The audit objective was to assess the appropriateness of the use and reporting of confidentiality provisions in Australian Government contracts for the 2012 calendar year reporting period.

Summary

Introduction

1. The Senate Order for Departmental and Agency Contracts (the Senate Order/the Order)1 was introduced in 2001 to improve public access to information about Australian Government contracting. The main principle on which the Senate Order was based is that parliamentary and public access to government contract information should not be prevented, or otherwise restricted, through the use of confidentiality provisions, unless there is sound reason to do so.2 Supporting this principle, successive governments have agreed to comply with the requirements of the Senate Order and its subsequent amendments.

2. The Senate Order requires that each Minister in the Senate, in respect of each agency3 administered by that Minister, or by a Minister in the House of Representatives represented by that Minister, table a letter of advice confirming that these agencies have published a list of contracts on their websites containing the following information:

a) each contract entered into by the agency which has not been fully performed or which has been entered into during the previous 12 months, and which provides for a consideration to the value of $100 000 or more;

b) the contractor, the amount of the consideration, the subject matter of each such contract, the commencement date of the contract, the duration of the contract, the relevant reporting period and the twelve‑month period relating to the contract listings;

c) whether each such contract contains provisions requiring the parties to maintain confidentiality of any of its provisions, or whether there are any other requirements of confidentiality, and a statement of the reasons for the confidentiality; and

d) an estimate of the cost of complying with [the] order and a statement of the method used to make the estimate.

Agency lists are to be published twice a year to cover the respective financial and calendar year reporting periods. Ministers’ letters are to be tabled no later than two calendar months after the end of the respective reporting period.

3. Where an agency has not entered into any relevant contracts, the Minister’s letter is to advise accordingly and a statement to that effect is to be published on the agency’s website. Where an agency has excluded contracts from its listing, or has not fully complied with the Senate Order, the Minister’s letter is to advise the basis for exclusion of any contracts and where applicable, when full compliance with the Order will be achieved.

4. The Senate Order further requests that the Auditor‐General annually examine a number of the contracts listed with confidentiality provisions, and report any inappropriate use of these provisions.

5. The Department of Finance and Deregulation (Finance)4 is responsible for providing agencies with guidance on complying with the Senate Order as part of its broader responsibility for procurement policy, including the appropriate use of confidentiality provisions. The Finance publication, Financial Management Guidance No. 8—Listing of Contract Details on the Internet (Meeting the Senate Order on Departmental and Agency Contracts) (January 2004) (FMG 8)5 provides guidance to support agencies in developing their Senate Order Internet listings.

6. Finance’s whole‐of‐government guidance—Buying for the Australian Government6provides guidance on the use of confidentiality provisions in contracts and includes the Confidentiality Test (the Test). The Test consists of four criteria, all of which must be met for a supplier’s commercial information to be considered confidential. These are:

  • the information to be protected must be specifically identified;
  • the information must be commercially ‘sensitive’;
  • disclosure would cause unreasonable detriment to the owner of the information or another party; and
  • the information was provided under an understanding that it would remain confidential.7

7. The Senate Order is one of several mechanisms to promote transparency in Australian Government contracting. Other mechanisms include the reporting on AusTender8 of procurement and consultancy contracts, the production of lists of grants—as well as the publication of grants on agency websites, and the presentation of summary contract information in agencies’ annual reports, as set out in the Department of the Prime Minister and Cabinet’s Requirements for Annual Reports.9

Audit objective, criteria and scope

8. This audit is the fifteenth10 in a series of audits and fulfils the Senate’s request for the Auditor‐General to provide an annual report on the use of confidentiality provisions in Australian Government contracts.

9. The audit objective was to assess the appropriateness of the use and reporting of confidentiality provisions in Australian Government contracts for the 2012 calendar year reporting period. To form a conclusion against the objective the ANAO considered whether:

a) Financial Management and Accountability Act 1997 (FMA Act) agencies published contract listings in accordance with the requirements of the Senate Order and the extent to which the published content aligned with the information requested by the Order;

b) confidentiality provisions were used appropriately in a sample of contracts, selected from the audited agencies’ Senate Order listings, reported to contain confidentiality provisions; and

c) the audited agencies’ guidance and procedures supported the accurate and timely reporting of contract information in the Senate Order listings and on AusTender.

