Investigation into allegations of improper procurement of services by the Department of Education and Early Childhood Development

VICTORIAN
Investigation into allegations of improper
procurement of services by the Department
Ombudsman Act 1973
of Education and Early Childhood Development
March 2014
Ordered to be printed
Victorian government printer
Session 2010 - 14
P.P. No. 314
www.ombudsman.vic.gov.au
Letter to the Legislative Council and the
Legislative Assembly
To
The Honourable the President of the Legislative Council
and
The Honourable the Speaker of the Legislative Assembly
Pursuant to sections 25 and 25AA of the Ombudsman Act 1973, I present
to Parliament my report into an Investigation into allegations of improper
procurement of services by the Department of Education and Early Childhood
Development.
G E Brouwer
OMBUDSMAN
26 March 2014
letter to the legislative council and the legislative assembly
1
www.ombudsman.vic.gov.au
Contents
Page
Background
3
Introduction
3
Issues subject to investigation
3
TAFE reforms
4
Victorian Government Purchasing Board
4
Accredited Purchasing Units
5
Investigation methodology
5
Legislative limitations on the Ombudsman’s Jurisdiction
6
a) The engagement of ACIL Allen Consulting for Ms Loureys services
and the alleged cerest
8
Background to the engagement
8
Cerest
9
Experience in the Education Sector
11
Relevant procurement requirements and the engagement
12
Variations and additional contract
12
Reporting requirements – disclosure of contractors with
esponsibility
13
Conclusions
14
Recommendations
16
b) The engagement of KPMG services related to TAFE reform and
the alleged cerest
17
Cerest
17
Relevant Procurement Requirements
17
Engagement of KPMG for Ministerial Roundtables
18
Engagement of KPMG for modelling work
21
Improvements made to policies and procedures
24
Conclusions
25
Recommendations
27
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Background
Introduction
1.
On 4 October 2013 I received a complaint from Mr Steve Herbert MP1,
requesting that I investigate the engagement of Ms Marianne Lourey,
Director of ACIL Allen Consulting (ACIL Allen)2 by the Department of
Education and Early Childhood Development (the department).
2.
Mr Herbert said that Ms Lourey’s engagement to lead the TAFE
Transition Taskforce may have been inappropriate because:
the Secretary of the Department, Richard Bolt and Ms Lourey had a
previous working relationship that was not disclosed
Ms Lourey had no experience in the TAFE sector
Ms Lourey’s initial contract, worth $517,000, had been entered into
without a tender process, and that subsequent variations to the
contract had increased its value to a total of $999,386
Ms Lourey’s business interest may cole on the TAFE
Transition Taskforce.
3.
On 23 October 2013, I received a subsequent letter from Mr Herbert in
which he raised further concerns that Ms Lourey’s engagement had not
been properly reported in the departments 2012-2013 Annual Report.
4.
On 30 October 2013, a related matter was reported in an article3 in The
Age newspaper. The article alleged that the Deputy Secretary Higher
Education and Skills Group, Ms Kym Peake, had awarded contracts
related to the TAFE reforms to her former employer, KPMG, without a
competitive process. It was alleged that the value of these contracts
totalled almost $500,000.
Issues subject to investigation
5.
Pursuant to section 15B of the Ombudsman Act 1973 I conducted an
investigation into the following issues:
a.
The circumstances in which Ms Marianne Lourey was engaged
as Project Executive Director of the TAFE Transitional Taskforce
by the department for services related to the reform of the TAFE
sector absent a competitive process. My investigation examined:
whether Mr Bolt and Ms Loureys prior working relationship
constituted a cerest
whether Ms Loureys business interests constituted a c
of interest in relation to her leadership of the TAFE Transition
Taskforce
1
State Member for Eltham (Shadow Minister for Higher Education and Skills, Shadow Minister for the Teaching Profession).
2
Formerly ACIL Tasman.
3
‘Watchdog to probe TAFE deal done without tender, The Age, 30 October 2013.
background
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whether the departments securing of Ms Loureys services
complied with the Victorian Government Purchasing Board
(VGPB) policies
the departments selection process and rationale for engaging
Ms Lourey to work on TAFE reform when she had no prior
experience in the sector
why the engagement of Ms Lourey was not reported in the
departments Annual Report.
b.
The circumstances in which the department entered into two
engagements with KPMG for services related to TAFE reform
without a competitive process, including:
whether the Deputy Secretary’s prior employment at KPMG
constituted a cerest
whether KPMG was engaged according to VGPB policies.
