This audit arose from concerns raised with me by the previous Acting Director General of the Department of Health. I need to acknowledge this referral by the Acting Director General. He was acutely aware of the prospect of very public exposure of shortcomings within the department, but nevertheless chose this course in the interest of ensuring a rigorous, external and independent review of this significant issue.

Health established its Centralised Computing Services contract to provide high quality primary and secondary data centre facilities, to eliminate the need to build and manage it’s own data centre facilities and to free up much needed cash for the health system. The contract established an important role for the private sector in the provision of public health services.

Large contracts between government and the private sector need to work well. Governments will never have all of the skills and capabilities required to deliver all of the services. Industry is ready and willing to provide services to government. Most importantly, government contracts need to deliver value for money.

The potential benefits of these arrangements are indisputable. But the risks are equally evident and if not managed well, prospective benefits can be lost.

This report demonstrates the importance of understanding and managing contract risks, particularly when they are of the complexity, the value and the length of Health’s Centralised Computing Services contract.

Signed in 2010 with a value of $44.9 million, the contract has grown through 79 variations to a potential $175 million with components of the contract running until 2020.

The audit identified numerous and fundamental weaknesses in Health’s management of the contract, ranging from a lack of identified need for the multi million dollar variations, to a failure in delegation and authorisation procedures, and from an absence of performance monitoring to inadequate checking of the accuracy of invoices.

Health, to its credit, has been implementing changes to address the issues identified in this report and has committed to further change. Thereafter, maintaining commitment to good practice is essential.

Unfortunately, too often we identify instances of agencies failing to follow their own approved practices or widely accepted good practice. The public is entitled to feel frustrated by these reoccurring events and justified in demanding improvements.