Australia

Disposal of defence assets are covered by policies with a legislative base in the Commonwealth Defence Act 1903 (1) and whole of government policies under the Public Governance, Performance and Accountability Act 2013 (2). The process of identifying which assets are to be disposed is set down in the Capability Systems Life-Cycle Simulation Support Disposal Phase Guide which is a publicly available document (3). Final approval for disposal rests with the Defence Capability and Investment Committee, and rules surrounding disposal are set out by the Capability Acquisition and Sustainment Group (which superseded the Defence Materiel Organisation). Specific policies on defence disposals are promulgated by the Defence Materiel Organisation on its website (4) including the details of the policy framework and the current tenders for disposals. Details of income derived from the disposal of defence assets are reported in the Department of Defence Annual Report which goes to Parliament (5).

The Department of Defence, like all Commonwealth organisations, is required to publish a detailed annual report that contains information about performance including financial statements. This annual report goes to Parliament and is signed off by the Secretary of the Department of Defence and the Chief Finance Officer. (1) As well, the Commonwealth Auditor General signs each annual report. The Australian National Audit Office provides regular external audit oversight for all Australian government organisations including Defence. It has reviewed property management practices in Defence and has signalled that it will conduct an audit specifically focused upon disposal of surplus equipment (3). As well as this external audit oversight, The Joint Standing Committee on Foreign Affairs, Defence and Trade reviews each annual report from the Department of Defence and publishes a report on it (4).

The exact proportion of expenditure for dedicated secret items is not available to the public. Following 9/11, there has been an extraordinary growth in the funding of the agencies within the Australian intelligence community (1). There is some capacity to determine the broad outline of the budget parameters of these agencies because some budgets come with specific appropriations. These are the Australian Security Intelligence Organisation ($334 million) Australian Secret Intelligence service ($316 million) and the Office of National Assessments ($33 million) (2), (3) and (4). Information relating to the budgets of other intelligence agencies detailed in Question 19 could not be found in Defence Annual reports or their respective websites.

The lack of transparency of intelligence agencies has been covered in the media (5). The degree to which activities of the intelligence agencies are opaque is indicated by the public reaction to the revelation by Edward Snowden that Australian Signals Directorate was conducting espionage activities of Australia's near neighbours (6).

As noted in question 24 above, there is limited public information on the specific items of expenditure of the organisations in the Australian intelligence community.

The Parliamentary Joint Committee on Intelligence and Security is empowered by the Intelligence Services Act (2001) to regularly review administration and expenditure of the Australian intelligence agencies (1) and publishes the reports (2). The Committee has powers to conduct enquiries into matters (including expenditure) into ASIO, ASIS, ASD, DIGO, ONA and DIO. While it is difficult to ascertain if this translates in practice to actual access to secret spending in intelligence, it seems likely that much of the secret expenditure is accounted for given the breadth of the reports and reviews the committee has published and presented to Parliament (3). Additional Parliamentary oversight of Australian intelligence agencies comes from other Parliamentary committees. The Senate Finance and Public Administration Committee (4), by virtue of its oversight of the Prime Minister and Cabinet portfolio covers ONA and IGIS. The Senate Foreign Affairs, Defence and Trade Committee (5) covers the Defence portfolio and therefore DIGO, ASD, DIO and DSD. The Senate Legal and Constitutional Affairs Committee (6) reviews the Attorney General’s portfolio which contains ASIO. Besides this there is a Senate Estimates Committee process which examines budget appropriations for all government agencies (7).

As observed by the 2004 Flood Report into Australian intelligence agencies (8), Australia appears to balances the need for the confidentiality of operational intelligence issues by a robust system of Parliamentary oversight (although this is a dated report). While the parliamentary reports indicate that some information is classified, it is not possible to determine determine the level of disclosure. The score has been selected accordingly.

Response to Peer Reviewer 1: There is no evidence that the information provided is limited. Given this ambiguity, score 2 fits best. Score maintained.

Yes. Section 57 of the Commonwealth Financial Accountability and Management Act 1997 requires all organisations covered by that act to have a copy of the audited financial statements accompanied by an Auditor-General’s report on that statement included in the annual report tabled in Parliament (1). Intelligence organisations covered by this requirement are ASIO, ASD, DIGO, ONA, DIO and the Australian Federal Police (2). The Australian Secret Intelligence Service has a specific requirement in its legislation to have its accounts audited by the Australian National Audit Office (3). Not only are these reports submitted to Parliament but they are specifically subject to scrutiny by the Parliamentary Joint Committee on Public Accounts (4) Other Parliamentary Committees with a scrutiny function over the intelligence organisations are the Parliamentary Joint Committee on Intelligence and Security (5). Senate Finance and Public Administration Committee (5), the Senate Foreign Affairs, Defence and Trade Committee (6) and the the Senate Legal and Constitutional Affairs Committee (7). Interviewee B indicated that the Australian National Audit Office was satisfied with its powers and authority to independently audit intelligence agency activities.

All military expenditures are listed in the Department of Defence Annual Report which is signed off by the Commonwealth Auditor General (1, 2). The Australian government has a comprehensive institutional framework of accountability which has its legal basis in the Commonwealth Constitution Act 1901 (3), the Auditor General Act 1997 (4), the Public Governance, Performance and Accountability Act 2013 (which superseded the Financial Management and Accountability Act 1997) (5) and the Commonwealth Authorities and Companies Act 1997 (6). Accountability expert Professor Warwick Funnell after describing the comprehensive institutional framework concludes that it would be very difficult for these controls to be circumvented (7). In a recent High Court case, the Executive’s inability to make payments outside appropriations was confirmed meaning that legally, no off budget expenditure is allowed in Australian government administration (8).

None evident and no discernible evidence of illicit activity found in sources that would be likely to report such activity (1), (2).

The mechanism for classifying information is set down in the Australian Government Security Classification System (1). That system sits within the Australian Government Protective Security Policy Framework (2). The sanctions for unauthorised release of information that has a security classification are contained in a variety of secrecy provisions in legislation (3). While the Framework has a review mechanism (page 14), that mechanism is aimed at ensuring all government organisations that hold confidential information are abiding by the policy. Australia has freedom of information legislation (Commonwealth Freedom of Information Act 1982) that creates the right for citizens to request access to government information. That Act contains two main exemptions: these are section 33(a) (documents whose disclosure would reasonably be expected to cause damage to the security, defence, or international relations of the Commonwealth) and section 38 (documents subject to secrecy because of a provision of an enactment). If individuals are dissatisfied with a decision to refuse access, they can seek judicial review by the Administrative Appeals Tribunal. Access to documentation through the FOI Act is subject to fees and the likelihood of a successful appeal against a rejection on the basis of section 38 is limited. There has been public criticism of the Australian government refusing access to information based upon security grounds. In 2009 that led to a reference to the Australian Law Reform Commission (3) which was critical of many aspects of the information security regime. There is occasional criticism in the media about government secrecy (5). There is no evidence of the framework in place being bypassed, however.

Australia recently amended the Australian Security Intelligence Organisation Act 1979 (ASIO Act) (6). One of the more controversial amendments was the additional of section 35P, which criminalises the unauthorised disclosure of information related to a special intelligence operation. An offender can be imprisoned for 5 years or 10 years in cases where the offender intended to or the disclosure of the information will “endanger the health or safety of any person or prejudice the effective conduct of a special intelligence operation” (section 35P(2)(c)). A number of media outlets have decried this provision as leading to the potential imprisonment of journalists for reporting on special intelligence operations (7, 8, 9). Following promulgation of this law, Australia appointed an independent national security legislation monitor to review the legislation (10). Human Rights Watch has already submitted its views to the monitor that the threat of prosecution may chill legitimate press debates (11).

Response to Peer Reviewer 2: Given the controversy regarding the recent amendments to the ASIO and occassional reports of excessive secrecy, score is maintained.

