A new audit conducted by the Australian National Audit Office (ANAO) has determined that the procurement processes of the Australian Passport Office (APO) within the Department of Foreign Affairs and Trade (DFAT) were not compliant with the Commonwealth Procurement Rules (CPRs).

The ANAO had previously reviewed the APO’s procurement practices as part of a separate audit from 2023 to 2024, and found that they “merited further examination”.

According to the recently released audit, the APO managed 331 contracts worth a combined $1.58 billion from 1 July 2019 to 31 December 2023; of these, there were 243 new contracts entered into totalling $476.5 million. The audit found that none of these contracts were entered into following an approach to open market, and only 29 per cent of 73 reviewed contracts took a “genuinely competitive” approach to market.

The audit also found that in addition to being non-compliant with the CPRs, the APO’s procurement practices did not meet the standards set by DFAT’s procurement policies and did not demonstrate that the contracts had achieved value for money.

“DFAT did not employ open and competitive processes in the conduct of Australian Passport Office procurement. There were no procurements conducted between July 2019 and December 2023 by way of an open approach to the market. Of the 73 procurements examined in detail by the ANAO, 29 per cent involved competition where the department had not identified a preferred supplier prior to inviting quotes,” the audit report said.

“Procurement decision-making was not sufficiently accountable and was not transparent. Procurement practices have fallen short of ethical standards, with DFAT initiating inquiries of the conduct of at least 18 individuals, both employees and contractors, in relation to Australian Passport Office procurement activities examined by the ANAO.

“DFAT’s AusTender reporting indicates the APO procures by open tender from a panel arrangement 71 per cent of the time. The ANAO examined 53 contracts DFAT had reported this way and identified that for 15 contracts (28 per cent) the APO had deviated from the panel arrangement to the extent that the approach constituted a limited tender.

“The ANAO also examined 12 contracts valued over the $80,000 threshold reported by DFAT as let by limited tender. The approach taken for six of these contracts (50 per cent) did not demonstrably satisfy the limited tender condition or exemption from open tender that had been reported by DFAT. The department’s approach is inconsistent with the Commonwealth Procurement Rules which, in turn, reflect the requirements of the Australia-United States Free Trade Agreement (DFAT is the Australian Government entity responsible for Australia’s international trade agreements).”

The ANAO also made seven recommendations to the department and the APO to address, which have all been agreed to.

1. The Department of Foreign Affairs and Trade improve its planning of procurement activity for the Australian Passport Office, including but not limited to taking steps to assure itself that procurement planning requirements (internal to the department as well as those required by the Commonwealth Procurement Rules) are being complied with.
2. The Department of Foreign Affairs and Trade strengthen its procurement processes for the Australian Passport Office so that there is an emphasis on the use of genuinely open competition in procurement to deliver value for money outcomes consistent with the requirements and intent of the Commonwealth Procurement Rules.
3. The Department of Foreign Affairs and Trade include evaluation criteria in request documentation for all procurements undertaken for the Australian Passport Office, and procurement decision‐makers ensure those criteria have been applied in the evaluation of which candidate represents the best value for money.
4. The Department of Foreign Affairs and Trade to strengthen its procurement policy framework by directly addressing the risk of officials being cultivated or influenced by existing or potential suppliers.
5. The Department of Foreign Affairs and Trade strengthen its controls to ensure any contract variations are consistent with the terms of the original approach to market, and that officials do not vary contracts to avoid competition or other obligations and ethical requirements under the Commonwealth Procurement Rules.
6. The Department of Foreign Affairs and Trade examine whether procurements not included in the sample examined by the ANAO also include ethical and integrity failures, and subject any such procurements to appropriate investigatory action.
7. The Department of Foreign Affairs and Trade strengthen oversight by its central procurement area of the procurement activities of the Australian Passport Office. This should include being represented on the evaluation team for each procurement activity of higher risk or value.

“The department values the ANAO’s independent review of procurement practices at the Australian Passport Office (APO). The audit came at a time when the department was assessing the effectiveness of the current procurement model. As a result of both reviews, the department’s procurement practices will be amended to improve compliance and efficiency,” the DFAT said in a statement responding to the audit’s release.

“This will include the Finance Division taking more centralised and direct control over procurement activities, and additional resources to implement changes and provide enhanced oversight. The ANAO audit highlighted the proactive steps the current Executive Director APO took to address procurement and cultural issues when she commenced with the department in early 2023. Work has continued, leading to the creation of a new Procurement, Finance and Assurance Section within APO. Additionally, the Internal Audit Branch has initiated a wide‐ranging internal audit of procurement activities across the department.

“Following the ANAO audit report and internal reviews, the department will also revise its Compliance and Assurance Framework as it relates to Public Governance, Performance and Accountability Act 2013 obligations. The updated Framework will be purpose-built, adopt a risk-based approach, and include effective assurance mechanisms. The department has initiated activities to address specific areas of concern regarding actions of staff.”