Location

'Do privacy laws affect the location decisions of internet firms? Evidence for privacy havens' by Fabrice Rochelandet and Silvio HT Tai in (2016) 42(2) European Journal of Law and Economics 339–368 comments

This paper empirically studies the location decisions of internet firms when they face high legal standards of privacy protection. Many factors might influence them: technological spillovers, lower taxation, and so on. Internet firms can also arbitrate national differences and many of them actually locate their activity in order to escape from national laws they consider over-stringent. In the current stage of development of the internet – the so-called Web 2.0 – the ease of access to personal data proved to be strategic input. So the more a jurisdiction makes collecting and using these data easy, the more attractive the country is, if all other things remain constant. One way for a firm to avoid such legal restrictions is to locate or to expand its business in less privacy protective countries. Our empirical results support this ‘no-privacy haven’ hypothesis. In particular, we highlight a new privacy paradox according to which the more stringent certain online privacy laws are, the more they induce firms to locate their business in less stringent countries, and finally the weaker actual privacy protection on the internet is.

The authors state

Privacy regulation is one of the most important debates in internet policy. For instance, Goldfarb and Tucker (2011) suggest that the EU’s e-Privacy Directive affects the performances of online advertising but more generally internet-based activities because of the importance of advertising revenues in supporting the development of the digital economy. A delicate compromise is to be found concerning legal restrictions on the commercial use of personal data. On the one hand, many online businesses are suspected of invading the privacy of individuals causing them various forms of harm. On the other hand, over-stringent rules can impede innovation on the web—targeted marketing, online customization—and perhaps impact internet firms’ location decisions in favor of less protective countries. In turn, this could entail a race to the bottom leading to laxer privacy to the detriment of internet users. This may be a new privacy paradox, i.e. stronger local privacy laws entail a reduction in global privacy protection for internet users. This new paradox can be explained by the contrast between national jurisdictions and the ‘global village’ nature of the internet.

In this paper, we pay particular attention to this dimension. We focus on privacy laws and ask how they affect the location decisions of internet firms in an international setting. In particular, we focus on the Web 2.0 services as the biggest users of personal data. Thus, our main question is whether more stringent privacy laws in one country can lead firms to locate or to expand their business into less protective countries.

One naïve approach might consist in considering the digital economy as a space where geography does not matter (Choi and Suh 2005). As a consequence, no significant physical or technological barriers would prevent online activities from expanding into digital networks while remaining located in their respective country of origin. Our first observations about the location of internet firms suggest that they tend to locate their business in countries that are often different from their national origin. Many factors may influence their location decisions: high-skilled and cheaper workers, spillovers and agglomeration effects, more favorable taxation, innovation policies, cluster development programs, and so on. Differences in national jurisdictions can also play an important role. Internet firms are often purported to locate their business overseas in order to exempt themselves from the jurisdiction of local law and thus benefit from a ‘legal haven’. For instance, illegal file-sharing networks often locate their servers in copyright-free countries (‘copyright havens’ or ‘copyright hells’). In the field of privacy, Facebook located its European headquarters in countries like Ireland but not in France, where legal protection of personal data is more stringent.

This paper shows that privacy and the legal protection of personal data explain the location decisions of internet firms. This result suggests a ‘no-privacy haven’ effect that induces them to locate their business in more privacy lax countries.

The rest of this paper is organized into five sections. The next section provides a brief survey of the literature that seeks to explain firms’ location decisions. The third section presents our hypotheses. Section 4 describes the method: variables used and the econometric model. Section 5 presents the main results. Section 6 envisages some policy implications.

The offer "Two legal implications"

 (1) The effectiveness of privacy regulation on the internet—as a ‘global’ network of networks—could justify a significant effort on the part of states to harmonize their privacy laws. Such an international agreement could be settled according to well-specified minimum standards as with the Berne Convention for the Protection of Literary and Artistic Works and the Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS) in the field of intellectual property. However, unlike these agreements, it seems that the governments that are the most likely to enable the prisoner dilemma underlying the ‘new privacy paradox’ to be overcome are also those which fully benefit from the locations of internet firms in terms of comparative advantages. So individuals might suffer for a long time from this race to the bottom. In addition, legal harmonization can have two negative effects: first, internet firms would be deprived of an opportunity to innovate by arbitrating between different legal orders; second, the harmonized standards could be fixed according to the "relative weights of interest groups asking for legal standards that benefit themselves, which can create inefficiencies if those standard rules prove to be unbalanced and generate losses of welfare due to legal irreversibilities over time" Ribstein and Kobayashi (2006). In the case of privacy, this risk seems to be prevalent because this social norm is currently moving and gqsit gives rise to many counter-claims from civil society, telemarketers, internet firms, and so on.

(2) The impact of privacy reinforcement and/or harmonization in terms of social welfare seems to be very tricky to evaluate. On the one hand, governments look for comparative advantages. Privacy protection level might be one of them if softening it can lead to greater benefits from more innovative services. On the other hand, individuals act as if they do not care anymore about their information privacy or as if they value it on a different basis than the sole protection of their intimacy over the internet. What constitutes an ideal privacy as a social norm under the context of Web 2.0? What is the actual impact of an improved preservation of privacy on individuals’ welfare if they do not care about it? How can a balance be found between (more certain) welfare gains in terms of innovation and (more uncertain) welfare losses in terms of a reduction of privacy? To some extent, government should soften the legal standards for the protection of personal data in order to attract more internet firms and stimulate innovations in online services. A major political challenge is then to be able to rank national priorities including privacy and competitiveness.

Autonomy

'“The Heart Knows its Own Bitterness”: Authority, Self, and the Origins of Patient Autonomy in Early Jewish Law' by Ayelet Hoffmann Libson in (2016) 56(3) American Journal of Legal History 303-325 comments

One of the central problems of modern bioethics concerns the relative merits of medical expertise, legal authority and patient autonomy. This article examines the pre-modern conflict between these principles, revealing how the early tradition of Jewish law sustained different models of expertise, authority and personal autonomy. Rabbinic sources preserve opposed and contradictory voices regarding who is authorized to define a patient’s needs as dire enough to supersede important legal prohibitions. Early rabbinic law enshrined the authority of experts, while later rabbis emphasized that life is the preserve of the individual and maintained that only the patient can make critical decisions about prolonging life, based on his or her physical and psychological needs and desires.

This transition is related to notions of consciousness and the self emergent among Christian contemporaries of the rabbis. The rise of a more sophisticated inner world and the significance accorded to individual choice influenced the interpretation and construal of law. By the late rabbinic period individuals were regarded as capable of recognizing their own needs and making informed choices regarding their bodies and selves. This ancient conversation offers a window into the history of the ethical questions that arise specifically in the field of medicine and more broadly in the legal realm.