The Australian government sometimes creates government business enterprises for reasons of promoting competition in a market or to maximise efficiencies of operations using private sector structures. Australian defence operates a number of such entities and these are publicly listed (1). The two major government business enterprises in the Defence area are Defence Housing Australia and ASC Pty Ltd (formerly the Australian submarine Corporation a wholly owned Australian naval shipbuilding company). Like other government business enterprises, these are covered by corporations law and the Commonwealth Authorities and Companies Act 1997. While government business enterprises are expected to operate on an equal footing with private sector competitors they are governed by financial accounting and reporting obligations.

However, these are not Defence-owned businesses and the score has been selected accordingly.

As discussed in the previous question, there are no businesses owned or operated by Defence.

Defence Instructions (2005) on the &quoute;Employment and voluntary activities of Australian Defence Force Members in off–duty hours&quoute; allows members of the Australian Defence Force (ADF) to engage in paid employment during off-duty hours as long as this is approved in line with the instruction (1). It defines the policy, the approving authorities and approval process, with a focus on ensuring this does not include conflicts of interest. There is also a Defence Workplace Relations Manual that does into further depth (2) on the Defence Audit and Fraud Control website page.

There also exists a Military Personnel Policy Manual which defines the conditions and process for off-duty employment (3). Further ethical guidelines regarding Defence's relationship with the private sector are set are in place as well (4, 5).

Reports by the Director of Military Prosecutions provide information on significant cases but it is not clear how many related to unauthorised private enterprise. There are some cases listed which are a result of &quoute;obtaining financial advantage&quoute; (6, 7).

Between 2010 and 2012 there were a raft of press reports about sexual harassment in the Australian Defence Forces. The Minister (1) and senior defence officials (2), (3) and (4) made strong public statements condemning that activity. The tenor of all of those statements was about the integrity of Defence culture. Having said that, while this indicates that leaders in Defence are prepared to talk publicly about integrity, the topic was about sexual harassment rather than issues of corruption.

Defence has a fraud and audit control unit which indicates commitment from the institution which is not publicly stated as such (5). Apart from that, there has been aknowledgement of governance and anti-corruption measures in the new Afghanistan strategy (6), statements regarding corruption in police forces in Australia when addressing the UN International Women’s Day Conference (7) and an article highlighting defence fraud investigators in the Defence magazine (8). None can be directly considered as evidence of commitment to anti-corruption in Defence, however.

Defence personnel are employed under two employment regimes. Civilians in the Department of Defence are employed under the Commonwealth Public Service Act 1999 (1). That legislation contains a Code of Conduct (s13) (2, 3) breaches of which can result in disciplinary action including termination of employment (s29). Military personnel are employed under the Commonwealth Defence Force Discipline Act 1982 (4) which include a wide range of offences (Part III) including fraudulent conduct. Breaches of that legislation can result in suspension or termination (s92). Neither the Australian Public Service Code of Conduct nor the Commonwealth Defence Force Discipline Act 1982 specifically mention corruption. Personnel are also subject to the Criminal Code Act 1995 (5) which includes offences including bribery of foreign officials (Division 7.7), bribery and related offences (Part 7.6) and fraudulent conduct (Part 7.3). Personnel convicted of such offences are likely to be dismissed from Defence employment. Defence is responsible for the investigation of breaches of the Australian Public Service Code of Conduct and offences under the Commonwealth Defence Force Discipline Act 1982. It has a branch specifically dedicated to the investigation of audit and fraud issues. There is an Inspector General of defence who, within the defence administration, has an autonomous role over citing fraud control issues including investigations (6). Defence also has a sophisticated Military Justice structure oversighted by the Inspector General of the Australian Defence Forces. This administrative element is responsible for range of military justice issues under the legislation (7). In the event that offences under Criminal Code Act 1995 are detected they are referred to the Australian Federal Police for investigation. The Department of Defence reports on the number of investigations it conducts. In 2013 - 14, 322 fraud investigations were completed and about 35 per cent of them led to criminal, disciplinary, or administrative action. About 44 per cent of those that led to such actions involved discipline under the Defence Force Discipline Act 1982, which governs discipline of military personnel (8, p. 153). In 2012-2013, 333 fraud investigations were completed, 19 per cent of which led to criminal, disciplinary, or administrative action. Approximately 55 per cent of the disciplinary actions fell under the Defence Force Discipline Act 1982 (9, p. 114).

The 2013-2014 Annual Report explains the complaint system for defence personnel who have experienced or witnessed unacceptable conduct in the workplace. In 2013 - 14, 827 complaints were made, and they fell into 6 categories, including abuse of power and conflicts of interest/inappropriate workplace relationships (other categories related to harassment and discrimination). The Annual Report does not provide a breakdown of these complaints by category but does explain that 10-15 per cent of complaints received are serious enough that formal disciplinary action occurs, but most other complaints are resolved informally (8, p. 141).

Reports by the Director of Military Prosecutions provide information on the number of cases dealt with and further details on the subject matter and outcomes of significant cases. It also provides provides figures relating to the class of offence by services, which include the classes &quoute;Fraud, Deception and other Offences&quoute; and &quoute;Specific Military Discipline Offences&quoute; (10).

Interviewee A indicated that Defence whistleblowing arrangements had detected a small number of corrupt activities and that these had been dealt with.

In January 2014, the Commonwealth Public Interest Disclosure Act 2013 came into effect (1). This legislation encourages Commonwealth employees to come forward with reports of wrongdoing and contains effective measures for their protection. Those measures are set out in Part 2 of the Act and include making reprisals against whistleblowers an offence, providing rights of compensation to whistleblowers who suffer reprisals and the capacity for the Federal Court to provide whistleblowers with injunctions against reprisals, apologies or any other orders. The Act includes a strong oversight function from the Commonwealth Ombudsman (s 74) (1, 2). This recent legislation was based upon recommendations arising from a comprehensive research project into public sector whistleblowing (3) and replaced a rather weak whistleblower protection scheme under the Commonwealth Public Service Act 1999. Following the PID Act, the Australian Public Service Commission issued new guidance on whistleblowing. Among other things, the Commonwealth Ombudsman is tasked with promoting awareness of the whistleblower law. (4)

Even though the previous scheme was less than optimal, Defence had taken the pro-active approach of creating its own Defence Whistleblower Scheme (5) which in 2012-2013 received 253 reports (6). In its 2013-2014 Annual Report, the Commonwealth Ombudsman reports that there is also a Defence Force Ombudsman, which handles complaints from the Australian Defence Force, Department of Veterans’ Affairs, Defence Housing Authority, and Department of Defence. During the 2013-2014 time period, that office received 518 complaints (7). The Defence Whistleblower Scheme was replaced by the Defence Public Interest Disclosure (PID) Scheme in January 2014 after the Commonwealth Public Interest Disclosure Act (2013) came into effect (8). It &quoute;facilitates and encourages public officials to report suspected wrongdoing, supports and protects disclosers, and ensures that suspected wrongdoing is investigated appropriately&quoute; (7, 8). The Commonwealth Ombudsman reported that these complaints “typically” involved employment matters. The Commonwealth Ombudsman handles complaints related to defence from members of the public.

Australia recently amended the Australian Security Intelligence Organisation Act 1979 (ASIO Act) (9). One of the more controversial amendments was the additional of section 35P, which criminalises the unauthorised disclosure of information related to a special intelligence operation. An offender can be imprisoned for 5 years or 10 years in cases where the offender intended to or the disclosure of the information will “endanger the health or safety of any person or prejudice the effective conduct of a special intelligence operation” (section 35P(2)(c)). A number of media outlets have decried this provision as leading to the potential imprisonment of journalists for reporting on special intelligence operations and being detrimental to whistleblowing (10, 11, 12). Following promulgation of this law, Australia appointed an independent national security legislation monitor to review the legislation (13). Human Rights Watch has already submitted its views to the monitor that the threat of prosecution may chill legitimate press debates (14). It is unclear how this may impact whistleblowing in Defence.

Normal practice in the Australian public sector is not to define particular employment categories or positions and to place specific employment requirements upon them. General policies are promulgated which take into account the varying circumstances of that public sector position. In the case of Defence Officials, they are covered by the broad security vetting arrangements that apply to the rest of the Commonwealth sector (1). The vetting for security clearance takes into account the sensitivity of the information the person will handle and involves checks of criminal records among other things. Also, the vetting process is not restricted to recruitment but can take place whenever an official moves into a sensitive position and clearances are regularly updated. The APSC website also sets forth work level standards for APS and executive level classifications. Although it explains that some positions (e.g., executive level) require a degree of sensitivity, it does not set forth specific vetting or oversight requirements for such positions.

For Defence procurement the Defence Procurement Policy Manual sets out security arrangements for procurement (2). General requirements for post-separation employment (3) and conflicts of interest (4) are set down in Defence Instructions. There are no specific requirements for rotation of post, although the risk management processes set down in the Defence Procurement Policy Manual (5) should identify where this control should be applied.

The Military Personnel Policy Manual Annex 3B discusses the selection criteria for an Aide de Camp (ADC) which it considers requires &quoute;a high level of tact and discretion&quoute;. This appears to be only reference to vetting of potential employees that discusses the need to consider the sensitivity of the position (6). Job descriptions relating to procurement, finance, contracting, and commercial management on the Defence Jobs website (7) do not publicly set forth specific vetting requirements – aside from the general substantive knowledge and experience requirements that one would expect in these sorts of positions.

Additionally, the Defence Fraud and Audit Control website (8) page on 'Policy' details policies on:
- Employment and voluntary activities of Australian Defence Force Members in off-duty hours
- Gifts, hospitality and sponsorship
- Notification of Post Separation Employment
- Conflicts of interest and declarations of interests
- The reporting and management of notifiable incidents
- Defence Whistleblower Scheme
- Defence Workplace Relations Manual
- Defence and the Private Sector - An Ethical Relationship
- Ethics Matters Handbook.

There is evidence that special attention is provided to personnel in certain positions. For example, the &quoute;Notification of Post Separation Employment&quoute; policy states that while the procedures apply to all personnel where there may be a risk, they are &quoute;most pertinent to Defence personnel who are in senior positions or have a significant role in procurement decisions, where real or apparent conflict between their Defence service/employment and proposed private employment are more likely&quoute; (9). In the &quoute;Conflicts of interest and declarations of interests&quoute; policy, the decision-making process in considering whether something constitutes a conflict of interest is to include the person's position, duties, level of decision-making responsibility, autonomy in decision-making etc. (10).

That information is published in the Department of Defence Annual Report (1).

Yes. That information is published in the Department of Defence Annual Report (1).

Payment systems in Australian Government administration are well established and routine. It is most unusual for problems in the payroll systems. The Australian Defence payroll system makes in excess of 2.5 million payments per year and undertakes over 20,000 leave audits per year. It has a sophisticated payroll assurance process (1). The Australian National Audit Office looked at payroll management across the Australian Government some years ago and found that, overall, payroll practices were of a high standard (2).

In 2010, the Minister for Defence Personnel, Materiel and Science announced the “immediate establishment of a high powered ADF Payroll Remediation Task Force” (1) in response to public scrutiny that had “highlighted a range of issues relating to the delivery of payroll services to members of the ADF [Australian Defence Force]” (2). The task force’s directives include to review and report on existing payroll procedures, put in place revised checks and balances, develop a forward looking audit program, and issue advice regarding ways to improve the payroll system (1).

In 2011, Defence announced that it was developing a Payroll Assurance Framework that would “reduce the instances and impact of payroll anomalies” (3, p. 22). A booklet was released in connection with this project (4). This framework sets forth the process of payroll in defence.

Pay scales are published, as noted in Question 39. There appear to be no reported complaints or issues since the overhaul of the system in 2011.

The appointment system for senior military personnel is established, objective and comprehensive and set out in the Military Personnel Manual (1) and associated Defence Instructions. Senior civilian staff are covered by a comprehensive system under the Commonwealth Public Service Act 1999 (2), (3). Transparency is limited by requirements for personal confidentiality although both appointment systems have general grievance processes.

Independent oversight is provided for by the Independent Selection Advisory Committee (4). The Australian Public Service Commission provides a strong, independent, and formal institution for managing personnel advancement, which includes the Office of the Merit Protection Commissioner (5). In addition, Australia has had a workplace relations tribunal since the early 1900s. That tribunal is now called the Fair Work Commission, and concerns itself with disputes regarding employment and promotion, including for government employees (6).

There are no indications that the system is not adhered to in practice.

Civilian staff in Defence are employed under a merit based system (1) which has promotion committees structured to enhance independence, formal appraisal processes and oversight from the independent Australian Public Service Commission (2). Military personnel are employed under a separate system set out in the Military Personnel Manual (3). Some, but not all the Defence Instructions where the details of the promotion and appraisal system are described, are publicly available. Surveys undertaken by Defence indicate some level of dissatisfaction with the promotion process (4) (dating back to 2010 however). One of the consequences of the revelations about sexual harassment in Defence (6) has been a commitment to improving the culture (7) including recognition to improve the promotion appraisal system (8).

The Australian Public Service Commission provides a strong, independent, and formal institution for managing personnel advancement, which includes the Office of the Merit Protection Commissioner (9). In addition, Australia has had a workplace relations tribunal since the early 1900s. That tribunal is now called the Fair Work Commission, and concerns itself with disputes regarding employment and promotion, including for government employees (10).

Response to Peer Reviewer 1: Accepted. Information added to the main answer and score raised from 3 to 4.

Australia has not had conscription since 1972 (1) and there is no prospect of it returning.

Australia does not have compulsory conscription (1). It has an active recruitment program (2) as well a work experience program (3) and is contemplating a ‘gap year’ program (4). Defence initiates these programs to promote recruitment and it is unlikely that individuals would pay to get preferred postings. Any such bribery would be contrary to explicit Defence policies (5),(6). As well all Defence personnel are subject to the Criminal Code Act 1995 which includes offences including bribery and related offences (Part 7.6) and fraudulent conduct (Part 7.3). There is no evidence of cases of bribery relating to preferred postings.

The score has been selected on the basis that there is no specific policy against bribery for preferred postings, although this would be covered under general policies and penalties against bribery in Defence.

There is no evidence of ghost soldiers and the tight Australian government financial management system (2), (3) would make that sort of fraud most unlikely.

All salaries issues come under the control of the Defence Force Remuneration Tribunal (1) that is appointed under s58H of the Defence Act 1903 and is independent of the military chain of command. Day to day administration is undertaken by the Directorate of Military Salaries and Allowances (2). Personnel can appeal to the Tribunal about any salaries and allowances issues.

The code of conduct for all Australian public servants is set forth in section 13 of the Public Service Act 1999 (1). It appears that the code of conduct in the Public Service Act 1999 only covers defence employees that are civil servants (that is, not military personnel) (;). Nonetheless, the APSC publication &quoute;APS Values and Code of Conduct in practice: A guide to official conduct for APS employees and agency heads&quoute; (cited above) discusses the application of the APS Code of Conduct to defence personnel as well as other government employees, which may lead to some confusion. Note, however, that this publication is in the process of being revised following legislative updates (4).

In 2011, the Australian Defence Force (ADF) issued a review of personal conduct among ADF employees. In it, they stated that each branch of the armed services has its own code of conduct (5, p. 27). The report stated, “Encouragingly, each of the Services not only now has such codes of conduct but is refining them further in response to this review. Less encouragingly, because such codes of conduct are likely to be based on the respective Service values, issues associated with the plethora of values . . . may weaken their overall usefulness” (ibid.). The report recommended the establishment of a universal code of conduct (p. 40, 42). I have been unable to find the individual codes of conduct for the separate services, aside from a code of conduct for Army trainees, which is not dated (but based on some of the pictures in the annexes, appears to be an older publication) (6). There exists general Defence policy on ethics that applies universally to Defence as well (7)

The Defence Force Discipline Act 1982 sets forth penalties for certain offences by military personnel (8). These tend to deal with criminal and property offences, rather than the way military personnel should act on a day to day basis. The law does not contain a code of conduct or a directive that service units should create codes of conduct. A number of defence policies have been issued in accordance with section 9A of the Defence Act 1903 (9), for example, Defence Instruction PERS 35-3, Management and reporting of unacceptable behaviour (2009) (10).

There are also specific policies for ADF personnel on a number of ethics-related matters, including Notifications of Post Separation Employment (11), Conflicts of interest and declarations of interests (12), PERS 25-2 Employment and voluntary activities of Australian Defence Force Members in off-duty hours (13), and PERS 25-7 Gifts, hospitality and sponsorship (14). These policies have been issued under section 9A of the Defence Act 1903. These are discussed in the Defence Ethics Matters handbook as well (7). The Audit and Fraud Control Unit oversees issues related to these specific policies (15).

The APS code of conduct appears to be widely discussed in online publications (such as those cited above) and is readily available online. The ADF instructions/policies are available online as well. Some materials, such as the Army trainee materials cited above, suggest that service-specific codes of conduct are made available to service members as soon as they enlist. No specific instructions regarding the distribution of such policies were found.

Aside from instructions regarding reporting misconduct, there is no further evidence of oversight mechanisms but there is likely to be one which may not be public.

Both interviewees indicated that the structure and procedures were robust but that the number of Defence personnel moving into the private sector contracting area required extra vigilance. Interviewee A expressly indicated that the anti-corruption training processes currently being rolled out addressed this issue.

The Defence annual report indicates that there were 358 investigations of fraud investigated by the Fraud Control and Investigations branch (p 114) and 58 matters brought before the Inspector-General of the ADF (p.115). Also there were reported two cases under the Defence Force Discipline Act 1982 brought before the courts (p 121). Some indication of the proportion of investigations that relate to disciplinary matters can be ascertained by a survey of Defence staff with experience of inquiries, investigations and reviews (2). Some 10 per cent dealt with fraud and 19 per cent with disciplinary or criminal misconduct. That would indicate that Defence dealt with around 700 cases of disciplinary or criminal misconduct – out of a total workforce of around 80,000. Personal details of individuals dealt with under disciplinary provisions (either civilian or military) are not divulged for privacy reasons in line with the Commonwealth Privacy Act 1988.

A more recent annual report has been issued (2013-2014), indicates that Defence registered 288 fraud investigations during that time period, with 322 investigations completed (some were registered in previous years) (p. 153). Around 25 per cent of the investigations led to criminal, disciplinary, or administrative action, and about 44 per cent of those investigations were related to offences under the Defence Force Discipline Act 1982 (3).

Additionally, the Director of Military Prosecutions publishes an annual report which provides an overview of case load, including cases of Defence Force Magistrate (DFM), General Court Martial (GCM) and Restricted Court Martial (RCM). Information related to &quoute;significant&quoute; cases is also provided and Appendix B provides figures relating to the class of offence by service. It is assumed that breaches of the conduct standards come under the category &quoute;Specific Military Discipline Offences&quoute;. Further, there is a category entitled &quoute;Fraud, Deception and other Offences&quoute; (4).

Successful prosecutions are referred to the Commonwealth Director of Public Prosecutions and publicly reported (5).

Defence and the Defence Materiel Organisation conduct regular ethics and fraud awareness programs, both face-to-face and through eLearning. Training is mandatory and in 2012-13 more than 45,000 employees undertook training, while in 2013 - 2014, this figure was 69,000. Defence staff must receive this training at least every two years. While not strictly anti-corruption training, such programs would clearly have a beneficial anti-corruption effect. Interviewee A indicated that, notwithstanding the lack of a national anti-corruption plan, Defence was proceeding to develop an anti-corruption plan. That process would occur within the legal framework of the fraud control arrangements. The Secretary of Defence has agreed to that process and specific anti-corruption training has commenced for senior officers and will be rolled out to Defence personnel in the future.

Response to Peer Reviewer 1: Agreed. The score reflects this.

Internally there is a policy that all breaches of the military disciplinary code are notified up the chain of command (1). The Director of Military Prosecutions publishes an annual report which provides an overview of case load, including cases of Defence Force Magistrate (DFM), General Court Martial (GCM) and Restricted Court Martial (RCM). Information related to &quoute;significant&quoute; cases is also provided and Appendix B provides figures relating to the class of offence by service, which include the classes &quoute;Specific Military Discipline Offences&quoute; and &quoute;Fraud, Deception and other Offences&quoute; (2). Civilian cases are referred to the Australian Federal Police for Investigation. Successful prosecutions are referred to the Commonwealth Director of Public Prosecutions and publicly reported (3). Those sources indicate only a small number of prosecutions of Defence personnel have occurred – around 2-5 per year.

There are no suggestions of prosecutions being suppressed or inappropriately sanctioned.

Facilitation payments in Australia are legal under the Criminal Code as long as their value is small (although no financial limit has been provided) and with the purpose of expediting or securing a routine government action. The Australian Taxation Office notes special record-keeping obligations for facilitation payments, but does not discourage them (2).

In November 2011, the government raised the possibility of an amendment to change Australia's law to exclude this exception (3). A document about the proposed change explained that the Attorney General’s Department would accept submissions regarding this proposed change until 20 February 2012 (4). Information about the proposed change was to be published on the Attorney General’s website. Although this information still appears on a webpage entitled &quoute;Planned Regulatory Changes,&quoute; no changes to Australia's law have occurred and it is unclear whether the consultation is still ongoing or has been abandoned.

The legal status of facilitation payments has attracted criticism from the OECD in 2012 (5). A follow up report in 2015 stated that good progress had been made on the previous report's recommendations on the subject but changes in the legal framework were still required (6).

Response to Peer Reviewer 2: The follow up report of the OECD in 2015 stated that there has been some improvement although legal changes are still needed. The score has been selected on that basis.

No specific doctrines addressing corruption as a strategic operations issue could be located. However, military personnel would be covered by the general ethics framework (1), (2) and (3). On recent overseas operations Australian Defence Forces have been proactive in promoting anti-corruption, both in the Solomon Islands (4) and Afghanistan (5). Interviewee A indicated that, notwithstanding the lack of a national anti-corruption plan, Defence was proceeding to develop an anti-corruption plan. That process would occur within the legal framework of the fraud control arrangements. The Secretary of Defence has agreed to that process and specific anti-corruption training has commenced for senior officers and will be rolled out to all Defence personnel in the future.

A guidance document on peacekeeping operations from 2009 does not address corruption risks in relation to peacekeeping operations, except for one small reference to conflicts of interest and another short reference to the EU's work on corruption issues (1). Another document from 2007 on leadership does not make any reference to corruption, although it does reflect on ethics (2).

On reviewing the courses available on the Australian Warfare Centre's ADF Peacekeeping Training Centre, none of the information specifies corruption or fraud awareness training, although there is a UN Staff Officers Course &quoute;Conduct & Discipline / Sexual Exploitation & Abuse / Consequences of Misconduct / HIV / AIDS & UN PKOs&quoute; (3). There is also general fraud and ethics training for all defence personnel, taking place biennially (4). .

On recent overseas operations Australian Defence Forces have been proactive in promoting anti-corruption, both in the Solomon Islands (5) and Afghanistan (6). This is in accordance with general ethics training (4, 7), policy obligations (4, 8) and leadership training (2).
It can therefore be concluded that some form of training in corruption issues for commanders does exist, given application in the field and the overall policy framework.

Interviewee A indicated that, notwithstanding the lack of a national anti-corruption plan, Defence was proceeding to develop an anti-corruption plan. That process would occur within the legal framework of the fraud control arrangements. The Secretary of Defence has agreed to that process and specific anti-corruption training has commenced for senior officers and will be rolled out to all Defence personnel in the future.

Response to Peer Reviewer 1: Agreed. Score lowered from 3 to 2.

The Attorney General's Department has set out detailed framework regarding the control of fraud in all Australian government operations (1). It includes risk management training in its fraud awareness courses that all Defence staff are required to undertake (2). Also Defence applies those risk management techniques to all of its activities and reports on the results in the Defence Fraud Control Plan (3).

A 2011 report entitled “The Australian Defence Force's Mechanisms for Learning from Operational Activities” states “all commanders are responsible for evaluating the performance of force elements (FE) under their command during all activities in which they participate” (4). However, it is not clear whether this includes monitoring and evaluating how corruption issues are handled.

