[Peetwo]

ANAO slap ASA with a wet lettuce - FDS!

Today the ANAO, with zilch fanfare, discretely tabled (out of parliamentary session) their 2nd audit report into the ASA OneSKY tender process. At first glance it would seem all's well in the Sir A & Harfwit ASA bubble of self-delusion and unlimited ATP funded trough funds:

Conduct of the OneSKY Tender

Published Monday, April 10, 2017


Report number: 46 of 2016-2017
Portfolio: Infrastructure and Regional Development; Defence; Finance
Entity: Airservices Australia; Department of Defence
Contact: Please direct enquiries relating to reports through our contact page.

The objective of this audit was to assess whether the OneSKY tender was conducted so as to provide value with public resources and achieve required timeframes for the effective replacement of the existing air traffic management platforms.

Summary and recommendations

Background

1. The civil air traffic management system operated by Airservices Australia (Airservices) and the separate system operated by the Department of Defence (Defence) for military air traffic are both due to reach the end of their economic lives in the latter part of the current decade. The December 2009 National Aviation White Paper identified expected benefits from synchronising civil and military air traffic management through the procurement of a single solution to replace the separate systems.
2. Under the OneSKY Australia program, Airservices is the lead agency for the joint procurement of a Civil Military Air Traffic Management System (CMATS). CMATS is intended to be delivered through contracts between Airservices and the successful tenderer, with a separate agreement being established between Airservices and Defence for the on-supply of services and goods/supplies. A Request for Tender (RFT) for the joint procurement was released on 28 June 2013. The RFT closed on 30 October 2013, with six respondents (including from the incumbent providers of both the Airservices and Defence ATM platforms).
3. On 27 February 2015, it was announced that an advanced work contracting arrangement would be entered into with Thales Australia, as a next step for the delivery of the OneSKY initiative.

Audit objective and criteria

4. The objective of the audit was to assess whether the OneSKY tender was conducted so as to provide value with public resources and achieve required timeframes for the effective replacement of the existing air traffic management platforms. To form a conclusion against the audit objective, the following high level criteria were adopted:

• Was the OneSKY tender process based on a sound business case and appropriate governance arrangements?
  
• Did the tender process result in the transparent selection of a successful tender that provided the best whole-of-life value for money solution at an acceptable level of cost, technical and schedule risk, consistent with the RFT?
  
• Did negotiations with the successful tenderer result in constructive contractual arrangements that ensured continuity of safe air traffic services, the managed insertion of an optimum system of systems outcome within required timeframes, and demonstrable value?
  

5. The Conditions of Tender had envisaged contracts would be signed in April 2015. As of January 2017, whilst a contract for the entire acquisition and support scope has not yet been executed, a number of contracts have been entered into through an Advanced Work Supply Arrangement for the acquisition contract scope, the first of which commenced in July 2015. Defence has advised its Ministers that contract signature for the entire acquisition and support scope is unlikely to occur before mid-2017. As such, this performance audit has not examined criterion 3.
Conclusion
6. The design of the OneSKY tender process was capable of producing a value for money outcome. The successful tenderer was assessed as significantly stronger in terms of technical capability as well as involving much lower schedule risk. The successful tenderer had also submitted significantly higher acquisition and support prices than the other tenderers. Adjustments made by the Tender Evaluation Committee (TEC) to tendered prices suggested that the successful tenderer offered the lowest cost solution. The TEC’s approach did not highlight to decision-makers the trade-off that needed to be made between the technical merits and cost of the competing tenders. There have also been significant delays with the conduct of the OneSKY tender process.
7. A two-stage tender process was employed involving a Request for Information (RFI) followed by a Request for Tender (RFT). This approach was appropriate for the scale, scope and risk of the joint procurement. It promoted a healthy level of competition for the procurement, with 23 responses to the RFI and nine tender responses received from six tenderers (two respondents offered a total of three alternate tenders). The RFT was released to the market in June 2013, 18 months later than the expected December 2011 release. This delay was further compounded by tender evaluation activities taking more than twice as long as planned. Contracts are unlikely to be signed prior to mid-2017, at least 40 months after tender evaluation commenced.
8. The evaluation governance arrangements were appropriate. They provided an approach that was capable of identifying the best value for money tender. They also guarded against the conflicts of interest issues identified in ANAO Report No.1 2016–17 impacting on the tender evaluation process and outcome.
9. Tender evaluation proceeded through the planned phases, with competitive pressure maintained until late in the process. The records of the evaluation process evidence that the successful tender was assessed to be better than the other remaining candidates from a technical and schedule risk perspective. It is not clearly evident that the successful tender offered the best value for money. This is because adjustments made to tendered prices when evaluating tenders against the cost criterion were not conducted in a robust and transparent manner. Those adjustments meant that the tenderer that submitted the highest acquisition and support prices was assessed to offer the lowest cost solution. It is also not clearly evident that the successful tender is affordable in the context of the funding available to Airservices and Defence.