TAFE reforms
6.
The 2012-2013 Victorian State Budget announced reforms to the
Vocational Education and Training secto
the funding models of TAFEs and Registered Training Organisations.
7.
As part of the budget the government released a ministerial statement,
Refocusing Vocational Training in Victoria, which provided that by
January 2013 the TAFEs and privately owned providers would receive the
same level of training subsidies.
8.
In June 2012 a TAFE Reform Panel was established to provide oversight
of the TAFEs as they adapted to reduced levels of funding.
9.
A TAFE Transition Taskforce (the Taskforce) was also established in June
2012. The purpose of the Taskforce was to provide analysis on which the
TAFE Reform Panel could base advice to Government.
Victorian Government Purchasing Board
10.
The Victorian Government Purchasing Board (VGPB) was established
under the Financial Management Act 1994 and is responsible for
establishing policies and procedures that government departments
must follow when procuring goods and services. Policies established
by the VGPB have the force of statute, and departmental procurement
policies must be consistent with those outlined by the VGPB.
11.
VGPB policies promote principled public sector purchasing that
emphasises value for money, open and fair competition, accountability,
risk management, probity and transparency.
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Accredited Purchasing Units
12.
The Accredited Purchasing Unit (APU), a unit within the department,
has responsibility, delegated by the VGPB, for ensuring compliance with
VGPB policies and procedures4.
13.
VGPB policies provide that in limited circumstances a government
department may be exempted from competitive purchasing such as
obtaining quotes or initiating a public tender process5.
14.
The APUs are responsible for approving requests in certain
circumstances, and must abide by VGPB policies and departmental
procurement policies relating to exemptions. APUs also play a role in the
approvariations to contracts in line with the departmental
procurement policies and VGPB policies.
Investigation methodology
15.
In investigating this matter mers:
reviewed relevant material from the department
made enquiries of the department
reviewed relevant legislation and policies
interviewed six witnesses.
16.
This report includes adverse comments about:
Mr Richard Bolt, Secretary of the Department of Education and
Early Childhood Development
Ms Kym Peake, Deputy Secretary, Higher Education and Skills
Group in that department; and
The Chair of the Accredited Purchasing Unit in that department.
17.
Mr Bolt, Ms Peake and the Chair of the APU were provided with the
opportunity to respond to those adverse comments. Mr Bolt and the
APU Chairs responses are fairly set out in this report. Ms Peake advised
that she did not have any further comment to make.
18.
This r
Mr Peter Hall, then Minister for Higher Education and Skills; and
Ms Marianne Lourey
And also may identify a person who was a former Executive Director at
the department. The report makes no adverse comments about any of
those people. They areport as:
I am sat it is necessary or desirable to do so in the public
interest; and
4
Accreditation of Departments by the VGPB Policy.
5
Exemption from Seeking Multiple Quotes, Open or Selective Tendering (Limited Tendering) and ICT IP Default Policy
Position.
background
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I am sat it will not cause unreasonable damage to the
person’s reputation, safety or well-being.
I note in this latter regard that these matters have been subject to media
commentary.
Legislative limitations on the Ombudsmans Jurisdiction
19.
e may not have been able to consider all the information relevant
to this investigation because the department redacted documents;
refused to provide documents; and one witness, Ms Kym Peake, said
that she was prevented from answering certain questions on the basis of
Section 19 of the Ombudsman Act 1973.
20.
Section 19 of the Ombudsman Act notes:
Deliberations of Ministers and Parliamentary committees not to be
disclosed
1.
A person shall not be required or authorized by virtue of this act-
a.
To furnish any information or answer any question; or
b.
To produce or inspect so much of any document-
which relates to the deliberations of Ministers or any
committee consisting of Members of Parliament where
the committee is formed for the purpose of advising the
Ministers in respect of their deliberations6.
21.
The department said that it withheld documents in part, or wholly where
the documents contained:
a.
Material that was prepared for the purpose of a submission to
Cabinet or a subcommittee of Cabinet; or
b.
Otherwise reveals the deliberations of Cabinet or a subcommittee
of Cabinet.
22.
In a letter to me Ms Peake said:
much of the information about the context in which KPMG were
engaged by the Department to produce work related to the ministerial
roundtables and further funding analysis falls within s19 of the Act. The
reason I cannot give this information in response to your questions is
for the same reason that material has been removed from the enclosed
documents.
