Australian government agencies 'consistently failed to negotiate best price' for telecoms deals

Gurjit Degun
30 June 2014

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30 June 2014 | Gurjit Degun

Government agencies in New South Wales have “consistently failed to negotiate the best price” for their telecommunication contracts, the state's Auditor-General has found.

Its investigation also revealed agencies in the state are not achieving value for money due to “inadequate contract and expense management processes”. The review examined the following agencies: Department of Education and Communities, Forestry Corporation of NSW, Fire and Rescue NSW, NSW Businesslink, Essential Energy and Sydney Trains.

Only one agency, Essential Energy, was found to manage procurement processes, contracts and expenses well, and “could demonstrate that it was getting value for money in its telecommunications arrangements”.

“Few agencies market-tested prices or negotiated with suppliers for better prices,” said NSW Auditor-General, Grant Hehir. “Most just took the ceiling price in the Government Telecommunications Agreement.

“Only one agency clearly took responsibility for achieving value for money. Central agency support was available if agencies were uncertain on how best to proceed and use of this could have generated significant further savings.”

The report also said that the agencies are slow to take advantage of savings opportunities, as some of those reviewed did not make use of a working group established to assist agencies drive better deals – the Procurement and Technical Standards Working Group.

“This is despite the fact that, in the last 12 months the working group realised total savings of AUS$3.66 million (£2 million) across 13 telecommunications proposals worth AUS$11.46 million (£6.3 million),” said Hehir. “This is a significant achievement.”

In terms of contract management, Hehir said that capability “needs to improve”. The inquiry found most of the agencies do not have staff with the “necessary expertise and experience to get the best value” out of contracts for telecommunications services.

The report called on the Office of Finance and Services (OFS) to: ensure that agencies submit their telecommunications proposals to the Procurement and Technical Standards Working Group for assessment; publish the outcomes and lessons learned from the working group's assessment of telecommunications contracts; and establish and report on key performance indicators for the government’s telecommunications broker.

In a letter to Hehir, John Hubby, chief executive of the OFS, said the department is implementing the recommendations in the report. "Your report highlights elements of good practice in procurement, contract management and expense management,” he wrote. “It is a valuable resource for agencies, the working group and OFS.”

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