Reforming Procurement to Rebuild Sovereign Capability
Published in Australian Quarterly, Apr–Jun 2026
The Australian Government spends approximately $100 billion annually on procuring goods and services.1 The intention is to improve efficiency and quality of service, to support day-to-day government operations and to deliver value for taxpayers — all good purposes. However, numerous independent reviews and audits have consistently found waste, inefficiency, and failure to deliver benefits. The Government's procurement track record has been shown to be abysmal.
In addition to the waste, there is also a massive opportunity cost. Government spending, if managed judiciously, has the potential to nurture Australian business capabilities and to enhance economic sovereignty. Yet, in practice, in key sectors Government procurements are awarded to foreign suppliers, providing less stimulus to local industrial capacity.
Today, Australia faces a global order in flux, with our most important ally acting unpredictably and the very real prospect of conflict in our region in the near to medium term. Through this lens, the scale of wasted government spending looks very serious: it has left us with enormous debt and weak sovereign capability, precisely when we need self-reliance.
This paper argues for a two-stage reform. First, the government must reform procurement legislation and reintroduce clarity, transparency, and accountability. This will curtail waste and mismanagement in procurement activities. The government can then leverage its procurement spending to rebuild Australia's sovereign capabilities.
The Government's Track Record
Any procurement process should: deliver against clear objectives; achieve value for money; and be timely. Sounds obvious, and most procurements would include these simple criteria in the tenders or requests to the market. But the record shows that few government procurements, even routine ones, meet these criteria.
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Most of the initiatives in Table 1 (below) have been outsourced to multinational organisations. The justification is that these organisations have capabilities not possessed by sovereign Australian companies. However, a recent Senate Inquiry into Sovereign Procurement suggests this is not the case. Despite a hefty price tag, these projects are not delivering outcomes that meet the government's original objectives.
Indeed, the presence of a multinational consulting firm is strongly correlated with both failure and cost overruns.
A more recent procurement failure was the Bureau of Meteorology (BoM) website, outsourced to a multinational consultancy. The website cost $96.5 million — some $92.5 million more than the original budget.15 The Bureau subsequently admitted that over $70m was spent on back-end development by Accenture.16 A sovereign company could have done the job for a fraction of that cost. Taxpayers have been left with a product deemed unusable by the Bureau's previously loyal customer base, while a multinational vendor has won a lottery-scale payday for an objective failure. In the author's experience, the BoM case is closer to the norm than to an outlier.
Unfortunately, apart from a few high-profile cases, like the BoM, routine Government project failure rarely makes the news. Perhaps that is because many instances are 'boring'. But cumulative losses in routine procurement are even worse than those in high-profile cases. The failure of the projects also means the Government doesn't get the capability it needs in a timely manner, if it gets it at all. This should concern every Australian.
| 1 | The Defence Data Project: A $515 million2,3 project to unify data within the Department of Defence, which was found to have serious governance failures and issues with delivered work. |
| 2 | My Health Record (MyEHR) was originally to cost $30 million. It passed an absurd $2.3 billion a couple of years ago and is still years away from delivering demonstrable value, if it ever does.4,5 |
| 3 | GovERP (Government Enterprise Resource Planning) was abandoned in 2024. This project aimed to consolidate the back-office systems of over 100 agencies. It was scrapped after $344 million6 was spent. Reports indicate that no modules were ever used in the field. |
| 4 | The Victorian Myki Smart Card cost $3.7 billion, significantly more than expected. After multiple delays, it was finally implemented. A similar initiative in Queensland had significant delays and cost overruns.7,8 |
| 5 | The Business Register modernisation was cancelled after spending $530 million due to 'underestimating the complexity'.9,10 |
| 6 | The Australian Cargo management system cost $205 million11 and experienced massive delays, resulting in significant unexpected costs for the industry and the community. |
| 7 | Visa processing platform — cancelled after estimating the new system would increase in cost by $500 million ($100 million written off).12,13 |
| 8 | Centrelink Calculation Engine — cancelled after $191 million spent.14 |
| 9 | The QLD government's digital licence allowed approximately 17,000 drivers with health conditions to renew their licences online without submitting mandatory medical certificates. |
Why Are Procurement Outcomes So Poor?
Ineffective processes
How can so many procurement failures occur? Weak legislation and misguided procurement practices are major causes. The Public Governance, Performance and Accountability (PGPA) Act of 2013 is the key legislation governing Commonwealth procurement.