23.
Since a number of documents were not provided to mers and
sections of other documents were redacted, it is unclear how the
withheld information related to the deliberation of Ministers or any
committee consisting of Members of Parliament.
24.
I also note that section 25A also applies in relation to the deliberation of
Ministers.
6
This section does not apply in relation to an investigation on a relevant protected disclosure complaint.
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25.
Section 25A of the Ombudsman Act provides:
25A Content of reports
(1) The Ombudsman must not include in a report under this Act-
b.
any information, or information in any document, referred to
in section 19, 19A or 19B;
26.
Section 25 of the Ombudsman Act does not prohibit me from receiving
information that is relevant to my investigations under Section 19, it only
prevents me from reporting such information.
27.
The application of these provisions demonstrate again the unnecessary
impediments imposed on my investigating and reporting functions which
continue tective investigations of public bodies, serve no
good public purpose and limit my ability to get to the truth.
background
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a) The engagement of ACIL Allen Consulting
for Ms Loureys services and the alleged
cerest
28.
My investigation considered the probity of the process undertaken by the
department in order to engage Ms Lourey to lead the Taskforce without
t undergoing a tender process.
29.
My investigation also considered whether Ms Lourey’s lack of experience
in the TAFE sector made her engagement inappropriate. My investigation
there was no reasonable perception of a cerest
between Mr Bolt and Ms Lourey for the r
paragraphs 41-48.
the department failed to meet its obligations under the Financial
Management Act 1994 in relation to the reporting of Ms Lourey’s
contract in its 2012-2013 Annual Report.
that experience in the TAFE sector was not one of the departments
main prerequisites for the position.
Background to the engagement
30.
On 16 July 2012 the Secretary approved an exemption from obtaining
quotes or undertaking a public tender in order to engage ACIL Tasman7
for Ms Marianne Lourey to lead the Taskforce. The exemption was valued
at $517,900 (GST inclusive).
31.
When the Taskforce was established in approximately June 2012 it was
led by an Executive Director who had worked at the department for over
a decade in areas that included oversight and reform of the TAFE sector.
32.
In July 2012, Mr Bolt and Ms Peake decided that the Executive Director
was unsuitable and embarked on a process teplacement. Ms
Peake and Mr Bolt both said that the governments timeline created a
great sense of urgency in relation to appointing somebody new to lead
the Taskforce.
33.
A number of deadlines were in place that related to the governments
announcement that TAFEs and private training providers would be
operating in a fully contestable market by January 2013.
34.
At interview Ms Peake, who was responsible f
said that she consulted with a number of people, including other
departmental Secretaries and the Victorian Leadership Development
Centre. Ms Peake said of the eight candidates that were subsequently
om within the public sector:
six were not immediately available
7
ACIL Tasman merged with Allen Consulting during the contract with the department and Ms Lourey became a director
of ACIL Allen Consulting.
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one candidate was interviewed and not considered suitable for the
role
another was not interested in leading the Taskforce.
35.
At interview Ms Peake said that the Taskforce needed to be led by
somebody with strong commercial acumen who also had experience
with market and industry restructure and understood corporate
governance.
36.
Ms Peake said that she was struggling to identify a suitable Taskforce
head and approached the Secretary who suggested that she might
consider Ms Lourey. At interview Ms Peake said that she ‘had no
impression that [she] was under any direction to engage Ms Lourey.
37.
Mr Bolt and Ms Lourey said at interview that they did not have a personal
relationship. Their shared professional history consisted of:
1999-2000: Mr Bolt was Director of Electricity Regulation at
e of the Regulator General (now Essential Services
Commission), and Ms Lourey as a contractor to KPMG working on
a price review of the energy sector. Ms Lourey said that during this
period, she did not work directly with Mr Bolt.
December 2003: Mr Bolt was the Executive Director of Energy
Policy at the Department of Infrastructure (DOI) and engaged Ms
Lourey for a 2-3 month period to provide advice afte at the
Morwell Briquette Factory.
November 2005-December 2006: Ms Lourey worked as a director
at DOI and reported directly to Mr Bolt who was then the Executive
Director, Energy and Transport Security.
2006-2011: Mr Bolt was the Secretary of the Department of Primary
Industries (DPI) and in 2006 he appointed Ms Lourey to his former
Executive Director role where she remained until 2010, including
while we Royal Commission.
