This article is an excerpt from The Art of Tendering: A Global Due Diligence Guide, which is available for purchase.
As evidenced by recent case studies from the South Pacific, public institutions worldwide are facing increasing scrutiny over their sole-source decisions, which is raising concerns over the probity and transparency of their direct contract awards and the failure to obtain value-for-money for the taxpayer.
For example, in a recent case in Papua New Guinea, a former prime minister faced criminal charges for abuse of office over an allegedly improper emergency sole-source award. While the Papua New Guinea National Court of Justice dismissed those charges in its October 2021 decision in The State v. Peter Paire Charles O’Neill, this case underscores the importance of establishing clear procedures for urgent direct awards, particularly when those awards directly involve elected officials.
As the Court summarized, the accused was charged with abuse of office under the Criminal Code after he directed state funds to the procurement of two diesel turbine generators that were purchased to address power shortages. He was charged with abusing the authority of his office and acting arbitrarily against the interest of the state based on allegations that the resulting payments were not supported by invoices or contracts and on allegations that the payments were processed based on undue pressure and without proper executive council approval.
However, the Court ruled that the prosecution failed to prove the abuse of authority allegations — a key element of the offence — beyond a reasonable doubt. In fact, the Court found that the transaction was based on a program that was previously approved by the executive council. Further, the Court found that the award decision was not arbitrary but was based on legitimate urgency, and that the government was not prejudiced by the transaction. While the former prime minister was ultimately acquitted of the charges, this case serves as a useful reminder of how the direct involvement of elected officials in contract award decisions, especially in rushed sole-source decisions, can lead to downstream controversy over the legitimacy of those contract awards. Public institutions should establish clear procedures to deal with their sole-source awards to avoid future legal uncertainty.
The Australian National Audit Office has also raised concerns over the lack of open tendering procedures and the failure to obtain value-for-money for the taxpayer. In its June 2022 report entitled Procurement by the National Capital Authority, Australia’s Auditor-General found that the National Capital Authority (NCA) failed to follow open procurement procedures and that its “poor transparency and record keeping” meant that the NCA “cannot demonstrate value for money across its procurement activities.” The Auditor-General concluded that the NCA’s “procurement decision-making has not been sufficiently accountable and transparent” and that gaps in procurement records was commonplace.
In fact, the Auditor-General noted that 62 percent of the contracts reviewed in the audit involved the NCA directly approaching suppliers that it had worked with in the past and that the NCA was limiting its contracting opportunities to “those known to or previously engaged by the NCA.” The report also found that only around half of the awards were supported with documentation that demonstrated that the awardee offered the best value-for-money. The Auditor-General also concluded that the procurements were not conducted in accordance with ethical standards since applicable conflict of interest rules were not followed.
As these case studies illustrate, public institutions are facing increasing scrutiny over the lack of open competition in the award of government contracts. These institutions need to bolster their internal governance practices to better ensure that their direct awards comply with applicable probity and due process standards and achieve value-for-money for the taxpayer.
