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ANAO Audit Report No.29 201112Administration of the Australia Network Tender Process
2
Commonwealth
of Australia 2012
ISSN 10367632
ISBN0642812365
COPYRIGHT INFORMATION
This work is copyright. Apart fromany use as permitted under theCopyright Act 1968, no part may bereproduced by any process withoutprior written permission from theCommonwealth.
Requests and inquiries concerningreproduction and rights should beaddressed to:
Executive DirectorCorporate Management BranchAustralian National Audit Office19 National CircuitBARTON ACT 2600
Or via email:
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ANAO Audit Report No.29 201112Administration of the Australia Network Tender Process
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Canberra ACT3 April 2012
Dear Mr PresidentDear Mr Speaker
The Australian National Audit Office has undertaken an independentperformance audit in the Department of Foreign Affairs and Trade,Department of Broadband, Communications and the Digital Economyand the Department of the Prime Minister and Cabinet in accordancewith the authority contained in theAuditor-General Act 1997. Pursuant toSenate Standing Order 166 relating to the presentation of documentswhen the Senate is not sitting, I present the report of this audit, and theaccompanying brochure, to the Parliament. The report is titled
Administration of the Australia Network Tender Process.
Following its presentation and receipt, the report will be placed on theAustralian National Audit Offices Homepagehttp://www.anao.gov.au.
Yours sincerely
Ian McPheeAuditor-General
The Honourable the President of the SenateThe Honourable the Speaker of the House of RepresentativesParliament HouseCanberra ACT
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ContentsAbbreviations .................................................................................................................. 7 Glossary ......................................................................................................................... 8Summary and Recommendations ............................................................................ 11Summary ...................................................................................................................... 13
Introduction ............................................................................................................. 13Key aspects of the Australia Network tender process ............................................ 14Media interest and Parliamentary requests for an audit ......................................... 15Audit objectives and scope ..................................................................................... 16Overall conclusion ................................................................................................... 17Summary of responses to the proposed report ...................................................... 26Full responses to the proposed report .................................................................... 29
Audit Findings ............................................................................................................ 311. Background and Context ........................................................................................ 33
Background on the Australia Network ..................................................................... 33Proposals for the future of the Australia Network ................................................... 35Key aspects of the Australia Network tender process ............................................ 43Media interest and Parliamentary requests for an audit ......................................... 45Audit objective, criteria and methodology ............................................................... 46Audit report structure............................................................................................... 49
2.Administrative Arrangements for the Tender Process ............................................ 50Introduction ............................................................................................................. 50Roles and responsibilities ....................................................................................... 51Tender timeframe .................................................................................................... 54Tender planning ...................................................................................................... 56Concluding comments............................................................................................. 64
3. The Initial Tender Process ...................................................................................... 67Introduction ............................................................................................................. 67Evaluation of the Australia Network tenders ........................................................... 67Consideration of the Tender Evaluation Report ...................................................... 73The Governments role in the decision-making process for the tender .................. 74The basis of the decision to amend the tender process ......................................... 79Decision and announcement on the tender process .............................................. 87Concluding comments............................................................................................. 88
4. The Amended Tender Process ............................................................................... 90Introduction ............................................................................................................. 90Implementing the amended process ....................................................................... 90Complaints relating to the tender process .............................................................. 92Supplementary tender evaluation process ............................................................. 97Consideration of the Supplementary Tender Evaluation Report ............................ 99
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Concluding comments........................................................................................... 1025. Tender Termination and New Arrangements for the Operation of the Australia
Network ................................................................................................................. 104Introduction ........................................................................................................... 104Termination of the tender ...................................................................................... 104Impact of the termination ...................................................................................... 110Future arrangements for the operation of the Australia Network .......................... 112Concluding comments........................................................................................... 115
Appendices ............................................................................................................... 117Appendix 1: Full responses to the proposed report .............................................. 119Index ........................................................................................................................... 131Series Titles ................................................................................................................ 132Current Better Practice Guides .................................................................................. 136Tables
Table 1 Recipients of the proposed report or extracts of the proposed
report .................................................................................................. 25
Table 1.1 Summary of the ABCs performance against the 2006 KPIs ............. 39Table 1.2 Key events in the 2011 Australia Network tender process ................. 45Table 2.1 Original timeline for the Australia Network tender .............................. 55Table 2.2 Published indicative timetable under the amended tender
process ............................................................................................... 55Table 2.3 Order of importance of evaluation criteria in the evaluation
process ............................................................................................... 62Table 2.4 Approved budget and departmental costs for the Australia
Network tender (as at 20 March 2012) ............................................... 64Table 3.1 Evaluation processAustralia Network tender .................................. 69Figures
Figure 1.1 Report structure .................................................................................. 49
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Abbreviations
ABC AustralianBroadcastingCorporationAFP AustralianFederalPoliceAFR AustralianFinancialReviewAGS AustralianGovernmentSolicitorANAO AustralianNationalAuditOfficeANC AustralianNewsChannelPtyLtdAPS AustralianPublicServiceCPGs CommonwealthProcurementGuidelinesDBCDE DepartmentofBroadband,CommunicationsandtheDigital
EconomyDFAT DepartmentofForeignAffairsandTradeFinance DepartmentofFinanceandDeregulationFMAAct FinancialManagementandAccountabilityAct1997FMARegulations
FinancialManagementandAccountabilityRegulations1997
KPI
KeyPerformance
Indicator
PM&C DepartmentofthePrimeMinisterandCabinetRFT RequestforTenderTEB TenderEvaluationBoard
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Glossary
Approach to the
market
Anynotice invitingpotential suppliers toparticipate in a
procurement,including
arequest
for
tender,
request
for
expressionof interest,requestforapplicationfor inclusion
onamultiuselist,orinvitationtotender.
Approver An approver is the person or decisionmakingbody that
decides whether or not to spend public money. This
includes decisions aboutwhether to select apreferred or
successful tenderer as the result of an approach to the
market.
The
FinancialManagement
and
Accountability
Act
1997regulationsdefineanapprovertomean:aMinister;a
Chief Executive of an FMA Act agency or a person
authorisedby or under an Act to exercise a function of
approvingproposals tospendpublicmoney.Thecapacity
for a Minister or Ministers collectively to undertake a
decisionmakingroleinrespecttodecisionsaboutwhether
to spend public money is provided for in the financial
management legislation provided that they are identified
asthe
approvers.
AusTender ThecentralwebbasedfacilityforpublicationofAustralian
Governmentprocurement information, includingbusiness
opportunities, annual procurement plans and contracts
awarded.Availablefrom:.
Commonwealth
Procurement
Guidelines
(CPGs)
The CPGs establish the Australian Governments core
procurementpolicyframeworkandarticulateexpectations
for all departments and agencies subject to the FinancialManagementandAccountabilityAct1997and theirofficials,when performing duties in relation to procurement. An
officialperformingdutiesinrelationtoaprocurementmust
actinaccordancewiththeCPGs.
Evaluation
criteria
Thecriteriathatareusedtoevaluatethecomplianceand/or
relativerankingof tenders.Allevaluationcriteriamustbe
clearlystated
in
the
request
documentation.
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Opentender
process
Aprocurementprocedure inwhicharequestfortender is
published invitingall suppliers that satisfy the conditions
forparticipationtosubmittenders.
Procurement Procurement encompasses thewholeprocessofacquiring
property or services. It begins when an agency has
identified a need and decided on its procurement
requirement.Procurementcontinuesthroughtheprocesses
of risk assessment, seeking and evaluating alternative
solutions,contractaward,deliveryofandpaymentforthe
property and services and, where relevant, the ongoing
management of a contract and consideration of options
relatedto
the
contract.
Requestfor
Tender(RFT)
A published notice inviting suppliers who satisfy the
conditions for participation to submit a tender in
accordancewithrequirementsoftherequestfortenderand
otherrequestdocumentation.
Valueformoney The CPGs explain that valueformoney in procurement
requires a comparative analysis of all relevant costs and
benefitsof
each
proposal
throughout
the
whole
procurement cycle (wholeoflife costing).1 Valuefor
money is enhanced in government procurement by:
encouragingcompetition;promotingtheefficient,effective
and ethicaluse of resources; andmaking decisions in an
accountableandtransparentmanner.