Genetic Discrimination

'Genetic discrimination and life insurance: a systematic review of the evidence' by Yann Joly, Ida Ngueng Feze and Jacques Simard in (2013) 11(25) BMC Medicine comments

Since the late 1980s, genetic discrimination has remained one of the major concerns associated with genetic research and clinical genetics. Europe has adopted a plethora of laws and policies, both at the regional and national levels, to prevent insurers from having access to genetic information for underwriting. Legislators from the United States and the United Kingdom have also felt compelled to adopt protective measures specifically addressing genetics and insurance. But does the available evidence really confirm the popular apprehension about genetic discrimination and the subsequent genetic exceptionalism? ...

This paper presents the results of a systematic, critical review of over 20 years of genetic discrimination studies in the context of life insurance.

The available data clearly document the existence of individual cases of genetic discrimination. The significance of this initial finding is, however, greatly diminished by four observations. First, the methodology used in most of the studies is not sufficiently robust to clearly establish either the prevalence or the impact of discriminatory practices. Second, the current body of evidence was mostly developed around a small number of 'classic' genetic conditions. Third, the heterogeneity and small scope of most of the studies prevents formal statistical analysis of the aggregate results. Fourth, the small number of reported genetic discrimination cases in some studies could indicate that these incidents took place due to occasional errors, rather than the voluntary or planned choice, of the insurers.

Important methodological limitations and inconsistencies among the studies considered make it extremely difficult, at the moment, to justify policy action taken on the basis of evidence alone. Nonetheless, other empirical and theoretical factors have emerged (for example, the prevalence and impact of the fear of genetic discrimination among patients and research participants, the (un)importance of genetic information for the commercial viability of the private life insurance industry, and the need to develop more equitable schemes of access to life insurance) that should be considered along with the available evidence of genetic discrimination for a more holistic view of the debate....

The prototypical issue used when discussing the ethical, legal and social issues associated with scientific progress in genetics has been genetic discrimination (GD). Lawyers and ethicists have been quick to point out the risk that uninhibited genetic progress would entice governments and institutions to treat people differently on the basis of their genetic constitution [1]. GD has been defined in many ways, a mark of the influence of divergent sociocultural and scholarly backgrounds. Insurers write of 'rational (actuarial)-irrational discrimination' [2], lawyers write of 'legal-illegal (illicit) discrimination' [3], whereas patients generally adopt a much broader definition encompassing all differential, negative treatments of an individual based on his or her genetic makeup [4]. However defined, widespread GD could potentially result in practices that exclude segments of the population from access to basic social necessities such as healthcare, insurance, housing, reproductive freedom and employment. Mass media has joined the debate, ensuring that the issue of GD is not confined to isolated academic discourse [5].

Among the fields of potential discrimination, one of the most commonly-debated topics has been the use of genetic information by the insurance industry to select applicants and determine insurance premiums. The dual nature of personal insurance, which is partly considered as both a public and private good in most jurisdictions, and the relatively limited amount of public trust in the practices of the private insurance sector might explain some of this attention. Policymakers themselves have entered the arena of debate following substantial pressure from their constituents. In continental Europe, the legislative response has been swift and strong. GD is prohibited by the Convention on Biomedicine (1997), the Charter of Fundamental Rights of the European Union (2000), and the national legislation of many individual countries [6]. In the United States, the much-discussed Genetic Information Nondiscrimination Act of 2008 (GINA) (2008) offers protection mainly in the domains of health insurance and employment [7]. In the United Kingdom, the Association of British Insurers and the British government have agreed on a Concordat and Moratorium on Genetics and Insurance that significantly restricts the capacity of British insurers to request genetic information from insurance applicants [8]. Australian (2008 amendment to the Disability Discrimination Act), Canadian and East Asian policymakers have also been active in this area, although less so than their European counterparts [6,9].

This paper focuses on GD in the field of life insurance. Life insurance facilitates the economic security of the policy holder. It is often described as a quasi-essential social good, a gateway good necessary to have access to important social and economic activities that provide considerable peace of mind to the policyholder [10]. Access to life insurance is far from universal and it must generally be purchased through a contractual agreement with a private insurance company. The majority of life insurance applicants are accepted at a standard rate set by insurance companies. Nevertheless, for the small group of individuals excluded from the common pool, the consequences can be dire [11].

Is the substantial attention given to the question of GD in academic literature, popular media and policymaking circles justified by the empirical evidence currently available? In other words, are the observed concerns and responses based on documented cases of discrimination, anecdotes or other less visible factors? This question prompted us to undertake a study, which to our knowledge is the first attempt to systematically review all available empirical evidence of GD using the life insurance sector as a subject of analysis. This study analyzes actual cases of discrimination, the evidentiary limitations, and the possibility of drawing overarching conclusions from the available evidence.

Access to Medicines report

The report of the United Nations Secretary-General's High Level Panel on Access to Medicines comments

 In September 2015, 193 Member States of the United Nations adopted the 2030 Agenda for Sustainable Development (2030 Agenda). This agenda includes Sustainable Development Goal (SDG) 3 that aims to ensure healthy lives and promote the well- being of all people of all ages. SDG 3 is an important vehicle for realizing the right to health and the right to share in the benefits of scientific advancements, whose affirmation dates back to the Charter of the United Nations (1945), the Universal Declaration of Human Rights (1948) and the Constitution of the World Health Organization (WHO) (1948). These rights are also enshrined in the International Covenant on Economic, Social and Cultural Rights (1966) and various other international treaties, declarations and national laws, including at least 115 constitutions. Consistent with the vision of the 2030 Agenda and a recommendation by the Global Commission on HIV and the Law that the United Nations Secretary-General establish a high- level body to propose ways of incentivizing health technology innovation and increasing access to medicines and treatment, Secretary-General Ban Ki-moon, in November 2015, announced the appointment of a High-Level Panel on Innovation and Access to Health Technologies.

In keeping with the commitment of United Nations Member States to enhance policy coherence for sustainable development, the High-Level Panel’s terms of reference called for it to “review and assess proposals and recommend solutions for remedying the policy incoherence between the justifiable rights of inventors, international human rights law, trade rules and public health in the context of health technologies,” among other things. In accordance with the principle of universality that underpins the 2030 Agenda and its aspiration to leave no one behind, the High-Level Panel views innovation and access to health technologies as a multi-dimensional and global problem that affects all countries.

Health technology innovation and access

Over the last few decades, medical innovation has dramatically improved the lives of millions of people across the globe. Vaccines have significantly reduced the prevalence of diseases, ranging from polio to human papillomavirus. Antiretroviral medicines have greatly improved the lives of people living with the Human Immunodeficiency Virus (HIV). Personalized strategies based on molecularly-targeted medicines are likely to become central to cancer treatment in the future. Despite this noteworthy progress, millions of people continue to suffer and die from treatable conditions because of a lack of access to health technologies.