An audit of the ADF’s investigative capability, undertaken in 2006, does mention issues with the role of personnel tasked with policing in operations but again, it is not clear whether this was geared towards investigating how corruption issues were handled.

Interviewee A indicated that, notwithstanding the lack of a national anti-corruption plan, Defence was proceeding to develop an anti-corruption plan. That process would occur within the legal framework of the fraud control arrangements. The Secretary of Defence has agreed to that process and specific anti-corruption training has commenced for senior officers and will be rolled out to Defence personnel in the future. The next Defence fraud control plan will include an anti-corruption plan. Also, Defence is developing a corruption intelligence capacity to complement this process.

Besides the general anti-corruption guidelines mentioned in Question 54, Defence has guidelines on peacekeeping operations that include promoting good governance (1). Overseas operations and deployments usually include Defence personnel working with the Australian Aid agency (AUSAid). That agency works within an anti-corruption framework (2) and has a contract with the U4 Anti-corruption Resource Centre. It is not clear whether this framework covers corruption in contracting on operations specifically.

There is evidence of an Operational Contract Management Course which was listed as one of the courses being provided at the Australian Defence College (3). It was rolled out in 2009 (4). Whether the content of this course provides training on corruption in contracting is unclear.

Interviewee A indicated that, notwithstanding the lack of a national anti-corruption plan, Defence was proceeding to develop an anti-corruption plan. That process would occur within the legal framework of the fraud control arrangements. The Secretary of Defence has agreed to that process and specific anti-corruption training has commenced for senior officers and will be rolled out to Defence personnel in the future. The next Defence fraud control plan will include an anti-corruption plan. Following on the scope of the fraud control plan, this anti-corruption plan will apply to Defence contractors.

Response to Peer Reviewer 2: Agreed. Score lowered from 3 to 2.

A 2015 report by the Australian Civil –Military Centre was released on the nature of Australia’s engagement with private security companies (PSCs), stating that they had become a regular component of the government’s operations in conflict and disaster zones. Defence was listed as one of the government departments most frequently interacting with PSCs (1).

While stating that the Attorney-General’s Department was responsible for several aspects of legislation relevant to the private security industry, the report also highlighted the lack of formal policies on PSCs within government departments, including defence, other than for the establishment and execution of contracts. It further went on to say that while the government was leading on the regulation of PSCs abroad (through its involvement in the ICoC, discussed below), this was not reflected at home. Some of the recommendations in the report included the ADF factoring in “private security liaison” into its mission planning and civil-military actors having awareness of reporting and investigating procedures in case of issues/events related to PCSs (1).

Like all government contractors, such companies, are subject to the Fraud Control Plan (2). The most recent Defence Policy Procurement Manual (3) discusses fraud risks as well as ethics in procurement (e.g., conflicts of interest). PSCs are regulated as any other government business under the Criminal Code Act 1995, which criminalizes bribery of domestic and foreign officials. A company that is convicted of bribery can be fined the greater of AUD 18 million, 3 times value of benefit received from the corruption, or 10% of annual turnover during relevant period. An individual can receive up to 10 years imprisonment and/or a fine of up to AUD 1.8 million (see CC sections 70.2 for foreign officials and 141.1 for other officials). Other offences related to bribery include giving corrupting benefits (CC section 142.1) and abuse of public office (CC section 142.2); these crimes have slightly lower penalties. Australia’s states and territories also have their own anti-corruption laws.

Australia is also a signatory of the International Code of Conduct for Private Security Providers’ Association (ICoC) aims to improve accountability of the PMSC industry by establishing an international, independent oversight mechanism (5, 6). While it is geared towards establishing standards in the industry primarily in relation to humanitarian law, it does reference corruption by PMSCs as well. Participating governments thereby commit to report on the implementation of the Montreux Document (which applies during armed conflict only) and on the ICoC and to promote compliance with the ICoC in their contracting policies and practices. An oversight mechanism to deal with allegations of member private companies violating the ICoC is still in development (5).

Whether PMCs are subject to scrutiny is not clear. There is no clear information on how sanctions are imposed in cases of corruption either.

The Financial Framework (Supplementary Powers) Act 1997 (FMA Act) was in place since 1997 (1) and until 2014 was the primary legislation governing government procurement in Australia. In July 2014, the Public Governance, Performance and Accountability Act 2013 (PGPA Act) went into force, replacing the FMA Act with regard to procurement (2).

The PGPA Act framework includes the Public Governance Performance and Accountability Rule 2014 (3), which expressly applies to the Australian Security Intelligence Organisation and Defence Materiel Organisation (clauses 6 and 10, respectively).

Commonwealth Procurement Rules (CPRs) have also been issued in accordance with section 101 of the PGPA Act (4). The rules do not specifically address corruption risks in procurement, but they do have chapters on &quoute;Efficient, effective, economical and ethical procurement,&quoute; &quoute;Accountability and transparency in procurement,&quoute; and &quoute;Procurement risk&quoute; (chapters 6, 7, and 8, respectively).

There is a transition document in place to assist the move to CPRs 2014 (5).

Following establishment of this new legal framework, the Department of Defence issued its own Defence Procurement Policy Manual (DPPM) (6). However, the PGPA Act, PGPA Rule, CPRs, and the Financial Delegations Manual (FINMAN 2) are still considered to be a higher authority when conflicts arise.

Division 1 rules of the CPRs govern all Defence procurement. However, certain procurement that reach certain monetary thresholds are subject to additional rules (under Division 2). The monetary thresholds are (i) $80,000 for non-construction procurement by non-corporate Commonwealth entities (such as Defence), (ii) $400,000 for non-construction procurement by relevant prescribed corporate Commonwealth entities (such as Defence Housing Authority), and (iii) $7.5 million for construction procurement.

The 2015 DPPM refers to “Exempt Procurement,” but such procurement is still subject to Division 1 rules. The real difference is that they are not subject to Division 2 rules (even if they meet the monetary thresholds listed above). Note, though, that the DPPM suggests using Division 2 rules as “best practice.” The types of procurement listed in Appendix A of the Commonwealth Procurement Rules (CPRs) are “exempt” in this sense, as is procurement in a few other cases outlined on pages 1.2-4 to 1.2-5 of the 2015 DPPM. It does not appear this would cover much defence procurement, as private construction or engineering contracts with private companies do not appear to be covered.

The Senate Foreign Affairs, Defence and Trade References Committee in 2012 found a series of issues with the procurement procedures in place for Defence capital projects (7). Overall the committee found that serious issues with Defence’s management structure, that Defence lacked a robust “risk management structure” and seemed “incapable of learning from past mistakes”, particularly in relation to learning from earlier project failures. The recommendations, recognising that Defence was making efforts to reform already, focused on changing the alignment of responsibilities in the organisation structure and ensuring agencies had the skills and resources required for the fulfilment of their obligations.

After the report, Australia’s Department of Defence produced an additional White Paper (in 2013) which set new, more realistic goals. (8). It is also in the process of updating that goal-making process by producing a 2015 white paper (9). Given the broad consultation process that is going into the 2015 White Paper (10), as well as the fact that it is producing this white paper so soon after the 2013 White Paper, it appears that Defence is attempting to take into account the committee’s recommendations.

The 2012 Senate committee report also noted that inconsistent application of policies and non-compliance was an issue that affected the “whole of the DMO level” (page 85). The DMO reform that ultimately resulted in this complete organizational overhaul resulted from a series of reports on the issue (11) and the reorganization appears to be an attempt to deal with committee’s recommendations head-on (12). This is discussed further in questions 61 and 67.

Since the changes to DMO/CASG occurred in 2015, they are not yet reflected in annual reports, although one would expect them to be reflected in future reports.

A score of 3 has been selected on the basis that these procurement guidelines do not expressly deal with corruption risks.

The Defence procurement cycle is sent out in detail in the Defence Procurement Policy Manual (1). Defence procurement follows a long term planning process set out in the regular Defence Capability Plan (2). Information on ongoing procurement is further made available through the AusTender website.

