Labor distortion of tender process pierced by report

THE Australia Network fiasco reveals a determination to put political objectives first.

THE documented exposure of the Gillard government's corruption of the Australia Network tender reveals that on media policy Labor cannot be trusted and that it will distort process and policy to achieve its political goals.

In December last year, Communications Minister Stephen Conroy completed a comprehensive victory by having the $223 million overseas television service become a permanent function of the ABC and no longer a contestable contract issue -- a cabinet decision opposed by every relevant policy department apart from his own.

The departments of Prime Minister and Cabinet, Treasury, Finance and Deregulation and Foreign Affairs and Trade did not support the government's decision, backing instead the cause of value-for-money service delivery.

This decision was also contrary to the result of two tender processes last year both finding unanimously in favour of the Australian News Channel, which runs Sky News, over the ABC.

In a June 2011 cabinet paper then foreign minister Kevin Rudd said the first tender result was "clear-cut". Indeed, at a meeting on May 12 with members of the Tender Evaluation Board, Rudd's departmental head, Dennis Richardson, aware of the explosive nature of the issue, asked each person individually if they had any reservations about the recommendation for ANC (Sky News) over the ABC and each confirmed the unanimous decision.

Yet Julia Gillard and Conroy refused to accept this decision, instituted a new process, refused to accept the second tender process when it produced the same result and, finally, aborted the entire tender on spurious grounds to locate the Australia Network in perpetuity within the ABC.

This week's report by the Auditor-General, Ian McPhee, finds the process casts the Australian government "in a poor light" and that it cost the two tenderers "time and money". He found that Conroy never accepted the tender findings in favour of Sky News, that Conroy, at the very least, suffered from the perception of a conflict of interest and that the conduct of the tender "brought into question" the government's ability to deliver a process "fairly and effectively", a serious matter since tenders penetrate to the integrity of governance.

The Auditor-General's report penetrates Labor's character. It documents the infighting that pitted Rudd against both the Prime Minister and Conroy. A reading of the report leads to only one conclusion: a relentless political quest to scuttle the Sky bid, to distort process to achieve Labor's preferred outcome, to change the rules against Sky and to even force a compensation payment to Sky in the cause of ensuring the overseas television service stayed with the ABC.

The political key is that ANC is one-third owned by British broadcaster BSkyB, which in turn is 39 per cent owned by The Australian's publisher News Corporation, the subject of intense attack by Labor ministers during the past 12 months on grounds of anti-Labor bias. Three underlying themes dominate this audit report: Labor's lack of integrity, its dysfunctional nature riven by Rudd-Gillard tensions and its fixation to put its political objectives above everything.

The Australia Network is broadcast across Asia and the Pacific 24 hours a day and is a vehicle for Australian self-promotion. Since its launch in 1993 it has been operated both by a commercial broadcaster and the ABC. The ABC held the contract from 2006 to last year.

Rudd, as foreign minister, was the driving force to put a new, 10-year contract to tender and he had been sceptical about the quality of the ABC's service.

In a victory for Rudd, the government decided on November 22, 2010, on a competitive tender. From the start, however, Rudd and Gillard were divided. Indeed, as early as November 2009 Conroy had signalled his hand with a submission advocating the ABC provide the service on a permanent basis, a submission not actioned.

The request for tender was issued on February 4 last year and there were only two tenderers, the ABC and the ANC.

The Auditor-General says the tender decision "created an obligation that the tender would be undertaken in good faith and conducted in a fair, transparent and defensible manner".

DFAT recommended to Rudd that as minister he should become "approver" of the tender. But Rudd rejected this advice. He said that Richardson, as DFAT departmental head, should be the approver. Rudd's thinking was to stay at arm's length and avoid any conflict-of-interest accusations.

Rudd wrote to senior ministers seeking nominations for the Tender Evaluation Board. But Gillard delivered a pivotal reply on January 25 last year, saying the "outcomes of the tender would be subject to cabinet consideration with cabinet to agree the successful tender bid".

This was completely at odds with Rudd's decision that Richardson approve the tender outcome. The process was cracked at its foundations. Gillard wanted to ensure that, as PM, she controlled the result. This was a Rudd-Gillard schism from the start with Conroy waiting in the wings.

Throughout the next several months of the tender evaluation there was an ongoing brawl involving departments and ministerial staff over how to determine the tender outcome. In the interim DFAT was in charge, running the process, yet its authority was illusory.

