or order the payment of compensation by the relevant entity to the supplier. Where a supplier decides to seek an injunction from the court, it must have first made a complaint to the accountable authority under section 18 of the GPJR Act and made a reasonable attempt to resolve the complaint.⁵⁴ The accountable authority must investigate complaints made under section 18 and prepare a report of the investigation. The accountable authority must suspend the procurement while the complaint is being resolved unless a public interest certificate is in force.⁵⁵

August 2023 complaint from the unsuccessful tenderer alleging breaches of the CPRs

4.40 The complaints process for the procurement was outlined in the approach to market documentation and referred complainants to AMSA’s managing procurement complaints webpage.⁵⁶ Prior to 23 February 2024, AMSA’s complaints webpage did not contain information about how to make a complaint under the GPJR Act. This was initially raised internally on 24 August 2023 but updated content was not provided by AMSA’s procurement area until 23 February 2024. AMSA advised the ANAO in March 2024 that the delay was due to ‘competing priorities and staffing issues’.

4.41 On 6 July 2023 the chair of the Consolidation Evaluation Panel rang the CEO of AMS Group advising of the unsuccessful outcome, with AMSA providing written advice on 7 July 2023. On 20 July 2023 AMSA posted on LinkedIn advising the AtoN procurement had been discontinued.⁵⁷ This was not the case. Rather than discontinuing the procurement, AMSA had concluded the AtoN component by deciding a value for money outcome was not achieved and was still progressing the ETC services component through to contract award. In April 2024, AMSA advised the ANAO that:

AMSA accepts that the words used could have been more consistent with the formal findings but it was not intended to provide formal notice or explanation of the decision to the tenderer, who had already received notification that we would not be proceeding to contract award, only to advise about the process. It may also be helpful to provide some context around this. The probity log shows a number of approaches from industry and media enquiries were also starting.⁵⁸ The probity advisor was content with wording prior to publication.

4.42 A debrief was provided to the unsuccessful tenderer on 25 July 2023. On 2 August 2023, the Executive Chair of the tenderer met with the AMSA CEO.

4.43 On 8 August 2023, the tenderer lodged a complaint with AMSA under the GPJR Act alleging contraventions of the CPRs.

Investigation of the complaint

4.44 The tenderer’s complaint referenced five specific provisions of the CPRs, of which four were ‘relevant provisions’ for the purposes of the GPJR Act.⁵⁹ AMSA documented there were three additional complaint matters ‘related to contractual management with inferences to the CPRs … not directly covered by the Act’ but that AMSA would investigate these as well. This decision was consistent with AMSA’s obligations under the CPRs.⁶⁰

4.45 On 10 August 2023 AMSA acknowledged receipt of the letter and on 14 August 2023 formally acknowledged receipt of the complaint and advised that AMSA would investigate the complaint.

4.46 AMSA appointed a senior manager who had not been involved in the conduct of the approach to the market to investigate the complaint. A report was finalised on 24 August 2023. According to the report:

• the investigation was ‘primarily informed by a desktop review of key documents’ with no formal interviews conducted and any clarification was sought from individuals involved by email; and
• no contraventions of the CPRs were identified (in response to the five specific CPRs raised by the tenderer, as well as three other complaints related to contractual management which AMSA identified as making inferences to the CPRs).

4.47 The investigation placed reliance on the internal audit (see paragraphs 4.28 to 4.37) and the interim report from the probity advisor (see paragraph 4.7).

4.48 Similar to incorrect public statements made by AMSA⁶¹ and the incorrect advice provided to the tenderer in its tender debrief (see paragraph 3.34) the complaint investigation report did not identify that the decision to not award a contract was because the tender evaluation had concluded the tender did not represent value for money. Rather, it focused on one of the value for money considerations (see paragraph 3.31), as follows:

AMSG’s tender response, as submitted, was evaluated in accordance with the Procurement Evaluation Plan. It did not demonstrate adequate capability or capacity.

