8 October 2010 | Angeline Albert

The Australian National Audit Office (ANAO) has declared taxpayers may not be getting value for money from government purchases because departments fail to understand proper procurement procedures.

Criticism of agencies’ procurement expertise for purchases totalling A$23.5 billion (£14.54 billion) last year, was raised in a report by auditor-general Ian McPhee.

The report said agencies tended to favour direct-source procurement, whereby an agency invites a supplier or suppliers of its choice to make submissions such as quotes or tenders, instead of open tendering for all suppliers. The direct-source approach is a barrier to a competitive procurement, the report said.

Australian government agencies could not show value for money in 74 per cent of the 285 directly sourced contracts analysed by the ANAO, and the departments did not get more than one quote in 85 per cent of the direct-source contracts analysed.

In 2009, 48 per cent of all contracts entered by the government were direct-sourced, amounting to A$10.2 billion out of the total spent that year.

Of the 645 contracts analysed, the auditors said in most there was “a lack of evidence of comparative analysis of the relevant costs and benefits of procurement options to support the procurement decision”.

The departments were criticised for an inability to estimate the value of procurement and to select the appropriate purchasing method. They did not establish practices that better supported value for money, adequately assess risks or manage conflicts of interest, the report said.

It said more clarity in procurement definitions was needed, and recommended strengthening agency operational guidelines, with agencies creating simple procurement process templates for staff.