Section 15 of the PGPA requires Commonwealth government procurement to be effective, efficient, economic, and ethical. That sounds good, but these traits are not defined. This leaves them open to interpretation and makes it very difficult to hold anyone to account or to assess performance.17
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Over time, agencies have developed their own definitions of effective, efficient, economic, and ethical procurement. With each iteration, the focus has shifted to even more risk-averse processes increasingly divorced from agency and public needs. These risk-averse processes appear to have replaced personal responsibility and good judgment. There seems to be a belief that, if one performs the required processes, one cannot be blamed for failure. Few would take this approach with their own money.
The weakness of government procurement is failing our nation. Multinational corporations are profiting, and the public servants who are 'managing' the process have safe careers. Clearly, change is needed.18
Clarity of Objectives
A set of clear objectives is fundamental to a successful procurement. Clear objectives hold vendors accountable while opening the door to innovative responses and shared risk arrangements. When vendors understand the outcomes the agency seeks, they will be more obligated to take responsibility for delivering them.
The procurement process becomes less effective when objectives are vague, and outcomes are replaced with overly detailed specifications. Here, the agency specifies HOW they want the job done, but it is unclear WHAT outcome they seek. In the author's experience, this is the norm for many government procurements.
The problems with overly detailed specifications include:
- They assume the agency knows the best solution — this is generally not the case.
- They limit vendors' ability to offer innovative responses, especially when the innovation falls outside the scope of the specs.
- They assess inputs — not outcomes. The procurement team mistakenly assumes that alignment with specifications automatically yields the desired result.
- It is very difficult to develop complete specifications. Incomplete specifications open the door for the provider to claim additional costs, as the 'fault' lies with the client's specs.
Well-defined objectives should form the basis of contracts. The clearer the objective, the more accountable the vendor. Not surprisingly, the hazier and wordier the objective, the more likely the project is to fail.
How Can Procurement Outcomes Be Improved?
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If visibility provides a basis for accountability, enforcement and consequences are what make policy and legislation effective. The PGPA would be strengthened by including meanings and measures of Efficient, Effective, and Ethical procurement. It should also specify consequences for those entrusted with public funds who fail to comply with Efficient, Effective, and Ethical practice.
Public procurement should then focus on these outcomes and the procurement objectives, rather than on detailed inputs such as technical requirements. Government needs to recognise that technology is an enabler and not an end in itself. It is buying the fulfilment of its objectives. It is up to the vendor how they meet the Government's objectives, which shifts the technical risks to the vendor.
Accountability for delivering the objectives then needs to be applied to both public servants and vendors. An egregious example of a lack of accountability was when PricewaterhouseCoopers (PwC) was found to have acted unethically in 2015–2016.19 While charging Treasury for advice on improving tax revenues from multinational corporations, PwC obtained privileged information which it used to advise multinational clients on how to avoid tax.
PwC was removed from the Management Advisory Services (MAS) panel, by which it was pre-qualified to bid for Commonwealth services. In reality, PwC sold its government business to Allegro Funds Pty Ltd, which created a new company, Scyne, with the employees and government contracts of the old PwC Government business unit. Despite the MAS panel being closed, Scyne was quietly put on. PwC was no longer involved in the projects, but they pocketed the sale proceeds, mitigating the cost of losing MAS membership.20
Recently, the government asked the Digital Transformation Agency (DTA) for advice on ways to punish malfeasance by multinationals. The DTA's advice? Don't punish — in case they develop important new technology in the future.21 Could this advice be considered competent or even ethical? Absolutely not.
The DTA is an organisation of ~300 people. If focused on enforcing efficient, effective, and ethical behaviour in a revamped PGPA, it has the resources to effect change across the public service. A key role should be to maintain performance records across jurisdictions so that both high and low-performing vendors can be easily identified by others in Government. A whole-of-Government approach could then be taken to reward good performance with preferential procurement, while limiting opportunities for poor performers until trust has been restored.
Operationally, a public dashboard should show the status of technologically enabled services. To their credit, the Queensland Government has a dashboard that shows the status of 122 projects. However, according to historical assessments, the Queensland government runs over 1,100 digital projects every year — so what is happening to the other 978? And what is happening in every other jurisdiction across Australia?
