Serious concerns about Entrepreneurs Program raised with Minister's office before AG report

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Serious concerns about Entrepreneurs Program raised with Minister's office before AG report

The office of Karen Andrews, the former Minister for the Department of Industry, Science, and Technology was aware of serious concerns about the administration of the Entrepreneurs' Partner program long before the Auditor General's report this week slammed how the seven "delivery partners" were procured.

One deal in particular caused consternation in the Minister's office, and in the innovation industry - the $31,388,800 awarded to i4 Connect, a company that did not exist when the tender was first issued, but which according to ASIC documentation was registered on 14 of November 2019.

The Request for Tender was issued in September 2019, according to the Auditor General's report.

"i4 Connect was formed as a Special Purpose Vehicle for the sole purpose of responding to this RFT," the auditor general found.

i4 Connect did not respond to multiple requests for information that CRN sent to it yesterday.

CRN (a Digital Nation sister publication) can confirm that Minister Karen Andrews' office received multiple written complaints from a variety of bidders that specifically questioned the capacity of i4 Connect to fulfil the contract, given it was a new company with no track record. These concerns were passed on to the Department. It is not known what subsequent action the Department took.

The Department also received feedback from unsuccessful participants in the tender directly during feedback sessions after tenders were issued, CRN has learned.

Responses to the tender were assessed on the following criteria and weighting;

  • organisational capability (70 per cent weighting);
  • promotion and marketing and industry knowledge (30 per cent weighting);
  • price (not weighted);
  • risk (not weighted);
  • corporate and financial viability (not weighted); and
  • Commonwealth policies (not weighted)

CRN has also learned of concerns raised about contractors working for another program in the Department - Accelerating Commercialisation - who subsequently worked for i4 Connect after it was awarded the tender.

I4 Connect’s contract to provide "management advisory services", including administering grants to businesses, from 1 July 2020 to 30 June 2023, was published on AusTender on 7 April 2020.

CRN has identified multiple contractors and staffers from the Department who joined i4 Connect either as staffers or contractors in the months after it won the Entrepreneurs' Program tender, including some who received significant grants from the department while in previous roles.

CRN has chosen not to name these staff as they could not be contacted prior to publication, and there is no suggestion of wrongdoing by these individuals.

Nor did anyone CRN spoke with make suggestions of wrongdoing by i4 Connect. Innovation industry participants however have told CRN they have very serious concerns about the Department's behaviour, including issues such as conflicts of interest, a matter raised by the Auditor General.

The auditor general's report said, “a conflict of interest register was not maintained” in procuring the delivery partners.

“Where declarations were provided…management actions were not put in place to avoid or mitigate them.”

Membership has its privileges

The Auditor-General also found that five organisations that were existing suppliers to the nearly half a billion, five-year industry development program received “incumbency advantages”:

  • Australian Industry Group ($37,031,346)
  • The NSW Business Chamber ($29,078,914)
  • Deloitte ($37,031,346)
  • Business SA ($9,912,634)
  • The CSIRO ($16,208,844)

Only two new delivery partners were awarded the contracts:

  • i4 Connect ($31,388,800)
  • Darwin Innovation Hub ($5,838,400)

“Departmental records indicate that information about the redesign of the program was revealed to incumbent tenderers involved in the redesign work providing them with a competitive advantage,” the auditor general found.

There was a 13 percent variance between the total original and total current contract value. The contracts ballooned by $165,517.

One of the bidders for the work, who flagged the report with CRN sister publication Digital Nation but wished to remain anonymous said, "We put in what we thought was a competitive bid and missed out. Now we have a sense of why."

53 compliant submissions were received, and 14 were shortlisted based on an evaluation of only two of the six published criteria.

“The department’s approach was deficient in significant respects such that there was not open and effective competition for the delivery partner roles,” the watchdog said.

The department accepted in a statement that the procurement process “fell short”, but denied that the program was not meeting its goals.

“The Entrepreneurs’ Programme has successfully supported over 22,000 Australian companies to strengthen and grow since its launch in 2014. Businesses participating in the growth element of the program have experienced average increases of 3.5 new jobs and an additional $1.47 million in turnover.”

A Department spokesperson refused to address the concerns about the procurement of i4 Connect to CRN.

"The total value of the previous relevant contracts was $155.019 million (GST inclusive) for Growth, Innovation Connections and Incubator Support services between 27 April 2015 and 30 June 2020."

"The delivery of Accelerating Commercialisation services cost an additional $27.69 million (GST inclusive) between 27 April 2015 and 30 June 2020.

IT channel partners such as Sydney-based managed security services StickmanCyber are among those who have received grants and the delivery partner’s financial advice from the program.

StickmanCyber chief executive Ajay Unni told CRN last year that the company met the program's eligibility criteria for a small-to-medium business with up to $100 million in revenue.

“Luckily, we already have our strategy and we are a little bit ahead of the game, but this program will help us validate all what we've done internally,” Unni said.

The delivery partners are required to submit quarterly reports updating the Department on their performance against their work plan but have collectively failed to meet 51 percent of reporting deadlines. And 60 percent of the Department's payments to the partners violate their contracts because they were made before the department received and accepted the partners' performance reports.

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