10. As at 28 February 2013, there were 106 FMA Act agencies subject to the Senate Order’s reporting requirements.11 All of these agencies were included for the purposes of the overall audit analysis (part (a) of the audit criteria). The agencies selected for detailed contract analysis in the audit (parts (b) and (c) of the audit criteria) were:

  • the Attorney-General's Department (AGD);
  • the Australian Transaction Reports and Analysis Centre (AUSTRAC);
  • ComSuper; and
  • the Department of Health and Ageing (DoHA).12

11. Agency selection took into account agencies’ involvement in previous Senate Order audits and the size and nature of the agencies’ contract listings (particularly the proportion of contracts listed as containing confidentiality provisions). Table S.1 shows the number and value of the contracts reported in the audited agencies’ 2012 Senate Order listings, and percentage of those contracts reported as containing confidentiality provisions.

Table S.1: Summary of contract information reported by the audited agencies

Source: ANAO analysis.

12. To assess agencies’ compliance with the Senate Order, the ANAO had regard to relevant procurement guidance prepared by Finance. In particular, FMG 8 was used to review agencies’ contract listings and the Confidentiality Test contained in the Buying for the Australian Government Guidance was followed to assess whether confidentiality provisions were used appropriately for a sample of contracts reported to contain confidentiality information.

Overall conclusion

13. The primary aim of the Senate Order is to reduce the unjustified inclusion of confidentiality provisions in government contracts. Reporting by agencies through Senate Order listings indicates that the use of confidentiality provisions in contracts has continued to reduce over time. When the Senate Order was introduced in 2001, 24 per cent of relevant Australian Government contracts were reported to contain confidentiality provisions. In contrast, the 2012 calendar year Senate Order listings contained 42 536 contracts, of which 1703 (4 per cent), were reported as containing confidentiality provisions.

14. For the 2012 calendar year reporting period, 89 of the 106 (84 per cent) FMA Act agencies to which the Senate Order applied, published a contract listing, or advice that no relevant contracts had been entered into, by the due date. This was a similar result to 2011 when 91 per cent of agencies achieved timely publication. Ministers’ letters confirm to the Parliament that agency contract listings have been published in accordance with the Order. Ministers’ letters covering 74 of the 106 agencies (68 per cent) were tabled within two months of the end of the reporting period as required. This was an improvement over the 2011 calendar year reporting period when letters covering only 55 of the 97 agencies (57 per cent) had been tabled by the due date.

15. Although there was a decline in the proportion of contracts reported as containing confidentiality provisions, specific confidentiality provisions in contracts continue to be incorrectly applied and reported. The ANAO’s examination of a sample of 107 contracts reported by agencies as containing confidentiality provisions showed that only 37 contracts (35 per cent) contained specific confidentiality provisions. Of these 37 contracts, 10 (nine per cent) contained provisions that were assessed by the ANAO as not meeting the Confidentiality Test. Primarily, these contracts had been reported as containing pricing/cost information or intellectual property requiring protection through the use of specific confidentiality provisions. When considered against the criteria of the Confidentiality Test these contracts were found not to contain pricing information which revealed internal supplier cost margins, or information on particular technical or business solutions that would be considered to constitute intellectual property.

16. Over the last five years, the proportion of contracts in the ANAO’s samples that have included provisions which did not meet the Confidentiality Test has ranged from 6 per cent to 29 per cent. Similarly, the proportion of contracts that did not contain specific confidentiality provisions and were therefore incorrectly listed has ranged between 32 per cent and 81 per cent since 2008. For the 2012 reporting period 65 per cent of contracts were incorrectly listed in this respect.

17. Overall, while the results indicate that the intent of the Senate Order is being addressed, some portfolio departments and agencies need to implement improved arrangements to support the timely publication of contract lists on their websites and the tabling of Ministers letters of advice. There is also scope for agencies to improve their reporting by only identifying in their Senate Order listings the use of specific confidentiality provisions. Finance providing clearer guidance to agencies about the application of the reporting requirements of the Senate Order is likely to assist in addressing this issue.

18. As noted in paragraph 7, Australian Government agencies are also required to report information for procurement contracts, including whether the contract contains confidentiality provisions, on AusTender. To determine whether contract information was consistently reported between the two media, the ANAO compared the procurement contract information reported by the audited agencies in their 2012 calendar year Senate Order listings to the contract information reported on AusTender for the same period. The analysis showed gaps and inconsistencies between data reported in the Senate Order listings and on AusTender. For example, the audited agencies reported a combined total of 1076 procurement contracts on their Senate Order listings. Of these contracts, 801 (74 per cent) were found to have a corresponding AusTender entry, of which the reported type of confidentiality provision(s)13 matched for 711 (89 per cent) of the entries.