2009: Mr Bolt and Ms Lourey worke Royal
Commission.
Ms Lourey stated that she worked directly with Mr Bolt for a total of
approximately 13-14 months.
Cerest
38.
The Code of Conduct for Victorian Public Sector Employees (the Code)
prescribes that public sector employees declare and avoid c
of interest, whether actual, potential or perceived, to help maintain
community trust and ce.
39.
The departments cerest policy states that it is particularly
important for employees to address risks of perceived cerest
because they are the most likely to be overlooked or underestimated.
engagement of ACIL Allen Consulting
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40.
The departments cerest framework states that the executive
team is responsible for modelling a commitment to key principles in
managing cerest by identifying cerest that
ect the executive team.
41.
Mr Bolt said that he had concerns about the appearance of bias and did
not participate in the decision to engage Ms Lourey. Mr Bolt also said
that he made his concerns clear to Ms Peake. Ms Peake said that Mr
Bolt only suggested [Ms Lourey] and she did not consider that she was
under direction by the Secretary to engage Ms Lourey.
42.
The VGPB policies, and the departments procurement policy8 that was in
place at the time, required that a public tender process be undertaken for
purchases in excess of $150,000, unless particular limited circumstances
apply9.
43.
The VGPB policy on exemptions states:
Subject to the agreement of the [Accer], approval of
exemptions less than the public tender threshold may be delegated to
persons with the appropriattion.
44.
The departments procurement policy provides that approval of the
Secretary, after APU endorsement of the request, is required for
exemptions sought in relation to a purchase in excess of $100,000 or
$150,00010.
45.
As the Accer, Mr Bolt approved the exemption valued at
$517,90011 for Ms Loureys services after it was endorsed by the APU.
Given his view that his relationship with Ms Lourey might be perceived
o engage her, it would have been desirable
for Mr Bolt to have delegated this function ter. However,
it does not appear that Mr Bolt had the option under VGPB policies to
delegate approval of exemptions.
46.
The VGPB policies, the departments cerest policy and
procurement policy do not provide for situations where the exercise of
a Secretarial power (eg the approval of exemptions over $150,000) may
lead to a perception of a cerest.
47.
As to the selection process, Mr Bolt did not interview Ms Lourey.
However, he was involved in the interview of another candidate on the
same day that Ms Lourey was interviewed. If, as he told mers, Mr
Bolt was concerned about the perception of bias regarding Ms Lourey, he
should have entirely removed himself from the assessment process.
8
The departments procurement policy that was in place at the time, Purchasing@DEECD, was replaced in November 2012.
9
The VGPB Exemption Policy provides a non-exhaustive list of circumstances that may give rise to a request for
an exemption cte including emergency, lack of competition, need for specialist expertise and exceptional
circumstances as determined by the Minister or Accer.
10
There was an inconsistency in the department’s procurement policy in that Section 2.2.3 Roles and Responsibilities in
Obtaining a Cte of Exemption provides that the Secretary must approve exemptions over $100,000, whereas
2.1.2b The Purchasing Method, provides that the Secretary must approve exemptions over $150,000.
11
GST inclusive.
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48.
Pers, must not engage in conduct
that undermines public ce. However in order for views regarding
a relationship to amount to a perceived cerest they must
be held by a fair-minded member of the public or a reasonably well-
informed person12 or a reasonable member of the public, properly
informed13.
49.
My investigation did not identify evidence a cerest in the
relationship between Mr Bolt and Ms Lourey. Nor did my investigation
identify a cerest between Ms Loureys business interests and
her engagement to lead the Taskforce.
Experience in the Education Sector
50.
Ms Loureys lack of experience in the education sector has been
reported in The Age14 and was raised by Mr Herbert in his complaint to
me.
51.
No position description along with a list of preferrtions,
knowledge and experience was drafted by the department.
52.
At interview, Ms Peake indicated that it was not necessary for Ms
Lourey to have experience in the TAFE sector. Ms Peake said that Ms
Loureys knowledge of governance and market restructure issues would
complement the skills that already existed in the Taskforce, which
included members with long standing TAFE involvement.
53.
At interview, Ms Lourey said that there werving
education sector experience:
Its actually, I think been better not having it, because the role is actually
far more focused on the commercial operation of the TAFE institute.
Around strategy, reporting, governance and people who have had
experience in the sector tend ted by their long term views
of the sector
54.