Investment in research and development (R&D) of health technologies does not adequately address a number of important health needs. In some cases, the cause lies in inadequate resourcing of R&D for diseases where the market does not provide sufficient return on investment. Antibiotics typically offer little pecuniary reward for years of often costly research. In these circumstances, experts warn that drug- resistant viruses, bacteria, parasites and fungi could cause 10 million deaths a year worldwide by 2050. The current model of medical innovation is ill-equipped to respond to the increasing emergence of infectious diseases, such as Ebola and Zika. Meanwhile, neglected tropical diseases (NTDs) continue to receive inadequate funding for R&D and access to health technologies, despite more than a billion people living with one or more NTD. The situation is driven by the relatively low purchasing power of people disproportionately affected by such conditions. There are many reasons why people do not get the healthcare they need, including, inter alia, under-resourced health systems, a lack of sufficiently qualified and skilled healthcare workers, inequalities between and within countries, regulatory barriers, poor health education, unavailability of health insurance, exclusion, stigma, discrimination and exclusive marketing rights. The High-Level Panel acknowledges the importance of addressing these multiple determinants to health technology innovation and access. However, the High-Level Panel’s mandate is focused on one aspect of a complex challenge: the incoherencies between international human rights, trade, intellectual property (IP) rights and public health objectives.

Policies and agreements related to human rights, trade, intellectual property rights and public health were developed with different objectives at different times. State obligations include duties not only to respect, but to protect and fulfil the right to health. This requires taking proactive measures to promote public health. As reaffirmed by a recent Human Rights Council resolution, ensuring access to medicines, and particularly to essential medicines, is a fundamental element of these obligations. Trade rules and intellectual property laws were developed to promote economic growth and incentivize innovation. On the one hand, governments seek the economic benefits of increased trade. On the other, the imperative to respect patents on health technologies could, in certain instances, create obstacles to the public health objectives of World Trade Organization (WTO) Members. The adoption of the WTO Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS) in 1994 ushered in a new and unprecedented era of global intellectual property norms and created a new standard of intellectual property protection and enforcement. However, negotiators included safeguards, or ‘flexibilities,’ within the TRIPS Agreement that could be used by signatories to tailor national intellectual property regimes so that countries could fulfil their human rights and public health obligations (for instance, laws and regulations regarding competition, government procurement and medicines). The proliferation of free trade agreements containing expansive patent and test data protections on health technologies, which exceed the minimum standards for intellectual property protection required by the TRIPS Agreement (so-called ‘TRIPS- plus’ provisions), may impede access to health technologies. Also, an uneven application of health and trade policy within and among states can create tensions that fuel policy incoherence.

Intellectual property laws and access to health technologies

Public health-sensitive intellectual property rules and mechanisms can help address the misalignment between profit-driven innovation models and public health priorities. Voluntary licences, entered into between right holders and third parties to facilitate the market entry of more affordable health technologies, have helped to lower treatment costs in many countries. TRIPS flexibilities – for example, the freedom to determine patentability criteria and further define concepts such as “novelty,” “inventive step” and “industrial applicability” – can ensure that patents are only awarded for genuine innovation. Similarly, the ability to determine the terms upon which compulsory licences are issued allows governments to fulfil their human rights obligations by securing the availability and affordability of health technologies. Many governments have not used the flexibilities available under the TRIPS Agreement for various reasons ranging from capacity constraints to undue political and economic pressure from states and corporations, both express and implied. Political and economic pressure placed on governments to forgo the use of TRIPS flexibilities violates the integrity and legitimacy of the system of legal rights and duties created by the TRIPS Agreement, as reaffirmed by the Doha Declaration. This pressure undermines the efforts of states to meet their human rights and public health obligations. The use of TRIPS flexibilities may also be impeded by the proliferation of bilateral and regional free trade agreements containing TRIPS-plus provisions. The policies of public funders of health technology R&D can also play an important role in enhancing health technology innovation and access. The United States, for instance, holds a central position in health technology innovation. The country’s R&D and access policies influence other actors, including private and public sector donors and foundations, and have an impact on access to the fruits of technology worldwide. The introduction of the 1980 Bayh-Dole Act in the United States significantly changed academic research by allowing universities and public research institutions to patent the results of federally-funded research and license private enterprises to develop them. However, limiting access to academic discoveries can obstruct follow-on innovation and force taxpayers to pay twice for the benefits of publicly-funded research. Strong, enforceable policies on data sharing and data access should be a condition of public grants. Public funding agencies should strongly encourage patenting and licensing practices that benefit public health, including the use of non-exclusive licences, the donation of intellectual property rights, participation in public sector patent pools and other mechanisms that maximize innovation while promoting access. Open models of innovation can also lower entry hurdles and accelerate the pace of development of health technologies, including those needed to combat emerging infectious diseases.

New incentives for research and development of health technologies

Market-driven R&D has been credited by some for producing a number of important health technologies that have improved health outcomes significantly worldwide. However, significant gaps in health technology innovation and access persist. Under the prevailing model, the biomedical industry, with the help of intellectual property and data protections, in addition to benefiting from public funding for research, recoups the costs of its R&D and marketing through high product prices protected by patent monopolies and data and market exclusivities. As a result, new technologies are rarely developed for health conditions which cannot deliver high returns, such as bacterial infections that only require antibiotics. Rare diseases that a ect comparatively small proportions of the population have not traditionally attracted investments although this is changing.

Various efforts are being undertaken by governments, philanthropic organizations, international entities, civil society groups and the private sector to resolve the incoherence between market-driven approaches and public health needs. However, such e orts tend to be fragmented, disparate and insufficient to deal with priority health needs on a sustainable, long-term basis. A much greater e ort must be directed to supplementing the existing market-driven system by investing in new mechanisms that delink the costs of R&D from the end prices of health technologies.

Identification of global health priorities is necessary to efficiently distribute scarce health resources, to substantially improve the health status of populations and to enhance global preparedness for future health crises. The current patchwork of public, private and philanthropic funding cannot sufficiently and sustainably improve access to health technologies. Greater and more sustainable financial commitments are needed from both the public and private sectors and should be coordinated to achieve maximum utility and effect.

Governance, accountability and transparency

Good governance, strong and concrete accountability mechanisms and greater transparency are decisive enablers of the 2030 Agenda. An important factor behind the incoherence between human rights, trade, intellectual property and public health lies in the diverse accountability mechanisms and transparency levels of these different, but overlapping spheres. Trade- and intellectual property-related accountability mechanisms are typically regulated by the WTO Dispute Settlement Understanding and dispute settlement provisions found in free trade and investment agreements. In contrast, human rights and public health accountability mechanisms are characterized by varying and often limited degrees of precision, legal weight and enforceability.

