Canberra's own TV drama
From www.theaustralian.com.au/news/features/c...frg6z6-1226317965442
The ABC now has a permanent right to broadcast Australian news, documentaries and entertainment into the Asia-Pacific through the Australia Network Source: Supplied
THE Australia Network tender process was fundamentally flawed from the very beginning. Then things got worse.
In late 2010, the government decided to hold a competitive tender for the $223 million, 10-year contract for the right to provide the international television service, Australia's most important vehicle for soft diplomacy.
The contract - to broadcast a mix of Australian news, documentaries and entertainment into the Asia-Pacific region - had been in the ABC's hands for a decade. But senior members of government, led by then foreign minister Kevin Rudd, believed a competitive tender would ensure the nation was receiving value for money.
Auditor-General Ian McPhee observes that "inherent in this decision to approach the market for the Australia Network was an obligation that the tender process be undertaken in good faith and conducted in a fair, transparent and defensible manner".
But his damning report handed down yesterday suggests it was anything but. McPhee found "the manner and circumstances in which this high-profile tender process was conducted brought into question the government's ability to deliver such a sensitive process fairly and effectively".
The 136-page report lays bare a startling catalogue of incompetence, confusion and infighting at the top levels of the government. Twice the independent evaluation panel recommended the contract be handed to Sky News over the ABC; twice cabinet ignored the panel. Once it justified its decision on the basis of shifting international events. The second time it cited media leaks and called in the federal police.
But the Auditor-General's report strips away those justifications and instead suggests ministers - Communications Minister Stephen Conroy in particular - happily shifted the goalposts on the bidders when the independent process didn't throw up the results they wanted.
On November 10, 2010, Rudd announced plans to put the Australia Network service out to tender. The ABC and Sky News were the only bidders. From the start, however, there were serious problems - of process and politics - that would mar the entire process.
The biggest was Conroy's longstanding belief that the service should be run permanently by the ABC. That would colour the increasingly confused internal tug-of-war between Rudd, Conroy, Julia Gillard and their various departments as senior public servants attempted to put themselves above the political fray to assess the competing bids on commercial and public interest grounds alone.
The other issue was who, ultimately, would get to approve the winning bidder when the bureaucrats had made their decision.
The contract was funded by the Department of Foreign Affairs and Trade. In December 2010, Rudd appointed DFAT secretary Dennis Richardson as the person who would approve the outcome of the tender. Richardson, Rudd believed, would make a decision that was - and would be perceived to be - based on merit and not any other consideration.
Rudd also wrote to Gillard, Conroy, Wayne Swan and Finance Minister Penny Wong seeking nominations for their departments on the tender evaluation board. The record shows that details of the tender were to be settled by Rudd, in consultation with the Prime Minister, the Treasurer and Wong. But a letter from Gillard on January 25 last year noted that the "outcomes of the tender would be subject to cabinet consideration, with cabinet to agree the successful tender bid".
Gillard received a brief from her department in April advising that the secretary of DFAT had sole responsibility for deciding the preferred tenderer and that, under the current process, there was no scope for the broader government to approve the preferred tenderer. It was returned unsigned.
The confusion continued when The Australian Financial Review reported on April 21 that Rudd's office had advised the recommendation of the tender evaluation board "would be considered by the approver, who is the secretary of DFAT. Cabinet and caucus are not part of the decision-making process".
This comment, the Auditor-General finds, was approved on April 19 by a senior adviser in the Prime Minister's office, with the advice provided to Rudd's office indicating that Gillard had "cleared these lines". Rudd and Gillard met on May 25.
Rudd followed these comments with a letter to Gillard noting apparent inconsistency between the government's decision on November 22 and her letter of January 25.
He said he been advised by his department that it was not possible for cabinet collectively to make the decision. He offered the blunt warning that referring the matter to cabinet for a final say would entail substantial policy, political and potential legal risks.
While this clash was under way, the tender evaluation board of senior public servants was continuing its work. On May 4, it unanimously recommended that the contract go to Sky. According to the Auditor-General, each TEB member was asked individually if they had any reservations about the recommendations of the report. "Each TEB member confirmed that they agreed with the outcome of the tender evaluation," McPhee writes.
The government had the answer. Yet no announcement was forthcoming. Gillard, flanked by Conroy, stood up in the Blue Room of Parliament House to make a major announcement about the tender on June 24 last year. But instead of revealing the successful bidder, she unveiled an "amended" tender process. It later emerged that responsibility for the decision had been taken from Richardson and given to Conroy.
Gillard justified her decision to restart the tender process by citing the Arab Spring, the unfolding events in the Middle East and North Africa. But both the Prime Minister and her Communications Minister appeared to be acting against the advice of their departments.
We now know from the Auditor-General's report that Conroy received a brief from his department ahead of the June 24 announcement, warning that changes to the process could lead to the perception that the government was not comfortable with the initial tender result, and was changing the rules to favour a particular applicant.
