A recently published report by the Australian New South Wales Audit Office has strongly criticized the Departments of Health and Police for poor contract management after the Auditor-General had analyzed two long-term contracts to determine value for money.

“Neither agency demonstrated that they continued to get value for money over the life of these long-term contracts, or that they had effectively managed all critical elements of the three contracts we reviewed post-award,” the auditor-general found. “This is because both agencies treated contract extensions or renewals simply as continuing previous contractual arrangements, rather than as establishing a new contract and financial commitment.

“Consequently, there was not a robust analysis of the continuing need for the mix and quantity of services being provided, or an assessment of value for money in terms of the prices being paid,” the auditor-general said in his conclusion.

In the case of the Department of Health, the Audit-General’s report is critical of the Department’s due diligence process in reviewing the price that it was paying for support services, for failing to engage in effective negotiation and for recording contracted commitments and obligations, particularly relating to service level agreements.

Other findings from the report included:

• Monthly payments were made in advance, and without corresponding safeguards
• No contract-specific roles and responsibilities for key agency personnel were documented, and there was no assessment of whether agency personnel had the skills and experience to manage the risk in the contracts
• No contract-specific risk assessment was undertaken
• Limited contract-management plans were in place
• No supplier-performance or contract-performance reports were prepared for management.