This article is an excerpt from the 2023 edition of The Art of Tendering: A Global Due Diligence Guide.
In its September 2022 Legislative Council inquiry report entitled Granting of contract number OoS17/18-021 by the Office of Sport, the New South Wales Public Works Committee found that the appearance of conflict of interest tainted an Office of Sport contract award. The Committee reviewed the tendering process that led to the award of a contract for resurfacing an indoor arena at an equestrian centre. The Committee found that the tendering process failed to meet applicable probity standards since the Office of Sport failed to keep an appropriate arm’s-length relationship with Equestrian NSW, the sporting body that had lobbied the government for funding for the new project.
In fact, the Committee report found that the Office of Sport allowed Equestrian NSW to influence the drafting of specifications, the evaluation of bids, and the awarding of the contract without establishing and enforcing appropriate measures to guard against conflicts of interest:
It became apparent to the committee that the tender process for the relevant contract was flawed, and ultimately did not meet the probity standards expected of a NSW Government agency spending public money. It was evident during the inquiry that the Office of Sport did not keep Equestrian NSW, the peak body for equestrian sports in NSW, at arms-length during the tender process. This relationship, in addition to a potential undeclared conflict of interest between Mr Bruce Farrar, the CEO of Equestrian NSW, and the successful tenderer, Barrie Smith Motorsport, clearly gave rise to the appearance of a tender process lacking in integrity.
It was also clear to the committee that the Office of Sport failed to adequately document its decision-making process in relation to the granting of the contract. This failure meant that it was difficult to justify the tender being awarded to Barrie Smith Motorsport once various allegations of impropriety had been made.
The Committee concluded that the CEO for Equestrian NSW should have reasonably foreseen that his involvement in the tendering process “would give rise to a perceived or actual conflict of interest, and that this conflict should have been disclosed.” However, that conflict was not disclosed, and the CEO, Bruce Farrar, was allowed to influence the drafting of requirements and the evaluation and award decision notwithstanding an apparently conflicted relationship between Equestrian NSW and the winning bidder, Barrie Smith Motorsport Pty Ltd.
By way of background, the Committee report detailed how “Equestrian NSW met with representatives from the Office of Sport in September 2016 to discuss a potential upgrade of the Sydney International Equestrian Centre (SIEC). SIEC is one of the three Olympic Sport Venues owned and managed by the Office of Sport.” Further, “in 2017, the CEO of Equestrian NSW, Mr Bruce Farrar, and the CEO of Equestrian Australia, met with the Hon Stuart Ayers MP, who was the Minister for Sport at the time.” In March 2017, “Equestrian NSW proposed the upgrade to the facility and sought government funding. In March 2017, Equestrian NSW submitted a business case for a $600,000 upgrade to the SIEC arenas to be funded by the NSW Government.” In July 2017, “the SIEC arena upgrade was included as part of the Office of Sport Minor Capital Works Program.”
Turning to the subsequent tendering process, the report noted that in August 2017 the Office of Sport conducted a Request for Interest (RFI) process involving six suppliers and included Bruce Farrar as an advisor in this process due to “the level of expertise required”. In October 2017, one of the potential bidders emailed Bruce Farrar to make a complaint about an alleged conflict of interest between Equestrian NSW and another bidder, Barrie Smith Motorsport. As the report detailed, the complainant alleged that there was a family relationship between Peter Dingwall, who was then the president of the Equestrian NSW board, and Barrie Smith, owner of Barrie Smith Motorsport. The Office of Sport claimed that it was unaware of that complaint at the time since the issue was dealt with by the board of Equestrian NSW.
Once bids were received, the Office of Sport conducted an internal evaluation and selected Barrie Smith Motorsport. At that point, an evaluation committee of “external experts” from the industry, which included Bruce Farrar, was also formed to confirm the evaluation results. While this practice was not common, the Office of Sport later justified the use of the external evaluation committee due to the urgency of the procurement and the unavailability of other international experts:
The Office of Sport told the committee that the use of a committee of this kind is not a regular feature of Office of Sport procurement. However, given the short timeframe for the project to be finalised, and the unavailability of other international experts, it was considered to be the most suitable way to establish a ‘cross-section of advice in relation to the multi-disciplinary aspects of equestrian sport to provide key input and guidance on the most appropriate way forward’.
The external evaluation committee also selected Barrie Smith Motorsport. Prior to that second evaluation, Bruce Farrar signed a conflict declaration and declared no conflicts. The Office of Sport approved the contract award recommendation.
Industry stakeholders subsequently raised concerns over the relationship between the Office of Sport and Equestrian NSW, arguing that the latter unfairly influenced the tendering process in favour of the winning bidder Barrie Sport Motorsport:
Some stakeholders raised concerns about the relationship between the Office of Sport and Equestrian NSW, with particular reference to the tender process for the SIEC arena upgrade. They argued that Equestrian NSW was able to unfairly influence the tender process and ensure the contract was awarded to Barrie Smith Motorsport. The complainants allege that Equestrian NSW sought to do this because of various relationships that existed between individuals within Equestrian NSW and others associated with Barrie Smith Motorsport.
Those industry stakeholders claimed that Equestrian NSW used its inappropriate influence to manipulate the specifications in favour of the winning bidder:
Some individuals involved in the equestrian community were highly critical of the process leading up the issuing of the tender. These stakeholders told the committee that Equestrian NSW was too closely involved with the Office of Sport and had an unfair and unreasonable influence both over the initial decision to fund the SIEC upgrade, as well as the awarding of the contract to Barrie Smith Motorsport. They argued that Equestrian NSW should not have been in the position where it could make funding requests to a government organisation.
