01 October 2015

Confidentiality in APS contracts

The Australian National Audit Office has released its report on Confidentiality in Government Contracts: Senate Order for Departmental and Entity Contracts (Calendar Year 2014 Compliance).

The report summary states -
The Senate Procedural Order of Continuing Effect: Departmental and Agency Contracts (the Senate Order/the Order) was introduced in 2001 to improve public access to information about government contracting. At the time, the level of information available to the Parliament and to the public about government contracting had not kept pace with the increased rate of contracting out.
Successive governments have agreed to comply with the Senate Order and its subsequent amendments. Under the Order, Ministers must table letters of advice that all entities which they administer have placed on the Internet lists of contracts valued at $100 000 or more, by no later than two calendar months after the end of each financial and calendar years. These lists are to: include the details of each contract1 which has not been fully performed or which has been entered into during the previous 12 months; and indicate whether the contracts contain confidentiality provisions or other requirements of confidentiality, and a statement of the reasons for the confidentiality.
The Department of Finance is responsible for providing entities with policy guidance on procurement, including confidentiality in procurement and compliance with the Order. This guidance is set out in: Resource Management Guide No. 403 (RMG 403)—Meeting the Senate Order on Entity Contracts which articulates the rationale for the Order, outlines its requirements and is designed to provide guidance to support entities in developing their Senate Order Internet listings; and Buying for the Australian Government, Confidentiality Throughout the Procurement Cycle (the Guidance) which contains advice on managing confidentiality throughout the procurement process, and includes the Confidentiality Test that is designed to assist entities to determine the appropriate inclusion of confidentiality provisions in contracts.
To support the Order, the Senate also requested in 2001 that the Auditor‑General annually examine a number of the contracts reported to contain confidentiality provisions, and report any inappropriate use.
Audit objectives and scope
The objective of the audit was to assess the appropriateness of the use and reporting of confidentiality provisions in a sample of Australian Government contracts. The criteria were: entities published contract listings on their websites and Ministers’ letters were tabled in accordance with the content and timing requirements of the Order; confidentiality provisions were used appropriately in a sample of contracts which were reported to contain confidentiality provisions by the selected entities; and the selected entities accurately reported contract information, including the use of confidentiality provisions, in the contract listings and on AusTender.
The selected entities for the audit were: Department of Finance (Finance); Department of the Prime Minister and Cabinet (PM&C); Department of Social Services (DSS); and Department of Veterans’ Affairs (DVA). The sample of contracts was taken from the selected entities’ Senate Order listings for the 2014 calendar year and AusTender. Two entities DSS and PM&C had significant machinery of government changes during 2014.
Overall conclusion
The Senate Order was introduced to improve public access to information about government contracting. The results of this audit indicate that while the reported use of confidentiality provisions is low, entities’ reporting practices are not always adequate or reliable enough to meet the requirements of the Order. Transparency of contract information can be affected as a result.
The 2014 Senate Order listings contained 41 469 contracts for goods and services totalling $216.3 billion, of which 1 855 contracts (4.5 per cent) valued at $30.1 billion (13.9%), were reported as containing confidentiality provisions. The reported use of confidentiality provisions by entities was in keeping with 2013 levels, and continues to reflect a significant decline from the 24 per cent of contracts reported in 2001, the year the Order was introduced.
Entities are expected to support their Ministers to comply with the Senate Order though publishing contract listings in accordance with content and timing requirements. This audit found that entities did not always meet these requirements and Ministers could be better supported through entities publishing lists by the due date and verifying that contract details are accurately reported. In this respect in 2014, the ANAO observed: overall entity performance in meeting the content requirements of the Order had declined in comparison to 2013—only 24 per cent of entities were fully compliant; for the four entities examined in detail by the ANAO, none of the contract listings fully complied with the Order’s publishing requirements. The main reason for non-compliance was the reporting of contracts outside the relevant contract period; and a small number of entity listings (15 per cent) were published late (within one month of the due date), and as at 30 June 2015 one entity, had not published a listing or a notice that no relevant contracts had been entered into.
Despite the low proportion of contracts reported as containing confidentiality provisions, specific confidentiality provisions in contracts continue to be incorrectly used and reported in 2014. The ANAO’s examination of a sample of 101 contracts reported to contain confidentiality provisions, found that for 80 per cent of the contracts the use of confidentiality provisions did not comply with the Guidance or was misreported. The level of inappropriate use has increased by 17 per cent compared to the 2013 Senate Order compliance audit. ...
Confidentiality provisions in government contracts can impede accountability and transparency in government purchasing. A request for specific information to be kept confidential must be assessed against the Confidentiality Test criteria and entities should make sure decisions to include confidentiality provisions are documented. In this respect, the audited entities were not able to provide documentation supporting their assessment of suppliers’ claims against the Confidentiality Test, and reasons for agreeing for the information to remain confidential.
The results of this audit indicate that processes to capture information about basic contract details and the reporting of existence of confidentiality provisions needs to improve. Entities currently must report on procurement contracts for the purposes of the Senate Order and separately on AusTender to meet requirements of the Commonwealth Procurement Rules. Of the 2 171 procurement contracts listed in the audited entities’ Senate Order listings, 1 936 (89 per cent) had a corresponding entry in AusTender. In the ANAO’s sample only 17 per cent of contracts were found to be accurately reported, taking into account the basic contract information and the correct type and reason for confidentiality provisions.
The ANAO has previously observed shortcomings both in the application of the Confidentiality Test and in the accuracy of Senate Order and AusTender reporting. The results of this audit show that there continues to be scope for entities to improve their assessment of suppliers’ claims for confidentiality of contractual information and implement more rigorous quality assurance processes for reporting confidentiality provisions in contracts.
The Department of Finance supports entities to comply with the Senate Order through providing whole-of-government procurement guidance and communicating the key requirements of the Order. Opportunities exist for Finance to improve advice through direct reference to the Confidentiality Test in the Commonwealth Procurement Rules, and disseminating better practice examples of entity assurance mechanisms.
The ANAO has made three recommendations to assist improving the use and reporting of confidentiality provisions. ...
These recommendations are based on findings at the audited entities and are likely to be relevant to other Australian Government entities. Therefore, all Australian Government entities are encouraged to assess the benefits of implementing these recommendations in light of their own circumstances, including the extent to which the recommendations, or parts thereof, are addressed by practices already in place.
Recommendation No. 1 Para 3.16 To improve the appropriate use and reporting of confidentiality provisions in contracts by entities, the ANAO recommends the Department of Finance revises guidance for confidentiality in procurement by including: (a) reference to the Confidentiality Test in the Commonwealth Procurement Rules; and (b) strengthening current guidance to include examples of entity assurance mechanisms. Department of Finance response: Agreed
Recommendation No. 2 Para 3.20 When considering requests to keep information contained in a contract confidential, the ANAO recommends that entities implement procedures that require: (a) a case-by-case assessment of supplier requests against the Confidentiality Test; and (b) adequate documentation of the reasons for agreeing to keep specific information in contracts confidential. Responses from audited entities: Agreed
Recommendation No. 3 Para 4.17 To improve the quality of information on AusTender, the ANAO recommends that entities implement appropriate quality assurance processes upfront at the point of contract creation to confirm the completeness and accuracy of reported contract information. Responses from audited entities: Agreed