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AU$240m went up in smoke on failed school portal project

Anti-corruption body finds project was more corrupt, for longer, than anyone thought

By Richard Chirgwin, 29 Jan 2017

The corruption watchdog in the Australian State of Victoria has concluded that the state's failed "Ultranet" project was made vastly more expensive by official, rampant and long-standing corruption.

The “Operation Durham” report also highlights just how long people can operate without oversight, if they happen to catch a government's imagination. The individual most criticised by the Independent Broad-based Anti-Corruption Commission (IBAC) is Darren Fraser, who it says has advanced a single-school portal since the 1990s.

The recap: the statewide project ground on from 2004 to 2014 before it was taken behind the shed. It was launched with a promotional event worth AU$1.4 million, during which Ultranet's flaming wreck crashed into the ground.

Oh, and about that launch - the Ultranet "Big Day Out" in 2010 for which Victorian teachers got a "pupil free day" so they could attend? The IBAC report says it was "funded not from monies allocated to the Ultranet project, but from the OGSE’s [Office for Government School Education] general budget – funds that are intended for the benefit of schools and education."

The IBAC report is critical of almost every step of the Ultranet process, from its inception, demonstration, tender, right through to management.

In 2016, IBAC noted the nearly-untraceable cost of the system could be $240 million (the nearest the auditor-general could get was $180 million), and warned it might make a corruption finding in its investigation.

That's now happened. In the media release announcing its latest report, IBAC says:

“Behaviours identified by IBAC include the inappropriate receipt of hospitality and travel; improper communications intended to influence the tender process; and a likely attempt to influence the tender outcome by ‘stacking’ an evaluation panel. IBAC found decisions contrary to proper procurement process, in particular singular preference for a particular bidder, despite serious concerns about its credentials.

The IBAC investigation also revealed almost one million dollars was improperly paid to an external company in an attempt to prop up the Ultranet project. There was also evidence some senior departmental officers used confidential information about the project to purchase shares, and misled the Department about those purchases."

The genesis of the story goes back even before the Department of Education swooned over a 2004 Oracle pilot.

In the mid-1990s enthusiasm for “intranets”, Fraser, then principal of Glen Waverley College, and staff Ron Schlosser, Frank Aloisio and Ben Cushing implemented an online portal for parents, teachers and students.

During the process, the report says, the group got to know an Oracle employee, Greg Martin. They tried unsuccessfully to commercialise the Glen Waverley technology under an entity called Coretecnica, but had another opportunity when Fraser was elevated to Departmental Secretary of the Office of Government School Education (the report is confused by how, since he seemed to lack the qualifications for the role).

In that role, Fraser was tasked with recreating the Glen Waverley College intranet on a statewide basis. As we previously wrote, when nobody, not even Oracle, could come up with a tender under $100 million, a company called CSG was formed and put forward an $80 million tender.

The new report states unequivocally that departmental officers – including Fraser – had a financial interest in the company.

When things started to go sour in 2010/11, a scheme was hatched to keep CSG afloat: the company needed a million dollars (described wryly by IBAC as “the million dollar 'little project'”) to keep operating. In the department, the report says, Fraser set up the “Learning Technologies Quality Assurance Project (LTQAP) which supposedly paid a company called Alliance Recruitment to assess the progress of the Ultranet – even though the company was a payroll and recruitment services outfit with no quality assurance or IT experience.

Here's how the report summarises some of the goings-on at that time:

Operation Dunham found evidence to suggest the 'little project' was a one million dollar sham. Payments were made to Alliance Recruitment from departmental funds to corruptly inject funds into CSG to ensure it had sufficient cash flow to properly deliver the Ultranet project. The process used to appoint Alliance Recruitment was in clear breach of departmental protocols and was intended to mask CSG’s involvement.

To push the “little project” through Departmental approvals, Fraser prepared documents presenting Alliance as a suitable company to handle the process without a public tender, according to the report.

Even Fraser's own evidence supports the idea that the Alliance project was a sham. He conceded to IBAC that “it wasn’t...meant to be a $1 million project...the money was to provide a justification for that $1 million going to CSG”, adding that “the LTQAP was a cover to allow me to have money transferred to CSG so they could pay the wages bill of key resources related to the Ultranet”.

The report also makes findings that people in the department were using insider information to conduct share trades in CSG.

The Department of Education has been told to clean up its act, with a report to IBAC by 30 September 2017. IBAC reckons the Victorian government as a whole needs to consider “a ban on public sector employees receiving any gift, benefit or hospitality from a current or prospective supplier”.

And, of course, there will be communication between IBAC and Victoria's public prosecutor.

What about Big Red?

In its response to the report, Oracle denies it did anything wrong. The preferential treatment IBAC alleges it received from time to time was due to actions by Fraser and others in the department, it says.

Oracle was intimately involved in the project from the get-go, as the only private software company involved in a steering committee, Students@Centre, that preceded Ultranet. Its role drew warnings from Gail Hart, then a general manager in the Department's Accredited Purchasing Unit, and Anne Dalton, who is a lawyer and probity advisor.

IBAC does identify departmental staff as most responsible for impropriety around Oracle: “The improper behaviours by department employees identified here – the overly close commercial relationships with Oracle, the forming of companies to benefit individuals, and the willingness to breach proper protocols – would continue through the formal Ultranet process.”

As subcontractor to CSG, Oracle took the lion's share of the original $80 million: it was signed for $71 million. ®

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