AHSPO Conference C f Is it a Legal Catch Probity & Management Management 23 O October t b 2009
My Background Chartered Accountant and Certified Internal Auditor; General Manager Assurance and Risk Management in Oakton; ASX listed Business and IT Consulting Organisation (OKN) with over 1,100 staff - BRW Best Professional Services Firm in 2008 ($20m-$200m Revenue); Diverse Probity experience over 60 assignments including: Probity Advisor for HealthSMART; Probity Auditor for Health Purchasing Victoria for the past 4-5 Years; Recently commenced with Probity Advisor with Bendigo Health accommodation project; Probity Advisor for the National Emergency Warning System 2
Overview What is Probity? Am I Effected? Essential Elements of Probity What Governs Probity Requirements in Victoria Ethical Decisions you May Confront What are the Consequences? Some Probity War Stories Key actions to manage probity risks What if I Discover a Probity Breach? Questions 3
What is Probity? Probity is where I leave my brain at home and just do what I m told a client cet I m not against probity, I just don t want it to interfere with what I m doing another client Probity will cause delays to my project 4
Am I Effected? Yes!! It does not cause delay or add costs. It generates value from proper reflection & efficient handling; Probity should be viewed as a key element of governance, setting the tone for how things are done. 5
Essential Elements of Probity All procurement processes be fair, open, transparent to all parties and be defensible. The essential elements of probity that must exist throughout a procurement are: 1. Compliance with legislative obligations and government policies; 2. Effective management of conflicts of interest 3. Fairness and impartiality; 4. Security & confidentiality; 5. Open and competitive process; and 6. Consistency & transparency of process (accountability). Proactive mitigation of probity risks. Aim is to achieve a justifiable, defensible process, not a perfect one!! 6
What Governs Probity Requirements in Victoria The key elements that define how probity in procurement operates in Victoria and/or provides guidance on probity principles includes: Common Law Public Administration Act 2004; VGPB Policies and guidelines; Policy for Conduct of Commercial Engagements ; The supporting Good Practice Guidelines for Commercial Engagements in Government ; Victorian Public Sector Code of Conduct; Building Commission o requirements; e e Ministerial Directions; Victorian Industry Participation Policy; Ethical Purchasing Policy and Environmental Purchasing Statement; Partnership Victoria Policy; Your Procurement Policy and Procedures; SAI Global Probity Handbook; and YOUR ETHICAL BEHAVIOUR. 7
Ethical Decisions you may confront? 8 questions to ask yourself when conducting procurement activities: 1. What would the reaction be if the decision was front page of the Herald Sun? 2. Do you think (or would a reasonable person think) it is the right thing to do? 3. Can the action be supported? 4. Is the action legal? 5. Is the action consistent with the organisation s Code of Conduct? 6. Is the action consistent with your organisation s Policy and Procedures? 7. Is there going to be any benefit to you or your friends? 8. What will be the outcome for your organisation, your colleagues and yourself? IF YOU ARE UNSURE, seek help. 8
What are the Consequences? Loss of confidence in procurement process; Legal action; Delays in achieving organisation s outcomes if projects are delayed to rectify issues; Additional cost particularly l if you have to restart t the procurement process; Your Dismissal or Disciplinary Action; Professional scrutiny by third parties such as: Ombudsman; VAGO; Internal Audit / External Audit; Legal Advisers; Media Parliamentary Questions. 9
10 Some Probity War Stories
Key Probity Challenges Each project is unique and can throw up many probity challenges. Some of the more common issues include: 1. Late tenders; 2. Poor record keeping and confidentiality of project information; 3. Identification and management of Conflicts of Interest; 4. Benefits to project staff entertainment, financial, offers of employment; 5. Lack of sufficient time and resources for project cut corners; 6. Insufficient skills to run procurements errors; 7. Evaluation plans not completed in sufficient time to test; 8. Use of mandatory criteria vs criteria to be scored. 9. Scoring Scale and cut-off levels for short-list not defined; 10. Contract negotiations material changes to specification. 11
Lessons Learned Ombudsman Report Probity Controls in Public Hospitals for Procurement of Non-Clinical Goods and Services (August 2008) Some key areas identified: Develop and circulate to staff guidance on whether to accept gifts. Advise contractors what the Departments policy is on acceptance of gifts; Keep a register for recording gifts and benefits; Suggested maximum of $50; Review the Conflict of Interest process and practices; Formal Process for selection of contractors public tender, EOI, publicly advertised and follow Building Commission / VGPB Independently check that all work has been completed before making payment sign off checklist; Look to use centralised procurement function; 12
Lessons Learned (Cont d) Ombudsman Report Probity Controls in Public Hospitals for Procurement of Non-Clinical Goods and Services (August 2008) Formal process to regularly check pricing at least once every six months (independent of contract manager); Effective process for monitoring contractors performance; Ensure that t delegations are current; All contracts to be reviewed by Legal; Centrally manage all contracts; Conduct regular audits to ensure compliance with VGPB/Building Commission policies; 13
