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Sydney Metro has 42 ‘contracts of concern’. One jumped in value 2811%
An internal Sydney Metro investigation found widespread risks of “fraud and corruption” within the agency, including deals with private companies that increased by more than 10 times their original value, undisclosed conflicts of interest and multimillion-dollar payments made to third parties with no record of why.
In September, Sydney Metro’s fraud and corruption unit handed the agency the results of an investigation it had carried out into 42 “contracts of concern”. It followed a series of internal Metro probes into its governance that raised concerns about the agency’s use of public funds and prompted a crackdown on the use of private contractors by the Minns government.
The internal investigation outlines a string of defects in the awarding of tens of millions of dollars in taxpayer funds, including cases in which professional service contractors employed by Metro had failed to declare a financial interest in companies that had won work with the agency.
The document, obtained by The Sydney Morning Heraldvia a parliamentary order, also details how concern about the use of those professional service contractors had found their way to Sydney Metro chief executive Peter Regan as early as August 2021.
It found the agency failed to follow internal sign-off protocols when approving significant increases in the value of contracts, including one deal analysed by the anti-corruption unit in which a contract originally valued at $3.2 million inflated to $21.3 million without proper authorisation.
It also found that Metro regularly gave “insufficient value for money” justifications when approving “substantial” variations in contracts, and failed to adequately document reasons for approving and extending 18 of the deals it examined.
A selection of the contracts of concern
One example cited by the internal probe noted that a contract with a private company originally worth $276,000 was varied to more than $8 million, an increase of about 2800 per cent, without documentation explaining the change.
The internal probe also uncovered what it described as “inappropriate procurement practices” with some contracts awarded to private firms, including agreements “varied to over 10 times the original contract value”. Four of those contracts were “single sourced”, it said, meaning a competitive tender had not been undertaken. Those contracts each had significant increases over time; one from an initial value of $107,400 to $1.4 million over seven years. Another increased from $2.5 million to $13.2 million…
“Allowing single-sourced contracts to be substantially varied to a higher value provides avenues for corrupt conduct or potential maladministration,” the investigation stated.
It added “less scrutiny is anecdotally afforded” to assessing single-sourced contracts, and raised concerns that a “lower value” might be given to a contract in some cases to circumvent competitive tenders.
“The contract can then be varied, and the competitive process can be more easily avoided,” the investigation stated.
The internal investigation did not make specific findings over the contracts, but was “intended to identify opportunities for system improvements”. While many of the contracts it examined had been “secured some time ago”, it said it would investigate any suspected fraud or corruption separately.
The previously unreported details of Metro’s record-keeping follow separate revelations by this mastheadinto the use of private contractors at the multibillion-dollar agency. In some cases, senior managers were allowed to run private companies that recruited contractors to the agency on salaries well over $500,000.
The Herald has also detailed how a separate internal probe into allegations of “conflicts of interest and … corrupt conduct” by senior executives at the agency had been referred to the Independent Commission Against Corruption.
The September investigation detailed 10 cases in which employees engaged as professional service contractors at Metro did not disclose they were shareholders or directors of companies engaged by the agency on contracts worth as much as $7 million.
While it did not suggest those individuals were responsible for hiring staff through their own companies, it found that the failure to disclose the conflicts created the “potential for inappropriate benefits to individuals or supplies with mutual personal interests”.
It also found a “potential for unauthorised access” to tender documents by “personnel who will influence decision-making in favour of a supplier of interest”.
The investigation reveals concerns about the use of professional service contractors within Metro date back to at least March 2021, when a previously unreported internal investigation code-named Aoede was commissioned. At the same time, an internal audit also raised “further concerns” over the use of private contractors which were elevated to Regan in August 2021, the document states.
Greens MP Cate Faehrmann, who secured the release of the document through parliament, said it was proof that “senior management at Sydney Metro have known about this rorting for years, including that it was breaching multiple codes and protocols”.
“Who at Sydney Metro decided that the rules which apply to all public servants don’t apply to them? How far back does this culture of non-compliance and making personal gain from public money go?” she said.
“With multiple metro projects underway in Sydney and billions of dollars still to spend, the minister needs to do more to assure herself that measures are now in place that prevent this type of behaviour.”
In a statement, a spokeswoman for Sydney Metro said all recommendations from the September review had been adopted, and noted that since it was released the agency had banned employees from acting as directors of professional services contractor companies.
The spokeswoman noted that decision had followed a review ordered by Transport Minister Jo Haylen in November last year to assess Metro’s use of private contractors. The review also led to changes that lowered the value at which contracts needed the chief executive’s sign-off.
“The independent legal adviser was satisfied that an appropriate level of care is given by Sydney Metro into the scope of investigations regarding Professional Services Contractor allegations and complaints,” the spokeswoman said.
