Message from the Commissioner – April 2017

Since becoming fully operational in early 2013, IBAC has identified vulnerabilities in public procurement as arguably the key corruption risk facing the Victorian public sector. This has been exposed through IBAC’s investigations, with more than a quarter examining allegations around suspected corrupt conduct in procurement practices. Three of our major investigations which have involved public hearings – Operations Fitzroy, Ord and Dunham – have examined corrupted procurement and contracting processes.

Misconduct and corruption in procurement is frequently associated with employees failing to properly declare and manage conflicts of interest, inappropriate acceptance of gifts, benefits and hospitality, poor financial controls, inadequate audit regimes and poor supervision. 

Procurement is an everyday activity in the Victorian public sector, ranging from the purchase of low value goods and services to contracting for major infrastructure projects. Public sector agencies need to have in place sound policies, systems and practices to mitigate corruption risks in their procurement processes, including regular staff training and well-communicated avenues for staff and suppliers to report any concerns.

Our recent special reports reveal that unless sound controls are in place, public sector procurement vulnerabilities can be exploited at significant cost to the Victorian community.

Operation Nepean

IBAC’s Operation Nepean special report, tabled to Parliament in April, details how a former manager at Dame Phyllis Frost Centre (DPFC), subverted proper procurement processes to provide $1.56 million in contracts to companies owned or operated by his son (and his son’s wife). In addition to disregarding procurement policies, the former manager knowingly failed to comply with policies around conflict of interest, and gifts and benefits. For example, he accepted a fishing boat and a trailer as a gift from a contractor.

There were a number of corruption vulnerabilities at DPFC that helped facilitate the conduct. This included failing to identify or act on red flags in procurement processes, not responding appropriately to conflicts of interest, and inadequate supervision.

Operation Liverpool

IBAC’s Operation Liverpool special report revealed how procurement controls were circumvented at Bendigo Health by a former construction manager to benefit himself and certain contractors.

Tabled to Parliament in March, the report outlines how the former construction manager took advantage of the separate governance arrangements for the construction of the new Bendigo Hospital to bypass the usual procurement controls. For example, the investigation revealed numerous instances where he awarded work to contractors with whom he had personal relationships and received benefits, without getting the necessary number of quotes.  

As in Operation Nepean, inadequate systems and controls at Bendigo Health including insufficient management oversight, helped create an environment which was able to be exploited.

In both investigations, IBAC has made recommendations to the organisations to address these corruption vulnerabilities.

Protected Disclosure

The conduct identified in Operations Nepean and Liverpool highlights the importance of public sector employees and the community speaking up when they suspect something isn’t right. IBAC is reliant on information from the public sector and the community to inform our investigations.

Corruption is – by its nature – secretive and difficult to detect, and public servants are often best placed to identify suspicious conduct by other employees in their organisation or involving external parties like contractors or suppliers. Every complaint to IBAC is treated with confidentiality and there are also a number of options to protect your privacy when you report corruption.

In our latest podcast, Dr. Suelette Dreyfus, Lecturer in the Department of Computing and Information Systems at the University of Melbourne expands further on the importance of blowing the whistle on corruption and how to encourage public sector employees to speak up, and report concerns. Well worth a listen.

Mandatory notifications

The importance of corruption intelligence to combating public sector corruption is also addressed in the Secretary of the Department of Premier and Cabinet, Chris Eccles’ special feature. Mr Eccles discusses the government’s introduction of a requirement for the heads of public sector organisations to report corruption to IBAC and how it is a key component to fostering an integrity culture across the Victorian public sector.