Supporting findings

Design of the tender process

10. Airservices and Defence took sufficient steps to generate market interest in the procurement process including by running a two-stage tender process—an RFI followed by an RFT.
11. An overarching business case was not prepared for OneSKY. Separate business cases were developed by Airservices and Defence. The Airservices business case has not been reviewed or updated since 2011. In December 2016, Airservices advised the ANAO that it had commenced an update of its business case, which is due for completion in the first quarter of 2017. Shortcomings in Defence’s 2011 business case were identified by a review that was commissioned after Ministers became aware of a significant increase in the initial estimated acquisition costs when a 2014 business case was prepared (on the basis of tender responses).
12. Significant delays occurred with the conduct of the tender process in comparison to planned timeframes and when decision-makers had been told that the existing systems would need to be retired. Of note was that the RFT was released to the market in June 2013, 18 months later than the expected December 2011 release. This was compounded by significant delays during tender evaluation and contract negotiations. Specifically, there was a delay of four months during Phase 3 of the tender evaluation, and as of January 2017, contract negotiations continue to exceed the original timeframe, with negotiations running 18 months over the planned 11 month schedule. In July 2016, Defence advised its Ministers that contract signature was ‘unlikely to occur’ before mid-2017.
13. Appropriate evaluation governance arrangements were established. They provided an approach that was capable of identifying the best value for money tender. They also guarded against potential conflicts of interest impacting on the tender evaluation process and outcome. Of note was that evaluation findings and recommendations were built up from detailed evaluation work that reflected input from a large number of Airservices employees and contractors as well as Defence personnel.

Tender outcomes

14. The evaluation processes for the progression, shortlisting and exclusion of tenders proceeded as envisaged with competitive pressure maintained until the conclusion of the Phase 4 tender evaluation. Decisions were then taken to set-aside, and later exclude, the second-ranked tenderer from further consideration rather than enter into parallel negotiations with two tenderers. The reasons for this decision were adequately recorded.
15. An inadequate approach to summarising the evaluation of tenders was employed. Specifically, the approach of ranking each tender against the criteria did not provide a suitable means of identifying the extent to which one tenderer had been assessed as better, or worse, than other respondents, or how well each tenderer had been assessed as meeting the relevant criterion aspect.
16. The evaluation of tendered prices against the cost criterion was not conducted in a robust and transparent manner. There was not a clear line of sight across the phases of the evaluation and the work of the Tender Evaluation Working Groups and the Tender Evaluation Committee (TEC) in relation to the adjustments made by the TEC to tendered prices for evaluation purposes. Of particular significance was the lack of adequate records explaining the TEC adjustments. Those adjustments suggested that the successful tenderer offered the lowest cost solution when the acquisition and support prices it submitted were actually considerably higher than those of the other tenderers.
17. The records of tender evaluation activities and the outcomes did not demonstrate that sufficient attention had been given to whether the tendered acquisition and support costs were affordable for either Airservices or Defence.
Summary of entity responses
18. Airservices and Defence provided formal comments on the proposed audit report, which are included at Appendix 1. Airservices also provided a summary response, as set out below.

Airservices Australia

Airservices notes the report. Airservices welcomes the ANAO’s conclusion that the tender process design was appropriate and that the evaluation governance both provided an approach capable of identifying the best value for money tender and guarded against the perceived conflict of interest issues that had been identified in the ANAO’s previous audit report as requiring further investigation.

Airservices notes that the report does not make any recommendations for improvement.

Airservices has provided further clarity on some of the matters raised as an attachment to this report. Airservices remains firmly of the view that the tender process, having been appropriately designed, has identified the best value for money tender at an acceptable level of risk, having regard to all of the evaluation criteria.

So all the Joint & Senate Parliamentary inquiries, multiple Estimate inquests and 2xANAO audits were all for nought and the Senators were being just a tad overzealous and a little paranoid - yeah right...BOLLOCKS!


MTF...P2

Ps

CHAIR: We are obviously going to have more interaction with you guys over the next couple of months as we try and walk with you to get to the end of these changes that are occurring. Thank you for your attendance, Mr Harfield and Mr Logan.

Mr Harfield : As I said at the 1 December one: any time and any place; happy to answer questions.

CHAIR: We probably need to lift the frequency, because we are getting a lot of traffic.

Mr Harfield : It is understandable.

CHAIR: We will probably do that as a committee, because I know it is writ large in our minds. Thank you your attendance. We wish you all the best on your journey to wherever it is you are going.