Published on the 05/06/2025 | Written by Heather Wright

Audit highlights big deficiencies in IT program…

The Australian Tax Office was ‘deficient’ in demonstrating value for money with the cost for six advisor contracts to support IT managed services procurements blowing out AU$69 million and not all conflict of interest declarations were made.

An audit by the Australian National Audit Office found the cost of the six advisor contracts supporting eight IT managed services procurements, valued at $2.5 billion, soared from an initial estimated value at contract approval of $19 million, to more than $88 million.

“Ancillary procurements, such as advisor procurements, must give equal attention to achieving value for money.”

The price increases for the advisors were out of proportion with the forecast maximum price at the time of approving the initial contract, the ANAO found.

It also notes not all conflict of interest declarations were made, or were not made in a timely manner or did not contain sufficient detail and record keeping was incomplete.

Despite the ‘shortcoming’, the report finds that the ATO’s procurement of IT managed services has been ‘largely effective’ with the managed services procurements demonstrating value for money.

The report follows an earlier 2020 ANAO audit which identified issues with the ATO’s IT procurement, including that the ATO ‘did not have evidence of market research, provide advice regarding risks to achieving value for money to the delegate, or have sufficient documentation of value for money and risk management, including probity risks’.

The latest audit focuses on five of the IT Strategic Sourcing Program procurements.

Five of the ATO’s largest IT managed services contracts, worth $225 million a year and representing about 50 percent of the organisations annual IT spend, were due to expire between 2023 and 2025. They included the technical helpdesk, monitoring and automation services, end user technology, enterprise service management centre and the provision of centralised computing services.

The five expiring contracts were broken into services bundles, resulting in eight contracts with a value of $2.5 billion over 10 years.

The report focuses on the procurements of enterprise operations and technical enablement, won by Accenture; mainframe hardware (IBM), mainframe services (DXC) and the sourcing partner and legal advisor (ISG and Sparke Helmore, respectively).

It also references the six ‘advisor procurements’ contracts with ISG Information Services Group for sourcing, PwC for technical, Galent for probity, ITNewcom for financial assurance, Sparke Helmore Lawyers, providing legal consulting, and Tullius for project management.

Several of the advisor procurements come in for rebuke with the ANAO noting the sourcing partner procurement blew out from $13 million to $42 million, the financial assurance procurement increased from $1 million to $17 million and the legal services procurement increased from $665,000 to $11 million.

“This indicates that whole of life costs estimates were incomplete at the time of procurement. Advice to delegates approving the evaluation reports and entering into the arrangement significantly underestimated the full value of the commitment and value for money assessments were not undertaken where costs exceeded forecast values,” the audit report says.

“When planning and undertaking procurement, procurements that are ancillary to the core procurements, such as advisor procurements, must give equal attention to achieving value for money.”

It also calls out the ATO on the issue of conflict of interest, around its former chief information officer Ramez Katf and his ex-employer, Accenture, saying it was ‘not appropriately managed’.

Katf, who was CIO from 2015 to 2024, was former managing director of Accenture and retained shares in the consulting company during the procurements. He failed to declare a conflict of interest when the programme began in early 2021.

Accenture was an incumbent ICT provider and went on to win the $136 million enterprise operations and technical enablement contract.

Katf declared a ‘perceived conflict’ in 2022, well after the initial discussions which took place between July and August 2021.

In September 2024 the ATO told the ANAO that the conflict was ‘well-known’ within the ATO as Katf had made 11 declarations about the conflict since 2015.

Despite this, Katf participated in the steering committee for the program through to April 2024, chairing most meetings and was not removed from decision-making for procurement decisions where Accenture was involved and approved documents including an evaluation report recommending shortlisting Accenture and another supplier.

A probity review, finalised in November 2023, found a lack of clarity and detail about his shareholding in Accenture, which resulted in limited management of the conflict, and assessed the conflict as an actual conflict, rather than the ‘perceived’ conflict it had been reported as.

The report also notes that no delegates for either the enterprise operations and technical enablement contract or the mainframe procurements were asked to complete a redeclaration at the evaluation stage and there were instances where evaluation committee members did not respond to redeclaration requests at the evaluation and negotiation stages.

Records couldn’t be fully reconciled, and across the 27 officers declaring a conflict of interest records didn’t consistently show the process had been completed appropriately.

The conflict of interest processes ‘could have been better managed, including to address risks in a timely manner’, the report notes.

The new audit report includes four recommendations, all of which have been accepted by the ATO.

The recommendations included improving conflict of interest processes and applying ‘an appropriate amount of vigour when assessing value for money’ including considering whole of life costs.