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Auditor-General recommends contract management improvements

by Staff Writers •
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In its recently published audit on Agencies’ Contract Management, the Federal Auditor-General provides valuable insights into government contract management practices.

This is not a critical or controversial report. It delivers no significant findings or headline grabbing exposés. But the report’s real value is in the detail, as it steps carefully through underlying processes likely to be found in many agencies. These are the processes that at times confound suppliers, as they struggle to deliver better contract engagement with their customers.

Government contract management is frequently played out as a struggle between two competing objectives, where:

  • Good contract management is about carefully following a prescribed set of rules and guidelines; or
  • Good contract management is about managing relationships, risk, and value for money to achieve the best outcomes for government.

While these objectives clearly should not be in conflict, most vendors would be able to point to examples where one has been sacrificed at the expense of the other.

In his report the Auditor-General casts an analytical eye over existing practices, suggesting improvements that deliver much needed balance.

Here are some examples:

  • Most agencies maintain a contract register designed to meet external reporting requirements such as AusTender and Senate Order reporting. In many agencies, this register is tightly secured to maintain contract privacy. However some data fields could easily be made available to contract managers across the agency, as they provide valuable information about contracts that could be leveraged by other business units.
  • Indeed contract register data quality is likely to improve significantly if data becomes more accessible. A check in one agency revealed fourteen out of thirty contracts were incorrectly listed in the contract register.
  • Details of the Financial Management and Accountability Act (the FMA Act) can sometimes appear complex for managers, especially when they have relatively simple requirements.

The two most regularly quoted FMA Act Regulations, simply stated are:

    • Reg 9, requiring a manager to have made reasonable enquires and to be satisfied, before making a financial decision
    • Reg 10, requiring a manager to not make a multi-year spending decision without prior approval.
    • Notwithstanding this, "30% of contract managers interviewed did not about these two regulations and whether they applied to them".
  • Contract Management Plans (CMPs) are useful tools for managing successful contracts, by ensuring the right information is collected, and the right issues managed in right timeframe. The detail required in a CMP clearly depends on the complexity of the project and risks involved. The audit revealed a tendency to over engineer CMPs so they became difficult to apply to smaller, simpler contracts. Unfortunately, in such situations it appeared that CMPs were abandoned altogether. In such situations, excessive enthusiasm to apply stringent process, has instead resulted in the application of no process.

While it is comforting the auditors did not find major shortcomings in government contracting, they did uncover significant room for improvement. The auditors have been careful to address the underlying issues, rather than taking the easy road by simply criticising the symptoms.

Careful consideration of the audit findings is therefore likely to provide contract improvements for both government and vendors.

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