Companies filling CenITex’s $40 million-a-year demand for contract labour are likely to feel the greatest impact of a damning report into the Victorian ICT agency released today by the State’s Acting Ombudsman, which has uncovered “serious improper conduct” primarily carried out by contractors left to their own devices.
Recommendations handed down by the Acting Ombudsman John Taylor, and accepted in principle by CenITex CEO Michael Vanderheide, aim to change the rules and obligations applied to contract roles at the agency to achieve greater alignment with Victorian Public Service staff.
For example, Taylor has recommended that contractors as well as VPS staff be trained in the Government’s code of conduct, conflict of interest policies and Whistleblowers Protection Act, and that an awareness of the code of conduct be written into their employment agreements.
Changes put into effect before the Ombudsman could complete his findings are also likely to see price negotiations tighten, thanks to the introduction of a rate-card system to ensure market alignment.
The report found that in the past CenITex had a tendency to be a “rate-taker” and made no attempt to assess value for money when engaging contract staff, which led to the agency paying as much as 30 per cent above market rates in 90 per cent of cases.
The Ombudsman’s recommendations have been put forward in an effort to prevent the repetition of cases where “nepotism and favouritism influenced procurement and recruitment practices”.
The report detailed various instances of “shady dealings” at the agency, where:
- A Victorian Departmental employee had engaged his wife’s company for data centre maintenance services within two weeks of joining the Department and had gone on to approve contract extensions himself. He then went on to join CenITex and act as contract manager for the same supplier, where he leaked confidential pre-tender information;
- Another CenITex employee sent an RFQ to a shell company he had established the day before, and successfully recommended that the company be contracted to the tune of $1.5 million without disclosing his interest;
- A recruitment firm, encouraged to pre-bill CenITex successfully invoiced for 43 days work carried out by a single contractor in the month of June; and
- “Sham” RFQ processes were carried out with the sole purpose of legitimising contracts, causing competing suppliers to “waste their time and resources” responding.
One of the most serious cases uncovered by the Ombudsman was evidence of “contract splitting” allowing more than $40 million worth of work to go to an unidentified company through more than 330 purchase orders, the majority of which fell below the $150,000 threshold for a public tender process.
The Ombudsman said it was likely that “a number of contracts were essentially for the same work” and has recommended that CenITex review all of its records of procurement through the company involved.
In light of the magnitude of his findings, however, the Acting Ombudsman has shown a certain level of restraint when suggesting remediation for the troubled agency.
He recognised that the new CenITex CEO Vanderheide had already made some of the necessary changes, many of his proposals only go as far as addressing misconduct carried out due to an ignorance of probity procedures and public service procurement guidelines.
The Ombudsman stopped short of placing any restrictions on the types of roles that can be filled by contractors at the agency, despite finding that “secondary employment, private business interests and nepotism are issues of particular concern with contractors”.
He also specifically recommended that the company and individuals involved in one of the most serious breaches be barred from future business with the agency, and that the CenITex employee at the heart of the scheme be referred to Police.
CenITex was established in 2008 with the purpose of providing ICT services to Victorian agencies. It provides support to 36,800 desktops across 10 Victorian Government Departments and two major agencies.