Transparency is necessary to hold governments, the private sector and other stakeholders accountable for the impact of their actions on access to health technologies. However, accurate and comprehensive information on the costs of R&D, marketing, production and distribution, as well as the end prices of health technologies, can be difficult to aggregate. Existing public databases of health technology prices managed by international organizations and civil society groups, while laudable, tend to be limited in scope and accuracy, in part because of discounts, mark-ups, taxes and regional pricing differences. The absence of transparency in clinical trial data and a lack of coordination within national drug regulatory authorities can contribute to delays in the registration of new health technologies. Procurement decisions and generic manufacturing are often delayed by the absence of clear, accurate and up-to-date information on existing and expired patents. Moreover, trade and investment agreements containing TRIPS-plus provisions are often negotiated in secret. This lack of transparency makes it difficult to hold governments and other stakeholders accountable for the impact of their policies and actions on innovation and access to health technologies. The incoherencies between the right to health, trade, intellectual property and public health objectives can only be resolved using robust and effective accountability frameworks that hold all stakeholders responsible for the impact of their decisions and actions on innovation and access to health technologies.

The Panel's recommendations, in summary, are

Intellectual property laws and access to health technologies

World Trade Organization (WTO) Members should commit themselves, at the highest political levels, to respect the letter and the spirit of the Doha Declaration on TRIPS and Public Health, refraining from any action that will limit their implementation and use in order to promote access to health technologies. More specifically: TRIPS flexibilities and TRIPS-plus provisions World Trade Organization (WTO) Members must make full use of the Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS) flexibilities as confirmed by the Doha Declaration to promote access to health technologies when necessary.

WTO Members should make full use of the policy space available in Article 27 of the TRIPS Agreement by adopting and applying rigorous definitions of invention and patentability that are in the best interests of the public health of the country and its inhabitants. This includes amending laws to curtail the evergreening of patents and awarding patents only when genuine innovation has occurred.

The United Nations Conference on Trade and Development (UNCTAD), the United Nations Development Programme (UNDP), the World Health Organization (WHO), the World Intellectual Property Organization (WIPO) and the World Trade Organization (WTO) should cooperate with one another and with other relevant bodies with the requisite expertise to support governments to apply public health-sensitive patentability criteria.

These multilateral organizations should strengthen the capacity of patent examiners at both national and regional levels to apply rigorous public health-sensitive standards of patentability taking into account public health needs.

Governments should adopt and implement legislation that facilitates the issuance of compulsory licenses. Such legislation must be designed to effectuate quick, fair, predictable and implementable compulsory licenses for legitimate public health needs, and particularly with regards to essential medicines. The use of compulsory licensing must be based on the provisions found in the Doha Declaration and the grounds for the issuance of compulsory licenses left to the discretion of governments. WTO Members should revise the paragraph 6 decision in order to find a solution that enables a swift and expedient export of pharmaceutical products produced under compulsory license. WTO Members should, as necessary, adopt a waiver and permanent revision of the TRIPS Agreement to enable this reform.

Governments and the private sector must refrain from explicit or implicit threats, tactics or strategies that undermine the right of WTO Members to use TRIPS flexibilities. Instances of undue political and commercial pressure should be reported to by the WTO Secretariat during the Trade Policy Review of Members. WTO Members must register complaints against undue political and economic pressure which includes taking punitive measures against o ending WTO Members.

Governments engaged in bilateral and regional trade and investment treaties should ensure that these agreements do not include provisions that interfere with their obligations to fulfil the right to health. As a first step, they must undertake public health impact assessments. These impact assessments should verify that the increased trade and economic benefits are not endangering or impeding the human rights and public health obligations of the nation and its people before entering into commitments. Such assessments should inform negotiations, be conducted transparently and made publicly available.

Publicly-funded research

Public funders of research must require that knowledge generated from such research be made freely and widely available through publication in peer-reviewed literature and seek broad, online public access to such research.

Universities and research institutions that receive public funding must prioritize public health objectives over financial returns in their patenting and licensing practices. Such practices may include publication, non-exclusive licensing, donations of intellectual property and participation in public sector patent pools, among others. Sufficient incentives must be in place in these practices to make it attractive for developers to underwrite the cost of bringing a product to market at affordable prices that ensure broad availability.

Universities and research institutions that receive public funding should adopt policies and approaches that catalyse innovation and create flexible models of collaboration that advance biomedical research and generate knowledge for the benefit of the public.

New incentives for research and development of health technologies

It is imperative that governments increase their current levels of investment in health technology innovation to address unmet needs. Stakeholders, including governments, the biomedical industry, institutional funders of healthcare and civil society, should test and implement new and additional models for financing and rewarding public health research and development (R&D), such as the transaction taxes and other innovative financing mechanisms.

Building on current discussions at the WHO, the United Nations Secretary-General should initiate a process for governments to negotiate global agreements on the coordination, financing and development of health technologies. This includes negotiations for a binding R&D Convention that delinks the costs of research and development from end prices to promote access to good health for all. The Convention should focus on public health needs, including but not limited to, innovation for neglected tropical diseases and antimicrobial resistance and must complement existing mechanisms.

As a preparatory step, governments should form a Working Group to begin negotiating a Code of Principles for Biomedical R&D. The principles would apply to public R&D funds and should also be adopted by private and philanthropic funders, product development partnerships, universities, the biomedical industry and other stakeholders. Governments should report annually on their progress in negotiating and implementing a Code of Principles as a preparatory step to negotiating the Convention in the United Nations General Assembly.

Governance, accountability and transparency

Governments

Governments must review the situation of access to health technologies in their countries in light of human rights principles and States’ obligations to fulfil them, with assistance from the Office of the United Nations High Commissioner for Human Rights (OHCHR) and other relevant United Nations entities. The results of these assessments should be made publicly available. Civil society should be financially supported to submit their own shadow reports on innovation and access to health technologies. Such national reviews should be repeated at regular intervals.

Governments should strengthen national level policy and institutional coherence between trade and intellectual property, the right to health and public health objectives by establishing national inter-ministerial bodies to coordinate laws, policies and practices that may impact on health technology innovation and access. Appropriate member/s of the national executive who can manage competing priorities, mandates and interests should convene such bodies. The deliberations and decisions of such groups should operate with a maximum of transparency. Civil society should be financially supported to participate and submit their shadow reports on innovation and access to health technologies.