Richardson warned stakeholders there would be intense media and political scrutiny and the integrity of the process must be safeguarded. Access to tender material was on a strict, "need-to-know" basis. Under the probity plan, ministerial briefings were not to disclose details of the tender or its evaluation.

The final report went to Richardson on May 4, endorsing ANC. Upon getting the report Richardson insisted on a meeting with the evaluation board to confirm absolutely its unanimous nature. But on about May 6, the head of Prime Minister and Cabinet, Terry Moran, contacted Richardson to convey, in the words of the Auditor-General, "that there was some unhappiness within government" over having a tender and that the outcome needed to be considered by the government. In short, Richardson had better not call this result. So he didn't call it.

On May 25, Rudd and Gillard met to try to resolve the mess. They failed. On June 5, Rudd wrote to Gillard arguing against Gillard's position and warning that bringing the issue to cabinet for a decision now ran substantial policy, political and legal risks.

Rudd kept fighting but he was doomed. Cabinet considered the issue on June 6, 14 and 20 amid a bevy of legal opinions. Rudd delivered a cabinet paper saying the tender result had been unanimous. It was not an "on balance" decision. He recommended leaving approval with Richardson. But his submission said if cabinet did take control then an individual minister had to assume the approver role. On probity grounds Rudd would refuse to accept this himself. He need not have worried; the cabinet did not want him.

Gillard's department, along with cabinet secretary Mark Dreyfus, disputed a series of claims in Rudd's submission.

Meanwhile, given the internal crisis, a range of ministers and staff had been briefed on all aspects of the process including the recommended tenderer, a situation criticised by the Auditor-General as unwise and inappropriate.

On June 16, Gillard's department advised on how to change the tender and this was largely accepted in cabinet's June 20 decision. At this point the process moved away from Rudd and came under the ultimate control of Gillard and Conroy.

Conroy was the new approver, replacing Richardson. It was made clear that cabinet would control the process. The PM&C brief argued there was no conflict of interest for Conroy being both tender approver and minister responsible for the ABC. There was no input into this judgment from the Australian Government Solicitor. The Auditor-General notes that "the covering page of the briefing paper, which was relied upon by ministers, stated in error that the entire paper had been cleared by the AGS".

Nonetheless, Conroy's own departmental brief warned it was inevitable his appointment would be seen as a perceived conflict of interest. It advised the tender process changes risked the perception the government was unhappy with the tender outcome in favour of Sky and that it was changing the rules to favour one applicant over another. It warned that Conroy would bear the extra risk associated with the tender process.

It said there was "no certainty" the revised tender provisions would provide a different result. Every warning was pertinent. Delivered to Conroy's office three days before the June 20 revised tender policy, the brief was returned to the department unsigned and marked "overtaken by events". You have to have a sense of humour.

The terms of the tender were altered to include new international events, notably in the Middle East and North Africa. The justification for these extra criteria was widely criticised at the time. Both tenderers said their original submissions met such requirements. The tender evaluation chairperson said much the same. One tender board member criticised the additional criteria. The Australia Network does not broadcast to the Middle East or North Africa. The warning from Conroy's department was vindicated when on August 30 the supplementary TEB report said it was "the unanimous professional judgment of all TEB members" that Sky had the superior bid. It gave a "good" rating to the ABC's effort and "very good" to the ANC bid, finding it was "the best overall value for money".

Obviously, this report was unacceptable to Conroy and the government. Conroy sought more information. He submitted 29 new questions to the TEB. Next he sought advice on the option of a parallel contract negotiation but was told this was undertaken when the tender result was very close with no clear winner. This wasn't the situation and it would risk a legal challenge. But on October 7, Conroy decided on this course and Brad Orgill was nominated as lead negotiator.

Finally and mercifully, in early November, using the excuse of media leaks, Conroy announced the termination of the tender because it could no longer be conducted in "a fair and equitable" manner.

So integrity was invoked as justification for Labor's final manipulation of the tender process to deliver its preferred result . No sensible person could accept Conroy's statement at face value.

In early December cabinet decided to bury the issue forever by making the overseas services a permanent function of the ABC. The competitive tender process to ensure the best possible service in return for the taxpayer's money is dead. The idea was tried and killed by Labor.

Paul Kelly appears regularly on Sky News.