19. The ANAO has previously observed that the need for agencies to comply with multiple procurement reporting requirements is a factor influencing the integrity of publicly reported contract information.14 Since the inception of AusTender in September 2007, Finance has advocated for its use as the authoritative source of information on Australian Government procurement so as to simplify contract reporting. In 2007, the Senate Standing Committee on Finance and Public Administration recommended in its second report on the operation of the Senate Order, that the Order be retained while AusTender was implemented, with departments and agencies advising through their Ministers’ letters that they had fulfilled the requirements of the Senate Order by placing details of their relevant contracts on AusTender.15 While this recommendation was agreed by the Government, the Senate Order guidance has not been updated to reflect the availability of this reporting option for agencies. As AusTender reporting is limited to procurement type contracts, agencies would still need to complete a Senate Order listing covering their non-procurement contracts and none chose this reporting method for their 2012 calendar year listings.

20. The 2012 Finance discussion paper on the Commonwealth Financial Accountability Review observed that ‘there are numerous reporting requirements for grants and procurements that require nearly the same information to be provided through different channels’.16 The review also raised as an issue the cost for agencies in meeting overlapping reporting requirements and suggested that it may be timely to undertake a cost-benefit analysis of existing requirements to inform a possible rationalisation. Finance informed the ANAO that planning for this activity has commenced. More broadly, the enactment of the Public Governance, Performance and Accountability Act 201317 is expected to require amendments to be made to Australian Government procurement policies and guidance where these policies relate to a type of entity as defined by this new Act. In this context, there are likely to be opportunities to consolidate contract reporting requirements in a manner which retains the expected transparency requirements.

21. The Senate Order has now been in place for 12 years, and while substantially fewer contracts have been reported as containing confidentiality provisions, agencies still experience difficulties in meeting all of its requirements. This is in part due to the lack of clarity created by various reporting requirements and the differing versions of guidance available. In particular, specific guidance for the Senate Order FMG 8 has not been updated since 2004 and as such does not clearly align to changes made in Commonwealth procurement policies and other guidance, such as Finance’s Buying for the Australia Government online material. Nevertheless, consistent with recommendations18 made by the ANAO in previous audits, agencies could improve the:

  • identification and reporting on the use of confidentiality provisions, particularly pricing information and the difference between general and specific confidentiality provisions; and
  • implement enhanced processes to support data capture, reporting and quality assurance of contract information.

In addition, Finance updating relevant guidance on the Senate Order would support more complete and accurate public reporting on the use of confidentiality provisions.

Key findings

Agencies’ Senate Order contract listings (Chapter 2)

22. The ANAO’s assessment of agencies’ Senate Order lists found that the majority of contract listings (84 per cent) were published on agency websites by the due date, although Ministers’ letters covering only 70 per cent of agencies were tabled by the due date. In some instances, portfolio departments need to better communicate the requirements of the Senate Order across their portfolio agencies, and implement improved arrangements to achieve the prescribed timeframes for both the publication of the contract lists and the tabling of Ministers’ letters.

23. As illustrated in Table S.2, the ANAO’s review of the contract listings found that a high proportion of the listings included information consistent with three requirements of the Senate Order, namely paragraphs 2(b) contract details, 2(c) confidentiality information and 2(d) compliance information. However, 72 agencies included contracts that did not meet the information requirements of 2(a) of the Order. Errors in this area included listing agency agreements19, contracts outside the reporting period, and contracts valued under $100 000.

Table S.2: Assessment of agencies’ contract listings against the requirements of the Senate Order

Source: ANAO analysis.
Note (a): Includes seven agencies that advised that no relevant contracts had been entered into.
Note (b): Includes one agency that listing was published post the completion of analysis.
Note (c): In assessing compliance against paragraph 2(b), the ANAO focused on the reporting of the required contract details by agencies for each contract.

24. Previous ANAO audits have noted that the accuracy of agency contract reporting would be supported by improved communication of key requirements, and by more rigorous quality assurance procedures. The results of this audit show that there remains a need for agencies to have quality assurance processes in place to identify errors such as incorrect contract details, contracts under $100 000 and agency agreements. Such processes will assist in the identification of these types of errors and enhance the accuracy of agencies’ contract information before publication on their websites.

The use of confidentiality provisions in contracts (Chapter 3)

25. Since the Senate Order was introduced in 2001, the proportion of contracts reported as containing confidentiality provisions has declined from 24 per cent to 4 per cent in 2012. In line with the central focus of the Senate Order, the reduction in the reported use of confidentiality provisions indicates that access by Parliament and the public to government contract information is now less likely to be impeded by unwarranted assertions of commercial sensitivity or confidentiality.

