Secretary to the Treasury Steven Kennedy, who referred PwC to the police © Photo by Sam Mooy/Getty Images
Secretary to the Treasury Steven Kennedy, who referred PwC to the police © Photo by Sam Mooy/Getty Images

Government tightens procurement rules in wake of PwC tax scandal

Australian government service suppliers will be forced to disclose unethical conduct to contract managers after the government tightened procurement rules following the PwC tax scandal.

The government has updated its procurement rules with a “notification of significant event clauses” that will take effect in new contracts.

Service suppliers including law firms will be required to notify the federal government if any of their staff are found to have behaved unethically.

The head of the federal treasury, Steven Kennedy, referred PwC to the police after a scandal he described as "clearly disturbing" was exposed by senators’ questioning.

The Australian Federal Police (AFP) is to investigate claims that PwC shared confidential information it gained from advising the government on how to increase tax receipts with other clients to help them dodge new laws.

Emails released to the Senate showed that PwC made at least $2.5m from having the information, and that it had helped win the firm "brand-defining" clients.

“The clauses require a service provider to notify the entity managing the contract immediately upon becoming aware of any adverse findings made by a court, commission, tribunal or other statutory or professional body regarding the conduct of the service provider or its capacity to deliver the agreed services,” the Department of Finance said in a note that updated the government’s procurement policy.

Upon receiving such a notification, the government can request a remediation plan from the supplier and, if it considers the plan to be unsatisfactory, can terminate the contract.

All new government contracts are to contain the Notification of Significant Event Clauses.

The clauses will grant contract managers greater visibility into the ethical behaviour of suppliers and more options on how to manage the relationship with the supplier in cases of poor behaviour, the note said.

And it said that government procurement teams must consider unethical behaviour and deficiencies in performance under prior contracts when evaluating tenders.

“Officials should monitor the ethical behaviour of suppliers throughout the term of the contract,” said the note.

“Provisions that allow for the termination of a contract for a material breach, including breaches of confidentiality and security requirements, should be included in all Commonwealth contracts.”

PwC Australia chief executive Tom Seymour, who was head of tax in 2015 when PwC was advising the government, and two other tax partners have resigned from the firm’s executive board.

PwC has $255.5m of contracts with the Australian government remaining for the current financial year.

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