Services Australia official oversaw decision to award contract to friend’s company, Synergy 360

A senior federal official oversaw a decision to award government contracts to a controversial consulting company even though the firm was partly owned by his long-standing friend.

The Services Australia public servant also met the owners of the consulting firm, Synergy 360, for drinks at one of their homes at the same time the firm was being paid by its corporate clients to advise them on how to win contracts from Services Australia.

The revelations about the conflict of interest issues surrounding Services Australia’s dealings with Synergy 360 come after the release of a damning review that called for further investigation into 19 contracts with a total value of $374 million.

David Milo, Coalition MP Stuart Robert and John Margerison.Credit:

But the new claims also raise concerns about the limits of the review by Dr Ian Watt, which did not interview key players involved in possible breaches of Commonwealth probity rules.

The review by Watt found that federal officials spent the $374 million in taxpayer funds on contracts tainted by concerns over conflicts of interest, poor value for money and inadequate records, but found no actual evidence of misconduct by any public servant.

However, Watt did not examine all the personal relationships between public servants and Synergy 360 and did not interview key Synergy 360 whistleblowers, who told this masthead of their concerns about the firm’s privileged access to departmental and ministerial officials.

Government Services Minister Bill Shorten released the Watt review on Sunday with a warning about the risk to taxpayer funds from contracts that needed further investigation.

“There is a legitimate and well-known assumption that where there is a conflict of interest or a possible conflict of interest in the allocation of [the contracts], it has to be declared,” Shorten said on Sunday.

“Dr Watt’s report reveals that in a range of these contracts, perceived conflicts of interest were simply not disclosed.

“More needs to be done to find out what was the basis of the allocation of $374 million worth of taxpayer money under the previous government.

Government Services Minister Bill Shorten has released the findings of a review into the problems with the awarding of some contracts.Credit: Rhett Wyman

“Why weren’t the basic standards met? It is completely unacceptable. This is taxpayer money. People pay their taxes in good faith to Canberra. They do not expect to have substandard procurement arrangements and no conflicts of interest declared or disclosed.”

The details of the Services Australia contracts provide a rare insight into the behind-the-scenes dealings between government officials and Synergy 360, which is owned by Canberra businesswoman Kham Xaysavanh, ex-military official David Milo and entrepreneur John Margerison.

Milo and Margerison are close friends of former Liberal cabinet minister Stuart Robert, who this masthead revealed last year was separately giving Synergy 360 advice about how its multinational clients could secure access to ministers, public servants and, potentially, lucrative government contracts.

A new investigation by this masthead has uncovered that a Services Australia senior official responsible for the department’s identity management processes was linked to at least two contracts awarded by his department to Synergy 360 in 2019.

The contracts were worth over $100,000 and involved Synergy 360 advising Services Australia about how to reform systems to verify the identity of Australians using its services, including by using biometric checking.

The senior Services Australia official is a longstanding friend of Xaysavanh, who owns 30 per cent of Synergy 360.

Xaysavanh hosted the public servant at her home to socialise with her and Synergy’s other owner, David Milo, on several occasions, according to a source with knowledge of the trio’s dealings. A second source said the trio met at a Canberra pub to discuss the department’s relationship with Synergy 360.

A leaked email reveals that in March 2018, Xaysavanh wrote to Milo about whether Synergy 360 could hire the official as a consultant.

In the email, Xaysavanh described the public servant as a “super smart & switched on guy” who was “looking for a contract role that would allow him to work on business transformation or strategy engagements”.

When quizzed about his relationship with Xaysavanh, the official said last week: “She is a friend of mine”.

He also said that Synergy 360 was hired to undertake a “research project” on identity management because the department was “desperate” for advice.

He declined to answer further questions, including whether he had disclosed the pair’s relationship to Services Australia. The public servant, who has left the federal public service, also declined to answer questions about why and on how many occasions he met Xaysavanh and Milo at Xaysavanh’s family home for drinks.

“Questions related to Services Australia procurements should be directed to Services Australia,” the public official, who this masthead is not naming, said in a statement.

Services Australia declined to answer questions about the official, stating: “we are not in a position to make any further comment on specific contracts or individuals”.

When this masthead asked Services Australia if the officials who decided the contracts disclosed any conflicts of interest, the agency’s media unit said: “We have not identified disclosed conflicts of interest from those officials.”

At least two contracts were awarded to Synergy 360 while the official held a senior role at Services Australia. One was a May 2019 contract to help Services Australia reform its identity management systems and was worth $28,875. The second contract was issued in September 2019 and involved the potential for the department to use biometric checking to confirm identities. It was valued at $79,585. The work concluded in November 2019.

Xaysavanh refused to answer questions about her relationship with the government official, saying she wanted to get legal advice before doing so.

Former Coalition minister Stuart Robert in parliament on March 6.Credit: Rhett Wyman

But leaked Synergy 360 documents also reveal that at the same time firm was providing the confidential “identity management” advice to Services Australia, it was getting paid by at least two multinational technology firms – Unisys and Infosys – to advise them on securing future identity management contracts from Services Australia.

In one leaked December 2019 document, Synergy 360 told Infosys that it had “conducted the Identity Management report – submitted to DHS [Services Australia]” and that it would “partner with Infosys to submit a joint bid response” to any identity management contracts subsequently released by the department. At the time, Infosys was paying Synergy tens of thousands of dollars for advice on how to win work from Services Australia and other federal agencies.

In 2019, Synergy told Unisys, which was also paying the firm for advice on winning Services Australia contracts, that it had found an “opportunity” for Unisys that involved “DHS Identity Management – POC [proof of concept] Biometrics.” A leaked Synergy document reveals that it had also advised a Unisys manager to “provide an order of magnitude pricing to” the Services Australia public servant who is friends with Xaysavanh.

Under the Australian Public Service rules, reasonable steps must be taken to avoid a real or perceived conflict of interest.

Watt, a former secretary of the Department of Prime Minister and Cabinet under prime ministers Tony Abbott and Julia Gillard, was asked to review the contracts after Shorten ordered an investigation by Services Australia and the National Disability Insurance Agency (NDIA).

Watt found a “number of procurements with insufficient conflict of interest documentation and a number of instances where actual, potential or perceived conflicts of interest were not adequately addressed.”

“Additionally, there were examples of poor practices and close relationships between some APS officials and suppliers and those relationships were not always managed effectively,” Watt found.

“In one instance, an initially low-value contract was varied up to three times the original value. This procurement led to a subsequent direct approach for related work which was worth more than seven times the value of the original contract.”

Watt also detailed concerns about “embedded contractors being able to pitch for further work while employed as a contractor, or having an unfair advantage due to learning about potential upcoming opportunities for new work.”

A spokesman for Robert said the Watt report noted the government taskforce on the contracts did not find clear misconduct within the procurement processes.

“Mr Robert has not been contacted by Services Australia, the NDIA, or any person conducting any review. Mr Robert has not received or been asked to provide input to any report prepared for either agency,” the spokesman said.

“Mr Robert rejects outright all inferences and/or allegations raised in your articles and enquiries.”

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