The objective of the audit was to assess whether Defence achieves value for money in the procurement of fuel. To form a conclusion against the objective, the ANAO adopted the following high-level audit criteria:
- procurement processes complied with the Commonwealth procurement framework and relevant Defence requirements; and
- Defence's contracting and purchasing arrangements achieve value for money for the Commonwealth.
Defence designed and implemented an effective competitive tender process but did not develop a negotiation strategy to maximise value for money and there remains scope to improve the effectiveness of contract management, purchasing and assurance arrangements to demonstrate that value for money is being achieved.
Defence's open tender and evaluation processes were fit for purpose. The processes were largely compliant with Commonwealth and Defence requirements. While the fuel pricing formula applied was industry standard, Defence was unable to demonstrate that value for money was maximised as Defence did not seek to negotiate lower prices for some components of the pricing formula before supply contracts were signed.
Defence's contract management would benefit from improved integration of key information systems and reduced manual intervention, including in the calculation of fuel prices.
Defence's ability to provide assurance over the management of its fuel supply chain is limited by infrastructure and information technology deficiencies and insufficient central data analysis. Defence is currently implementing some short-term initiatives to improve central oversight, however significant systems level improvement regarding assurance controls is not scheduled to commence until 2022.