1Australian Government, Commonwealth Procurement Guidelines, Department of Finance and
Deregulation, Canberra, p.10.
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Summary and
Recommendations
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Summary
Introduction
1. TheAustraliaNetworkisanAustralianGovernment2fundedoverseas
televisionbroadcastingserviceestablished topursueforeignand tradepolicy
objectives,including:
promotingAustralias engagement across theAsiaPacific and Indian
subcontinent;
fostering an understanding of Australia as a dynamic, culturally
diversenation;and
raisingawarenessofAustraliaseconomicandtradecapabilities.3
2. TheAustraliaNetworkserviceisavailableviasatelliteandonlinevideo
and is rebroadcastacrossAsia, thePacificand the Indian subcontinent.The
service is: freetoair, operating 24 hours a day, seven days a week; and
broadcasts a mix of news, current affairs and business, Englishlanguage
learning, education, documentaries, drama, sports and childrens programs.
The Australia Network is also used to transmit consular information to
Australianslivingabroad,particularlyintimesofcrisis.4
3. Since 2001, the Australian Broadcasting Corporation (ABC) has
delivered theAustraliaNetwork serviceunder twosequentialcontractswith
theCommonwealth ofAustralia, representedby theDepartment of Foreign
Affairs and Trade (DFAT). The most recent contract was due to expire on
8August2011.Priortotheexpiryofthecontract,theGovernmentconsidereda
rangeofoptionsforthecontinueddeliveryoftheservice,withadecisiontaken
on 22November2010 to award the contract through a competitive tender
process.
Procurement framework
4. The letting of Australian Government contracts involves the
expenditure ofpublicmoney and is therefore subject to applicable financial
2For the remainder of this report, the Australian Government will be referred to as the Government,unless otherwise indicated.
3DFAT,Annual Report 201011, p. 130.
4
Australian Government Budget 201112, Budget Paper No. 2 Budget Measures, p. 202.
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RFTattractedtendersfromtheABCandtheAustralianNewsChannelPtyLtd
(ANC),ajointventureofNineDigital,adivisionofNineEntertainmentCo.,
Seven Media Group and British Sky Broadcasting.8 Both organisations that
tenderedhadalsoparticipatedinthe200506tenderforthe200611Australia
Networkcontract.
9. DFAT initially planned for a sixmonth tender process. However,
significantchangestotheprocessweremadebytheGovernmentatkeypoints,
which extended the timeline. These changes included the Governments
decisioninJune2011to:addanewevaluationcriteriontotheRFTandtoseek
further information from tenderers;and change thedecisionmakingprocess
forawardingthetenderbyreplacingtheSecretaryofDFATwiththeMinister
forBroadband,Communicationsand theDigitalEconomy (Communications
Minister)as
the
approver.
The
Government
sought
agreement
from
the
ABC
to
extend the contract for six months until 8February2012 to allow for the
continuation of the Australia Network service while the amended tender
processwascompleted.
10. InNovember2011, the tenderwas terminatedby theGovernmenton
publicinterestgrounds9,followingmediareportsthatreferredtoconfidential
information relating to the tender process. Subsequently, inDecember2011,
theGovernmentdecided that theAustraliaNetworkwouldbedeliveredby
theABC
on
apermanent
basis.
Media interest and Parliamentary requests for an audit
11. TheAustraliaNetworktelevisionbroadcastingservicehas,overmany
years,beenanimportantavenuethroughwhichAustraliaispromotedtoother
partsoftheworld.Whenconsideredagainstthebackgroundofthehighlevel
of interest inmediaownershipandbroadcastingrights inAustralia, itwasto
beexpectedthatthetenderfortheAustraliaNetworkcontractwouldgenerate
moremedia
interest
than
many
other
government
procurement
activities.
12. Initial reporting in the media focused on the degree to which the
Government wouldbe able to influence editorial andbroadcasting content.
Laterreportsspeculatedon,andreportedon,aspectsoftheconfidentialtender
8The ANC owns and operates Sky News Australia, Sky News Business, Australian Public AffairsChannel, Sky News Local and Multiview, and provides news content on both free-to-air and subscriptionservices in New Zealand.
9The RFT provided at clause 4.7.1 that the contract may be suspended or terminated if the
Commonwealth, represented by DFAT, considered that it was in the public interest to do so.
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evaluation process, delays in awarding the contract, changes to the tender
requirements and the perceptions of government interference in the tender
process. The probity of the tender process was also questioned following
reportsthatseniorABCexecutiveshadapproachedtwogovernmentMinisters
atthe
time
the
Government
was
considering
changes
to
the
tender
process.
13. The tenderprocess also attracted considerable Parliamentary interest.
Inthiscontext,inSeptember2011,theDeputyLeaderoftheOppositionwrote
tome requestingan investigation into theconductof theAustraliaNetwork
tender,particularlythetransferofthedecisionmakingresponsibilityfromthe
Secretary of DFAT to the Communications Minister. My response on
28September2011 indicated that, given the advanced stage of the tender
process, an audit would notbe undertaken at that time,but that I would
continueto
monitor
the
tender
process
and
outcome,
and
keep
open
the
option
ofundertakinganauditatalaterdate.
14. TheDeputyLeaderoftheOppositionagainrequestedthatIinvestigate
mattersrelatingtotheAustraliaNetworktenderprocesson8November2011,
following the announcement of the termination of the tender process. The
CommunicationsMinisteralsowrotetomeon22November2011requestinga
review of the tender process in the interest of ensuring that future tender
processesareasrobustaspossible.
15. Following consideration of these requests and the broader
Parliamentary and public interest, I announced on 24November2011 that a
performance audit of the administration of the Australia Network tender
processwouldbeundertakenundersection18oftheAuditorGeneralAct1997.
Audit objectives and scope
16. TheauditobjectivewastoreportontheadministrationoftheAustralia
Network
tender
process
and
to
identify
lessons
learned
from
the
conduct
of
the
processtoinformfutureprocurementactivities.
17. Theauditexaminedtheadministrationofthetenderprocess,including:
planning; conduct of the tender; and managing the change in tender
conditions.Theauditalsoconsideredtheadviceprovidedtogovernmentand
the manner in which government decisions were implemented, including
compliancewithprocurementrequirements.
18. The Australia Network tender process has been subject to ongoing
considerationby
the
Government.
The
Government
has
performed
akey
role
in the decisionmaking process and, in doing so, has taken into account the
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advice provided by several departments and advisers. The departments
concernedhadalsoobtainedadvicefromexternalprobityand legaladvisers.
Inseveralareasofthisreport,referencehasbeenmadetotheadvicereceived.
The report also includes relevant references to briefings and submissions
provided
to
Cabinet,
Cabinet
decisions,
and
the
deliberations
and
recommendations of the Tender Evaluation Board, including the preferred
tenderer,aswellascomplaintsmadeaboutthetenderprocess.Ihavetakenthe
extraordinarystepofincludingthisinformationinthisreportasitiscentralto
understandingtheissuesinvolvedinthetenderprocessandtoprovidecontext
fortheauditfindings,conclusionsand lessons learned.Ihaveconcludedthat
the inclusion of the information is not contrary to the public interest.10 The
report on the audit does not extend to commenting on the deliberations of
Cabinet,except
where
such
matters
have
been
specifically
referred
to
by
Ministerstoinformtheauditonkeyissues.
19. Aseparate investigation isbeingconductedby theAustralianFederal
Police (AFP) into thepossibleunauthoriseddisclosureof confidential tender
information.11 The audit did not directly examine these matters, but did
include consideration of the confidentiality and document handling
arrangementsestablishedbyDFATforthetenderprocess.
Overall conclusion20. The Australia Network is an Australian Government funded
international television servicedesigned topresentan impartial, reliableand
independent voice in Asia, the Pacific and the Indian subcontinent. Since
commencement of an internationalbroadcasting service in 1993, it hasbeen
operatedbyacommercialbroadcaster,andalsoby theABC,whichheld
thecontracttodeliverservicesfrom4August2006until8August2011.Under
thetermsofthecontract,DFATwasrequiredtoprovide12monthsnoticeto
theABC
regarding
any
intention
to
extend
the
contract
for
afurther
five
years,
effectivelyestablishingadeadlineof8August2010foradecisiononthefuture
10Section 37 of theAuditor-General Act 1997outlines the circumstances in which particular information isnot to be included in public reports, including if the Auditor-General is of the opinion that disclosure of theinformation would be contrary to the public interest.
