20 August 2009

Success fees: something doesn’t add up

Success fees have been much in the news lately, since Queensland Premier Anna Bligh moved against the idea of Labor insiders (usually ex-politicians) using their political contacts to grease the wheels for companies bidding on major infrastructure projects, and being paid huge “success fees” when their clients win.

I must be missing something here. As far as I am aware, in every jurisdiction in Australia government procurement is conducted on the basis of open competitive tendering, in which tenders are evaluated by public officials on the basis of published evaluation criteria, and submitted to Cabinet for what ought in almost all circumstances to be pro-forma approval. Ministers normally have no role in selecting the successful tenderer – their role is the formal commitment of already budgeted funds once they are advised that a satisfactory tender has been received.

There is a role in this process for people with public sector expertise, but only a limited one – a role in decoding complex tender documentation for the benefit of private sector companies and providing advice about how to present the offering in a manner that makes sense to the officials who will evaluate it.

If it is true that there are jurisdictions in which ex-politicians can use their political contacts in such a way as to “get their clients over the line” and claim success fees denominated in the million dollar range, then describing this as “inappropriate” or “sleazy” would strike me as highly euphemistic. I think a better term would be corruption, spelt C-O-R-R-U-P-T-I-O-N. In a polity which conducts its procurement with appropriate probity, there is no scope for lobbying to affect the outcome.

And if there is no scope for lobbying to affect the outcome, then the people who claim to have such influence that they are deserving of “success fees” are fraudulently misrepresenting themselves to their clients.

I am not a stranger to this process. In 1999 I was, as Secretary to the Department of Defence, the formal (and final) decision maker in the selection of Boeing as the preferred tenderer for Project Wedgetail, the Airborne Early Warning and Control Aircraft project, estimated cost at the time $5.5 billion. Evaluation of the three bids, from Boeing, Lockheed and Raytheon, was a complex process involving significant numbers of people over many months.

None of the three companies mentioned is a shrinking violet in the highly competitive world of commercial aerospace. None of them sought to make direct representations to me of any kind; I would not have seen them if they had sought to. No Minister or staffer sought to intervene in the process. They would have been sent packing if they had; the Secretary is the person with the legislated power to make procurement decisions.

When the selection of the preferred tenderer was made, the Minister was briefed on who had been selected and why, and the matter went to Cabinet for the formal commitment to proceed with the project.

Since leaving the Commonwealth I have assisted a number of clients with large Commonwealth tenders. The rules are in substance as they were ten years ago. All significant procurement is on the basis of open competitive tendering, published on the Austender website, and conducted in accordance with Commonwealth Procurement Guidelines established by the Department of Finance. The evaluation criteria are published, the evaluation is carried out by a panel of public officials, and a senior officer will have the delegation to make a final decision on the tender on the basis of the recommendation of the evaluation panel. Apart from a single designated contact officer, no-one associated with the tender will talk to the tenderers. The contact officer will take written requests for clarification of the documentation; when a query is received, the contact officer circulates the query and the answer to all participants. Not much scope for anyone to earn “success fees” in this environment – and nor should there be.

No comments: