The Industry department has settled a dozen compensation claims related to the disastrous tender for its flagship innovation program and is bracing for more payouts amid allegations of corruption in parts of the $160 million procurement.
Legal advice being taken on the compensation claims, some of which are understood to be in danger of breaking down, is costing the department another $1500 a day, while one unresolved claim is understood to be seeking opportunity costs beyond the tender preparation.
In the wake of a scathing 2022 independent audit of the procurement of delivery partners for the Entrepreneurs’ Programme, the department invited 48 unsuccessful bidders that missed out to air any concerns and seek compensation.
The department also commissioned its own review of the procurement and later engaged an integrity consultant to examine claims of fraud or corruption during the tender.
Neither have found evidence of deliberate non-compliance that warrants further inquiries, according to the department, which has declined to release the inquiries’ findings or exercise a contractual right to inspect the books of one of the successful tenderers allegedly involved in corruption.
But the breaking of Commonwealth Procurement Rules and ethical shortcomings in the 2019/20 procurement has opened the department up to compensation claims.
An Industry department spokesperson told InnovationAus.com earlier this month that 16 claims for compensation relating to the Entrepreneurs’ Programme delivery partners procurement have been received to date.
“12 claims have been finalised. Given the claims process is ongoing, it would be inappropriate to provide further detail on the cost to date or potential future cost,” the spokesperson said.
The department has already confirmed to the Parliament that at least 11 of the claims were finalised under the Government Procurement (Judicial Review) Act.
This Act provides a mechanism for compensation for breaches of Commonwealth Procurement Rules, but the compensation is limited to the cost to suppliers of preparing a tender, not the opportunity cost of the profit they could have made.
At least two of the compensation claims for the Entrepreneurs Programme procurement have been made under the Scheme for Compensation for Detriment caused by Defective Administration.
This scheme allows for compensation on moral grounds rather than purely legal ones when an agency fails to institute appropriate administrative procedures, comply with existing administrative procedures, or provide proper advice.
It is a discretionary scheme and would not be limited to the costs of preparing the tender. Any payment would need to be authorised by the Industry minister, currently Ed Husic.
InnovationAus.com is aware of one claim under this defective administration scheme that was made with allegations of corruption in the tender process.
The corruption allegation includes a claim one of the successful tenderers relied on the assistance of a government contractor involved in earlier iterations of the program, with a large success fee then being paid.
The contractors allegedly involved have denied the claim, while the department has said its external review of the allegation did not find substantive evidence that would warrant further inquiries.
Following the release of the audit by the Australian National Audit Office in 2022 that exposed the broken Commonwealth Procurement Rules and ethical shortcomings in the procurement of delivery partners, the Industry department engaged Minter Ellison to provide legal advice on the compensation claims.
The department has had to extend the legal services contract five times already, with its estimated cost now nearly $760,000 over two years – almost $1500 every working day.