11The AFP informed the Senate Legislative and Constitutional Affairs Committee on 14 February 2012,that some interim findings had been provided to the Secretary of the Department of the Prime Ministerand Cabinet (the matter was referred to the AFP by the Secretarysee paragraph 37). The departmentsubsequently informed the ANAO that it has provided additional information to the AFP and that the
department had not received further findings.
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ofthecontract.Thisnotificationdeadlinewasextendedtwicetoprovidetime
fortheGovernmenttomakeadecisiononwhethertoextendthecontract.
Retendering for the Australia Network service
21. To informthedecisionregarding thefutureoperationoftheAustraliaNetwork,DFATreviewedtheABCsperformanceundertheexistingcontract
and conducted an industry submission process. The review and the
submissionprocess identifiedbenefits togovernment from a longer contract
periodandstrengthenedperformanceindicators.Atthesametime,aproposal
outlined in an earlier 2009 submission sponsored by the Communications
Minister for theAustraliaNetwork tobepermanentlyoperatedby theABC
wasstillbeingconsideredbygovernment.
22. In response to a briefing from the former Foreign Minister, theHon.KevinRuddMP, theGovernmentdecidedon22November2010 thata
10yearcontractforthedeliveryoftheAustraliaNetworkshouldbeawarded
througha competitive tenderprocess,with thedetails tobe settledbetween
Ministers. Inherent in thisdecision toapproach themarket for theAustralia
Network,was an obligation that the tender processbe undertaken in good
faithandconductedinafair,transparentanddefensiblemanner.
23. Whileformalrecordswillnotnecessarilyreflectallmatterscanvassed,the
Governments
decision
to
select
aservice
provider
for
the
Australia
Network throughanopen tenderprocesswas silenton thedecisionmaking
processforthetender.Thelackofadocumentedgovernmentpositiononthis
issuecreatedsomeuncertainty in relation to thedecisionmakingprocess for
thetender,andsubsequentlyledtomodifiedarrangementsfor,anddelaysin,
thetenderprocess.
24. InDecember2010,theformerForeignMinisterappointedtheSecretaryofDFATasthepersontoapprovetheoutcomeofthetender.TheMinisterlater
explainedthat
his
decision
was
taken,
amongst
other
reasons,
to
ensure
that
the decision was, and was perceived tobe, on thebasis of merit and not
influencedbyanyother consideration.TheMinisteralsowrote to thePrime
Minister, Deputy Prime Minister, the Communications Minister and the
Minister for Finance and Deregulation seeking nominations from their
departments for representation on the Tender Evaluation Board (TEB) and
agreementtothedetailsforthetenderprocess.TheMinisterscorrespondence
referred to the TEB assessing the tenders and making recommendations to
Ministers.
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25. In response to the former Foreign Ministers correspondence, thePrimeMinisterinherletterof25January2011notedthattheoutcomesofthe
tender wouldbe subject toCabinet consideration, with Cabinet to agree the
successfultenderbid.Thiswasthefirstdocumentedreferencetoaformalrole
forCabinet
in
the
decision
making
process
although
asubsequent
briefing
preparedbytheCabinetSecretary12 indicatedthatMinistershadagreedatan
October2010meetingthatthedecisionwastobemadebyCabinet.However,
arrangementsalreadyputinplacebytheForeignMinisterfortheSecretaryof
DFAT to approve the tender outcome did not envisage an explicit role for
Cabinet.
26. During December 2010 and January 2011, DFAT establishedgovernance and administrative arrangements to manage the approach to
marketand
the
evaluation
of
tenders,
having
regard
to
specialist
advice,
including probity advice. These arrangements were, in the main, effective.
Probity arrangements were also put in place for the tender process.
Compliancewith thesearrangementsbyallpartieswouldhaveprovided the
basistobettercontroltheflowofconfidentialinformationduringthecourseof
thetenderevaluation;informationsecuritywaslatertobecomeanissueinthe
tenderprocess.
27. Over the initial five months of the tender process, issues around theapproval
arrangements
for
the
tender
remained
unresolved.
Against
the
background of this uncertainty, on 4May2011 the TEB, through the tender
Steering Committee, recommended to the Secretary of DFAT, in his role as
approver, that he accept the ANC as the preferred tenderer. While the
Secretary of DFAT had the authority to make a decision on the preferred
tendereroncehewassatisfiedthatallrequiredstepshadbeenundertaken,he
consideredthatmakingadecisionwouldbeinappropriategiventhediffering
views that existed within government, including at the ministerial and
departmentallevels,
as
to
how
the
decision
on
the
future
provider
was
to
be
made.Inthecircumstances,thiswasareasonableapproachtotake.
The amended tender process
28. Itwasnotuntil6June2011thattheGovernmentrequestedtheformerForeignMinistertobringforwardasubmission inrelationtothetenderwith
the aim of the Government agreeing the successful tender. The submission,
12
This brief to the Prime Minister was prepared on 14 June 2011 (paragraphs 3.37 and 3.55 refer).
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21
whether the additional evaluation criterionwould elicitmuch in the
way of further insights into the tenderers capacity to deliver the
service,giventherewasconsiderableweightofopiniontosuggestthat
the original tender scope of requirements was sufficientlybroad to
captureglobal
events14;
and
the added time and cost of the revised tender arrangements for the
partiestenderingtoprovidetheAustraliaNetworkservice,andtothe
Government.
31. Key Ministers were provided with a range of advice from theirdepartments ahead of the abovementioned government decisions, which
raised matters along the lines of the issues referred to in the preceding
paragraph.In
the
process
of
developing
advice
for
ministerial
consideration,
theTEBdeliberationsandrecommendations,whichfavouredtheANCasthe
preferred tenderer,wereprovided to staff inPM&Cand the formerForeign
Ministers officeby DFAT. In addition, the TEB report was provided to a
DBCDEofficerby thedepartmentsTEBmemberfor thepurposesofbriefing
theCommunicationsMinister shortlybefore theGovernmentsconsideration
ofchangestothetenderprocessthebriefwasmadeavailabletoanumberof
departmentalofficers and theMinistersoffice.While itwas appropriate for
thedepartments topreparebriefings forMinisterson the tenderprocess, the
briefingsshould
have
had
greater
regard
to
the
confidentiality
and
sensitivity
of the informationbeingprovided forwhatwas still a live tenderprocess.
Ultimately,informationwasnotastightlycontrolledasitshouldhavebeen.
32. FollowingtheGovernmentsdecisiontochangethetenderprocess,anAddendum to theRFTwas issuedon8July2011.TheTEBwas reconvened
and,after reviewing the revised tenders, submittedaSupplementaryTender
Evaluation Report to the CommunicationsMinister on 30August2011. The
report indicated it was the unanimous professional judgement of all TEB
14The initial Australia Network RFT required tenderers to provide an international television service andother digital media services that broadly supported Australias national interests. The original conditionswere considered by the Government to relate to Australias enduring interests in the Asia-Pacific region.The additional evaluation criterion focused on Australias national interests in light of changedinternational circumstances, particularly emerging markets in South Asia and the Asia-Pacific, politicaltransformation in the Middle East and North Africa, and recent consular crises. At the time the RFT wasreleased in February 2011, political unrest had been experienced in Tunisia and Egypt, but conflict hadyet to arise in other parts of the Middle East, including Libya and Syria. While the additional criterionrelated to international developments in the Middle East and North Africa, the Australia Network does notcurrently broadcast to the Middle East or North Africa and the RFT did not specify an expansion to these
regions as a requirement of the new contract.
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members that the ANCbid offers thebest overall valueformoney; [and]
accordinglytheBoardsoriginalrecommendationofselectingtheANCasthe
PreferredTendererremainsunaltered.15
33.
The
Communications
Minister
sought
additional
information
from
the
TEBonaspectsof theevaluationon twooccasions.TheMinisteralsosought
advice regarding the option of conducting parallel negotiations with both
tenderers.TheadviceobtainedbytheMinisterindicatedthat,whileitwasnot
withoutrisk,itwasopentotheMinistertoonceagainreferthematterbackto
theTEBandrequestDFATtoopenparallelnegotiationswithbothtenderers.
