Mike Pezzullo, Home Affairs lashed over 'serious' procurement failings

The Joint Committee of Public Accounts and Audit found Mr Pezzullo, who has headed the mega-department since 2017, was "not ... persuasive" in his attempts to explain why the troubled multi-billion dollar maritime surveillance services contract was extended to 2027 without seeking a competitive tender and despite serious shortcomings identified by the Australian National Audit Office.

The committee, whose report on Commonwealth procurement failings was tabled in Parliament on Wednesday, said an audit finding of deficiencies "in almost every aspect of the department's management of a contract intended to protect Australia's maritime zone from illicit activities ... is unacceptable".

"This is on the back of similarly critical audit reports on other significant procurements," it said, including for services for offshore processing centres at Nauru and Papua New Guinea.

The auditor found the maritime surveillance contract found that the provider did not meet the department's operational needs and did not possess the equipment and capabilities paid for.

Despite knowing of these serious deficiencies, the department decided to extend the contract at the cost of an extra $991 million, taking the total value to $2.6 billion over 21 years.

Mr Pezzullo told the committee the contract had been extended because the department lacked an "integrated investment plan" .

The committee said it did not find the department head's explanation "persuasive" and, following an offer from Mr Pezzullo, invited the department to make a supplementary submission. None was provided.

"The department's response to the findings of the audit and the committee's concerns were disappointing," the report said. "Its rejection of key findings from the audit ... suggests that it has not fully acknowledged its shortcomings in contract management or accepted this experience as a valuable learning opportunity".

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The committee report followed this rebuke with an even sharper swipe at Mr Pezzullo and his leadership team, who have come under heightened scrutiny in recent weeks over concerns that Home Affairs has hired companies linked to an offshore bribery case.

The primary determinant of organisational culture is the behaviour of and tone set by leaders, including officials and ministers, the report said.

"The committee is concerned that the Department of Home Affairs has consistently been found in annual APSC surveys to have the worst culture of any large Commonwealth department," it said.

"This cannot be set aside by grandiose critiques of the survey methodology or by claims that it is because staff want to be paid more."

While acknowledging the impact of wage concerns and "serial under-resourcing" on staff morale, "the leadership of Home Affairs needs to accept its share of responsibility", the report said.

Tabling the report in parliament, committee chair, Labor MP Julian Hill , said that "above all else, culture is set by leaders".

Mr Hill said the "big message" from the committee report was the need for a major shift in public service culture and behaviour around the procurement of goods and services.

The report had made 19 recommendations aimed at strengthening knowledge or, and adherence to, Commonwealth procurement rules, including maximising value for money through competitive tendering, improved transparency and record keeping and making procurement a professional stream within the public service.