Lessons Learned (Cont d) Ombudsman Report Office of Housing Contract (2007) Clarify in RFT, Evaluation Plan and Tender Briefing that Past Performance will be assessed; Give tenderers an opportunity to comment on their past performance; There was strong record keeping, file record system and audit trail; Record movements of all tenders outside of secure room; Ensure all evaluation reports are dated, signed and duly completed; Have Probity Auditor/Advisor at Tenderer Debrief; Plan debrief; Advise the Evaluation Panel and Tender Steering Committee to be alert to situations that create a potential conflict of interest Tender Steering Committee members to complete Conflict of Interest declarations 14
Refresh - Essential Elements of Probity The essential elements of probity that must exist throughout a procurement are: 1. Compliance with legislative obligations and government policies; 2. Effective management of conflicts of interest; 3. Fairness and impartiality; 4. Security & confidentiality; 5. Open and competitive process; 6. Consistency & transparency of process (accountability). 15
Key Actions to Manage Probity Risks 1. Comply with Government and Legal requirements eg Prepare a Procurement Conduct Plan (Probity Plan) 2. Effective Management of Conflicts of Interest These are not wrong should be declared and appropriately managed; Refer to the organisation s Conflict of Interest policy; Declared at all times by all people that have any form of influence on the outcome of a project process; Check COI before Procurement commences and when Tenderers are known and then as CoI arise 16
Key Actions to Manage Probity Risks (Cont d) 3. Fairness and Impartiality No representations or promises of work; All information provided equally to all potential tenderers in the same time frame; No proprietary information without the approval of the IP owner; Each stage of the evaluation process should be comprehensively documented, be consistently applied and be tied explicitly to the bid evaluation criteria contained in the Evaluation Plan and RFT; The evaluation process should be documented fully in advance, with a clear allocation of responsibility between those evaluating the bids, those charged with making recommendations on the selection of the successful or preferred bidder, and those responsible for making final decisions 17
Key Actions to Manage Probity Risks (Cont d) 4. Security and Confidentiality Sensitive project documents must be securely controlled; All project staff and advisers should sign a standard confidentiality undertaking; All contact with prospective tenderers should be through a nominated person and be minuted; Limited numbers of copies of tender related documents should be produced, and each copy should be numbered; In the case of emailed documents, records of circulation arrangements should be maintained; Maintain a movement register; Must not discuss other applications at debriefings 18
Key Actions to Manage Probity Risks (Cont d) 5. Open and Competitive Process Communications with potential Tenderers - in accordance with the Procurement Conduct Plan; Contract management meetings with existing suppliers/contractors should be minuted; Records should be kept of information sent by the organisation to tenderers; All Project Team members should understand and comply py with the procurement processes and probity principles during the RFT process; Routine business meetings, conferences and social activities may continue, however, you should exercise caution in discussions with potential tenderers. All such discussions should be minuted and forwarded to the Project Director 19
Key Actions to Manage Probity Risks (Cont d) 6. Consistency and Transparency (Accountability) The project requires adequate resourcing time and personnel; Project timetable known, agreed with evaluation team and made a priority; Appropriate evaluation processes; Evaluation plan must be established prior to opening tenders; In the event that an error or omission - seek legal advice; Evaluation team is adequately briefed prior to scoring applications; Scoring scale established and relevant; Pre determined guidelines for ranking of tenders. TIP: COMMON SENSE FOLLOW YOUR PROCEDURES CONSIDER ETHICS!!!!!! 20
What if I discover a Probity Issue? Record probity issues/risks in a secure location for audit trail; Discuss probity issues with Probity Practitioner/Procurement Team; If no Probity Practitioner, consider appointing one refer to VGPB Probity Practitioners Panel; Seek advice from your procurement experts; Seek legal advice; Report material probity issues to the Project Governance Group ie Steering Committee / Project Control Board / Manager. Take appropriate and timely corrective action. 21
Probity Tools and Templates www.vgpb.vic.gov.au Strategic Procurement Planning Policy for Conduct of Commercial Engagements (includes Procurement Conduct Plan general and simple plans) Procurement Practitioners Guide Tendering Contract Management www.audit.vic.gov.au Victorian Auditor General Reports & Publications www.ombudsman.vic.gov.au Media & Publications www.anao.gov.au Commonwealth Auditor General Publications 22
Thank You Questions For further information: C i Geddes Craig G dd General Manager Assurance and Risk Management Ph: 03 9617 0200 craig.geddes@oakton.com.au