Defence procurement is subject to external audit by the Australian National Audit Office (1), which as discussed in Question 15, is independent from the Executive and reports directly to Parliament. As of July 2015, the Australian National Audit Office (ANAO) had 5 audits in progress. One of those audits expressly deals with procurement issues (&quoute;Test and Evaluation of Major Defence Equipment Acquisitions&quoute;). ANAO has explained that the objective of the audit is mainly focused on (but not restricted to) &quoute; examining the effectiveness of Defence’s management of the Testing & Evaluation aspects of its capital equipment acquisition program” and to “report on Defence’s progress in implementing relevant recommendations made in the 2012 Senate Foreign Affairs, Defence and Trade References Committee report Procurement Procedures for Defence Capital Projects”. It goes on to further state that it is considering 14 additional potential audits, including one on selected aspects of Defence procurement management of procurement activities”.

The same audit was also mentioned as a potential audit in ANAO's 2014 audit plan, but it was not carried out. (2) The ANAO reports its audit work plans since 2010 on its website. All of these work plans have included a defence component.

Based on the terms of reference (3), it appears that the Senate Standing Committee on Foreign Affairs, Defence and Trade engaged in its review of defence procurement procedures following issuance of the 2009 defence white paper, Defending Australia in the Asia Pacific Century: Force 2030 (4). In other words, this review appears to have arisen in relation to a particular report, not as part of a regular work stream of review of defence procurement procedures. It analysed 28 major procurement projects and identified significant problems. Those 28 projects accounted for A$7.8 billion of cost overruns and combined schedule slippage of 760 months (page 34).

A few recent news articles have highlighted a lack of transparency in defence procurement as well as allegations that Defence has provided clearly false information about potential procurements to Parliament (5, 6, 7). Earlier allegations of unethical conduct in relation to defence procurements have also arisen (8, 9).

Although there are allegations that the procurement process may not be entirely transparent, the ANAO has been active over the past few years in reviewing defence procurement issues during each yearly cycle and the Senate has also investigated concerns that have arisen. No press allegations that ANAO or the Senate's review processes have been biased or ineffective.

Clause 7 of the Commonwealth Procurement Rules (CPRs), &quoute;Accountability and Transparency in Procurement,&quoute; requires the publication of any open tender (1). The Commonwealth Procurement Rules (CPRs), clause 7, deals with publication of tenders as well (2). The Public Defence Capability Plan (2012) provides information on major capital acquisition proposals for a four year period (until the end of FY 2015 – 2016), without information on sensitive or previously approved proposals (3). Additional, the Capability Acquisition and Sustainment Group (which replaced the Defence Materiel Organisation) publishes detailed information on approved projects online (4).

The Department of Defence's tenders (open and closed) and annual procurement plans are available on AusTender's website (5). These plans appear to contain planned procurements for the next year, but not the next few years. Information classified for national security reasons do not appear to have to be disclosed, as is mentioned in a Major Projects Report (2012 – 2013) by the ANAO (6). It is not clear what percentage of projects or information in specific projects is not disclosed based on this exception. Without having a basis for comparison, it seems that a large number of defence procurements are actually disclosed (on AusTender and/or in ANAO's reports).

The Australian National Audit Office (ANAO) audits defence projects each year (7). Procurement issues arise in some of these audits; however, there is no yearly comprehensive audit of defence procurement practices. Rather, a particular acquisition or project may be audited. Note, though, that the ANAO website states that up to 80 per cent of Defence’s major capital equipment acquisitions are to be replaced over the next 15 years and that major capital equipment acquisitions are a priority of the ANAO audit strategy. Additionally, an audit of &quoute;Defence Procurement&quoute; was on the list of potential audits in both the 2014 and 2015 work program (8).

There have been media reports stating that incorrect information was allegedly provided to the public and parliament regarding Australia's submarine replacement programme, which is considered the largest defence procurement program in its history (9).

The Commonwealth Procurement Rules (CPRs) provide that a government entity may specify conditions for participation in a procurement but then goes on to state, “Conditions for participation must be limited to those that will ensure that a potential supplier has the legal, commercial, technical and financial abilities to fulfil the requirements of the procurement” (1). The section entitled ‘Ethical procurement’ states entities must “not seek to benefit from supplier practices that may be dishonest, unethical or unsafe. This includes not entering into contracts with tenderers who have had a judicial decision against them (not including decisions under appeal) relating to employee entitlements and who have not satisfied any resulting order. Officials should seek declarations from all tenderers confirming that they have no such unsettled orders against them”. It further goes on to state that procurement officials must recognise and deal with conflicts of interest (actual and potential) and comply with directions involving gifts and hospitality. The DPPM also provides that a contract may include provisions requiring compliance with certain standards, in order to “ensure that what is delivered will satisfy the identified requirement” (2, p. 3.2-8).

Chapter 4.2 of the DPPM (starting at p. 4.2-1) deals with overseas procurement, including export compliance. It indicates that the contractor is generally responsible for obtaining any necessary export licence or other approval required to perform a contract (p. 4.2-7). It does not discuss the need for a compliance program in the contractor, however (2).

Contractors that “store[] or transport[] Defence weapons or explosive ordnance; store[] or handle[] specified levels of Defence official information or specific security-protected assets; or provide[] security services on behalf of Defence” must have Defence Industry Security Program (DISP) membership (p. 2 of). To obtain membership, the business must submit information about its ownership structure, revenue sources, and relationships with foreign entities, and it must have an appointed security officer that has a security clearance. There is no requirement of any special compliance program (3).

There is government policy for companies wishing to comply with export control requirements (4, 5, 6). None of these resources set forth a requirement that a company have an export compliance policy in place in order to bid on a defence contract. As noted above, the DPPM provides only that the contractor is responsible for complying with export control requirements.

In short, neither the Australian government nor the Department of Defence appear to require any type of compliance program in order to bid for a government contract. As anti-fraud requirements are imposed by the government, this has been taken as some reference for the need for companies to avoid corruption.

In terms of debarment, individuals interviewed as part of the OECD Working Group on Bribery's 2012 Phase 3 review indicated that government agencies have the discretion to debar a company convicted of a corruption offense; however, debarment is a discretionary sanction and it is unclear whether debarment has even been applied to a company that has been convicted of a corruption offence (7). During the 2015 follow-up to this review, the OECD Working Group on Bribery indicated that Australia has not yet “put in place transparent debarment policies for procuring agencies” (8). In short, although debarment is said to be available, it is unclear how it would apply in practice, including the range of corruption offences it might be applied to.

(Relevant information from Peer Reviewer 2 has been included in the main comments)

The government last issued a national security strategy in 2010 in the form of the Defence Strategy Framework (1). This strategy document points out the need for stronger ties between defence strategy and procurement decisions. The Defence Materiel Organisation (DMO) issued its own strategy document for 2013-2015 (2). However, the DMO has been superseded by the Capability Acquisition and Sustainment Group (CASG), which does not appear to have issued any similar strategy document.

The Strategic Policy Division is noted as the organisation managing capability needs identification, which involves “contributing strategic guidance to capability documents to ensure that the development, acquisition, and evaluation of capabilities aligns with Defence’s strategic priorities”. One of the key outcomes is listed is an “auditable logic trail” between government direction and Defence Capability development decisions. The Capability Development Group staff are to use this strategic guidance in finalising the Need Phase, followed by the Requirements Phase where the goals and programs are more refined.

The Defence Capability Development Handbook (2012) directs the Military Strategy Branch to draft a Statement of Strategic Guidance (SSG) in connection with defence procurements. The SSG is to &quoute;articulate[] a clear strategic need for the capability that forms the foundation of the CSS, which is drafted in subsequent steps of the process&quoute; (3). The relation between this 2012 document and the new DPPM (which was drafted after the PGPA Act was enacted) is unclear.

Reviews of the Defence budget (the Pappas Review) and Defence procurement (the Mortimer Review) in 2008 led to the conclusion that “Defence’s strategy and its capability decisions needed to link more effectively in a transparent and auditable manner”, while the 2009 Defence White Paper outlined the need for a five-year planning cycle for major Defence Defence decisions, which is set out in the Strategic Framework (1). It goes on to state that the Defence Planning Guidance (DPG) sets strategic guidance for procurement consistent with national security priorities.