It cautioned that as the person responsible for the decision, he would bear the increased risk associated with the tender process and advised Conroy against altering the tender evaluation criteria.
It noted that there was "no certainty that a revised national interest criterion would provide an outcome different to that under the original criteria, particularly should it reference the Middle East". The brief was returned to Communications unsigned and instead marked"overtaken by events".
The Prime Minister had also been warned. A brief from the-then secretary of Prime Minister and Cabinet cautioned that the focus of the new evaluation criterion on changes in the Middle East was too limited. It noted that while the Arab Spring might justify the Australia Network broadcasting to a wider audience, there were more immediate issues in which the network could assist, such as tourism and education, particularly given the strengthening Australian dollar and the growth in the middle class in the Asia-Pacific region.
The brief recommended terminating the existing tender process and developing a new process, focusing on the role of the network in the Asia-Pacific.
The Auditor-General records: "The department does not have a record of the Prime Minister's response to the brief."
He notes: "The change to tender criteria was unusual and raised further questions about the tender process. Although the additional criterion included reference to international developments in the Middle East and North Africa, the Australia Network does not currently broadcast to these regions and the request for tender did not specify an expansion as a requirement of the new contract."
Work on the supplementary tender assessment moved swiftly.
On August 30 the evaluation board gave its findings to Conroy, declaring that while the ABC bid was "good" overall, Sky's was "very good" and offered the best overall value for money.
Its original recommendation remained unaltered.
This time, Conroy leapt on leaks to the media as justification for terminating the tender. The Australian Federal Police were called in to investigate (they have since closed the case) and the ABC, twice the losing bidder, won the day. Against the advice of the four most powerful government departments - PM&C, Treasury, Finance and DFAT - Conroy fulfilled his long-held ambition to shift Australia Network permanently under the umbrella of the public broadcaster.
One DFAT insider, having read the report, told The Australian yesterday there was "a clear pattern of manipulation, ignoring departmental advice and arriving at a predetermined outcome".
The opposition agrees. It says the evidence points to an almighty battle behind the scenes to marginalise Rudd and News Corporation, publisher of The Australian and owner of 39 per cent of BSkyB, which in turn owns one-third of Sky.
"This report paints Kevin Rudd as a saint, who held due process and the avoidance of perceived conflicts as integral to a fair outcome," declared Liberal frontbencher Simon Birmingham, who pursued Conroy through the parliament and estimates.
"In contrast, Julia Gillard's cabinet actively intervened in this tender in a manner that created not just perceived but real conflicts of interest. The political interventions by the Gillard cabinet were transparently motivated by their distrust for Kevin Rudd and their desire to deliver payback to anything or anyone remotely associated with News Corporation."
Gillard insisted yesterday that the government "determined that it was best that the ABC do that work and that was the right decision". But the Auditor-General says there were financial negatives, as well as failures of process.
He estimates it cost Sky more than $1.4m to participate in the tender; the ABC $475,000; and the Department of Foreign Affairs and Trade $770,000 (almost double the budget and excluding staff and other agencies' costs). Cabinet has approved a demand for compensation from Sky. The terms are confidential, but it is understood to exceed $2m.
"There are some real questions here as to whether heads should be rolling over such a botched tender process that is leaving taxpayers picking up the bill," Birmingham says. He has one particular head in mind: Conroy's. He alleges a very clear conflict of interest.
"We now know that Stephen Conroy had a preferred outcome from this tender all along," Birmingham argues. "He took that to cabinet in 2009, arguing the Australia Network should permanently be the responsibility of the ABC. Having lost that battle, it seems Senator Conroy thought two botched tenders and millions wasted was a small price to pay for eventually getting his way."
The Auditor-General refers to "perceptions, at least, of a conflict of interest arising from the Communications Minister being the nominated approver, given his portfolio responsibilities for the ABC".
The government claims it took legal advice over this, but it is not clear how much input the Australian Government Solicitor had into the preparation of the advice.
Sky chief executive Angelos Frangopoulos would not comment on the report yesterday. But in a letter to the Auditor-General as part of the inquiry he complained of Conroy's "apprehended bias". He also raised the issue of a briefing by Conroy or his staff to an AFR journalist, Tony Walker, as the drama reached its crescendo. Conroy's office declined to comment on the claims yesterday or comment on the Auditor-General's criticisms of the handling of confidential information his report.
Birmingham says it "seems clear that Senator Conroy's office and department were, at best, cavalier with commercially confidential information related to this tender". "It must have been a happy coincidence for Senator Conroy when the leaking of information his staff and officials had handled inappropriately provided him with the final excuse to scuttle the tender that he never wanted."
THE Auditor-General has driven a stake through the heart of Julia Gillard's claims of cabinet competence.
