'Misplaced' disk leads to probity query

Serious probity issues have been raised in an audit of a $351 million Federal Government IT outsourcing contract won by IBM GSA after a computer disk with tender information was 'misplaced'.

The Australian National Audit Office (ANOA) report, published earlier this month, into the Health Group contract which covers the Department of Health, Medibank Private and Health Insurance Commission, said there was a "lack of formal documentation and transparency" in the tender process, but couldn't reach a conclusion on whether any tenderer gained a competitive advantage.

The audit referred to a disclosure event on July 28, 1999 when "sensitive price information from the other tenderers was inadvertently passed to IBM GSA by the Office of Asset Sales and IT Outsourcing (OASITO), and the subsequent late lodgement by IBM GSA of its revised pricing offer on August 2 which had substantial price reductions".

According to ANAO: "A number of issues arose in the course of the tender that had the potential to compromise the probity of the process, or to at least give rise to a perception that it may have been or had been compromised."

The report claims OASITO faxed information to tenderers prior to meetings to be held in Canberra the following day but IBM GSA called to say the fax was illegible and requested an electronic version of the document.

An IBM GSA representative then collected a computer disk from OASITO offices and later that day IBM GSA advised OASITO the document contained information relating to other companies, the disk was then retrieved, the report said.

Revised submissions were then received by tenderers including IBM GSA, CSC and EDS, the ANAO report with pricing substantially lowered by IBM GSA and CSC.

Last month the former Minister for Finance and Administration John Fahey advised ANAO that: "When the disc containing all three bids was delivered to IBM GSA in error my reaction on being informed directly by OASITO was to cancel the tender. I could not see that a tender process with integrity could continue. I conveyed this view to OASITO and I requested two things. Firstly, that all parties associated with the tender be informed of the potential breach of confidentiality and their views obtained. Secondly, that the Probity Auditor be immediately informed and that all subsequent dealings on this issue be in the presence of the Probity Auditor so that a separate audit report could be prepared on this issue to underpin either cancelling the Health tender or proceeding with the concurrence of all parties. At the conclusion of the tender I was both disappointed and annoyed at the limited role of the Probity Auditor and the absence of a separate report on this issue."

ANOA also revealed in the report that due to a lack of documentation kept during the tender process OASITO "relied extensively upon assurances contained in statutory declarations to conclude the tender process could continue".

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More about Australian National Audit OfficeAustralian National Audit OfficeCSC AustraliaDepartment of HealthEDS AustraliaGSA GroupHealth Insurance CommissionIBM AustraliaIBM GSANational Audit OfficeOASITOOffice of Asset Sales and IT Outsourcing

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