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Thursday, 12 December 2002
Page: 7821

Senator FORSHAW (9:56 AM) —I present the report of the Finance and Public Administration References Committee entitled Departmental and agency contracts: Report on the first year of operation of the Senate order for the production of lists of departmental and agency contracts.

Ordered that the report be printed.

Senator FORSHAW —I move:

That the Senate take note of the report.

I have a short tabling statement but I am happy to seek leave to incorporate it in Hansard, in the interests of speeding up the business of the Senate.

Leave granted.

The statement read as follows—

Today I am tabling the report of the Senate Finance and Public Administration References Committee on the first year of operation of the Senate order for the production of lists of departmental and agency contracts.

The rapid expansion in the number of government contracts with many confidentiality clauses has been of concern to the Senate for some time. Convergence of the public and private sectors in accounting, auditing, financial administration and service delivery has resulted in conflict between commercial considerations and contractors' wish to maintain competitive advantage, and the need for access to information about government contracts by parliament and the public. The key to public sector accountability is openness and transparency and the challenge is to achieve a balance between the interest of all parties.

The ability of parliament to scrutinise the efficiency and effectiveness of government operations, including those outsourced, is crucial to accountability. In resolutions dating back to 1971, the Senate has reiterated that the operations of bodies in receipt of public funds are open to parliamentary scrutiny. While the means of delivery of public services may have changed, the need for the Government to account for the provision of goods and services that are funded from the public purse remains.

The Senate order is an effective means of scrutiny of government contracts. It is also vital to ensuring that contracting processes are properly documented and that effective competition and value for money are being achieved.

The order has been described in the media as `arguably the most important accountability requirement to have emerged from the Parliament for ages'. It has been a catalyst for action on the part of government for greater accountability and transparency in relation to government contracting. In response to the order, new accountability requirements were included in the revised Commonwealth Procurement Guidelines (CPGs) of October 2001. And best practice guidance on the determination of commercial confidentiality for government contracts is due for release by the Department of Finance and Administration by the end of 2002.

The order requires the six-monthly publication of lists of contracts to the value of $100,000 or more by all FMA agencies, that is, those covered by the Financial Management and Accountability Act 1997. Ministers are also required to table letters in the Senate regarding compliance with the order by agencies for which they are responsible. Contract lists must indicate whether each contract is subject to commercial confidentiality conditions. Publication of government contract information has been the norm in other countries for some years. In some jurisdictions this includes publication of the full text of contracts.

The Committee appreciates that most agencies have responded positively to the order and that changes in contracting practices are occurring as a result. It notes, however, that, in taking a literal and over-cautious response approach to the letter of the Senate order, some agencies may still be resisting the spirit of the accountability requirements of the Senate. Understanding and reacting positively to the spirit of the order will hasten progress and a satisfactory outcome.

The Committee believes that all government contracts must be transparent. It does not wish to restrict the scope of the order, for example, to procurement-related contracts only. Instead, the order should capture all arrangements that could be considered contracts at law. This could include grants and funding agreements, sales contracts, building leases, certain employment contracts and demand-driven contracts.

The order requires the Auditor-General to conduct audits of compliance at six-monthly intervals. A high proportion of contracts examined in those agencies assessed so far have not complied with the contract commercial confidentiality guidelines developed by the Auditor-General in response to this Committee's first report on this matter. This non-compliance can be partly explained by the fact that lists published to date include many contracts negotiated prior to the establishment of the new accountability framework.

The Committee considers it is important to continue to monitor commercial confidentiality regarding government contracts for some time and at intervals of six-months, at least until reliable statistics on the application of commercial confidentiality to different types of contracts can be quantified.

The Committee strongly supports administrative efficiency and reduced duplication in reporting on government contracts. It notes the timely development of enhancements to the Gazette Publishing System or GaPS to assist compliance with the Senate order. The Committee also encourages ways of linking reporting under the Senate order, GaPS and for annual reports. However, because GaPS contains information about procurement-related contracts only, because the enhancements to GaPS are not yet finalised and because agency practice is not yet standardised, reporting of government contract information through GaPS alone will not be sufficient.

The order has been operational for a relatively short period of time. The Committee considers that wholesale changes to the order at this stage would weaken its intent and undermine the progress being made towards development of a new culture of openness and accountability in relation to government contracting. The Committee prefers that the order remain less prescriptive in favour of guidance from the Auditor-General, where necessary, to assist with compliance. It also wishes to reduce imposing an additional administrative burden on agencies.

It therefore recommends only minor changes to the order. The most important are:

· to align reporting periods with financial and calendar years, rather than with parliamentary sitting years as at present; and

· to extend the time allowed for tabling of ministers' letters to the Senate and publication of contracts lists to not later than two months after the end of the financial or calendar year, as the case may be.

These changes will not only standardise reporting under the order with other reporting (for example, of financial information and annual reports) but will also give agencies more time to compile and check contract lists and to brief ministers, before letters are tabled in the Senate and lists are published. The Committee also recommends including some additional contract information to enhance the context of the published lists. Information such as contract commencement date and duration, and identification of the relevant reporting period and the twelve-month period relating to the contract listings should be readily available.

The Committee is committed to maximum transparency and accountability by government. Therefore, it wishes to include, in addition to FMA bodies, all bodies subject to the Commonwealth Authorities and Companies Act 1997 (that is, CAC Act bodies) within the order from the beginning of 2004. In preparation for this, it recommends that CAC Act bodies extend the best practice commercial confidentiality guidance expected from Finance to all new contracts entered into from the beginning of 2003.

The Committee notes that all parliamentary departments have complied with the order except for the Department of the House of Representatives. If the Senate agrees that, in the interests of transparency and accountability, the Department of the House of Representatives should comply with the order, it suggests that the President of the Senate could convey this view to the Speaker of the House of Representatives

The Committee is also concerned at the lack of transparency in relation to contracts let by ASIO and ASIS and considers that these agencies would have many `common stores' contracts that could be listed under the order. It does not accept that a blanket exemption (on national security grounds) should apply to ASIO and ASIS and recommends that these agencies apply the commercial confidentiality guidelines expected from Finance to their contracts from the beginning of 2003.

The Committee acknowledges the progress being made towards a new culture of openness and accountability in relation to government contracting, in large part as a result of the Senate order. It hopes that the Senate will agree to minor amendments to the Senate order to clarify its intent and assist agencies to achieve better and smoother compliance with the order.

I foreshadow the Committee's intention to report on the order again at the end of the second year of its operation. By this time, agencies will have well-established systems and processes for compliance and a good understanding and more experience in determining and negotiating commercial confidentiality for contracts.

Senator FORSHAW —I seek leave to continue my remarks later.

Leave granted; debate adjourned.