26. The ANAO examined 107 of the 1703 contracts reported by the four audited agencies as containing confidentiality provisions. Of the 107 contracts examined, 37 contained specific confidentiality provisions. The remaining 70 contracts contained only general provisions and had either been incorrectly reported as containing specific provisions, or the agency had unnecessarily identified use of general provisions.

27. Of the 37 contracts identified as containing specific confidentiality provisions, 10 contained confidentiality provisions which, when considered against the criteria of the Confidentiality Test, had not been applied appropriately. The results of the ANAO’s analysis of the application of the Confidentiality Test and the reporting of confidentiality provisions in agencies’ Senate Order listings are shown in Figure S.1.

Figure S.1: Contract analysis result: appropriateness of the use and reporting of confidentiality provisions

 

Source: ANAO analysis.
Note: Percentages may not add up to 100 per cent (horizontally) due to rounding.

28. The results of the ANAO’s analysis indicate that agencies need to improve their approaches for identifying and reporting the use of confidentiality provisions in contracts. Consistent with recommendations made by the ANAO in previous audits20, agencies could:

  • improve the identification and reporting on the use of confidentiality provisions, particularly pricing information and the difference between general and specific confidentiality provisions; and
  • implement enhanced processes to support data capture, reporting and quality assurance of contract information.

29. Agencies strengthening their data input and quality assurance processes prior to the publication of contract information would support more complete and accurate public reporting on the use of confidentiality provisions.

30. The inclusion of confidential provisions in a contract does not prevent an agency being required to disclose confidential contract‐related information where a matter is before the courts, to a parliamentary committee or to the ANAO. The inclusion of relevant disclosure clauses and access clauses in contracts assists agencies in informing contractors about the fact that there is no absolute guarantee of confidentiality of information.

31. A high proportion of the contracts sampled contained appropriately worded parliamentary disclosure clauses (92 per cent) and reference to ANAO access clauses (94 per cent). A factor which contributed to this result was the inclusion of these disclosure and access clauses in the audited agencies’ standard contract templates. Where disclosure clauses were not included in the contracts examined, the agency’s standard contract template had generally not been used. While there can be various reasons for using non-standard contract templates, agencies should have in place procedures and guidance to make certain that disclosure and, where appropriate, access clauses are included in the contract terms and conditions of all contracts issued.

The Senate Order and AusTender (Chapter 4)

32. The ANAO’s comparison of the audited agencies’ contract reporting in their 2012 calendar year Senate Order listings and on AusTender found discrepancies in relation to the contracts reported and the use of confidentiality provisions attributed to the contracts reported. These discrepancies reflected weaknesses in the contract data entry and quality assurance processes used by agencies. The ANAO has previously observed that the need for agencies to comply with multiple procurement reporting requirements is a factor influencing the integrity of publicly reported contract information. Finance updating the relevant Senate Order guidance to fully inform agencies of their contract reporting options, in addition to agencies strengthening their data input and quality assurance processes prior to the publication of contract information, would support more complete and accurate reporting on the use of confidentiality provisions.

Summary of agencies’ responses

33. The audited agencies provided the following summary responses, with each agency’s full response included at Appendix 1.

Attorney-General's Department

The department considers that the audit highlights the complexities of both applying the confidentiality policy and the comparison of two sources of information produced at different points-in-time (AusTender and Senate Order).

Australian Transaction Reports and Analysis Centre

AUSTRAC agrees with the findings outlined in the proposed audit report. AUSTRAC has implemented changes to address these findings and will continue to refine its processes to improve performance in this area.

ComSuper

ComSuper found the audit to be beneficial. The audit identified areas where ComSuper can improve its reporting processes. ComSuper accepts and agrees with the audit findings and is updating internal processes and procedures to continue to improve the quality and accuracy of its reporting.

Department of Health and Ageing

The department agrees with the audit conclusions relating the Senate Order Contract Listing, the use of confidentiality provisions in contracts and AusTender Listing.

In order to further improve compliance with the requirements of Senate Order Listing, the department undertook a review of the reports and processes necessary for compliance following the publication of the 2011–12 financial year listings. The improvements made include automation of reports, staff awareness sessions, staff training and instituting a more robust control environment.

Footnotes

[1] The Senate Order for Departmental and Agency Contracts is reproduced at Appendix 2.