4.49 The complaint investigation report incorrectly suggested that the CPRs (specifically, paragraph 4.5)⁶² did not permit AMSA’s tender evaluation to consider its relationship with the incumbent contractor ‘as this might cause advantage or disadvantage compared to other tenderers with whom AMSA has not dealt with previously’. While it is important that incumbency risks be managed in any procurement process, the CPRs provide that ‘potential supplier’s relevant experience and performance history’ is relevant to evaluating value for money.⁶³ This was reflected in the RFT, as follows:

• one of the evaluation criteria was ‘the extent to which the Tenderer is assessed as having the experience and demonstrated expertise to meet the requirements set out in the Statement of Requirements and the Draft Contract’⁶⁴ (see Table 2.2); and
• required tenderers to nominate two referees with the RFT stating that: ‘AMSA may use any relevant information obtained in relation to a Tenderer (through this Approach to Market or by independent inquiry of the Tenderer’s referees or references or from any other source) in the evaluation of Tenders’. Consistent with this:
  • AMSA recorded in the ‘referee reports’ section of the June 2023 Value for Money Assessment Report (which was one of the internal documents included in those provided to the reviewer for examination) that:
    • one of the referees nominated by the tenderer did not respond to requests to provide input;
    • the other referee provided input (that referee was in relation to the existing contract with AMSA); and
    • ‘AMSA’s internal referee report’ was based on ‘the information already provided to AMSA’s Board through formal reports on AMSG’s performance, presented prior to tender closure (December 2022) and in an updated report submitted to the Board (May 2023)’;⁶⁵ and

  • The June 2023 Tender Evaluation Report (which was also one of the internal documents included in those provided to the reviewer for examination) recorded that ‘the CEP decided that given the tenderer had nominated current contracts with AMSA for the referee reports, then AMSA’s current view of service delivery by AMSG should be considered’. The report summarised the feedback as follows:
     

    historically AMSA had been satisfied with the performance of AMSG across its main contracts. However, aspects of AMSG’s service delivery over the last two years have been disappointing. For example, there have been delays to the annual AtoN work programme, deficiencies in Search And Rescue equipment maintenance and reporting, and poor change management on the ETC contract that led to an off-line period and substantial Key Performance Indicator deductions.

    These concerns had been raised with CEO AMSG over a series of meetings.

    There are signs the level of service is improving as additional staff have been recruited and improved management processes implemented. While there may have been mitigating circumstances as the country came out of COVID, including unseasonal wet weather that hampered site access, it is taking time to train new resources and restore desired service levels.

4.50 In a letter dated 24 August 2023⁶⁶ to the unsuccessful tenderer, AMSA advised that an investigation into the complaint had found that ‘no breach of the CPRs had occurred’ and that AMSA ‘will not be proceeding to contract for AtoN maintenance services at this time’.⁶⁷ AMSA provided the unsuccessful tenderer with a copy of the investigation report and also advised that the procurement was no longer suspended as a Public Interest Certificate had been issued on 22 August 2023.⁶⁸

4.51 On 30 August 2023, the CEO of AMS Group phoned the CEO of AMSA and left a message seeking to discuss the outcome of the AtoN maintenance services contract. AMSA obtained probity advice that supported a meeting occurring given the AtoN component of the tender was concluded. The probity advisor advised that it would be prudent to have another member of AMSA’s staff in attendance and that a file note should be taken to summarise the discussion points. AMSA advised the ANAO in April 2024 that a meeting occurred between the CEO of AMSA and the CEO of AMS Group following this call, however ‘no minutes or file notes were kept by AMSA’.

4.52 In a letter to the AMSA CEO dated 4 September 2023, AMS Group sought an extension to its existing fixed price contract through a limited tender as a potential solution to the procurement outcome. The proposal was for the current contract conditions to remain unchanged with the timeframe,⁶⁹ pricing⁷⁰ and indexation to be updated.

4.53 The chair of the Consolidation Evaluation Panel was briefed by AMSA’s Governance Manager, who had conducted the procurement complaint investigation, on 6 September 2023. The advice was that a limited tender would:

• likely contravene the CPRs;
• the offer did not meet the CPR exception conditions for the use of limited tender; and
• to do so exposed AMSA to other procurement related risks.⁷¹

4.54 AMS Group was advised that a limited tender would not be undertaken by AMSA for AtoN maintenance services by letter dated 25 September 2023. In a letter dated 17 October 2023, AMS Group outlined: ‘this letter is a formal response to the alleged failure of the AMS Group tender response’. The letter set out AMS Groups’ concerns with the feedback it had been provided with through the debriefing process.

4.55 Between 11 July 2023 and 1 December 2023, AMSA received eighteen direct contacts (phone or email) from six AMS Group representatives and six industry stakeholders regarding the outcome of the AtoN maintenance procurement. There were also two industry publication articles, three mainstream media articles and at least thirteen items of correspondence relating to the outcome of the AtoN procurement were received by AMSA management, the Chair of the AMSA Board, the department or Parliamentarians. The minister received five of those. During that period the Chair of the AMSA Board advised the minister by letter⁷² that:

The AtoN maintenance process produced a single tender from the incumbent. Scores awarded by the evaluation team were disappointing and overall, the bid was assessed as only marginally meeting the technical requirements. Given the safety critical nature of the service, and the high cost of the capability, the evaluation team concluded that a contract should not be awarded from the AtoN component of this procurement.