At interview, the previous TAFE transition taskforce lead said that while
he felt he had the relevtions for the role he could also
understand the rationale for appointing somebody with no relationship
to the sector:
Sometimes when you’re having to make big changes in organisations,
you are bettving someone coming in who’s completely clinical
and has no particular involvement. Particularly if youve got a team
around them that does know whats going on.
12
Queensland, Crime and Misconduct Commission and New South Wales, Independent Commission on Corruption,
Managing Cerest Toolkit (2004) 37.
13
Paper presented at the Australian Public Sector Anti-Corruption Conference on Wednesday 24th October 2007 by
Mr Gary Crooke QC, Queensland Integrity Commissioner, The Queensland Integrity Commissioner Role and functions:
Cf Interest matters and examples, 4
.
14
‘Department awards $1M TAFE contract without tender, The Age, 2 October 2013.
engagement of ACIL Allen Consulting
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Relevant procurement requirements and the engagement
55.
Departments are not permitted to engage suppliers prior to the approval
of an exemption15. The evidence indicates that, while discussions and
negotiations occurred prior to the granting of the exemption, the
department had not entered into any binding arrangement until the day
the exemption was granted.
56.
On 9 July 2012 Ms Peake and Ms Lourey had two telephone
conversations about the project. On the same day, Ms Peake provided
Ms Lourey with a project brief and Ms Lourey submitted a proposal that
included rates of pay.
57.
According to Ms Peake’s evidence the telephone conversations on 9 July
2012 included negotiation around pay:
certainly I had a conversation with her on the Monday about her rates
and what she could do to discount those.
58.
There is also evidence to suggest that a verbal understanding was
reached between 9 July and 11 July 2012 for Ms Lourey to head the
Taskforce, although I do not consider that either Ms Peake or Ms Lourey
considered that this understanding constituted a binding obligation.
59.
On 11 July 2012, Ms Peake submitted a request for a cte exempting
the department from a competitive procurement process, for a total
cost of $470,000 (excluding GST), for the engagement of a contractor
to lead the Taskforce for a period of six to nine months. The rationale
for requesting the exemption was strict project timelines and specialist
knowledge and expertise.
60.
The request was endorsed by the APU on 16 July 2013 with a
recommendation that the Secretary approve an exemption to engage Ms
Lourey. The exemption cte was signed by Mr Bolt on the same day.
61.
The contract16 between ACIL Tasman17 and the department for Ms
Loureys services18 was also entered on 16 July 2012. Ms Lourey
commenced work the same day.
Variations and additional contract
62.
On 25 March 20ariation to Ms Loureys contract was
approved extending the engagement to 26 April 2013.
63.
On 24 April 2013, two days before Ms Loureys contract would have
ended, a further variation valued at $49,068 was entered extending the
contract until 24 May 2013.
15
The VGPB Exemption from Seeking Multiple Quotes or Selective Tendering (Limited Tendering) and ICT IP Default
Position Policy. The department’s procurement policy required that approval to waive tender or quotation requirements
must be obtained prior to accepting quotes, engaging a supplier, commencement of work or commitment of funds by
te.
16
The contract was for an eight month period, the initial rate of $3,136.50 per day (excluding GST) for 31 days, to a
capped sum of $97,231.50. Thereafter, the discounted rate of $2,788 per day applied (excluding GST). The duration
of the initial contract was for eight months. The contract commencement date was 16 July 2012 and completion date
listed as March 2013.
17
ACIL Tasman merged with Allen Consulting during the contract with the department and Ms Lourey became a director
of ACIL Allen Consulting.
18
Ms Lourey was recorded as service providers only employee to be engaged in the provision of the services (unless an
equivalent representative was required in her absence).
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64.
On 28 May 2013 the department entered into a new contract with
ACIL Allen for the provision of further services by Marianne Lourey to
the value of $432,418.30 for a period of approximately 10 months. As
Secretary of the department, Mr Bolt approved an exemption allowing
the engagement to occur without a tender process.
65.
The services to be provided by Ms Lourey under this second contract
included the implementation of the Governments response to the
TAFE Reform Panel recommendations contained in the A Strong And
Sustainable TAFE Sector Report.
66.
The variations and additional contract brought the total expenditure by
the department on contracts with ACIL Allen related to TAFE reform to
$999,386.
Reporting requirements – disclosure of contractors with
esponsibility
67.
My investigation considered whether Ms Loureys contract was properly
reported in the departments 2012-2013 Annual Report.
68.
