A recent Northern Territory Auditor General’s report has highlighted the importance of maintaining probity across all stages of a procurement process after questions were raised regarding the Northern Territory Government’s decision to award prime commercial land to a Darwin developer for zero consideration.

The Berrimah Farm site was vacant Crown Land of approximately 168 hectares, located in Darwin, NT. In October 2014, the NT Government’s Department of Infrastructure, Planning and Logistics (Department) sought Expressions of Interest (EOI) via a two phased procurement for a residential and commercial development at the Berrimah Farm site. A Probity Advisor was engaged and a probity plan was enacted for the procurement.

Following the two phased procurement process, the Evaluation Panel issued their final report in October 2015, which recommended that the NT Government enter into dual negotiations with two of the proponents. A report supplied by the Probity Advisor at this point of the process had not raised any issues. After negotiations, a brief approved by the Minister recommended that negotiations be continued with a single preferred proponent. It has since been revealed by the Auditor General and in a NT Public Hearing that:

• the scope of the project materially changed during negotiation, which included the scrapping of a requirement to construct an international grammar school;
• 11 hectares of land would be retained by the developer for nil consideration rather than being returned to the Territory, even though the second proponent would have offered cash for the land;
• the Probity Advisor was not engaged to oversee the final negotiation phase of the procurement; and
• the provisions of the successful proponent’s Contract differed materially to the deliverables and outcomes initially established by the Department.

The Department has responded to the Auditor General’s findings and considers that a commercial outcome has been achieved and that, on the whole, the Department complied with systems, processes and Government policy. However, for those in procurement, flaws in a “due and proper” process raises questions over the outcome and increase risk to the commercial outcome (e.g. whether another participant could have offered a stronger commercial outcome armed with the same level of knowledge) and to the reputation of the process and/or the organization.

For those involved or undertaking procurement, this case study highlights the importance of maintaining probity across all phases of a procurement process. Why a probity advisor would be engaged to participate in all but the most critical of phases of the procurement raises its own probity concerns and quite rightly the Auditor General is asking questions. Probity is not something one can opt in and/or out of for convenience and it is most certainly not merely a compliance exercise. After all, featuring in an Auditor General report or facing a Public Hearing where questions of probity are being highlighted is not a desired procurement outcome at any stage, let alone in the current climate of government.

Source: Auditor General for the Northern Territory – March 2018 Report to the Legislative Assembly – http://www.nt.gov.au/ago/reports/2018_March.pdf