4.56 The Chair of the AMSA Board also met with the minister for the first of what is to be a regular six monthly meeting.

4.57 The AtoN Network Service Project was also put in place by AMSA management with the initial planning meeting scheduled on 22 August 2023. The purpose of the project was ‘to develop detailed plans for and implement alternative AtoN maintenance services arrangements to sustain the AtoN network post 30 June 2024.’ At the request of the department, AMSA provided an update for the minister on 8 September 2023 on the progress of the project work. On 21 November 2023, the AMSA Executive were briefed on the proposed new model, with the strategy for the second procurement approved by the AtoN Network Service Project steering committee on 8 December 2023.

26 November 2023 allegation of a conflict of interest for the Chair of the AMSA Board

4.58 On 26 November 2023, the unsuccessful tenderer wrote to the minister alleging that the Chair of the AMSA Board had an apparent conflict of interest as a result of their partner’s employment and also the Chair’s partner ‘is an active participant on social media and has been derogatory of AMS Group since we commenced pilotage operations in Brisbane in 2022.’ ⁷³

4.59 The Chair was appointed to this role on 3 July 2023 for a period of four years having been an existing member of the Board. Board Members are required to complete a private interests declaration. In the document signed on 28 August 2020, the now Chair identified their partner and partner’s employment. This was declared again on 24 May 2023 prior to the Board Member becoming the Chair.

4.60 The AMSA Board Charter does not refer to ‘conflicts of interest’, but it does require a member to ‘exercise the degree of care and diligence that a reasonable person would exercise if he or she were an official of a Commonwealth entity authority in similar circumstances’ and ‘to disclose material personal interests that relate to the affairs of that entity’. For the September 2023 Board meeting the Chair updated disclosures to include that she had a personal relationship with the person who wrote the social media post referenced in the complaint from the unsuccessful tenderer.

4.61 In addressing the complaint, AMSA obtained assurances from each member of the Consolidation Evaluation Panel that they had not discussed the procurement with any member of the AMSA Board before the decision was made by the Panel not to proceed with the AtoN maintenance element of the procurement. A similar assurance was sought and obtained from the AMSA CEO. The CEO’s assurance did not cover any discussions with Board members prior to the close of the RFT. AMSA advised the ANAO in April 2024 that the question was worded ‘to allow for the fact that the CEO may have discussed the approach to market with the Board in general terms in the period before the tender period had closed’.

4.62 Email records show that the chair of the Consolidation Evaluation Panel had a meeting scheduled with the Chair of the AMSA Board on 5 July 2023 to brief on the outcome of the procurement.⁷⁴ AMSA advised the ANAO in April 2024 that the Board paper was the basis for this briefing and no minutes or file notes were recorded.

4.63 On 29 January 2024, the minister requested an ANAO ‘urgent assurance review’ of the procurement. On the same date, the minister also signed a letter to the unsuccessful tenderer that stated:

• the AMSA Board was not involved in the tender assessment or decision-making relating to not awarding the contract; and
• the procurement was supported by an independent probity advisor ensuring high standards of integrity and compliance throughout the process.

30 November 2023 allegations about the Chair of the Consolidation Evaluation Panel

4.64 On 8 January 2024, AMSA became aware of allegations made by the unsuccessful tenderer on 30 November 2023 to the minister about the chair of the Consolidation Evaluation Panel. There were seven allegations that AMSA’s corporate services area grouped into the two themes. The first was that the chair of the Consolidation Evaluation Panel ‘had used [their] position to unduly influence the AtoN Approach to Market outcomes’ and secondly, that they had ‘knowingly misled the Parliament and the public’.

4.65 AMSA became aware of these allegations after it received a copy of a department ministerial briefing that included the letter dated 30 November 2024. The department advised the ANAO in April 2024 that the delay in the department bringing the allegations to the attention of AMSA was due to the sensitivity of a peer of the chair of the Consolidation Evaluation Panel acting at that time in the role of AMSA CEO and departmental staff leave over the Christmas holiday season. As preparations were underway for a further procurement process, had some, or all, of the allegations been substantiated, this would have necessitated changes to the management of the further procurement process and, as a result, potentially delayed it.

