Conflicts of interest mar Defence Department’s $365m IT overhaul: Australian National Audit Office report

Conflicts of interest are marring a $364 million program to overhaul the Defence Department’s IT systems, with contractors involved in decisions increasing the value of their company’s contracts, the national auditor says.

The Australian National Audit Office has raised the alarm about Defence’s handling of the program, saying the company, IBM, had staff at meetings deciding on changes to the program that later grew contract values by $483,900.

But the audit, released on Monday afternoon, found no evidence that the IBM staff declared a conflict of interest, or recused themselves from the meetings.

The auditor has called for Defence to change how it manages the program after it found that no department staff were present in four of 26 meetings it examined where decisions were made by the board approving changes to the IT program.

Defence had tasked officials with overseeing the IT overhaul, and had three departmental staff working alongside 11 contractors on the Change Control Board.

However, on average, there was one departmental official present at board meetings out of nine attendees, according to meeting minutes.

“A low level of Commonwealth representation across a contractor-led program can create oversight risk for the responsible entity,” the audit said.

“Further, Defence’s program change arrangements give rise to both real and perceived conflicts of interest, as contractors are involved in the department’s substantive decision-making processes relating to their contracts, including contract variations with financial consequences for the Commonwealth.”

The audit said the Change Control Board was a decision-making and approval body for requests to alter the project. It meets fortnightly or as required, and includes 14 program personnel, including one public servant, two military personnel, four IBM contractors and seven non-IBM contractors.

IBM staff were at each of the 31 meetings minutes reviewed by the watchdog.

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