Local Government Amendment Bill 2019
June 19, 2019
Mr ANOULACK CHANTHIVONG (Macquarie Fields) (10:51): I make a contribution to debate on the Local Government Amendment Bill 2019. Each day residents across New South Wales are trying to manage their household budgets; mums, dads, couples and singles have to balance the money coming in with the expenditure required to live. Electricity bills, council rates, strata fees, groceries, mortgage payments, rent and child care are some of the expenses that impact on household budgets. That is why every person who pays a bill or buys goods wants to know that they are getting value for money and are making every cent count.
Most of us will research products and suppliers to make sure we are getting the best deal possible and are dealing with reputable companies. Taxpayers and ratepayers expect and deserve the same from government organisations. I have reservations about some aspects of the bill that have the potential to short-change ratepayers when it comes to value for money and, just as importantly, about the consequence of reducing the level of public trust in the management of their hard-earned money. My concerns specifically relate to schedule 1 , schedule 1  and schedule 1  to the bill.
Schedule 1  and schedule 1  raise the tendering exempt threshold to $250,000. I am concerned about the need for rigorous corporate governance given the substantial increase. Contracts that are below this threshold must go through a transparent internal selection process prior to a contract being awarded. It is important that the internal selection process must also go through an independent assessment on a regular basis because we are dealing with public money and managing public trust. Ratepayers must be satisfied that a corporate governance structure is in place to ensure that not a single dollar of public money is being wasted. Being careful and considered with public money are important variables in the public trust equation.
Issues around aggregation also need to be considered. For example, to avoid the tender process a council could have multiple contracts with the same service provider where each contract is for less than $250,000. What is to prevent a service provider from breaking up their service contract into stages or different parts that are below the threshold? A stage one contract could be worth $245,000, stage two $230,000, stage three $245,000 and so on, just as a matter of administrative convenience not of commercial reality. Suddenly there is a contract worth more than $1 million to a single service provider with no tendering process and no oversight in determining value for money due to the absence of a competitive tendering process. Up to $250,000 is not an insubstantial amount for local government, especially for smaller rural and regional councils, and creating a more opaque environment only increases the risk of corporate misdemeanours.
It is a sad fact that public sector procurement can be a hive of mismanagement, misconduct and, at worst, corruption. The December 2018 ICAC report titled “Corruption and Integrity in the NSW Public Sector: an assessment of current trends and events” found that more than 50 per cent of ICAC's reports that contained findings of corruption involved procurement and/or contract management processes. The report states that due diligence tended to be performed to a higher standard when part of a formal tender process or large project. However, when suppliers were sourced for smaller engagements—for example, when they required just a single quote or where there was a direct engagement—the standard of checking usually fell away.
Now we are about to legislate that contracts of up to $250,000 should be given more executive discretion and less transparent examination. This does not seem to meet the spirit of ICAC's findings. Furthermore, the ICAC report found that agencies do not have robust systems for conducting due diligence on suppliers. I believe that the exempt threshold in the bill falls short in creating an adequate due diligence framework for contracts to ensure that our ratepayers are getting value for money. For example, in Operation Tilga — an investigation into the supply of security services to several New South Wales public authorities — ICAC recommended mechanisms such as scrutiny of low bids, consideration of previous performance, seeking referee reports beyond those provided by the tenderer and verification of case studies, as broad due diligence measures. No ratepayer wants their council awarding a $240,000 contract when the work is actually worth only $150,000 because adequate internal assessment was not undertaken.
If the threshold of $250,000 were to be adopted, I would like to see contemporary publishing mechanisms — such as real-time publishing of awarded contracts online — to ensure transparency and accountability.
Schedule 1  to the bill indicates that councils do not have to invite tenders if a contractor is approved under the National Prequalification System or is a disability organisation under the Public Works and Procurement Act 1912.
It is imperative that the list of approved organisations remains contemporary and that all contractors have not had adverse legal findings made against them for civil or criminal charges. Only last month police made arrests of those in an alleged organised criminal syndicate accused of defrauding more than 70 people of NDIS payments. It is alleged that three registered NDIS providers fraudulently claimed more than $1.1 million in NDIS payments to buy items like luxury cars—money that was meant to go to NDIS clients for disability support programs and equipment. Our most vulnerable were left stranded and the public was ripped off because the service provider was not properly assessed.
"Phoenix" contractors and company directors of pre-approved contractors must have a clean record and be of good and proper character. This information must be as contemporary as possible. There are myriad stories of the smallest subcontractors being ripped off by the big tenderers who win contracts only for the said company to file for liquidation, leaving many subbies and small businesses unpaid. For major contracts, some councils are increasingly engaging top-tier corporate consultants and spin doctors, which rebrand corporate images and develop glossy brochures that masquerade as planning reforms. They are essentially outsourcing work and awarding lucrative contracts to lobbyists and expensive consultants on projects that many in the community do not want, and that deliver no commensurate community value.
This bill makes it even easier for councils to continue this process without enhancing corporate governance. Ratepayers must have confidence that the system works in their best interests. I will always be on the side of the ratepayers and residents who require transparency and strong corporate governance structures. I am not on the side of the council corporate executives and their desire for increased administrative convenience and/or discretion. This bill can be improved to ensure that the benchmarks set meet community standards and expectations and to ensure that the public trust in the management of public finance only ever improves.