4.66 AMSA’s corporate services area undertook a formal internal investigation in response to a number of allegations by AMS Group. In planning the investigation, an AMSA internal options brief outlined that: ‘AMSA has, under various Commonwealth Acts, responsibility to investigate and respond to allegations of staff behaviour that might be seen as inappropriate or corrupt. The basis for responding to the allegation is founded in the requirements of Public Governance, Performance and Accountability Act 2013, which sets out specific duties that public officials must uphold’. It further outlined that: ‘Noting the nature of the allegations the PID Act, the National Anti-Corruption Commission (NACC) requirements, Commonwealth Fraud Control Framework, [and] AMSA’s Code of Conduct may be relevant’.

4.67 The investigation report to the AMSA CEO dated 17 January 2024 outlined there was no evidence that the chair of the Consolidation Evaluation Panel had in any way unduly influenced the procurement (from development of the tender documentation to the tender evaluation). Further, the internal investigation found there was no evidence that the chair of the Consolidation Evaluation Panel had:

• breached the public trust. The process of the AtoN component of the approach to market appears to have been conducted and decisions made for proper purpose.
• abused [their] office as a public official. There is no evidence to suggest [the individual] has abused [their] office by:
  • engaging in improper acts or omissions in their official capacity, and
  • knowing that those acts or omissions are improper, and
  • intending to gain a benefit for themselves or cause a detriment to another person.
• has caused other officials to behave in a biased manner when carrying out official duties.

4.68 It was further concluded that there was no evidence provided to support the claim the chair of the Consolidation Evaluation Panel had knowingly provided false or misleading evidence to the Senate.

4.69 As the allegations had been made by AMS Group in a letter dated to the minister, and the letter had not been referred to AMSA by the department for response, the outcome was for no internal action to be taken in relation to the chair of the Consolidation Evaluation Panel and the report to be held on file should a third-party investigation be undertaken. The CEO of AMSA advised the department of the outcome of the investigation on 22 January 2024.

Appendix 1 Entity responses

Appendix 2 Improvements observed by the ANAO

1. The existence of independent external audit, and the accompanying potential for scrutiny improves performance. Improvements in administrative and management practices usually occur: in anticipation of ANAO audit activity; during an audit engagement; as interim findings are made; and/or after the audit has been completed and formal findings are communicated.

2. The Joint Committee of Public Accounts and Audit (JCPAA) has encouraged the ANAO to consider ways in which the ANAO could capture and describe some of these impacts. The ANAO’s Corporate Plan states that the ANAO’ s annual performance statements will provide a narrative that will consider, amongst other matters, analysis of key improvements made by entities during a performance audit process based on information included in tabled performance audit reports.

3. Performance audits involve close engagement between the ANAO and the audited entity as well as other stakeholders involved in the program or activity being audited. Throughout the audit engagement, the ANAO outlines to the entity the preliminary audit findings, conclusions and potential audit recommendations. This ensures that final recommendations are appropriately targeted and encourages entities to take early remedial action on any identified matters during the course of an audit. Remedial actions entities may take during the audit include:

• strengthening governance arrangements;
• introducing or revising policies, strategies, guidelines or administrative processes; and
• initiating reviews or investigations.

4. In this context, the below actions were observed by the ANAO during the course of the audit. It is not clear whether these actions and/or the timing of these actions were planned in response to proposed or actual audit activity. The ANAO has not sought to obtain assurance over the source of these actions or whether they have been appropriately implemented.

• Paragraph 6.6.d⁷⁵ of the CPRs require entities to comply with all directions in relation to gifts or hospitality. During the course of the audit, the ANAO notified AMSA that its published gifts and benefit register had not been updated since March 2022. Australian Public Service agency heads are required to publish a register of gifts and benefits they accept that are valued at over $AUD100.00 (excluding GST) on their website on a quarterly basis. Since March 2024, AMSA has updated its published register to list all entries since March 2022.
• Paragraph 7.8⁷⁶ of the CPRs require entities to maintain a current procurement plan containing a short strategic procurement outlook. AMSA advised the ANAO in March 2024 that it did not publish an annual procurement plan during the procurement of the AtoN. AMSA advised that it began publishing its annual procurement plan on December 2023 and that its ‘divisions are canvased quarterly for relevant procurement information’ to maintain it.
• AMSA’s complaints webpage now contains information about how to make a complaint under the Government Procurement (Judicial Review) Act 2018 (see paragraph 4.40).