Multilateral organizations

The United Nations Secretary-General should establish an independent review body tasked with assessing progress on health technology innovation and access. Challenges and progress on innovation and access to health technologies under the ambit of the 2030 Agenda, as well as progress made in implementing the recommendations of this High-Level Panel, should be monitored by this body. Membership should comprise of governments, representatives from United Nations and multilateral organizations, civil society, academia and the private sector. The United Nations Secretary-General should establish an inter-agency taskforce on health technology innovation and access. This taskforce, operating for the duration of the SDGs, should work toward increasing coherence among United Nations entities and relevant multilateral organizations like the WTO. The taskforce, charged with overseeing the implementation of the High-Level Panel’s recommendations should be coordinated by the United Nations Development Group and report annually to the United Nations Secretary- General on progress made in enhancing United Nations system-wide coherence on innovation and access to health technologies.

The United Nations General Assembly should convene a Special Session, no later than 2018, on health technology innovation and access to agree on strategies and an accountability framework that will accelerate efforts towards promoting innovation and ensuring access as set out in the 2030 Agenda. Civil society should be financially supported to participate and submit their reports on innovation and access to health technologies at this Special Session.

Private sector companies

Biomedical private sector companies involved in health technology innovation and access should report, as part of their annual reporting cycle, on actions they have taken that promote access to health technologies.

Private sector companies should have a publicly available policy on their contribution to improving access to health technologies setting out general and specific objectives, timeframes, reporting procedures and lines of accountability and a governance system that includes direct board-level responsibility and accountability on improving access to health technologies.

R&D, production, pricing and distribution of health technologies

Governments should require manufacturers and distributors of health technologies to disclose to drug regulatory and procurement authorities information pertaining to: (1) the costs of R&D, production, marketing and distribution of health technology being procured or given marketing approval with each expense category separated; and (2) any public funding received in the development of the health technology, including tax credits, subsidies and grants.

Building on the Global Price Reporting Mechanism (GPRM), V3P and others, WHO should establish and maintain an accessible international database of prices of patented and generic medicines and biosimilars in the private and public sectors of all countries where they are registered.

Clinical trials

Governments should require that the unidentified data on all completed and discontinued clinical trials be made publicly available in an easily searchable public register established and operated by existing mechanisms such as the WHO Clinical Trials Registry Platform, clinical trials.gov or in peer reviewed publications, regardless of whether their results are positive, negative, neutral or inconclusive.

Junk Publishing and Pseudolegalism

A small moment of cheer for scholars disquieted by email from junk publishers, with news last month that the US Federal Trade Commission  charged OMICS Group, Inc. (along with two affiliated companies and executive Srinubabu Gedela) with deceiving academics and researchers about the nature of its publications and hiding publication fees ranging from hundreds to thousands of dollars.

The FTC’s complaint alleges that the OMICS group - publisher of what the FTC characterises as "hundreds of purported online academic journals" - claim that

their journals follow rigorous peer-review practices and have editorial boards made up of prominent academics. In reality, many articles are published with little to no peer review and numerous individuals represented to be editors have not agreed to be affiliated with the journals.

According to the FTC’s complaint, OMICS does not tell researchers that they must pay significant publishing fees until after it has accepted an article for publication, and often will not allow researchers to withdraw their articles from submission, thereby making the research ineligible for publication in another journal. Academic ethics standards generally forbid researchers from submitting the same research to more than one journal.

“The defendants in this case used false promises to convince researchers to submit articles presenting work that may have taken months or years to complete, and then held that work hostage over undisclosed publication fees ranging into the thousands of dollars,” said Jessica Rich, Director of the FTC’s Bureau of Consumer Protection. “It is vital that we stop scammers who seek to take advantage of the changing landscape of academic publishing.”

Among the deceptive statements OMICS made to researchers, according to the complaint, were descriptions of its journals as having a high “impact factor,” a term that describes approximately how frequently articles in a particular journal are cited in other research. Thomson Reuters’ proprietary measure of journals’ impact factors is the widely accepted standard, but OMICS allegedly calculated its own impact scores and did not clearly disclose that fact to consumers.

The defendants also tell researchers that their journals are indexed by federal research databases, including the National Institutes of Health’s PubMed and MEDLINE services, when in fact that is not true, according to the complaint.

In addition to misrepresentations related to their journal publishing services, the FTC’s complaint alleges that the defendants regularly deceive consumers while promoting academic conferences they organize. The defendants allegedly include the names of prominent researchers as participants and presenters at the conferences, which charge registration fees that can cost more than $1,000, when in fact many of those researchers often did not agree to participate in the events.

The FTC’s complaint charges the defendants, OMICS Group Inc., iMedPub LLC, Conference Series LLC, and Srinubabu Gedela, with multiple violations of the FTC Act’s prohibition on deceptive acts or practices.

There's another perspective in Ennis v Credit Union Australia [2016] FCCA 1705. 

Jarrett J states 

The respondent suggests that the applicant has pursued these proceedings by seeking to engage an argument which has found some favour with persons who are seeking to avoid payment of their debts, around the world really, but principally in the United States, Canada and Australia. The argument is described in the material as an “Organised Pseudolegal Commercial Argument” and there are, as the respondents submissions point out, a number of hallmarks to that type of approach which are present in the current case. 

The relevant approach has been described in other cases – and I do not intend in these reasons to go through chapter and verse what that argument entails other than to say that it has been the subject of scholarly explanation in a decision from Canada called Meads v Meads (2012) ABQB 571. The argument and the approach is flawed and cannot succeed for the reasons explained in Mead v Mead. 

In this application, although Ms Ennis disavows any knowledge of the “Organised Pseudolegal Commercial Argument” she does, nonetheless, seek to rely on a case which tends to suggest that she is, in fact, relying on the “Organised Pseudolegal Commercial Argument”. 

The case concerned is a decision from a United States court in Minnesota. That decision, First National Bank of Montgomery v. Jerome Daly, Dec. 9, 1968 (Justice Court, Credit River Township, Scott County, Minnesota), also known as the Credit River Case was a case where a Justice of the Peace in a court in Minnesota determined that the U.S. Federal Reserve Act was unconstitutional and void; determined that the U.S. National Banking Act was unconstitutional and void and declared a mortgage acquired by the First National Bank of Montgomery, Minnesota in the regular course of its business, along with the foreclosure and a sheriff's sale to be void. The respondent, who was being pursued by his bank for recovery of land that was used as security for a loan, was successful in avoiding having to repay the debt and by the decision was able to keep his land. 

In her materials Ms Ennis suggests that that case is somehow important here; she suggests that the decision has survived an appeal because an appeal was made out of time and dismissed and that the decision should bind me. But none of that is correct. The decision has no importance here for a number of reasons. First, it is a decision of a very minor court in the United States given in 1968. It has no precedent value here. It is not even part of the same court system. Secondly, the decision in that court was “voided” in 1969 by a subsequent decision of the Minnesota Supreme Court: see Zurn v Northwestern National Bank 284 Minn. 573, 170 N.W.2d 600 (1969). 