The Financial Management Act 1994 requires that Victorian public sector
entities provide the relevant Minister with its annual report as soon as
practicable aftear.
69.
The Department of Treasury and Finance provides guidance to assist
public sector entities comply with acceporting
obligations. The Minister for Finance has the authority to issue
mandatory directions in relation ttration issues that
must be applied in the preparation of an entity’s annual report19.
70.
Financial Reporting Direction20 21B (the direction) states that an entity
shall disclose the number of contractors char
management responsibilities, to whom the total expenses paid by the
entity exceed $100,000.
71.
The direction also provides that:
the entity shall exercise judgement in determining whether
a contractor has been char
responsibilities.
72.
Some of the indicators of esponsibilities’
red in the Financial Reporting Direction, are:
having the authority for planning, directing and controlling the
activities, directly or indirectly
participating in the formation of an entitys business/project plans
undertaking team/project leadership roles or
involvement in the entitys operational decisions.
19
Pursuant to section 8 of the Financial Management Act 1994, and Regulation 16 of the Financial Management Act 2004.
20 Financial Reporting Directions (FRDs) preporting requirements. Compliance with
FRDs is mandatory and must be consistently applied in the preparation and presentation of an entity’s annual report.
engagement of ACIL Allen Consulting
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73.
Ms Lourey was listed in the departments 2012-2013 Annual Report as a
‘Project Executive Director, with no disclosure that she was on a contract.
74.
At interview Ms Peake said that Ms Lourey was a contractor and
not a consultant. Ms Peake said that Ms Lourey was not listed in the
annual report because she did not have responsibility for performance
management of s. She stated that Ms Lourey was responsible for task
allocation but not performance management.
75.
However, Ms Lourey said that she was involved in some Human
Resourcing processes such as recruitment and termination of s. At
interview Ms Lourey said:
When I started the TAFE Transition Taskforce wasnt fully sed so one
of my jobs was to actually fully s
76.
In addition, Section 7.5 of the direction states:
or human resources management delegation
is not a pre-requisite f
responsibilities.
77.
A review of the documentation provided by the department indicates
that Ms Lourey wesponsibilities
such as chairing the TAFE transition taskforce group meetings, attending
meetings with the Minister, meeting TAFE CEOs and developing strategic
planning guidelines.
Conclusions
Cerest
78.
There is no evidence that the Secretary and Ms Lourey had a personal
relationship or that their professional relationship could give rise to an
actual or perceived cerest.
79.
In my view, Mr Bolt and Ms Loureys professional relationship, of itself,
o cause a reasonably informed person to consider that
there is a possibility of a cerest.
80.
The Secretary and Ms Loureys common work history is not inconsiderable,
and the Secretary’s own view was that the relationship might be perceived
as one involving bias. As a result of this concern, Mr Bolt was not involved
in the interview of Ms Lourey. While I do not consider that it was necessary
that Mr Bolt not participate in the interview of Ms Lourey, it is unfortunate
that Mr Bolt did not apply his concerns consistently and interviewed
another candidate on the same day.
81.
I also note that the idea of engaging Ms Lourey originated with the
Secretary, and as the departments Accer, he was
ultimately responsible for approving her engagement. The APU
endorsed the exemption prior to the Secretarys approval. However, the
lack of independence and rigour with which the APU operated does
not reassure me that this endorsement, in itself, could have cured any
perception of bias in the selection process.
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82.
In response to my draft report the Chair of the APU said:
In relation to comments made in relation to the APU considerations
of cerest/bias it is noted that the APU endorsed the
exemption in relation to the engagement of ACIL Allen Consulting
Pty Ltd (ACIL Allen), as opposed to an exemption in relation to the
engagement of Ms Marianne Lourey.
The documentation provided to the APU did not give rise to a suspicion
of any actual or perceived bias in the request to approve an exemption
in relation to the engagement of ACIL Allen. Had a bias or c
ould have been in a position to consider that
cocess and act accordingly.
Improved documentation for procurement processes now require that
businesonsider any issues of actual or perceived
cerest in their preparation. This has been in operation since
mid-2012.
83.
The VGPB policies do not allow for a delegation when there is an actual
or perceived cerest and the departments cerest
policy does not provide a process for relieving the Secretary of duties
where the exercise of such duties may create a perception of a c
of interest. I consider that there should have been a process which would
have allowed the Secretary to address his concerns about the perception
of bias in his relationship with Ms Lourey. Clearly some saw a c
hence the complaint to me.