Procurement's Role in Developing Sovereign Capability
Sovereign capability refers to a nation's strategic ability to independently develop, produce, and sustain critical technologies, goods, and services to ensure national security, economic resilience, and self-sufficiency, reducing reliance on overseas-based supply chains for critical sectors such as defence, health, energy, and advanced manufacturing.
It seems an obvious goal, but at present, the Australian government has no policy to develop sovereign capability through government procurement.
The Senate recently held an Inquiry titled 'Supporting the development of sovereign capability in the Australian tech sector'. A common theme in submissions was the suppression of local innovation and sovereign capability, in the hope of a cheaper, more effective outcome for Government. Recommendation 4 of the Inquiry advocates that the Government address rampant conflicts of interest in procurement by mandating that all suppliers disclose their commercial relationships with any other suppliers working on the same project.22 A clear pattern emerges of multinationals favouring other multinationals in procurement advice.
Nurturing Strategic Sovereign Industry
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While there is no Sovereign Capability Strategy, Government currently does support generic business development through grants, tax deductions, and, in some limited cases, preferential procurement. However, in the new, fast-moving digital economy, the generic business support programs are losing impact.
For example, Australian Government procurement policies have long required multinational vendors to include a local vendor in major government proposals. This approach is generally opposed by local vendors, who are routinely underpaid for their contributions, cannot develop or sell intellectual property, and find it difficult to build relationships with government decision-makers.
Government should work with local vendors, including innovative start-ups, to jointly identify opportunities to improve Government performance in areas of low sovereign capability. In particular, agencies could provide 'sandpits' to conduct R&D in collaboration with local companies and test options before officially going to market. This would more directly connect vendors with the people in agencies who manage the relevant work. The cost to agencies and government, as a whole, would be more than offset by improvements in efficiency and effectiveness.
Within these sandpits, it would also be possible to implement practical risk reduction strategies, including: sharing the agency's architectural standards with the industry; leveraging composable architectures so that the failure of an individual contributor is not terminal to the agency's services; sharing risk assessment and mitigation priorities with industry partners; working with local partners to help them address government scale; and ensuring the industry understands the government's privacy and cyber-security standards.
Within reasonable financial thresholds (at least six figures), Government agencies should also be able to procure from companies collaborating in the sandpits, provided there is a business case for faster delivery, lower administrative overheads, and potential sovereign capability enhancement.
Hiring local firms and paying them promptly for their work is far more effective than handing out grants or tax deductions. In the digital economy, customers are almost as important as income. Government procurement can be decisive for a local company bringing a new product to market.
The procurements also need to be timely for local vendors. Go-to-market documents may be reviewed for months by legal and procurement advisors. These are not advancing the objectives; they are overburdening procurement with administrative work. Multinationals can absorb delays because they have deeper pockets and other large projects worldwide. Local providers need cash flow to survive.
Conclusion
We live in a time when government procurement capability must be uplifted for the sake of our national security. For decades, we have relied on the US and UK for crucial capabilities, but the geopolitical order is in flux. We suddenly find ourselves vulnerable. Unlike other nations, we have failed to leverage government buying power to ensure we can sustain ourselves if global freight networks were to be disrupted, even for a short time.
Government procurement professionals are not to blame for this situation. They are following a set of poorly conceived and unaccountable processes as if they are ends in themselves. They are not. We can no longer afford a system that fails to deliver capability and value for money. Reform is sorely needed.
The first step is to move to procuring outcomes. This creates a clear line between the customer, who specifies the outcomes it seeks, and the provider, who delivers them. The selected vendor is responsible for how they are delivered. Current processes blur this line and, in doing so, leave the government liable for massive cost overruns. Effective legislation is a crucial part of performance uplift.
The PGPA needs to be both simplified and enhanced. It must contain clear, commonsense rules and definitions; compliance must then be monitored and enforced. The general public ought to be angered that government spending on goods and services worth more than $100bn per annum is administered without clear rules and with virtually no enforcement. Surely these are ideal conditions for waste and corruption.
The second step is to develop a sovereign capability strategy. This is more difficult because it requires nurturing local businesses and changing the way Government agencies understand and manage risk. The Australian Public Service has great people, and when they understand the challenge and the outcomes Australia needs, they can change the system for the better.
One thing is for sure. We can't keep doing what we are doing now. When the general public really understands how much money and opportunity have been wasted, they will be outraged.