34. Againstthebackgroundofthisadvice,theCommunicationsMinistersoffice advised the Secretary of DFAT that, following consultation with his
ministerialcolleagues
and
in
order
to
make
afinal
recommendation
to
government,theMinisterhaddecidedthatbothtenderersshouldgothrougha
parallel negotiation process to: further test the financial reliability of each
tenderer given the duration of the proposed contract; clarify commitments
madeinthetenders;andfirmupaspectsofbothoffers.
Termination of the tender process
35. However,beforeparallelnegotiations commenced, theMinister,withtheagreementoftheGovernment,announcedtheterminationoftheAustralia
Networktender
on
7November
2011,
as
follows:
duetosignificantleaksofconfidentialinformationtothemedia,theAustralia
Network tenderprocesshasbeen compromised to such adegree thata fair
andequitableoutcomemaynolongerbeabletobeachieved.
36. While the stimulus for this decision was the publication of mediaarticleson17and24October2011,therehadbeenaseriesofearlierreferences
inthemediainMay,JuneandJuly2011toconfidentialaspectsofthetender.
37.PM&C
requested
that
the
AFP
commence
an
investigation
into
the
possible unauthorised disclosure of tender information in the October2011
media articles,but not the earlier possible disclosure of confidential tender
information. These earlier articles were not considered to contain tender
informationreflectingthesamelevelofaccuracy.
15DFAT, Supplementary Tender Evaluation Board Report, RFT DFAT11-CPD-02 Australia Network
Addendum 1, 30 August 2011, p. 3.
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38. The Communications Minister acted on the basis of legal anddepartmental advice16 in relation to key decisions on the tender process,including thedecision to terminate the tenderonpublic interestgrounds (asprovided for in theRFT).Nevertheless, it is clear that theMinister hadnotbeen convinced,upuntil the time of the termination of the tender, that theproposal by the ANC represented the best outcome for the AustralianGovernmenttodelivertheAustraliaNetworkservices.The costs and consequences
39. TheANChasestimatedthedirectcostsofparticipationinthetenderataround $1.4million plus additional preparation and indirect costs; the ABChasestimatedaround$475000indirectcosts;andDFATscoststoMarch2012were
around
$770
000.
The
ANC
has
approached
the
Government
to
seek
compensationforthedirectcostsofparticipationinthetender.40. The end result is that,afterhaving embarkedon a tenderprocess inNovember2010 for a 10 year contract for the delivery of the AustraliaNetwork, the Government changed courseon public interest groundstomake a policy decision in December2011 that the ABC would provide theserviceonapermanentbasis.41. While the Government was entitled to take such a decision, theAustraliaNetworktenderprocesshaspresentedtheAustralianGovernmentina poor light and cost the two tendererstheANC and theABCtime andmoney.Inthiscontext,theANCinformedtheANAOthat:
ANCexpended significantcostsparticipating in two tenderprocesseswhichwereultimatelycancelledforpoliticalreasonsandthroughnofaultofANC.17
42. DespitetheGovernmentagreeingtoatenderprocess,keyMinistersdidnot hold a common view of the approval processes, including any role forgovernment inbeing consulted on, agreeing to, or making the decision inrelation to thepreferred tenderer.Theapprovalarrangementswere changed16
The advice relied on by the Minister included: briefs from both PM&C and DBCDE in June 2011 thatindicated that there were no substantive conflict of interest or probity issues with the Minister becomingthe approver. The brief provided by PM&C (and relied on by DBCDE) incorrectly stated on the coverpage that the advice had been cleared by the AGS. While the AGS had reviewed earlier versions of thepaper, it did not review the specific paragraphs drafted by PM&C in relation to a possible conflict ofinterest for the Communications Minister, prior to the papers finalisation and circulation to Ministers.Further legal and probity advice relating to parallel contract negotiations with the tenderers andtermination of the tender was provided to the Minister in September and October 2011, respectively.
17
ANC, advice provided to the ANAO, 14 March 2012.
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fourmonths after the initialRFTwaspublished, and the additionof anew
evaluationcriterion for the tendernecessitated retendering,butdidnotalter
theviewsoftheTEBastothepreferredtendertheANC.Thisadditionalstep
addedalmost fivemonths to theprocessandadditionalcosts.Further, there
wereindications
of
possible
leaks
of
information
as
early
as
May
2011,
and
following further significant leaksof confidential information to themedia,
theGovernmentdecided,on thebasisof legaladvice,thatthe tenderprocess
hadbeencompromisedandshouldbeterminated.
43. The manner and circumstances in which this high profile tenderprocess was conducted brought into question the Governments ability to
deliver sucha sensitiveprocess fairlyandeffectively.This isdespite the fact
thatmany other tenderprocesses are employed in all areas of government,
someinvolving
decisions
by
Ministers,
on
more
substantial
and
complex
proposals,andareconcludedsatisfactorily.
44. One of the reasons for conducting this auditwas to identify lessonslearnedfromtheconductofthetenderprocessto informfutureprocurement
activities.Thereare threemain issues tobear inmind.Firstly, it is important
that,where it is intended thatMinisters orCabinet have a formal role in a
tenderprocess, that thisbemade clear;departmentshavea role inassisting
governmenttobeexplicitaboutthis.Secondly,informationsecurityiscritically
importantto
effective
tender
arrangements
and
there
are
accepted
ways
within
governmentofmanaging this,namely,bynotcirculatingconfidential tender
information toanydepartmentalofficers,Ministersor theirstaff,unless they
arepartof the tenderdecisionmakingprocessorhaveademonstrableneed
forsuchspecific information.Finally,allparties involved in themanagement
of a tender process should have regard to the importance of adhering to
conventionalprocurement arrangements and effectivelymanaging the range
ofrisksinvolved,giventheycanchangesignificantlyovertime.
45. TheGovernmentmayalsowishtoreflectonMinistersperformingtheroleofanapprover,insituationswheretheMinistersportfoliobodiesmaybe
submitting tenders for services to be determined by government. In such
circumstances,anyperceptionofaconflictofinterestcouldbemitigatedbythe
Government agreeing to another Minister, or more than one Minister,
approvingthetenderoutcome.
46. The audit has not made any recommendations in the light of thetermination of the tender process. That said, the abovementioned lessons,
together with some further suggestions in the concluding comments ofChapters 2 to 4 in this report, are designed to inform future procurement
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activitiesabout importantprocesselementsnecessarytoachieveefficientand
effective outcomes which have the confidence of tenderers and the wider
community.
Provision of the proposed report
47. UnderSection19of theAuditorGeneralAct1997, theAuditorGeneral
mustprovideauditedagencieswithacopyof theproposedreport,andmay
provideacopyof,oranextractfrom,theproposedreporttoanyone(including
a Minister) who, or anybody that, in the AuditorGenerals opinion, has a
special interest in thereportorthecontentof theextract.Subsection19(4)of
theActprovides that, if therecipientof theproposedreport,oranextractof
theproposed report, giveswritten comments to theAuditorGeneral within
28days
after
receiving
the
proposed
report
or
the
extract,
the
Auditor
General
mustconsider thosecommentsbeforepreparing the final report. Inaddition,
subsection19(5)oftheActrequirestheAuditorGeneraltoincludeinthefinal
auditreportallsuchcommentsreceived.
48. Accordingly,copiesoftheproposedreportorextractswereprovidedto
thefollowingagencies,organisationsandindividuals.
Table 1
Recipients of the proposed report or extracts of the proposed reportRecipient Role in the tender process Received
Department of Foreign Affairs andTrade
Administering agency
Designated subject of the audit underSection 18 of theAuditor-General Act1997
Full report
Department of Broadband,Communications and the DigitalEconomy
Policy agency
Designated subject of the audit underSection 18 of theAuditor-General Act1997
Full report
Department of the Prime Ministerand Cabinet
Co-ordinating agency
Designated subject of the audit underSection 18 of theAuditor-General Act1997
Full report
Senator the Hon. Stephen Conroy
Minister for Broadband,Communications and the DigitalEconomy
Approver for the Australia Networktender
Full report
The Hon. Kevin Rudd MPMinister for Foreign Affairs from14 September 2010 to 22 February2012
Full report
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Recipient Role in the tender process Received
The Hon. Mark Dreyfus QC, MP Cabinet Secretary Full report
The Hon. Stephen Smith MPMinister for Foreign Affairs from3 December 2007 to 14 September
2010
Extract
The Hon. Martin Ferguson AM, MP
Minister for Resources and EnergyMinister for Tourism
Contacted by a tenderer
Extract
Australian BroadcastingCorporation
Tenderer Extract
Australian Federal PoliceConducting an investigation intounauthorised disclosure of tenderinformation
Extract
Australian Government SolicitorProbity adviser to the tender
Adviser to the CommunicationsMinister
Extract
Australian News Channel Pty Ltd Tenderer Extract
Department of Finance andDeregulation
Policy department responsible foradministering the FinancialManagement and Accountability Act1997
Extract
Ms Pamela Fayle Chair of the Tender Evaluation Board Extract
Source: ANAO.
