Wednesday, 6 February 2013
Questions on Notice
Defence Integrated Distribution System Contract (Question No. 2392)
asked the Minister representing the Minister for Defence, upon notice, on 19 October 2012:
With reference to the Defence Integrated Distribution System contract that outsourced the management of Defence warehouses:
(1) Is the department acting on the commercial advice of Deloitte and the legal advice of the Australian Government Solicitor, that the TTDL consortium is completely liable for the $4 million in missing stock and the department is entitled to enforce its contractual rights to have these losses refunded; if not:
(a) why not; and
(b) can an explanation be provided as to why the department considers it is not in breach of the Financial Management and Accountability Act 1997 by refusing to enforce its contractual rights to reclaim the $4 million.
(2) Can a complete inventory of all the missing stock be provided?
(3) Are reports that the clauses relating to the liabilities of TTDL have been amended to provide for 'further discussions' correct; if so, what have been the outcomes of the further discussions between the parties?
(4) In awarding the tender to TTDL, what processes were in place to guard against conflicts of interest, given that the former Minister who launched the tender, Mr Peter Reith, worked as a consultant to the firm when the tender was awarded?
The Minister for Defence has provided the following answer to the honourable senator's question:
(a) A separate independent investigation into stock discrepancies concluded that an actual physical loss could not be confirmed and that no reparation action be pursued. To ensure the ongoing sustainability of the contract and the maintenance of logistic support for critical Australian Defence Force activities, the Secretary of Defence and the Chief of the Defence Force directed that the broad range of contractual issues between Defence and TenixToll Defence Logistics (TTDL), including stock discrepancies, be resolved through mediation. The mediation process was overseen by a Defence Integrated Distribution System (DIDS) Oversight Board, which was established in November 2007 as a forum for senior Defence stakeholders to oversee Defence's approach to resolving a range of contractual issues.
(b) The Commonwealth did not breach the Financial Management Act as it did not have a sound basis to pursue the claim. In addition, the scale and complexity of the contractual difficulties at the time meant a more holistic approach to resolve those difficulties was warranted. Through the successful mediation, the Commonwealth was able to ensure the future sustainability of the contract, generate ongoing savings in specific services, and establish a robust contract governance framework to ensure the contract delivers value for money and services that consistently meet or exceed contracted performance standards.
(2) No. An investigation into stock discrepancies concluded that an actual physical loss could not be confirmed and that no reparation action be pursued.
(3) No. The DIDS contract contains robust liability provisions.
(4) At all stages of the DIDS contract tender and implementation processes there were robust governance arrangements in place. This included oversight by an independent Project Board and external probity advisors.