While there is a process laid out to ensure clear linkages between national strategic direction and procurement, with an identified need for this to be “auditable”, reports by think tanks indicate that successive governments have failed to provide a well-defined national strategy that can provide a strategic guidance to acquisition and that decision-making in some cases of procurement may have been driven by opportunism (4, 5).

Defence embarked on a strategic reform process &quoute;The Strategic Reform Program 2009: Delivering Force 2030&quoute; following the 2009 Defence White Paper, which set forth a goal that Australia strengthen its national defence. The programme elements includes improving strategic planning and forecasting of acquisitions aimed at delivering good value-for-money procurement outcomes (1)

Australian defence procurement is conducted through the Capability Acquisition and Sustainment Group (CASG) in accordance with provisions of Defence Procurement Policy Manual (2, 3) and the framework set forth under the Public Governance Performance and Accountability Act 2013 (4), the PGPA Rule 2014 (5), and the Commonwealth Procurement Rules (CPRs) (6). Matching defence purchases to identified requirements is addressed in the Defence Capability Plan (7) and the Defence Capability Guide (8).

The Defence Strategy Framework 2010 notes the Strategic Policy Division as the organisation managing capability needs identification, which involves “contributing strategic guidance to capability documents to ensure that the development, acquisition, and evaluation of capabilities aligns with Defence’s strategic priorities”. One of the key outcomes is listed is an “auditable logic trail” between government direction and Defence Capability development decisions. The Capability Development Group staff is to use this strategic guidance in finalising the Need Phase, followed by the Requirements Phase where the goals and programs are more refined (9).

The Senate Foreign Affairs, Defence and Trade References Committee in 2012 found a series of issues with the procurement procedures in place for Defence capital projects (10). A problem highlighted was the disconnect between words and practice in the 2009 Defence White Paper. Specifically, the Senate committee report said that this white paper set unrealistic goals and expectations that Defence was unable to deliver on. One of committee's recommendations was that future white papers be prepared “in such a way that all procurement proposals are costed and scheduled realistically and that Defence undertake comprehensive consultation with industry before decisions on inclusion are made” (“Procurement Procedures,” page xxvii). The recommendations recognised that Defence was making efforts to reform already and future white papers have reflected more realistic goals (11). Further, a major reform to bring about efficiency was the complete organisational overhaul that led to the replacement of the Defence Materiel Organisation (DMO) by the CASG.

The media has reported on the Australian government's attempts to cut costs for defence in accordance with this strategic reform process (12). In addition, on specific projects -- for instance, a 2014 government decision to buy 58 F-35s for $12 billion -- the government has threatened to pull out of the deal if the costs rise too high (13).

While open tender processes for procurement are preferred, the Defence Procurement Policy Manual (1) allows for other procurement methods (Page 3.1-3); prequalified tender process using a shortlist of potential suppliers or a limited tender process. All methods have to be in accordance with the Commonwealth Procurement Rules. For a country like Australia, while open tender processes for procurement are preferred, there are a limited number of suppliers and Governments sometimes will depart from the principle (3) and (4) to assist Australian industry. One specific example of this was the procurement of the Collins class submarines that involved a mix of overseas supplier and local construction through a Government owned company (Australian Submarine Corporation). The Country Assessor was unable to locate any data quantifying single source procurement for Australian Defence. In an exhaustive review of Defence procurement in 2012, the Senate Foreign Affairs, Defence and Trade References Committee (5), analysed 28 major procurement projects and identified significant problems. Those 28 projects accounted for A$7.8 billion of cost overruns and combined schedule slippage of 760 months (page 34). The Committee’s analysis of the procurement problems did not mention single source contracting as a risk. However, it did note that there were probity risks in Defence engaging in consultation with industry early in the procurement cycle that potentially could favour particular suppliers. Nevertheless, Committee endorsed the practice, noting that these probity risks could be overcome (page 237).

In early 2015, press allegations arose that the government was not following its defence procurement policies (6) along with press allegations that the Department of Defence was providing incorrect information to Parliament about the capability of Sweden and/or Germany to deliver in relation to a submarine procurement (7,8).

The score has been selected on the basis that while it is unlikely that single sourcing accounts for a major proportion of defence purchases, it is not possible to verify this with public information.

Procedures for evaluation of tenders are set down in the Defence Procurement Policy Manual (1). All Defence procurements by tender require a Tender Evaluation Plan which includes the creation of a Tender Evaluation Board (Chapter 5.6). All Defence officials are required to abide (page 3.13-2) by the Australian Public Service Code of Conduct (2). The Manual provides a detailed mechanism for dealing with complaints (Chapter 5.7) requiring referral to the Commonwealth Ombudsman where complaints are not resolved. Defence procurements are externally audited by the Australian National Audit Office with openly published reports (3).

Under the Commonwealth Competition and Consumer Act 2010 (s45), Australia has strict prohibition on collusion (1). Section 45 of the Commonwealth Competition and Consumer Act 2010 forbids corporations from entering into collusion agreements. Section 76 of this act sets forth financial penalties, which are the greater of $10 million, 3 times the value of the benefit received, or (if the value cannot be determined) 10 per cent of the corporation's annual turnover during. Please note that this legislation is not specific to defence. The competition law does not list debarment as a potential sanction.

The Australian Competition and Consumer Commission issued a publication in 2011 titled &quoute;Cartels: Deterrence and Detection a Guide for Government Procurement Officers,&quoute; which provides guidance on how to recognise collusion in the government procurement process (2).

The Defence Procurement Policy Manual specifically requires Procurement Officers to be alert to the possibility of collusion in tenders (3). Procurement Officers are advised to initiate action and advise the regulator, the Australian Competition and Consumer Commission should collusion in defence procurement be suspected (3). Interviewee A observed that the recent enactment of the Commonwealth Public Interest Disclosure Act 2013, with its extensive coverage into contracting areas, provided a good basis for detecting and dealing with malpractice in procurement.

An academic blog called &quoute;Australian Competition Law&quoute; contains information about collusion cases that have arisen in Australia, showing that companies have been sanctioned for collusion (5). None of the recent cases appear to have involved defence contracts. One case was concluded in 2015 (thus far), 6 in 2014, and 8 in 2013.

The Senate Foreign Affairs, Defence and Trade References Committee in 2012 found a series of issues with the procurement procedures in place for Defence capital projects (1). Overall the committee found that serious issues with Defence’s management structure, that Defence lacked a robust “risk management structure” and seemed “incapable of learning from past mistakes”, particularly in relation to learning from earlier project failures. More specifically, the following problems were outlined:

• There is &quoute;a culture of non-compliance with policy and guidelines; where personnel get 'bogged down' with too much paper work, produce a 'certain amount of nugatory work' and 'miss the important things going on'&quoute;;
• There were &quoute;confused or blurred lines of responsibility&quoute;;
• The framework for &quoute;accountability that is too diffuse to be effective—the organisation is unable or unwilling to hold people to account&quoute;;
• There is &quoute;a poor alignment of responsibility due to an excessive number of groups and agency functions, which gives rise to unhealthy management and organisational relationships—for example capability managers sidelined from active participation in an acquisition&quoute;;
• There is &quoute;a 'One Defence' view that does not produce an integrated enterprise: Defence remains an organisation composed of separate groups working to their own agendas&quoute;;
• &quoute;Defence remains an organisation composed of separate groups working to their own agendas;
difficulty attracting and retaining people with the required level of skill and experience to support acquisition activities, particularly engineering&quoute;.

The 2012 Senate committee report also noted that inconsistent application of policies and non-compliance was an issue that affected the “whole of the DMO level” (page 85). The recommendations, recognising that Defence was making efforts to reform already, focused on changing the alignment of responsibilities in the organisation structure and ensuring agencies had the skills and resources required for the fulfilment of their obligations.