Summary of responses to the proposed report
49. TheAustralianNewsChannelPtyLtd,oneof the tenderers, and thethree departments subject to the audit provided the following summaryresponses.Australian News Channel Pty Ltd
50. The Australian News Channel Pty Ltd provided the followingsummaryresponse,withthefullresponseatAppendix1:TheAustraliaNetwork tenders represent a failure of public administrationandhighlight thepotential risk toa commercialorganisationofengaging inbusinesswith theCommonwealth, particularlywhen a government ownedentityisthecompetitor.NoAustralianbusiness,regardlessofindustryorsize,shouldbeexposedasANCwasbyparticipating,notoncebuttwice,intenderprocesses thatwereultimately cancelled throughno faultof theirown.Thiscannotbeinthenationalinterest.
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Department of Foreign Affairs and Trade
51. TheDepartmentofForeignAffairsandTradeprovided the following
response:
TheDepartment
of
Foreign
Affairs
and
Trade
believes
it
managed
the
Tender
process for the Australia Network consistent with the requirements of
Commonwealth Procurement Guidelines. The Department notes that the
Guidelines neither suggest nor require that APS officers sign individual
confidentialityundertakings.IftheANAObelievesthatthisshouldbeso,then
it should sort it outwith theDepartment of Finance andDeregulation.The
DepartmentbelievesitisuntenablefortheANAOtohaveastandarddifferent
tothatrequiredinofficialProcurementGuidelines.
TheDepartmentofForeignAffairsandTradenotesthathighlysensitiveand
classifiedmaterial
is
regularly
handled
through
the
Cabinet
communications
systemandcanseenoreasonwhytheAustraliaNetworkmattershouldhave
beentreatedanydifferently.
ANAO comment on the response from DFAT concerning confidentialityundertakings
52. As isoutlined inparagraph 2.3 in the report, theCPGs establish the
procurementpolicyframeworkforAustralianGovernmentagenciesandassist
seniormanagement inmeeting the financialmanagementandaccountability
requirementsof
the
FMA
Act.
Outlined
in
the
CPGs
are
mandatory
requirementsandmattersofsoundpractice.TheCPGsarenotexhaustiveand
it is the responsibilityofagencies to implementappropriatearrangements to
manageprocurementprocesses inaway that isproportional to the riskand
sensitivityofthevariousprocurementsinwhichtheyareinvolved.
53. The Australia Network tender process was a sensitive procurement
given the profile that media issues of this kind attract in Australia. In
administeringthetenderprocess,DFATimplementedarrangementsthatwere
overand
above
the
mandatory
requirements
of
the
CPGs
including:
establishinga steeringcommittee tooversee the tenderprocess;conveninga
multidepartment evaluation board with an independent chair to evaluate
submissions; and engaging external probity, legal and technical advisers to
assistwiththeongoingconductofthetender.
54. Where there is a sensitive tender process, theANAO considers that
askingevaluationboardmemberstoformallyacknowledgetheconfidentiality
and information security requirements outlined in the probity plan, or,
alternatively,complete
aconfidentiality
undertaking
reinforces
their
personal
responsibility for safeguardingconfidential tender informationandassists in
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managing the flowof such information.AGS in responding to theproposed
auditreportadvisedtheANAOthattheremaybesomecaseswhereobtaining
a writtenacknowledgement is appropriate and this is a practice which AGS
oftenadopts.18
55. The issueraisedbyDFAT inrelationtotheCPGs isonlyoneelement
relatingtoinformationsecuritythatthisreportrefersto.Themoresignificant
matter is the wide range of ministerial and departmental officers that had
access to theTEBsdeliberationsandrecommendationswhile the tenderwas
still live. There is also the separate issue of the AFP investigation into the
possible unauthorised disclosure of confidential tender information to the
media.
Department of Broadband, Communications and the DigitalEconomy
56. The Department of Broadband, Communications and the Digital
Economyprovidedthefollowingsummaryresponse,withthefullresponseat
Appendix1:
The Secretary of DBCDE, in reviewing the particular circumstances of the
14JuneCabinetconsiderationof the tenderandamendedarrangements,has
concluded that the circulation of briefing within the Department and
MinistersOffice
could
not
have
been
limited
to
fewer
officers.
The
Secretary
supportsgreaterclarityinarrangementstoexplicitlyauthorisethebriefingof
Ministers by TEB members when the tender is the subject of Cabinet
deliberation.
Department of the Prime Minister and Cabinet
57. The Department of the Prime Minister and Cabinet provided the
followingresponse:
1. TheDepartment
of
the
Prime
Minister
and
Cabinet
considers
that
the
reportinaccuratelydescribesthetenderasbeingconductedinaclimate
of uncertainty as to the decisionmaking process. The Prime Minister
hadadvisedon25January2011,beforethetenderwasreleased,thatthe
tenderbebroughtbacktoCabinetfordecision.Anydelaystothetender
in order to implement that decision did not arise from uncertainty or
lackofclarity.
18
AGS, advice provided to the ANAO, 22 March 2012.
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2. TheDepartmentagreesthatinformationsecurityisimportantfortender
processes. Departmental officers are subject to broader duties and
confidentiality obligations outside the tender process. Any
confidentialityarrangementsput inplace for tenderprocessesneed to
beconsidered
in
that
light.
ANAO comment on the response from PM&C concerning the decision-makingprocess for the tender
58. TheevidenceobtainedbytheANAOindicatesthattherewerediffering
viewswithingovernment,includingattheministerialanddepartmentallevels,
about thedecisionmakingandapprovalprocessesfor theAustraliaNetwork
tender.Therewasnoformaldocumenteddecisionofgovernmentinrelationto
theapprovalprocessintheearlystagesofthetender.Rather,therewereclear
indicatorsof
different
views
being
held.
59. InDecember2010,theformerForeignMinisterappointedtheSecretary
ofDFATasthepersontoapprovetheoutcomeofthetender.Inrespondingto
correspondence from the former Foreign Minister regarding the tender
process, thePrimeMinister incorrespondenceof25January2011noted that
the outcomesof the tenderwouldbe subject toCabinet consideration,with
Cabinet to agree the successful tender bid. A subsequent briefing by the
Cabinet Secretary19 indicated that Ministers had agreed at an October 2010
meetingthat
the
decision
was
to
be
made
by
Cabinet.
However,
arrangements
alreadyput inplaceby theForeignMinisterdidnotenvisageanexplicitrole
forCabinet.
60. Thedecisionmakingarrangementsforthetenderremainedunresolved
until such time as Cabinet appointed the Communications Minister as the
approverinJune2011.
Full responses to the proposed report
61. Fullresponses
provided
by
the
Australian
News
Channel
Pty
Ltd,
the
Hon. Martin Ferguson AM MP, the Department of Broadband,
Communications and theDigital Economy, and theAustralianGovernment
Solicitor,areincludedatAppendix1.
19
This brief to the Prime Minister was prepared on 14 June 2011 (paragraphs 3.37 and 3.55 refer).
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1. Background and Context
ThischapterprovidesbackgroundontheAustraliaNetwork,examinesthecontextforthe tenderprocess and refers to the media, Parliamentary andpublic interest in the
AustraliaNetworktender.Theauditobjective,criteriaandscopearealsooutlined.Background on the Australia Network
1.1 The Australian Government20 funds the Australia Network, an
overseas televisionbroadcasting service to pursue foreign and trade policy
objectives.Theseinclude:
promoting Australias engagement across the AsiaPacific and Indian
subcontinent;
fostering an understanding of Australia as a dynamic, culturally
diversenation;and
raisingawarenessofAustraliaseconomicandtradecapabilities.21
1.2 The Australia Network service is available via satellite and online
video,andisrebroadcastacrossAsia,thePacificandtheIndiansubcontinent.