[2] Department of Finance and Deregulation, Listing of Contract Details on the Internet (Meeting the Senate Order on Departmental and Agency Contracts) - The Financial Management Guidance Series of Publications No. 8 (FMG 8), January 2004. [Internet] available from <http://www.finance.gov.au /publications/fmg-series/08-listing-of-contract-details.html> [accessed 19 September 2013].

[3] Agencies meaning those ‘agencies’ subject to the Financial Management and Accountability Act 1997.

[4] In line with changes to the Administrative Arrangements Order issued 18 September 2013, the Department of Finance and Deregulation became the Department of Finance.

[5] Department of Finance and Deregulation, FMG 8.

[6] Department of Finance and Deregulation, Buying for the Australian Government,Confidentiality throughout the Procurement Cycle: Principles. [Internet], available from <http://www.finance.gov.au/procurement/procurement-policy-and-guidance/buying/contract-issues/confidentiality-procurement-cycle/principles.html> [accessed 19 September 2013].

[7] Department of Finance and Deregulation, Buying for the Australian Government,Confidentiality throughout the Procurement Cycle: Practice. [Internet], available from <http://www.finance.gov.au/procurement/procurement-policy-and-guidance/buying/contract-issues/confidentiality-procurement-cycle/practice.html#test> [accessed 27 August 2013].

[8] Introduced in September 2007, AusTender is the Australian Government’s web-based procurement information system. Available from <https://www.tenders.gov.au/>.

[9] Department of the Prime Minister and Cabinet - Requirements for Annual Reports, 28 June 2012. [Internet] available from <http://www.dpmc.gov.au/guidelines/docs/annual_report_requirements_2011-12_markedup.pdf> [accessed 27 August 2013].

[10] In 2003, the Senate Order was amended to request that the Auditor-General provide an annual report to the Senate (by no later than 30 September each year) rather than twice-yearly as specified in the original Order. A list of previous audits and recommendations (where applicable) is provided at Appendix 3.

[11] As at 28 February 2013, there were 112 FMA Act agencies. The Senate Order is not applicable to the Australian Secret Intelligence Service or the Australian Security Intelligence Organisation for reasons of national security. The Order is also not applicable to the Department of the House of Representatives, the Department of the Senate, the Department of Parliamentary Services and the Parliamentary Budget Office as they are not administered by a Minister.

[12] In line with changes to the Administrative Arrangements Order issued 18 September 2013, the Department of Health and Ageing became the Department of Health.

[13] When identifying confidentiality provisions in contracts, agencies are required to identify the ‘type’ of provision, that is, whether the provision(s) deal with information contained in the contract (provisions requiring the parties to maintain confidentiality of any of its provisions), or provision(s) that deal with other requirements of confidentiality (other requirements of confidentiality).

[14] ANAO Audit Reports: No. 27 2005–-06, Reporting of Expenditure onConsultants p. 18; No.7 2010–11 Confidentiality in Government Contracts: Senate Order for Departmental and Agency Contracts (Calendar Year 2009 Compliance) pp. 20–22; No. 2 2011–12, Confidentiality in Government Contracts: Senate Order for Departmental and Agency Contracts (Calendar Year 2010 Compliance) p. 63; and No.4 2012–13 Confidentiality in Government Contracts: Senate Order for Departmental and Agency Contracts (Calendar Year 2011 Compliance), p. 68.

[15] The Senate, Standing Committee on Finance and Public Administration, Department and agency contracts, Second report on operation of the Senate order for the production of lists of departmental and agencies contracts (2003–06), February 2007, Recommendation 1, p. ix.

[16] Department of Finance and Deregulation, Commonwealth Financial Accountability Review: Is Less More? Towards Better Commonwealth Performance: Discussion Paper, March 2012, p. 76

[17] The Public Governance, Performance and Accountability Bill 2013 gained assent on 29 June 2013. Parts 1–5 took effect from 1 July 2013, with Sections 6–10 to take effect 1 July 2014 (or earlier if a proclamation is issued). This new Act will replace the current model for Commonwealth financial management established through the Financial Management and Accountability Act 1997 (FMA Act) and the Commonwealth Authorities and Companies Act 1997 and provides new definitions for agencies and bodies as Commonwealth entities.

[18] A list of previous audits and recommendations (where applicable) is provided at Appendix 3.

[19] FMG No.8 states that one of the elements that must be present for a contract to exist is ‘an intention to create legal relations’. An agency agreement is an agreement between Australian Government agencies that articulates respective agency responsibilities but is not legally enforceable due to both agencies being part of the same legal entity, that is, the Commonwealth.

[20] A list of previous audits and recommendations (where applicable) is provided at Appendix 3.