Defence also attempted to remedy these issues by disbanding the Defence Materiel Organisation (DMO) and replacing it with the The Capability Acquisition and Sustainment Group (CASG). The DMO reform that ultimately resulted in this complete organizational overhaul resulted from a series of reports on the issue (2) and the reorganization appears to be an attempt to deal with committee’s recommendations head-on.

Since CASG is such a new organization, it remains to be seen whether it will achieve a better culture of compliance than DMO, but the reorganization appears to be an attempt to deal with committee’s recommendations head-on. In response to some of the committee report’s specific concerns, accountability in CASG is now aligned among distinct lines – commercial, joint/systems/air, land/maritime, and submarines (3). Each of these lines of accountability is divided into separate divisions, with leadership information available online in many instances.

CASG explains on its website that it provides a range of procurement training opportunities, including training courses that can lead to vocational qualifications (4). No information is provided about how often these training sessions are offered, whether they are offered to all staff, or whether they are mandatory. In addition, no information is provided regarding the outcomes of such training in terms of staff empowerment or what CASG's capacities are generally.

CASG also supports staff who wish to participate in professional development activities hosted by the Chartered Institute of Purchasing and Supply (CIPS) Australasia or the Australian Association of Procurement and Contract Management (AAPCM) (5).

The Defence Procurement Policy Manual provides a detailed mechanism for dealing with complaints (Chapter 5.7B) outlining procedures for internal review (including &quoute;specialist advice&quoute; and &quoute;independent internal review&quoute;) as well as external grievance redressal mechanisms which included the Commonwealth Ombudsman and the civil legal system. It is mandatory policy not to discriminate against those lodging complaints in future procurement processes (1).

Additionally, paragraph 6.8 of the Commonwealth Procurement Rules (2) says ‘If a complaint about procurement is received, agencies must apply equitable and non‑discriminatory complaint-handling procedures. Agencies should aim to manage the complaint process internally, where possible, through communication and conciliation’. Interviewee A observed that the recent enactment of the Commonwealth Public Interest Disclosure Act 2013, with its extensive coverage into contracting areas, provided a good basis for detecting and dealing with malpractice in procurement.

Under the Defence Procurement Policy Manual (1), Procurement Officers are required to assess probity risks in the tender process and the possible responses are set down in Annex 3A. These probity risks are likely to be of a minor nature and could involve the sanction of Defence retendering. For more serious issues, the Procurement Officers are under an active obligation to report any suspicions (2). Under the Defence Fraud Control Plan (3), Defence has a policy of seeking recovery of monies fraudulently obtained. For cases involving possible criminal conduct, for example, offences including bribery of foreign officials (Division 7.7), bribery and related offences (Part 7.6) and fraudulent conduct (Part 7.3).under the Commonwealth Criminal Code Act 1995, matters would be referred to the Australian Federal Police for possible prosecution. These offences can carry a custodial sentence. Where collusion is suspected, s45 of the Commonwealth Competition and Consumer Act 2010 can result in significant fines. Successful prosecutions are referred to the Commonwealth Director of Public Prosecutions and publicly reported (3). Those sources indicate only a small number of prosecutions relating to Defence have occurred.

Although government agencies have the discretion to debar a company convicted of a corruption offense, debarment is a discretionary sanction and it is unclear whether debarment has even been applied to a company under such circumstances. During the 2012 review of Australia’s compliance with the OECD Anti-Corruption Convention and the 2015 follow-up, the OECD Working Group on Bribery indicated that Australia has not yet “put in place transparent debarment policies for procuring agencies” (6, 7). Civil society reports have also indicated that Australia's debarment system is not robust enough with regard to foreign bribery (8, 9). The competition law does not list debarment as a potential sanction.

In the Australian Industry Capability Toolkit (1), it is stated in paragraph 1.4.4 that Australian Defence does not support offset contracts. Also, in Building Defence Capability, it states ‘Government procurement policy … has moved away from offsets programs towards competitive procurement based on value for money criteria that encourages Australian industry to be internationally competitive and globally integrated’. (Paragraph 2.26)

The Australian Defence Ministry does not use offset contracts.

The Australian Department of Defence does not use offset contracts.

The Defence Procurement Policy Manual (DPPM) states a preference against the use of agents that act as intermediaries between the Department of Defence and a contractor (1, p. 3.7-4). However, as the use of agents is permitted through the Goods and Services Tax (GST) Act, it further provides the terms of the use of resident agents. The Australian Standard for Defence Contracting (ASDEFCON) (Strategic Materiel) and ASDEFCON (Support) provide mechanisms for the recording of resident agents in contracts (1).

The DPPM also states that all defence contracts must include provisions that require the contractor as well as its officers, employees, agents, and subcontractors to follow Defence Instruction (General) Personnel 35-3 - Management and Reporting of Unacceptable Behaviour (2).

Departmental Procurement Policy Instructions (3) amends procurement standards so that ‘Tenderers and Related Bodies Corporate, and their officers , employees, agents and advisers must:

•tComply with the ethical framework (4)
•tNot offer unlawful inducements
•tMeet all probity assurance requirements
•tAvoid conflicts of interest, and
•tEmploy former Defence staff without approval

The Defence Procurement Policy Manual (1) requires that the tenderer fulfill all security requirements set down in the standards (5).

All contracts over $10,000 are reported publicly (1) through AusTender as required by the Commonwealth Procurement Rules (2) and through Annual Report requirements. However, this applies only to successful bids and commercial-confidentiality as well as security obligations limit the amount of information made public.

According to Part 8 of the Commonwealth Fraud Control Framework 2014 on &quoute;Fraud prevention, awareness and training&quoute;, “If not already required, all officials and contractors should take into account the need to prevent and detect fraud as part of their normal responsibilities. Appropriate fraud awareness and training measures include a rolling program of regular fraud awareness raising and prevention training for all officials and, where deemed appropriate, for contractors” (1).

Further, the Defence Procurement Policy Manual does provide, &quoute;The contractor retains responsibility for ensuring appropriate subcontractor performance&quoute; (2, p.6.2-6,). It also includes additional information about hiring subcontractors. For example, certain clauses must be included in contracts for complex procurements to clarify that subcontracting does not relieve a contractor of its obligations. In addition, a contractor may have to obtain approval to hire a subcontractor under certain circumstances (2, p. 6.2-7). Further, part of the DOOM mandatory policy is &quoute;Any Defence contract for services must require the contractor, its officers, employees, agents and subcontractors to comply with Defence Instruction (General) Personnel 35-3 - Management and Reporting of Unacceptable Behaviour&quoute;.

The score has been selected on the basis that prevention and detection of fraud is a contractor’s responsibility as is holding subcontractor performance to standards, which should include this as well.

Response to Peer Reviewers: Agreed. Relevant information has been added to the main answer. Score lowered from 2 to 1.

There have been media reports stating that incorrect information was allegedly provided to the public and parliament regarding Australia's sub-replacement programme, which is considered the largest defence procurement program in its history

Historically, United States has been Australia’s major supply of military equipment. With very few exceptions, the Collins class submarine being one, most purchases of capital equipment have come from the United States (1). In 2013, there was an active debate in Australia about the purchase of F-35 strike fighters (2). Defence links between Australia and the United States are very strong and there are military, economic and political dimensions to the relationship but not without critics (1).

Allegations have arisen that Australia may not always take a neutral attitude towards the countries bidding to supply military equipment. For example, allegations arose in early 2015 that Australia's Department of Defence discounted the possibility of obtaining a submarine from Sweden (3) and allegedly provided incorrect information to Parliament about the capability of Sweden and/or Germany to deliver in relation to a submarine procurement (4). At the same time, Australia appeared to favour Japan's tender (5). One news source suggests that the favouritism towards Japan may stem from a desire to help the U.S. rebalance its power in the Asia Pacific region, given that Japan is a U.S. ally and the contract would strengthen Japan's defence industry (6). After the change in Prime Minister when the ruling party voted to replace Tony Abbott, reports surfaced suggesting that the preference for Japan was due to the previous PM and his “pro-Japan” National Security Advisor (7). The submarine program is the largest defence procurement program in Australia's history (6).