The Efficacy of Australia Adopting a Debarment Regime in Public Procurement

Published date01 March 2021
DOI10.1177/0067205X20973478
Date01 March 2021
Article
The Efficacy of Australia
Adopting a Debarment Regime
in Public Procurement
Olivia Dixon*
Abstract
While transparent and efficient public sector procurement systems facilitate innumerable
opportunities for stakeholders, the scale and scope of the global procurement market has ren-
dered it increasingly vulnerable to corruption. The Organisation for Economic Co-operation and
Development estimates that annually US$2 trillion of public funds is lost to corruption, yet gov-
ernments have failed to respond with robust measures to deter such practice. Through comparing
the debarment frameworks and policy goals across five jurisdictions, this article argues that
Australia should consider adopting a discretionary debarment regime. By excluding bidders who
have engaged in ‘corporate integrity offences’ from procurement contracts, debarment policies
offer a potentially important mechanism in the fight against corruption. Debarment would not only
protect the government from current threats, but it may also deter potential wrongdoers,
encourage contractors to rehabilitate themselves, incapacitate actual offenders and facilitate
development of a culture of compliance through the competitive advantage gains enjoyed by law-
abiding firms.
I Introduction
Globally, governments spend US$9.5 trillion each year procuring goods and services from the
private sector, making public procurement the largest global marketplace.
1
When fair, open and
well-functioning, public procurement systems can benefit all stakeholders: governments, private
enterprises and citizens. However, ...few government activities create greater temptations or
offer more opportunities for corruption than public sector procurement.’
2
The Organisation for
Economic Co-operation and Development (‘OECD’) estimates that corruption costs account for
approximately US$2 trillion of this annual procurement budget.
3
The potential scope of the
* Senior Lecturer, The University of Sydney Law School. The author may be contacted at olivia.dixon@sydney.edu.au.
1. The World Bank, ‘Why Modern, Fair and Open Public Procurement Systems Matter for the Private Sector in Developing
Countries’ (2018) <https://www.worldbank.org/en/news/feature/2018/05/16/why-modern-fair-and-open-public-
procurement-systems-matter-for-developing-countries>.
2. Transparency International, ‘Curbing Corruption in Public Procurement: A Practical Guide’ (2014) 8 <https://www.
acec.ca/source/2014/november/pdf/2014_AntiCorruption_PublicProcurement_Guide_EN.pdf>.
Federal Law Review
2021, Vol. 49(1) 122–148
ªThe Author(s) 2020
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DOI: 10.1177/0067205X20973478
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problems posed by corruption within this sector and the need for effective solutions is therefore
patent,
4
with research demonstrating the negative impact of corruption on investment,
5
business
costs,
6
efficient allocation of capital,
7
and public welfare.
8
Corruption in public procurement is not only a concern for the developing world but also exists
in developed countries. In Australia, where public procurement is estimated at AUD$200–300
billion,
9
the issue of corruption in government and the politica l sphere has intensified
10
with
several high-profile investigations at both the State and Federal level. In Victoria, an investigation
by the Independent Broad-based Anti-corruption Commission into the Education Department’s
failed Ultranet software system was found to have been subject to corrupt activity, costing approx-
imately AUD$240 million for a system which did not work.
11
In Western Australia, the Corruption
and Crime Commission reported corrupt activity at the North Metropolitan Health Service that
went undetected for up to a decade res ulting in the gros s misuse and fraud ulent misappropr ia-
tion of hundreds of thousands of dollars of public funds.
12
At the Federal level, recent
examples of alleged corruption include the Great Barrier Reef Foundation,
13
Parakeelia
14
and
3. Gerry Ferguson, Global Corruption: Law, Theory & Practice (Victoria University, 2018) 941, 946.
4. Ethan S Burger and Mary S Holland, ‘Why the Private Sector Is Likely to Lead the Next Stage in the Global Fight
Against Corruption’ (2006) 30 Fordham International Law Journal 45, 45 n.1, citing John Hooker, Working Across
Cultures (Stanford University Press, 2003) 89, 204, 317.
5. Paolo Mauro, ‘Corruption and Growth’ (1995) 110 Quarterly Journal of Economics 681; Shang-Jin Wei, ‘How Taxing
Is Corruption on International Investors?’ (2000) 82(1) The Review of Economics and Statistics 1.
6. Organisation for Economic Cooperation and Development, ‘The Rationale for Fighting Corruption’ (2000) <https://
www.oecd.org/cleangovbiz/49693613.pdf>.
7. Susan Rose-Ackerman, Corruption and Government: Causes, Consequences, Reform (Cambridge University Press,
1999) 3, 30.
8. Cheryl W Grey and Daniel Kaufman, ‘Corruption and Development’ (1998) 35(1) Finance and Development 7; Ben W
Heinemann, Jr and Fritz Heimann, ‘The Long War Against Corruption’ (2006) 85 Foreign Affairs 75; Paolo Mauro,
‘The Effects of Corruption on Growth, Investment and Government Expen diture: A Cross Country Analysis’ in
Kimberly Ann Elliott (ed), Corruption and the Global Economy (Institute for International Economics, 1997) 83-107.
9. Transparency International, ‘Transparency in Public Procurement’, Position Paper #6 (January 2016) 1.
10. On 13 December 2018, the Australian government announced that it will establish a Commonwealth Integrity
Commission. Although the National Integrity Commission Bill 2019 was moved on second reading in September
2019, it was subsequently removed from the Notice Paper in accordance with (SO 42) in March 2020.
11. Independent Broad-based Anti-corruption Commission, ‘Operation Dunham: An Investigation into the Conduct of
Officers of the Department of Education and Training, Including Darrell Fraser, in Connection with the Ultranet
Project and Related Matters’ (January 2017) <https://www.parliament.vic.gov.au/file_uploads/Operation_Dunham_
special_report_January_2017_Q8233Kkg.pdf>.
12. Corruption and Crime Commission, ‘Report into Bribery and Corruption in Maintenance and Service Contracts Within
North Metropolitan Health Service’ (16 August 2018) <https://www.ccc.wa.gov.au/sites/default/files/Report%
20into%20bribery%20and%20corruption%20in%20maintenance%20and%20service%20contracts%20within%
20North%20Metropolitan%20Health%20Service.pdf>.
13. See Rachel Baxen dale, ‘PM’s $444m for Great Barrier Reef Foundatio n a “Developing Scandal”: Shorten’, The
Australian (online), 6 August 2018 <https://ww w.theaustralian.com .au/nation/politics/ malcolm-turnbull-def ends-
giving-great-barrier-reef-foundation444m/news-story/ 1f54ab2ab358d210d7a4d0b2d9ac015e>; Tony Walker, ‘Reef
Donation Just the Tip of the Iceberg’, The Sydney Morning Herald (online), 19 August 2018 <https://www.smh.
com.au/politics/federal/reef-donation-just-the-tip-of-the-iceberg-20180816-p4zxtt.html>.
14. See Michael Bradley, ‘Explained: The Liberal Party’s Parakeelia Rort’, ABC News (online), 23 June 2016 <https://
www.abc.net.au/news/2016-06-23/bradley-explained:-the-liberal-partys-parakeelia-rort/7535372>.
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