The same thing happened in another case also involving Mr Daley, as it turns out, Daly v Savage State Bank 285 Minn. 503, 171 N.W.2d 218 (1969). Sadly for Mr Daly, who was a lawyer, following those decisions he was disbarred as a direct result of the arguments in those cases: In re Jerome Daly 291 Minn. 488, 189 N.W.2d 176 (1971). 

There has also been an erudite discussion of these types of matters in a case called Tuttle v. Chase Home Finance, LLC et al., U.S. District Court for the District of Utah, Oct. 26, 2008, case no. 2:08-CV-574-DB. 

So enough said about the “Organised Pseudolegal Commercial Argument” and the cases upon which it might be founded. ...

Corporate Criminal Identity

'When and How Corporations Became Persons under the Criminal Law, and Why It Matters Now' by W. Robert Thomas (University of Michigan Law School) comments

The Supreme Court concluded in 1909 that a corporation, like an individual, can be held criminally responsible for its misconduct. Yet even now, corporate-criminal liability has yet to overcome the same skeptical argument it faced then — and, for that matter, for centuries prior. The skeptic’s challenge appears as simple as it is persistent: Lacking a mind distinct and independent from its constitutive stakeholders, a corporation cannot produce the sorts of intentional attitudes needed to satisfy the law’s mens rea component. In other words, a corporation is straightforwardly incapable of satisfying one of criminal law’s most basic requirements. Accordingly, to the skeptic the very idea of corporate-criminal liability is, and always has been, pure nonsense.

Though it presents as a simple, common-sense challenge to a corporation’s ability to intend — criminally or otherwise — unpacking the skeptic’s critique quickly implicates profound considerations regarding the nature of personhood and proper methods of attribution. Animating the dispute between skeptics and proponents of corporate-criminal liability is a disagreement over how to evaluate personhood, and further how one’s conception of personhood licenses attributions of actions, attitudes, and ultimately responsibility to the entity in question. This brand of disagreement is nothing new: These themes recur throughout Western thought and extend far beyond corporate law, from Plato’s Phaedo to Boethius and Bartolus of Sassoferato, from Thomas Hobbes to John Locke. Given the intellectual lineage behind what is otherwise an ordinary policy disagreement, perhaps it should not be terribly surprising that skepticism about corporate-criminal liability was never put to rest.

I don’t expect that we can break this conceptual stalemate all at once, if at all, to solve the challenge facing corporate crime. More to the point, we don’t need to. As it turns out, in taking up this very dispute at the turn of the 20th century, courts and legislature sided with the proponents of corporate crime in a way that the skeptic cannot, or at least should not want to, unwind. The proponents of corporate-criminal liability did not just win the policy fight; they did so in a way that rendered the skeptic’s position incompatible with broader theoretical commitments that are now instrumental to the modern corporation.

This Article offers two contributions to the debate over corporate-criminal liability: one conceptual, and one practical. First, the same argument embraced by today’s skeptics was tried but rejected in the late 1800s, when the practice of holding corporations responsible first developed. Courts previously receptive to the skeptic’s reasoning abandoned the view — and more importantly, the relationship between personhood and attribution underwriting it — as increasingly untenable amidst a changing economic environment in which commercial corporations transformed from tiny, narrowly constrained, quasi-state entities to sprawling, sophisticated, dominant participants in the national marketplace. Meanwhile, the gradual embrace of corporate liability, both in tort and crime, is intimately connected to the simultaneous demotion of corporate law as a regulatory tool. The turn towards corporate-criminal liability thus reflects a broader abandonment both of a long-dominant conception of personhood and of an approach to corporate regulation rendered ineffective by the development of what has become the basis for our modern corporate law. In a slogan, corporations today are persons under the criminal law not because they have always been eligible, but rather because they became eligible.

Second, a clear theoretical understanding of how and why courts first held corporations criminally responsible has profound consequences for how and why we continue to hold them responsible today. Most directly, recognizing the conditions under which corporations became persons for the purposes of criminal law removes from contemporary debates one complaint with modern practice, and does so without having to resolve some deep metaphysical truth about the ultimate nature of personhood. Today’s skeptic of corporate capacities presupposes an outdated premise about how capacities should be attributed to a person, the abandonment of which is pivotal to creating and maintaining modern corporate law and today’s commercial corporation. Taking seriously the skeptic’s position, on this discovery, threatens to undermine the conceptual foundation integral to a regulatory framework making commercial corporations what they are today. In addition, taking seriously courts’ actual reasoning in holding corporations criminally responsible unearths both a method and rationale for continuing to do so, which is rooted in a constellation of fairness considerations towards individuals that, although mostly lost to history, nevertheless applies more strongly today than ever before. Commitment to this qualified anti-discrimination norm applies at least as powerfully today as it did a century ago: Far from being a once-excusably incoherent, now-superfluous practice, corporate-criminal liability has as much reason to exist today as it did upon inception.

Governance

The Australian National Audit Office report on Offshore Processing Centres in Nauru and Papua New Guinea: Procurement of Garrison Support and Welfare Services offers a damning assessment of governance regarding Australia's offshore detention centres.

The report notes

The objective of the audit was to assess whether the Department of Immigration and Border Protection (DIBP) had appropriately managed the procurement of garrison support and welfare services at offshore processing centres in Nauru and Papua New Guinea (Manus Island); and whether the processes adopted met the requirements of the Commonwealth Procurement Rules (CPRs) including consideration and achievement of value for money.

 The ANAO states

Background

1. In 2012 the Australian Government established offshore processing centres1 in the Republic of Nauru (Nauru) and Papua New Guinea (PNG) with the agreement of the Nauruan and PNG Governments. Under the agreements, the Australian Government was to bear all costs associated with the construction and operation of the centres. Transfers of asylum seekers to Nauru commenced on 14 September 2012 and to PNG on Manus Island on 21 November 2012.

2. To underpin operations at the centres, the Department of Immigration and Border Protection (DIBP or the department) entered into contracts for the delivery of garrison support and/or welfare services with a number of providers. Garrison support includes security, cleaning and catering services. Welfare services include individualised care to maintain health and wellbeing such as recreational and educational activities.

3. The department has undertaken a series of procurements relating to the garrison support and welfare services functions. The department applied limited tender procurement methods to acquire the services initially in 2012 and then again in late 2013. In 2015–2016, the department conducted an open tender procurement process for the services (for a single contract across both islands).

4. In October 2015, Transfield6 became the sole provider of all garrison support and welfare services to asylum seekers at the offshore processing centres in Nauru and on Manus Island. In February 2016 these arrangements were extended through to 28 February 2017 and in August 2016 the contract with Transfield was further extended until 31 October 2017. The contracts for garrison support and welfare services are set out in Table 1.1. The total combined contract value as at the end of March 2016, as reported on AusTender, was $3 045 million.