84.
In response to my draft report Mr Bolt said:
I do not consider the relationship between Ms Marianne Lourey and
myself to be one that might beperceived as a c.
Marianne Lourey engagement
85.
Before engaging Ms Lourey, the department considered other options
within the public service and did not believe there was anyone available
with the desired skillset.
86.
The department did not consider experience in the TAFE sector to
be necessary because there were others on the Taskforce with that
experience. Ms Lourey was engaged by the department in order to help
estructure of the TAFE sector, and to this end
commercial expertise was prioritised. Ultimately, this was a decision
reasonably open to the department to make.
87.
I consider that Financial Reporting Direction 21B required Ms Loureys
contract to be disclosed in the departments annual report because her
role clearly involved management responsibilities. She was only listed
by the department as an executiver with no disclosure about the
contract.
engagement of ACIL Allen Consulting
15
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Recommendations
I recommend that the department:
Recommendation 1
Seek advice from the VGPB about how to manage situations where the
Secretary has a cerest thaects the ability to discharge
one of his or her powers and update its cerest policy
accordingly.
I recommend that the Secretary:
Recommendation 2
Retrospectively report Ms Lourey as a contract
management responsibilities in 2012-2013 and 2013-2014 in the
departments 2013-2014 annual report.
Departmental response:
The Secretary of the department stated:
I acknowledge and will implement the recommendations.
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improper procurement by the department of education and early childhood development
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b) The engagement of KPMG services
related to TAFE reform and the alleged
cerest
88.
My investigation also considered allegations that Ms Peake had awarded
contracts worth almost $500,000 to her former employer, KPMG,
without a competitive process.
89.
My investigation examined two contracts that were awarded to KPMG
by Ms Peake. While my investigation did not identify Ms Peake as having
a cerest with regard to the engagements, a number of
breaches of VGPB requirements werhese included:
The department varied the contract with KPMG for ministerial
roundtables on TAFE Governance without seeking or obtaining
APU approval. The APU then retrospectively granted approval of
the variation.
An exemption for the engagement of KPMG for modelling work
was requested by the department and approved by the APU some
months after KPMG completed the work.
The scope and cost of the engagement with KPMG for modelling
work was expanded prior to seeking APU approval.
The department failed to report any breaches that occurred in
relation to the contracts with KPMG to the VGPB.
Cerest
90.
At interview Ms Peake said that she was employed by KPMG for eight
months in 2008 and that for three months of her employment she was
overseas on secondment. Ms Peake also said that she was seconded to
the Department of Sustainability and Environment for a month, and in
total only spent three and a half months at KPMG’es.
91.
Ms Peake also said that, prior to KPMG’s work on TAFE reform, she
had nevs work on the
engagement for services related to Ministerial Roundtables.
Relevant Procurement Requirements
92.
Neither the VGPB nor the APU are able to retrospectively approve
procurement activity that does not comply with VGPB policies21.
93.
The departments procurement policy states that:
Approval to waive tendering and/or quotation requirements cannot be
sought retrospectively. That is to say, you must not seek a cte
after you have embarked on a course of action as this will be considered
to be a serious breach of government policy and may be reported
to the relevant Deputy Secretary, Secretary/ Minister and the Victorian
Government Purchasing Board (VGPB), Details of breaches reported to
the VGPB are included in the Boards annual report to Parliament.
21
VGPB Protocol for Reporting Non-Compliance with VGPB Policies.
engagement of KPMG
17
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94.
VGPB policies allow administrativariations of existing
supply contracts where, during the course of an engagement, the
scope of a contract requires adjustment. However there are a number of
rules that govern how departments are permitted to use variations.
95.
The VGPB Variation Process Approval fontracts
Policy states the following:
Approvariation within a departments accreditation
level is the rte, and or in accordance
with procedures adopted by the APU.
96.
The procedures adopted by the APU in relation tariations
require APU approval of a variation where the value of the purchase was
greater than $100,000.
97.
The VGPB variation policy also states that:
The approvariation does not remove the obligation
to report a breach of process if the variation is the result of a failure to
comply with VGPB policy.
Only after approval has been given is the department in a position to
implement the contract changes for which approval was sought.
Engagement of KPMG for Ministerial Roundtables
98.