The service is: freetoair, operating 24hours a day, seven days a week; and
broadcasts a mix of news, current affairs and business programs,Englishlanguage learning,education,drama,sportsandchildrensprograms.
TheAustraliaNetworkserviceisalsousedtotransmitconsularinformationto
Australianslivingabroad,particularlyintimesofcrisis.22
1.3 Since 2001, the Australian Broadcasting Corporation (ABC) has
delivered theAustralia Network serviceunder twosequential contracts with
the Government, administered by the Department of Foreign Affairs and
Trade(DFAT).
20For the remainder of this report, the Australian Government will be referred to as the Government,unless otherwise indicated.
21DFAT,Annual Report 201011, p. 130.
22
Australian Government Budget 201112, Budget Paper No. 2 Budget Measures, p. 202.
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Overview of service delivery arrangements for the AustraliaNetwork
1.4 The television broadcasting service now known as the Australia
Network
was
established
in
1993,
following
a
proposal
by
the
ABC
to
develop
aninternationaltelevisionservicethatwouldtransmitprogramstosouthand
southeast Asia. Australia Television International was established as a
subsidiary company of theABC and fundedby theGovernment through a
grant of $5.4million, repayable if the service returned a profit. The ABC
launched Australia Television International on 17February1993, initially
transmitting to 15countries. The ABC continued to operate Australia
TelevisionInternationalforfiveyears,duringwhichtimetheserviceoperated
ataloss.23
1.5 In1997,theGovernmentapproachedtheABCregardingtransitioning
AustraliaTelevision International to theprivate sector and in February1998
theSevenNetworkpurchasedtheservicefromtheABC.24TheSevenNetwork
operated Australia Television International for three years, closing it in
March2001. At the time, the Seven Network noted that the service was
operating in a crowded marketplace25 and that it was not commercially
viable.26
1.6
Following
the
closure
of
Australia
Television
International,
the
Governmentsoughtproposalsfromindustryregardingtheestablishmentofan
enhanced television service to the AsiaPacific region to project accurate
imagesandperceptionsofAustralia.27Afteralimitedselectionprocess28,the
Government announced in June 2001 that the ABC would be funded to
establish the service under a $90.4million fiveyear contract, spanning the
23Further information on the establishment of Australia Television International can be found in: KS Inglis,
Whose ABC?: The Australian Broadcasting Corporation, 19832006, Black Inc., Melbourne, 2006,pp. 2869.
24R Alston, (former Minister for Communications, Information Technology and the Arts), ABC base fundingretained in budget, media release, Parliament House, Canberra, 13 May 1997.
25Seven Network Limited, To Re-Assess Ongoing Viability of Australian TV, Announcement to theAustralian Stock Exchange, 7 August 2000.
26Seven Network Limited, Seven to close Australia Television, Announcement to the Australian StockExchange, 19 March 2001.
27DFATAnnual Report 200001, p. 177.
28A Downer, (former Minister for Foreign Affairs and Trade), Australian television service to the
Asia-Pacific region, media release, Parliament House, Canberra, 20 June 2001.
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35
period 2001 to 2006. The ABC recommenced international television
broadcasting,underthenameABCAsiaPacific,on31December2001.
1.7 In2005,thelastyearofthecontractwiththeABC,atenderforanew
five
year
contract
was
initiated,
with
the
aim
of
testing
the
market
for
potential
suppliersandselectingthemostsuitableprovidertocontinuetheinternational
televisionbroadcastingservice.Twoproposalswerereceived thatconformed
tothetenderrequirementsfromtheABCandtheAustralianNewsChannel
PtyLtd(ANC).TheANCisajointventureofNineDigital,adivisionofNine
Entertainment Co., Seven Media Group and British Sky Broadcasting.29 The
ABCwasassessedasthepreferredtenderer,andthethenGovernmententered
intoacontractwith ittodeliver internationaltelevisionbroadcastingservices
until 8August2011. The service was renamed Australia Network in
August2006.
Proposals for the future of the Australia Network
1.8 From 2009, the Government considered a range of options for the
ongoing operation of the Australia Network. These included: the Australia
Network being permanently operated by the ABC; the existing fiveyear
contractwiththeABCbeingrolledover;oranopentenderprocesstoselectthe
mostsuitableprovider.
1.9 Under the termsof theexisting200611AustraliaNetworkcontract,
DFAT was required toprovide 12months notice to the ABC regarding any
intention to extend the contract for a further five years. This effectively
established a deadline of 8August2010 for a decision on the future of the
contract.Ultimately,theGovernmentsdecisiontoinitiateacompetitivetender
processwasmadeon22November2010,aftertheABChadagreedtodeferthe
notification date to 8November2010 because of the Federal Election and
subsequentlyfurtherextenditto26November2010.
29The ANC owns and operates Sky News Australia, Sky News Business, Australian Public AffairsChannel, Sky News Local and Multiview, and provides news content on both free-to-air and subscription
services in New Zealand.
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Proposals for the Australia Network to be permanently operated bythe ABC
1.10 InNovember2009, theManagingDirectorof theABCdelivered the
Bruce
Allen
Memorial
Lecture.30
The
lecture
discussed
the
role
of
international
broadcasting and soft diplomacy, and proposed expanding the ABCs
internationalservice(theAustraliaNetwork)throughafourstageapproach:
Stage one: enhancing Australias media presence in the AsiaPacific
region,inparticular,IndiaandChina;
Stage two: expanding to 22countries in the Middle East and
53countriesinAfrica,includingArabiclanguagecontent;
Stagethree:expandingtoLatinAmerica;and
Stagefour:globalexpansionviabroadbanddeliverysystems.
1.11 Thecoreelementsof thisproposalhadpreviouslybeenprovided to
thethenPrimeMinister(theHon.KevinRuddMP) inearly2009followinga
requestfromthethenPrimeMinisterfortheABCtoprovideitsfuturevision
fortheAustraliaNetwork.
1.12 The Managing Directors lecture also informed government debate
aboutthefutureoftheAustraliaNetwork.InNovember2009,theMinisterfor
Broadband,Communications
and
the
Digital
Economy,
Senator
the
Hon.
StephenConroy (Communications Minister), sponsored a submission to the
Government31 outlining a proposal for the ABC to provide the Australia
Networkserviceonapermanentbasis,expanding its reachandaligning the
servicewithAustraliasdiplomatic sphereof influenceby integrating itwith
the ABCs other international broadcasting service, Radio Australia. The
submission stated that this approach would allow the ABC to deliver the
Australia Network as part of its core business, moving the international
televisionbroadcasting
function
from
the
Foreign
Affairs
and
Trade
portfolio
intotheBroadband,CommunicationsandtheDigitalEconomyportfolio.
30M Scott, A Global ABC: Soft Diplomacy and the World of International Broadcasting, Bruce AllenMemorial Lecture, Macquarie University, Sydney, 5 November 2009.
31
This proposal was titled ABC International Broadcasting Expanding Australias Voice.
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1.13 This submission was considered by the Government and it was
agreedthatthethenMinisterforForeignAffairs,theHon.StephenSmithMP,32
couldbringaproposalforwardaspartofthe201011Budgetconsiderations,if
it was his preferred option. However, the Minister opted not tobring the
proposalforward
in
the
Budget
considerations
as,
by
that
time,
he
was
consideringlaunchingaformalindustryconsultationprocess.
DFAT advice to government
1.14 InJanuary2010,DFATbriefedthethenForeignMinisterontheneed
toinformtheABCby8August2010oftheGovernmentsintentionsregarding
anextensionoftheexistingcontract.Thebriefoutlinedaproposedtimelinefor
thepreparationofasubmissiontotheGovernmentto informafinaldecision
onthe
contract
for
the
Australia
Network.
DFAT
expected
this
process
to
be
completeby earlyJuly 2010. At the request of the Minister, thebrief also
included information about an industry submission process expected to
commence inearlyJanuary2010andbecompletedby theendofApril2011.