5. The Australian Government is a significant purchaser of goods and services and has in place resource management legislation and related policies that establish a framework for Government procurement and contracting. The Commonwealth Procurement Rules (CPRs) establish procurement principles that apply to all Australian Government procurement processes. The CPRs combine both Australia’s international obligations and good practice, and enable Government entities to design processes that are robust, transparent and instil confidence in the Australian Government’s procurement activities. The CPRs are issued under the Public Governance, Performance and Accountability Act 2013 (PGPA Act) and articulate the requirements for officials performing duties in relation to procurement.

Audit objective, scope and criteria

6. The objective of the audit was to assess whether the Department of Immigration and Border Protection (DIBP) had appropriately managed the procurement of garrison support and welfare services at offshore processing centres in Nauru and Papua New Guinea (Manus Island); and whether the processes adopted met the requirements of the Commonwealth Procurement Rules (CPRs) including consideration and achievement of value for money.

7. The audit examined procurements conducted since 2012, when the arrangements were first put into place, through to the open tender process which commenced in 2015. The ANAO reviewed DIBP and service provider records; and interviewed relevant DIBP officials (past and present) and stakeholders including service providers, tenderers and Government officials from Nauru and Papua New Guinea. The audit team also visited Manus Island and Nauru during August and September 2015. Due to shortcomings in DIBP’s record keeping system, DIBP was not able to provide the ANAO with assurance that it provided all departmental records relevant to the audit.

Conclusion

8. The Department of Immigration and Border Protection’s (DIBP) management of procurement activity for garrison support and welfare services at the offshore processing centres in Nauru and Papua New Guinea (Manus Island) has fallen well short of effective procurement practice. This audit has identified serious and persistent deficiencies in the three phases of procurement activity undertaken since 2012 to: establish the centres; consolidate contracts; and achieve savings through an open tender process.

9. Of most concern is the department’s management of processes for contract consolidation and the open tender. The Australian Government intended that these procurement processes would rein in the growing expense associated with managing the centres. In both cases, the approach adopted by the department did not facilitate such an outcome. The department used approaches which reduced competitive pressure and significantly increased the price of the services without Government authority to do so. The open tender process was cancelled by the department on 29 July 2016 and consequently had no outcome.

10. The conduct and outcomes of the tender processes reviewed highlight procurement skill and capability gaps amongst departmental personnel at all levels. Procurement is core business for Commonwealth entities and the deficiencies have resulted in higher than necessary expense for taxpayers and significant reputational risks for the Australian Government and DIBP. The audit’s two recommendations are intended to address: the significant skill and capability gaps identified amongst personnel at all levels in the department, including within the central procurement and budget units; and persistent shortcomings in the planning and conduct of the procurements, including in relation to record keeping, consistency and fairness in the treatment of suppliers, and the assessment of value for money.

Supporting findings

Establishing the offshore processing centres in 2012

11. For each of the procurements involved in this establishment phase, the department adopted limited tender arrangements. The department relied on the conditions for limited tender in the Commonwealth Procurement Rules, relating to urgent and unforeseen circumstances. Given the circumstances which existed—the department was expected to establish operations for the offshore processing centres in Nauru and on Manus Island immediately—the use of limited tender was justified. However, there was limited specification of the type of services to be delivered, and no estimation of the expected value of individual procurements, as required by the Commonwealth Procurement Rules.

12. The department was unable to demonstrate the achievement of value for money in three of the four procurement processes. In engaging Transfield the department set aside an earlier approach to Serco.  The department did not require Transfield to provide a proposal specifying services to be delivered and a price. As a result it was very difficult for the department to demonstrate that it had conducted a robust value for money assessment which considered the financial and non-financial benefits of the proposal. Transfield was instead assessed on its ability to respond in a short timeframe. The Salvation Army was also assessed as providing value for money on the basis of availability, without any specification of the services to be delivered or price. The department could not make available any records of how Save the Children was assessed as providing value for money. G4S was engaged following a limited tender procurement that involved a request for expressions of interest from five potential suppliers. This approach introduced competition in an otherwise limited tender procurement.

13. Contracts with service providers took between 16 and 43 weeks to negotiate, and the department relied on letters of intent or heads of agreement pending contract signature. Service requirements and prices were not settled until contracts were entered into. The approach adopted by the department introduced additional risk for the Commonwealth.

14. The department was not able to provide the ANAO with evidence that it implemented mechanisms to manage probity risk. The ANAO’s review, based on available evidence, of the conduct of these initial procurements indicates that suppliers were not always treated fairly or equally. In particular, Serco’s proposal was set aside without an opportunity to negotiate. The available records indicate that the department did not seek probity advice on this proposed course of action or document its decision-making. There are no available records of specific conflict of interest declarations having been made by departmental officers responsible for the initial procurements.

15. The department’s central procurement unit had limited effective oversight of the initial limited tender procurements. Available records indicate that program areas with responsibility for conducting the initial procurements obtained the necessary approvals to conduct limited tender procurements from the Chief Financial Officer, but not prior to commencing the procurement process as required by DIBP’s financial delegations. Consolidation of contracts in Nauru and on Manus Island in 2013–14

16. The department again relied on paragraph 10.3(b) of the CPRs16 to conduct a limited tender, on the basis of urgent and unforeseen circumstances, to engage Transfield in Nauru and on Manus Island as part of a contract consolidation process. At the time, consolidation was considered an interim measure pending an open tender process in 2014. The available record does not indicate that urgent or unforeseen circumstances existed but suggests that the department first selected the provider and then commenced a process to determine the exact nature, scope and price of the services to be delivered. The department decided not to continue with the existing provider (G4S), but did not clearly document its reasons. Advice prepared by the department’s Central Procurement Unit was not consistent with the CPRs and the Department of Finance (Finance) guidance on key issues. In seeking advice from Finance, the Unit made written statements implying underperformance by service providers which was not supported by the evidence. The department subsequently referenced Finance’s support in briefings for its Minister.

17. DIBP’s approach to engaging Transfield through limited tender procurement removed competition from the outset. The services to be provided and related costs were not agreed with Transfield prior to G4S and The Salvation Army being advised that they would exit from service delivery on Manus Island. The proposed costs submitted by Transfield were higher than the department had anticipated and exceeded those charged by G4S and The Salvation Army for service provision on Manus Island.