In November 2011 the department engaged KPMG to ore
ministerial roundtables that were to be held between November 2011
and February 2012. The engagement was procured via an exemption for
$45,000, approved by Ms Peake. Ms Peake’tion enabled
her to approve ctes of exemptions valued at up to $50,000.
99.
At interview Ms Peake said that the roundtables involved consultation
with the TAFEs ‘around the structure of their boards’. Ms Peake
explained:
the Minister attended a round table that one of the partners at KPMG
was hosting with universities on a pro bono basis to consult with them
on their governance and came back from that and said that he had
spoken to that partner and was very keen for a similar set of round
tables to be hosted by KPMG, by this KPMG partner, about the TAFE
sector to inform his thinking so I signed an exemption for I think it was
$45,000 for them to undertake those roundtables on the Ministers
request.
100.
During a further interview with mers, Ms Peake said that the
Minister requested that ‘in a very short period of time that we do the
same thing, exactly the same format for the TAFEs’.
101.
Ms Peake said that whilst the Minister requested the work, as the
te she was saopriateness of the
engagement, because:
she had also attended the university roundtables and was
impressed, and was familiar with other governance related work
that KMPG had completed for the department
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improper procurement by the department of education and early childhood development
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KPMG’s costs were comparable to other similar consultancies.
she involved another consultancy in the project that had been
engaged via a competitive process for similar work in order to
ensure continuity.
102.
At interview Mr Peter Hall, then Minister for Higher Education and Skills,
said that he received a recommendation from the department that
hosting roundtables about TAFE governance would be appropriate,
and approved the recommendation. Minister Hall also said that he
receives recommendations that are signed by the Secretary and Deputy
Secretary.
103.
Minister Hall denied that he had requested that KPMG host the
roundtables. He said:
I was unaware, I had no recollection that they were the nominated
company to assist with that particular work, so there was certainly not a
request from me for any organisation in particular to be involved.
104.
Ms Peake said that in late February or early March 201222, the department
was asked to do further urgent work about TAFE governance that
stemmed from the roundtables.
105.
My investigat this work had commenced at least two
months prior to the department seeking APU approval to vary the KPMG
contracts. In fact, the works had already been completed and invoices
had been received from KPMG totalling $199,900, some $154,900 above
the $45,000 originally approved by Ms Peake.
106.
On 1 May 2012, Ms Peake submitto the Chair of the
APU requesting approval of the expenditureeake
explained that:
as the roundtables progressed, two key complex policy issues
emerged that the Minister sought advice on, and as KPMG had been
part of the initial conversation, their engagement was varied to include
supporting the provision of the advice.
107.
Ms Peake wrote that there was an ‘overarching requirement for
co Cabinet-in-Ce processes and an
excvironment and that she had requested
further works without consulting the relevant contract manager who was
aware that there was a $45,000 cap on services.
108.
eake also acknowledged that approval for the
variation ‘should have been sought from the APU panel’23.
109.
At interview Ms Peake said that the request was submitted
retrospectively because there had been miscommunication between
se and the team conducting the work about who was
responsible for obtaining the necessary approvals.
22 The material provided by the department related to the Roundtables work has been redacted pursuant to the
departments application of Section 19 of the Ombudsman Act. However Ms Peake’s oral evidence was that the
department was asked to organise further work in late February or early March 2012.
23 Ms Peake’tion allows her to approve exemptions up to $50,000, and variations under $100,00.
engagement of KPMG
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110.
On 11 May 2012 the APU approved the additional expenditure of $154,900,
enabling the department to pay KPMG for the services already provided.
111.
The Chair of the APU was questioned about the process that enabled the
APU to approve a variation request a number of months after the work
had been completed. The Chair of the APU stressed that the APU did not
approve a contract variation but the overall expenditure that had been
committed. Indeed, the approval cte that was granted by the APU
at least two and a half months after the additional work had commenced,
references ‘expenditure’ of $199,900.14. Howev
accompanying the approval, the APU Chair described the procurement
activity as a ‘variation.
112.
At interview the APU Chair explained the approval provided by the APU.
She said:
When we had a look at this one under the procurement process
guidelines on our website there were some inconsistencies there in
one part of it So thats why we said to them w
retrospectively approve a variation because its already happened but
we note that you have conducted the work, that an appropriat
delegate approved it frte perspective all we can do
is approve the expenditure.
113.
Advice to me from the VGPB is that approval of expenditure
related to a contract is the rte, and
APUs are only able to approve the related procurement process.
114.
At interview the APU Chair said that there were some