There were ongoing discussionsbetween the Minister and the department
about the industry submissions process, with the Minister endorsing the
processinJune2010.
Industry submissions
1.15 The thenForeignMinister launchedan industry submissionprocess
onAustraliasinternationalbroadcastingserviceon18June2010withaclosing
dateof19July2010.ThroughthisprocesstheGovernmentsoughttheviewsof
interestedpartiesonthreekeyissues:
future opportunities and challenges for a governmentfunded
internationalbroadcastingservice toeffectivelydeliverahighquality,
credibleandreliableserviceintheAsiaPacificregion;
optionsfor
the
delivery
and
funding
of
an
international
broadcasting
serviceintheAsiaPacific;and
whether future delivery of the services should be the subject of a
competitivetenderprocess.33
32The Hon. Stephen Smith MP was the Minister for Foreign Affairs from 3 December 2007 to14 September 2010.
33S Smith, (former Minister for Foreign Affairs and Trade), Australian International Broadcasting Service:
Request for Industry Submissions, media release, Parliament House, Canberra, 18 June 2010.
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1.16 The Federal Election was announced on 17July2010two days
before the closing date for receipt of industry submissions. The subsequent
caretakerperiodcontinueduntil14September2010.Aspreviouslymentioned,
attherequestoftheGovernment,theABCagreedtodeferthenotificationdate
foran
extension
of
the
existing
contract
to
8November
2010.
1.17 Intotal,14submissionswerereceivedfromindustry.Themajorityof
submissionsdidnotsupporttenderingforthecontractandconsideredthat,if
thepurposeoftheAustraliaNetworkwastoactasatoolofpublicdiplomacy,
the service should remainwith theABCas thenationalbroadcaster.Several
submissionsalsonoted that itwasunusual foran internationalbroadcasting
servicefundedbyagovernmenttooperateunderacommercialarrangement.
1.18 Twoparties
indicated
an
interest
in
the
opportunity
to
tender
for
the
contract if a competitive tender process was tobe undertaken. It was also
suggestedthatalongertermcontractarrangementwouldsupportthefinancial
security of the service and, therefore, longterm planning, and brand
developmentandrecognition.
Review of the ABCs performance
1.19 Under the 200611 contract, a detailed performance review of the
ABCs operation of theAustraliaNetworkwas scheduled tobe undertaken
after thecompletionof the thirdyearof thecontract (that is, from late2009).
DFATcommencedthereviewinApril2010andprovidedthereviewreportto
the then ForeignMinister on 28June2010, fiveweeks ahead of theAugust
deadline tomake adecisionon the futureof theABCs contract.34Asnoted
above,thisdeadlinewasnotmet,largelybecauseoftheannouncementofthe
FederalElectionandassociatedcaretakerperiod.
1.20 CentraltothereviewwasanassessmentoftheABCsperformancein
meetingthekeyperformanceindicators(KPIs)establishedunderthecontract.
The reviews findings regarding theABCsperformanceagainst theKPIsare
summarisedinTable1.1.Overall,DFATconcludedthattheABCsdeliveryof
theAustraliaNetwork servicehad consistentlymetor exceededmostof the
established KPIs. Factors beyond the ABCs control had influenced
achievementofsomeoftheKPIs,withthesefactorsraisedwithDFATduring
thecontractperiod.
34The review was conducted by a committee comprised of two officials from DFAT and one official from
DBCDE.
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Table 1.1
Summary of the ABCs performance against the 2006 KPIs
KPI Performance review finding
Appeal/distribution and re-distribution of theAustralia Network
Met and exceeded contractual requirements.
Reach/conducting surveys and measuringaudience appeal
Partially complied with contractualrequirements, but found that the KPIs were, onreflection, unrealistic.
General programming mix and schedulingLargely met contractual requirements, withroom for improvement in the dramaprogramming.
News, current affairs and business programsLargely met contractual requirements, withroom for improvement in the lack of news
broadcast on weekends (interrupted by sport).
Marketing, branding and revenue raising
Marketing targets compliant with contractualrequirements.
Revenue targets did not meet contractualrequirements, but the targets were, onreflection, unrealistic.
Ancillary services Met contractual requirements.
Management and business plan Largely met contractual requirements.
Source: ANAO analysis of Performance Review of the Australia Network, August 2006March 2010,
29 June 2010 (DFAT). [Internal document]
1.21 On30June2010, twodaysafterproviding the thenForeignMinisterwith the ABC performance review,but prior to the receipt of all industrysubmissions, DFAT againbriefed the Minister, highlighting the need for adecisiontobemadebyAugust2010.TheoptionofnegotiatingwiththeABCan extended notice period was raised, along with suggested options for thefutureoftheAustraliaNetwork.Theseoptionsincluded: exercisingtheGovernmentsoptiontoextendtheexistingcontractfora
furtherfiveyearswiththesametermsandconditions; puttingtheAustraliaNetworkcontractouttocompetitivetender;or bringing forwardaproposal forconsiderationby theGovernment,as
part of the Budget process, for the ABC to provide the service on apermanentbasis.
1.22 ThisbriefwasnotactionedpriortotheannouncementoftheFederalElectionon17July2010.
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assessed asnotmeeting.While supporting the rolloverof the contract for a
further fiveyears,DFATadvised theMinister that thisoptionwould forego
theopportunityto:developmorequantifiableKPIs;establishalongercontract
period; and increase the flexibility of the programmingmix. By contrast, a
tenderwould
give
the
Government
greater
scope
to
use
the
Australia
Network
asapublicdiplomacytool,andgivegreateracknowledgementtomultimedia
platforms,suchasvodcasts.
1.27 TheGovernmentdidnotmakeadecisionbytheextendeddeadlineof
8November2010.DFATsubsequentlynegotiatedwiththeABCtoextendthe
notice period until 26November2010. The department also advised the
ForeignMinister that theABCwasunlikely toagree tofurtherextensions,as
delayswould impacton renegotiations for thirdparty service contractsand
mayresult
in
afinancial
burden
for
the
future
Australia
Network
provider.
1.28 In response to a briefing from the former Foreign Minister, the
Government decided on 22November2010 that a 10 year contract for the
deliveryof theAustraliaNetworkshouldbeawarded throughacompetitive
tender process. The Governments decision was announcedby the Foreign
Minister on 23November2010.36 TheMinisters announcement stated that a
competitivetenderprocesswouldensurethebestpossibleserviceinreturnfor
theAustralianGovernments investment,and thata10year contract for the
servicewould
be
used
to
provide
greater
certainty
to
the
service
provider.37
1.29 The expectationwas that the tenderprocess couldbe concludedby
June2011,allowingsufficienttimeforthepossibletransitiontoanewservice
providerbytheexpiryoftheexistingcontractinAugust2011.
Procurement framework
1.30 The letting of Australian Government contracts involves the
expenditure ofpublicmoney and is therefore subject to applicable financial
management legislation. Specifically, the Financial Management andAccountability Act 1997 (FMA Act) provides a framework for the propermanagementofpublicmoneyandpublicproperty.This framework includes
requirements governing the process by which decisions are made about
36 K Rudd, (former Minister for Foreign Affairs),Australia Network for the future, media release, ParliamentHouse, Canberra, 23 November 2010.
37
ibid.
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whether publicmoney shouldbe spent, aswell as accountability for such
decisions.
1.31 The procurement policy framework is a subset of the financialmanagement
framework
related
to
the
procurement
of
property
or
services.
FordepartmentsofstateandagenciesprescribedundertheFMAAct,thecore
policy framework is established by the Commonwealth Procurement
Guidelines (CPGs), which are issued under the authority of the Financial
ManagementandAccountabilityRegulations1997theFMARegulations.
1.32 TheFMARegulations requireMinistersandagencyofficials tohaveregardtotheCPGswhenperformingdutiesrelatedtoprocurement.TheFMA
Regulationsalsorequirethataproposaltospendpublicmoney(includingfor
theproposed
procurement
of
property
or
services)
must
be
considered
and
approved by an appropriately authorised party before contracts or other
arrangements involvingtheexpenditureofpublicmoneycanbeenteredinto.