18. Ministers expected the consolidation of contracts to achieve innovation and savings. Savings were not realised and the basis which the department relied upon to demonstrate savings was unreliable. In particular: The department applied a benchmark model to demonstrate the achievement of value for money. Overall the benchmark was adjusted above historical costs to account for changes to the department’s service requirements and contractual approach, upwards to $372 million, to accommodate a number of service enhancements. The Government had directed the department to reduce per-head costs. The department had no authority to increase the funding value of the contract above historic costs. Separate benchmarks were developed for Nauru and Manus Island, but the department determined ‘value for money’ and claimed savings (against the benchmarks) on a combined basis. This allowed the department to demonstrate ‘savings’ by offsetting higher costs for Manus Island against lower costs for Nauru. While Transfield’s bid for Nauru was lower than historical costs, the bid for Manus Island exceeded historical costs by between $200 million and $300 million.

19. While the department based the negotiated contract price on a high capacity scenario, there was a steady drop off in new asylum seeker arrivals from a high of 1 647 in August 2013 to zero in March 2014. On this basis it was increasingly unlikely that the high capacity levels would eventuate. The resulting contract was volume driven, with significant economies of scale expected at high capacity levels. This contract exposed the Commonwealth to the risk of locking-in a high price for services delivered at lower capacity levels.

20. There is no available record of specific conflict of interest declarations having been made by departmental officers who were responsible for the procurement. There is also no available documentation to indicate whether the department performed due diligence checks on the successful tenderer (Transfield) or its subcontractors as part of the contract consolidation.

21. The Prime Minister had requested that per head costs be lower as a result of retendering the contracts, but the department did not calculate a per person cost. Finance advised the ANAO that under the consolidated contract, the per person per annum cost of holding a person in the offshore processing centres in Nauru and on Manus Island, was estimated at $573 111, at the time of the Mid-Year Economic and Fiscal Outlook 2015-16.18 Prior to consolidation Finance estimated the cost at $201 000.

Open Tender Process from 2014 to 2016

22. While aspects of the department’s open tender planning addressed the requirements of the CPRs, insufficient consideration was given to: The use of benchmarking to determine overall value for money. The department’s approach involved comparing only the preferred tenderer’s negotiated final costs with a benchmark, and was incompatible with the CPRs. The CPRs require each eligible  tenderer’s financial and nonfinancial benefit to be compared on a like for like basis with other eligible tenders. The scope of services set out in the statement of requirement. In particular, whether the department had policy authority to expand the services or increase the value of the contract beyond the contracts which were in place. The value of expanded services was estimated by an external adviser (KPMG) at between $594 million to $835 million above historical costs. The Government had not provided policy authority to expand the services or increase the funding value of the contract to accommodate service enhancements or adjustments.

23. The department’s tender evaluation processes were not sufficiently robust to meet a range of applicable CPR requirements. In particular: the department was unable to demonstrate that the original tender documents lodged through AusTender were used by evaluation team members for the tender evaluation; individual assessor records were incomplete and there were missing documents in relation to various aspects of the process; using compact disks rather than TRIM20 files did not provide sufficient control over the security of the tender documentation and the commercial material contained within those documents; and there were significant unquantified pricing risks related to most of the tender bids, which the department did not clarify prior to selecting a preferred tenderer and forming an opinion on value for money of the preferred and reserve tenderers.

24. The assessment of value for money focused on provider claims and referee reports and did not take into account the department’s own contract management experience with suppliers.

25. The department determined to only enter into negotiations with the preferred tenderer (Transfield). During the course of negotiations the department amended its requirements and accepted enhancements and adjustments to services which flowed through to a $1.1 billion increase in Transfield’s overall price. The department did not seek clarification or repricing from any other tenderers and instead set out to determine value for money by comparing the negotiated price with a benchmark. The benchmark was the cost of services provided in Nauru and on Manus Island, which had been procured via a non-competitive limited tender process in 2013–14. The approach adopted was not consistent with an open tender which requires that eligible tender bids are compared on a like for like basis. 26. The delegate had determined to finalise the procurement process and sign the contract. There are no available records to demonstrate that the delegate: considered if sufficient funds were available to enter into the commitment; considered if additional policy authority was required to accommodate the service enhancements negotiated; or questioned the increased cost of the bid.

27. A steering committee and independent probity adviser were key oversight mechanisms for the open tender process. Both were consulted after the negotiation team had reached agreement on a final negotiated outcome with Transfield and prior to the anticipated contract signing. The probity adviser identified that the department’s negotiation report appeared to include substantial modifications to the statement of requirement from that released to the market and that Transfield appeared to have been permitted to make material changes to its original tender, including significant overall price increases. The probity adviser considered that these developments raised significant probity and process risks, including the risk that the department was not in a position to determine whether the changes continued to represent best overall value for money compared with other tenderers.

28. After considering this advice the steering committee decided it was unable to determine whether the final negotiated outcome with Transfield demonstrated best value for money. The effective operation of these oversight mechanisms contributed to the department initiating an amended tender process. The Minister was advised of the amended tender process prior to it commencing, and that approvals for funding would need to be reassessed. The amended process only involved the preferred and reserve tenderers and was in effect a limited tender process. On 29 July 2016, in the course of this audit, the department cancelled the initial and amended request for tender. DIBP extended its contract with Transfield until 31 October 2017 and the department advised the ANAO on 29 August 2016 that it was conducting market testing to determine its next steps.

Recommendations

29. Procurement is core business for Commonwealth entities and deficiencies in capability, process and advice can result in higher than necessary expense for taxpayers and significant reputational risks for the Australian Government and responsible entities. The audit recommendations are intended to address significant weaknesses in the Department of Immigration and Border Protection’s (DIBP) administration of procurement.

Recommendation No. 1 Paragraph 4.64 That the Department of Immigration and Border Protection address, as a priority: through training and staff selection—the significant procurement skill and capability gaps identified in this audit amongst personnel at all levels, including: the central procurement unit; budget unit; program area staff; and delegates; through guidance, training and staff selection—an approach to ensuring that officials have appropriate seniority and experience to undertake key procurement roles, such as chief negotiators and delegates, and effectively manage procurement risk; and through guidance, training and a strategic approach to records management—persistent shortcomings in record keeping for procurement activities.

Department of Immigration and Border Protection response: Agreed

Recommendation No. 2 Paragraph 4.65 That the Department of Immigration and Border Protection take practical steps to ensure adherence to the requirements of the resource management framework when undertaking procurements, including: the obligation to manage all aspects of a procurement process in accordance with the Commonwealth Procurement Rules; compliance with Government approved scope and contract value; in respect to open tender processes, adopting a value for money assessment which compares tenderers against other bids; the application of documented eligibility criteria in line with the Request for Tender and consistent with the Commonwealth Procurement Rules, with any modifications advised to all potential suppliers; the need for ethical conduct throughout the procurement to ensure consistent and fair treatment of suppliers; the need to recognise and manage actual, potential and perceived conflicts of interest; and the maintenance of clear and complete records of all tender bids, key actions, decisions, conflict of interest and SES disclosure declarations.

Department of Immigration and Border Protection response: Agreed