In particular, Mrs Maggie Dawkins and Ms Berni Saunders, members of the equestrian community, told the committee that it was of significant concern that Equestrian NSW was able to meet with the relevant Minister to discuss the project. They also stated that it was not appropriate for Equestrian NSW to have been responsible for the drafting of a funding submission. Mrs Dawkins argued that this level of access and influence over the Office of Sport was unfair and demonstrated the unreasonable degree to which the Office of Sport relied on the views of Equestrian NSW CEO, Mr Bruce Farrar, from the origin of the project.
The committee also heard allegations that Mr Farrar engaged inappropriately with Mr Barrie Smith of Barrie Smith Motorsport, to undertake early scoping works prior to the funding submission being lodged and the funding being allocated. Mrs Dawkins told the committee that Mr Farrar had obtained quotes from Mr Smith before the project had been approved, demonstrating the degree to which Mr Farrar and Equestrian NSW were involved with the upgrade, and the level of influence they were able to exert over decisions which should have been made independently by the Office of Sport.
Additionally, stakeholders such as Mrs Dawkins and Ms Hannah Brooks, another member of the equestrian community, told the committee that by engaging with Mr Smith prior to the funding submission being lodged, Mr Farrar was able to shape the tender and project scope in a way that benefited Barrie Smith Motorsport.
More specifically, the stakeholders raised concerns over the inclusion of an Ebb and Flow Watering system, an emerging technology that Barrie Smith Motorsport was particularly well positioned to provide as the exclusive representatives for the Australian manufacturer:
At the time of the project, the committee heard that only one arena with an Ebb and Flow system had been installed in Australia. This was at the arena in Wallaby Hill, which is privately owned by Equestrian NSW Board Member, Ms Alexandra Townsend.
Some stakeholders pointed to requirement for Ebb and Flow technology in the project scope to demonstrate that it had been designed with Barrie Smith Motorsport in mind. This is because Barrie Smith Motorsport was the exclusive representative of OTTO Sport in Australia, who were the designers of the Ebb and Flow system.
It was put to the committee by several stakeholders that Mr Farrar worked closely with Mr Smith during the development of the funding proposal to ultimately ensure he would be awarded the contract. They alleged this was done due to the desire on the part of Mr Farrar and Equestrian NSW to unfairly benefit Barrie Smith Motorsport.
The stakeholders claimed that the new technology was unnecessary and was only included in the specifications to facilitate an award to Barrie Smith Motorsport:
Some inquiry participants expressed concerns about the awarding of the contract to Barrie Smith Motorsport, including that its tender proposal was flawed and not the best option, and that Barrie Smith Motorsport only became the successful tenderer due to Mr Farrar’s inappropriate influence and position on the TAC.
…some stakeholders argued that the awarding of the contract to Barrie Smith Motorsport was fundamentally unfair given the project specification required the use of Ebb and Flow watering technology. According to these stakeholders, this kind of technology was relatively new and not necessary for the delivery of an effective arena surface. They therefore disputed that this technology was ‘industry best practice for arenas’, and stated this requirement was only in place to facilitate Barrie Smith Motorsport being awarded the contract.
These conflict concerns were amplified by the lack of proper documentation in relation to the evaluation and award decision and the lack of conflict declarations from evaluation committee members:
Lack of documentation and a rigorous tender process
The committee heard that the documentation and probity processes in place at the Office of Sport were not sufficiently robust and posed a significant governance risk. Stakeholders explained that there was a lack of adequate record keeping which ultimately resulted in the appearance of conflicts and a lack of integrity in the process.
Several stakeholders pointed to the fact that the Office of Sport does not have in its possession conflict of interest declarations of the other two TAC panel members, namely Ms Julie Farrell and Mr John Vallance. When this was put to the Office of Sport, Ms Jones told the committee that the office was unable to confirm with confidence if these declarations had been filled out and could not be found, or if they never existed.
Further, the committee also heard the documentation setting out the rationale for decision making during the tender process was not sufficient. For example, the Office of Sport acknowledged that the RFT documents did not accurately reflect why the tenderer with a lower RFT score was ultimately the successful candidate. It was also noted that the Evaluation Criteria and the general scoring criteria in the RFT documents did not accurately reflect the Office of Sport requirements and what was being tested during the procurement process.
This led the Committee to conclude that “the procurement process by which this contract was awarded was flawed” and that there was a “failure in meeting the robust probity requirements expected when expending public funds, particularly in relation to documentation standards.”
The Committee concluded that irrespective of whether the apparent conflict did or did not impact the bidding process, “there is a very real perception that it did.” Further, the report concluded that Bruce Farrar “should have reasonably foreseen that his involvement in the tender process for the contract would give rise to the perception of a perceived or actual conflict of interest, and that this conflict should have been disclosed.”
Turning to the conduct of the Office of Sport, the Committee found that the Office “failed to uphold robust probity standards by allowing the close involvement of Mr Farrar in the tender process for the contract” and that his involvement in the funding request, developing the specifications, and participating on the evaluation committee was inappropriate. Further, the Committee found that the Office of Sport “failed to adequately investigate the issues relating to the granting of the contract once they had been brought to its attention.”
The Committee recommended that the Office of Sport seek further advice from the Independent Commission Against Corruption to ensure that its procurement processes align with legislative requirements and probity standards. The report also confirmed that the Office of Sport had already updated its procurement procedures to better document its decision-making and manage conflicts when retaining external advisors.
As this report illustrates, public institutions should adopt proactive conflict control measures to help protect the integrity of their procurement processes.