In this respect, theFMARegulations require thatanapprovernotapprovea
spendingproposalunlesssatisfied,aftermakingreasonableenquiries,thatthe
proposal is an efficient, effective, economical and ethical use of
Commonwealth resources that is not inconsistent with the policies of the
Commonwealth.Whereatenderprocessisconductedinrelationtoaproposed
procurement,considerationoftheoutcomeofthetenderevaluationprocessby
therelevant
decision
maker
may
result
in
adecision:
to
enter
into
acontract
with a successful tenderer; to select a preferred tenderer for further
negotiationswith a view to subsequently entering into a contract; or to not
proceedwiththeproposedprocurementactivitywithanyofthetenderers.In
eachcase,thiswill,inthenormalcourse,representadecisionaboutwhetherto
approvethespendingofpublicmoney.
1.33 ThedecisionaboutwhethertospendpublicmoneymaybemadebyaMinister, by Ministers collectively (such as in Cabinet), an agency Chief
Executive,officials
acting
under
the
authority
of
aMinister
or
their
Chief
Executive,orotherpersonsauthorisedby legislation tomakesuchdecisions.
Thecapacity foraMinisterorMinisterscollectively toundertakeadecision
making role in respect todecisionsaboutwhether to spendpublicmoney is
provided for in the financialmanagement legislationprovided that they are
identifiedastheapprovers.
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43
Key aspects of the Australia Network tender process
1.34 The Request for Tender (RFT) for the provision of the Australia
Network was lodged on the Governments central procurement website,
AusTender,on
4February
2011.
The
RFT
sought
tenders
from
appropriately
qualified organisations to provide an international Australian television
serviceandassociateddigitalmediaservices.38Theservicewasvaluedatupto
$223.1million over 10years, commencing on 9August2011. An industry
briefing was conducted by DFAT on 11February2011 for those parties
consideringsubmittingatender.
1.35 Thepurposeofthetenderprocesswastoselectaserviceproviderthat
demonstratedvalueformoneyandcouldbroadlysupportAustraliasnational
interestsand
meet
the
Governments
objectives
of:
providingacredible,impartialandindependentvoice,deliveredtoan
international audience via innovative as well as conventional
multimediaplatforms;
promotingan imageofAustraliaasadynamicandculturallydiverse
nationoftheAsiaPacificregionandraisinginternationalawarenessof
Australiasstrengthsandachievementsacrossarangeoffields;
presentingAustralian
perspectives
on
the
world
and
fostering
public
understandingofAustraliasglobalandregionalrole;
increasing awareness of the strong linksbetween Australia and the
AsiaPacificregion;and
providing consular information to Australians living abroad,
particularlyintimesofcrisis.39
1.36 The RFT attracted tenders from the ABC and the ANC. Both
organisations that tendered had participated in the 200506 tender for the
200611AustraliaNetworkcontract.
1.37 DFAT initially planned for a sixmonth tender process. However
significantchangestotheprocessweremadebytheGovernmentatkeypoints,
whichextendedthetimeline.
38DFAT, Request for Tender for the provision of an international Australian Television service andassociated digital media services, DFAT11-CPD-02, 4 February 2011.
39
ibid., p. 27.
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ThesechangesincludedtheGovernmentsdecisioninJune2011to:
add a new evaluation criterion to the RFT and to seek further
informationfromtenderers;
changethe
decision
making
process
for
awarding
the
tender
by
replacingtheSecretaryofDFATwiththeCommunicationsMinisteras
theapprover;and
allow theCommunicationsMinister tomake a decision that did not
reflecttherecommendationsoftheTenderEvaluationBoard(TEB).
1.38 The Government also decided to exercise its option to extend theABCs contract for six months until 8February2012 to allow for the
continuation
of
the
Australia
Network
service
while
the
amended
tender
processwascompleted.
1.39 InNovember2011,thetenderwasterminatedbytheGovernmentonpublic interest grounds40, following media reports referring to confidential
information relating to the tender process. Subsequently, inDecember2011,
theGovernmentdecided that theAustraliaNetworkwouldbedeliveredby
theABConapermanentbasis.Table1.2outlines the timeline forkeyevents
duringthetenderprocess.
40The RFT provided at clause 4.7.1 that the contract may be suspended or terminated if the
Commonwealth, represented by DFAT, considered that it was in the public interest to do so.
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Table 1.2
Key events in the 2011 Australia Network tender process
Date Event
4 February 2011 Request for Tender announced on AusTender (DFAT11-CPD-02).
25 March 2011 Tender closed.
4 May 2011Tender Evaluation Board
41submitted its recommendation to the
Secretary of DFAT as the decision-maker for the tender.
6 July 2011
The Government requested tender participants to submit amendedtender documentation relating to an additional evaluation criterion, andchanged the approver from the Secretary of DFAT to theCommunications Minister.
27 July 2011 Closing date for amended tenders.
27 October 2011 The Australian Federal Police requested to investigate the leaking oftender information (not announced until 7 November 2011).
7 November 2011The Government announced that the tender process had beenterminated and that the Australian Federal Police was conducting aninvestigation into alleged leaks.
5 December 2011The Government announced that the ABC would provide the AustraliaNetwork service on a permanent basis.
Source: ANAO analysis.
Media interest and Parliamentary requests for an audit1.40 TheAustraliaNetworktelevisionbroadcastingservicehas,overmanyyears,beenanimportantavenuethroughwhichAustraliaispromotedtootherpartsoftheworld.Whenconsideredagainstthebackgroundofthehighlevelof interest inmediaownershipandbroadcastingrights inAustralia, itwastobeexpectedthatthetenderfortheAustraliaNetworkcontractwouldgeneratemoremediainterestthanmanyothergovernmentprocurementactivities.1.41 Initial reporting in the media focused on the degree to which theGovernment wouldbe able to influence editorial andbroadcasting content.Laterreportsspeculatedon,andreportedon,confidentialaspectsofthetenderevaluation process, delays in awarding the contract, changes to the tenderrequirements and the perceptions of government interference in the tenderprocess. The probity of the tender process was also questioned following
41The Tender Evaluation Board was responsible for conducting a detailed and comparative evaluation of
tender submissions and preparing a report for the decision-maker.
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reports that theABChadapproached twogovernmentMinistersat the time
theGovernmentwasconsideringchangestothetenderprocess.
1.42 ThetenderprocessalsoattractedconsiderableParliamentaryinterest.
In
this
context,
in
September
2011,
the
Deputy
Leader
of
the
Opposition
wrote
tome requestingan investigation into theconductof theAustraliaNetwork
tender,particularlythetransferofthedecisionmakingresponsibilityfromthe
Secretary of DFAT to the Communications Minister. My response on
28September2011 indicated that, given the advanced stage of the tender
process, an audit would notbe undertaken at that time,but that I would
continuetomonitorthetenderprocessandoutcome,andkeepopentheoption
ofundertakinganauditatalaterdate.
1.43 The
Deputy
Leader
of
the
Opposition
again
requested
that
Iinvestigate matters relating to the Australia Network tender process on
8November2011, following the announcement of the termination of the
tender process. The Communications Minister also wrote to me on
22November2011requestingareviewofthetenderprocess inthe interestof
ensuringthatfuturetenderprocessesareasrobustaspossible.
1.44 Following consideration of these requests and the broader
Parliamentaryand public interest, Iannounced on24 November 2011 thata
performanceaudit
of
the
administration
of
the
Australia
Network
tender
processwouldbeundertakenundersection18oftheAuditorGeneralAct1997.Audit objective, criteria and methodology
1.45 The audit objective was to report on the administration of the
Australia Network tender process and to identify lessons learned from the
conductoftheprocesstoinformfutureprocurementactivities.
1.46 The audit examined the administration of the tender process,
including:planning;
conduct
of
the
tender;
and
managing
the
change
in
tender
conditions.TheauditalsoconsideredtheadviceprovidedtotheGovernment,
the decisions made by the Government and the manner in which those
decisions were implemented, including compliance with procurement
requirements.
1.47 The Australia Network tender process hasbeen subject to ongoing
considerationbytheGovernment.TheGovernmenthasperformedakeyrole
in the decisionmaking process and, in doing so, has taken into account the
advice
providedby
several
departments
and
advisers.
The
departments
concernedhadalsoobtainedadvicefromexternalprobityand legaladvisers.
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Inseveralareasofthisreport,referencehasbeenmadetotheadvicereceived.The report also includes relevant references to briefings and submissionsprovided to Cabinet, Cabinet deci