NSW public sector agencies routinely purchase a wide range of goods and services including specialised products such as construction services and information and communication technology. This kind of purchasing is often called "procurement".

Several ICAC investigations have exposed corrupt conduct and identified common corruption risks in procurement processes.

The NSW Government Procurement Policy requires state public sector organisations to follow the NSW Code of Practice for Procurement unless they are specifically exempt or are State Owned Corporations.

Local councils are subject to provisions of the Local Government Act 1993, including section 55, and the Local Government (General) Regulation 2005, concerning procurement.

The ICAC has established a procurement task group that is working with the NSW state and local government sectors to understand corruption risks in procurement and develop responses that will reduce the risk of corruption in purchasing, disposal, outsourcing and contract management.

More detailed resources to help prevent corruption in public procurement are being prepared and will be available on this website.

Corruption risks

A risk assessment of the procurement function is likely to identify some or all of the following corruption risks:

  • An employee providing confidential information to a tenderer resulting in an unfair advantage.
  • A procurement officer having a private company that produce goods/services relevant to their agency's operations and submitting tenders to the agency without declaring this interest
  • A member of a procurement panel/procurement officer not declaring an existing relationship or secondary employment with a tenderer for that contract.
  • Two tenderers colluding with one submitting a 'dummy' bid and one a genuine bid.
  • An employee colluding with a contractor to falsify or inflate invoices.


Managing corruption risks

As a minimum your agency should:

  • Introduce policy and procedures for the procurement of resources that contain elements listed in the Policy Development guide and Checklist (see Tips and tools below).
  • Include in the policy sanctions for any breach of the policy and procedures.
  • Review the policy every two years.
  • Refer to the management of procurement in all corporate documents such as codes of conduct.
  • Train all relevant employees in the policy and procedures to ensure they are aware of their accountabilities.
  • Include procurement as a risk to be assessed in the agency's internal audit and corruption risk management processes.

The following record-keeping requirements should be included in the policy:

  • Weightings of evaluation criteria is determined prior to advertising/opening the tender.
  • A probity procedure is followed in all procurements with each stage being recorded and approved. 
  • Meetings or other contact with individual tenderers prior to the tender selection is recorded in writing.
  • Tenders are placed in a tender box which is opened in the presence of at least two officers and a list of the tenderers is made.
  • Members of tender assessment panels are required to declare in writing any conflicts of interest with tenderers. Disclosure documents are to be signed and dated by each panel member and countersigned by the convenor, and kept with the tender records.
  • If alternative or non-complying tenders/offers are considered the conditions for doing so are specified in writing.
  • Tender panel decisions and the reasons for these decisions are made in writing and records kept in line with relevant legislation and policy.
  • Communicating with all tenderers in writing and keeping the tender documents.


Risk management strategies

Following a risk assessment of procurement in your agency, you should consider the following risk management strategies:

  • Implementing a "probity plan and checklist" as a guide for procurement officers to follow in the procurement process. (This incorporates the general behavioural standards in the NSW Code of Practice for Procurement and/or policies pertaining to local councils.)
  • Putting selection criteria in place prior to advertising the tender or, in the event of any changes, ensuring that this information is widely advertised. 


Case studies

Case study 1: Collusion with private sector

An ICAC investigation found that a public official and a private business owner, who had been friends for several years, acted corruptly in the procurement of traffic management services to two government agencies. Neither of these persons disclosed their friendship.

The public official worked for the Roads and Traffic Authority (RTA) and was responsible for liaising with Railcorp about the provision of traffic management services during rail shutdowns. He told Railcorp that the RTA had engaged the business owner to provide these services and arranged for the business owner to invoice Railcorp directly for this work. In fact, the business owner performed no tasks at all in regard to rail shutdowns – these tasks were performed by public officials, paid for by the agency, and concealed by charging the payments to the wrong cost codes. The official was able to postpone preparing new tenders for additional traffic management services several months after the original contracts had finished, with no follow-up from senior employees.

The ICAC found that the business owner submitted fraudulent invoices for more than $300,000 for services he did not perform and for goods he did not supply. The official was able to approve these fraudulent invoices for payment.

Between them, the two men were found to have obtained more than $257,000 from the government organisation taking the total of their corrupt gains to in excess of $500,000.

The ICAC made recommendations directed at improving the capacity of the systems and individuals responsible for supervising and monitoring the performance of the contracted services.

Case study 2: Bribes for contracts

In 1999, the ICAC released its investigation report into allegations that a purchasing officer with a city council had accepted cash payments from contractors in exchange for allocating work to the contractors. The officer provided them with information to make the tenders more competitive. The council officer also arranged for contractors to submit "dummy" quotes at different times for certain tenders, and nominated the amounts to be tendered. The contractors who submitted the dummy quotes knew that this would ensure that they would win other tenders.

In situations when the contractors were to be awarded the tender, the council officer sometimes directed them to increase the tendered amounts. As a result, council was paying more for its contracts than the competitive price. 

The ICAC's investigation found inconsistencies between the council's stated policies and practices and the actual behaviour of its officers. For example, purchasing decisions were made when only two quotes were received, despite policy requiring three quotes to be obtained.

Where practice is routinely allowed to diverge from policy, opportunities for corruption or inefficiency may arise.

The ICAC subsequently produced guidelines on contracting in local government, Taking the con out of contracting.

Frequently asked questions

When is it appropriate for an agency to enter into a direct negotiation rather than call for tenders? 

As a general rule direct negotiations should be avoided. However there are scenarios when it may be impossible to test the market, or use a competitive process. Each matter should be considered individually, but the issues to be considered include:

  • exemption by statute or government policy
  • monopolies: when it is beyond doubt that only one proponent can meet an agency's well-defined needs
  • intellectual property (IP): when IP forms a necessary part of a project and ownership of that IP can be demonstrated, agencies may have to agree to direct negotiations, perhaps by purchasing or licensing the IP
  • real property rights: if a particular proponent owns a parcel of real property that is on or near the site of a proposed project, direct negotiations may be justified
  • interface with an existing facility or product
  • emergency circumstances.1   

My agency never buys high-value items. Should we also be concerned about corruption risks in procurement?

The risk of corruption can increase when the goods or services being procured are of a relatively low financial value compared to an agency's overall budget. Low-value items are often frequent purchases so their value adds up over time.

Another risk is that they may not be subject to the same level of scrutiny by legal officers or other specialist procurement staff in the agency so opportunities for corruption are exploited. 


ICAC publications


Other publications

  • Consultation Draft - Tendering Guidelines for NSW Local Government, Circular 06-03, NSW Department of Local Government, January 2006
  • Public Disclosure of Information arising from NSW Government Tenders and Contracts, Memorandum 2007-01, NSW Department of Premier and Cabinet, January 2007
  • Procurement in NSW Local Councils, Circular 06/07, NSW Department of Local Government, January 2006.


Relevant ICAC investigations


Relevant legislation and policy

  • Public Finance and Audit Act 1983
  • NSW Code of Practice for Procurement NSW Treasury, January 2005
  • Local Government Act 1993, section 55
  • Local Government (General) Regulation 2005 (Part 7).


Relevant websites


Related topics on the ICAC website



1 Direct Negotiations – Guidelines for managing direct negotiations with proponents, ICAC, Sydney, September 2006