Senior staff in Victorian Premier Daniel Andrews's government interfered and pressured public servants to ensure lucrative contracts were awarded to a key Labor Party ally without competitive tender, the state's anti-corruption watchdog has found.
The Independent Broad-based Anti-corruption Commission (IBAC) has slammed the premier, health ministers and the public service for the awarding of a contract in 2018 to the Health Workers Union (HWU) to deliver specialist training to deal with occupational violence.
"The union was given privileged access and favourable treatment,'' IBAC's Operation Daintree found.
"The combined effect of these failings and unethical conduct resulted in a contract that should not have been entered into with the union and an outcome which was not in the public interest."
During her interview with investigators, former health minister Jenny Mikakos told IBAC "it appeared the contract had only been entered into to placate [HWU secretary Diana] Asmar during the election period and looked like a 'way … of injecting funds into the HWU'".
But IBAC's report, tabled in state parliament on Wednesday morning, stopped short of findings of corrupt conduct, instead saying Mr Andrews should be accountable to parliament for the behaviour of his staff.
Findings of corruption under Victorian legislation require findings of criminal conduct.
"[Operation Daintree] did however reveal a range of concerning conduct and omissions in breach of the public duties and ethical obligations of ministers and ministerial advisors,'' the report said.
"It also identified conduct by senior public servants that fell short of the required Victorian public sector standards."
The key concern for the anti-corruption commission was the behaviour of advisors working for Mr Andrews and former health ministers Jill Hennessy and Jenny Mikakos. Both women have since left parliament.
"The pursuit by advisors of the perceived interests of their ministers, including the premier, at the expense of proper process and standards is another example of the phenomenon of grey corruption that is of increasing concern to integrity bodies around Australia," the report said.
IBAC said grey corruption "involves the bending or breaking of rules, even if that might not amount to criminal behaviour, but that unfairly favours the allies, friends and networks of decision makers".
Premier labels report 'educational'
The report found ministerial advisors bypassed normal protocols in dealing with the public service to ensure the contract was awarded and then upheld.
There was also constant communication between union secretary Diana Asmar and ministerial advisors about the project, with pressure put on the department to ensure it occurred.
To tackle this, IBAC has made 17 recommendations to ensure staff and ministerial codes of conduct are less opaque, and to crack down on advisors pressuring public servants.
IBAC also suggests allowing parliamentary committees to call advisors to ministers, which is currently not allowed.
The report is also critical of some public servants for not providing frank and fearless advice.
"The evidence from Operation Daintree provides a powerful example of the apparent increase in the pliability of the public service,'' IBAC said.
Mr Andrews addressed the media in a hard hat and high-vis at a press conference with Deputy Premier Jacinta Allan to discuss their government's North-East Link build in the hours after the scathing report was tabled. It took about six minutes for Mr Andrews to raise the IBAC report.
"We thank them for that report, there are 17 recommendations made in that important educational report. I will lead, as the chair of the cabinet, a cabinet process to consider those issues and we will respond in due course," he said.
Mr Andrews noted that there were no findings against anyone in the report but acknowledged "the recommendations do go to a number of serious matters, important matters".
"The staff members that are referred to in this report do not work for the government anymore and have not worked for the government for years. And of course, as you well know, the two ministers who are referenced in the report are not even members of the parliament any longer," he said.
"So obviously, I am accountable and fundamentally responsible for driving a process to consider those 17 recommendations, look at them very carefully, to potentially further engage with IBAC to seek their advice and then to respond once that work has been done."
When asked about IBAC's comments relating to "grey corruption", Mr Andrews said it would be inappropriate to comment on the "commentary" found within the report, repeating that there were no findings against anyone.
"The issues that IBAC raise in very broad, sweeping, often undefined terms, are picked up in a series of recommendations that have been made," he said.
Opposition Leader John Pesutto labelled the report "scathing" and said it went "to the heart of the Andrews government['s] abuse of process and a complete lack of integrity".
"Soft corruption, grey corruption, call it what you like — it's all corruption," he said.
Mr Pesutto appeared at his afternoon press conference with a series of IBAC and Ombudsman reports involving the Andrews government, including the recent Operation Watts report.
He said the time had come for Mr Andrews "to seriously consider his position" but stopped short of calling for him to resign.
Million-dollar contract awarded with no competitive tender process
In 2018, the HWU made an unsolicited proposal to the Andrews government to develop a training program to addresses occupational violence and harassment.
The government awarded a $1.2-million contract to the union to provide the training to 575 frontline health workers just hours before it went into caretaker mode ahead of the November 2018 state election.
The training program was delivered by a new entity called the Health Education Federation (HEF), which was set up by the HWU.
It had no experience and there was no competitive tender process.
A week earlier, the premier made an election promise for another $2.2 million to train 1,000 frontline health workers in partnership with the HWU.
It followed a meeting between Ms Asmar and the premier just weeks before.
Mr Andrews was interviewed in secret as part of Operation Daintree, as IBAC went to court to try and stop The Age newspaper from disclosing details of the probe during last year's state election.
IBAC said the premier "had no recollection of what he discussed with Ms Asmar, no recollection of any discussion with his advisors that led to this announcement [election promise] and no awareness that they and the Minister for Health's advisor had discussed a detailed proposal".
"After the Premier realised that his recollection of what he announced was faulty he left open the possibility that he may have made a commitment to Ms Asmar but remained quite uncertain that what he announced amounted to a commitment,'' the report said.
IBAC found that a ministerial advisor in Ms Hennessy's office "exerted pressure" on the Department of Health and Human Services (DHHS) to award the contract.
It also found the decision by DHHS to contract the HEF "without undertaking a competitive procurement process was driven by a belief of senior staff in that department that that was the minister's and government's preference, and by ongoing pressure from the ministerial advisor and secretary of the union".
Mr Andrews, Ms Hennessy and Ms Mikakos all said, at times, that they were unaware of the specific activities of their staff.
"It would be a matter for parliament to consider whether the conduct of his advisor in this case was sufficiently serious for the Premier to be held personally responsible for it, on the basis that he ought reasonably to have known about it,'' IBAC said.
Report finds HEF 'not equipped' to fulfil contract
In 2019, feedback for HEF's pilot program was poor but it didn't stop the project.
Among concerns about the training program were reservations that it was plagiarised, was littered with grammatical errors and did not address key areas of risk.
"From the outset, it was apparent to DHHS officers that HEF was not equipped to deliver the training,'' the report said.
"During 2019, DHHS found HEF's performance under the contract to be so poor that it was subsequently said by numerous witnesses, including former Minister Mikakos and Executive Officer A, to be a contract that should never have been awarded to HEF."
Despite pressure to delay the training program from department officials, Ms Mikakos' office directed the program to continue.
IBAC said an advisor "intruded into DHHS' management of the contract in ways favourable to the HEF and against the public interest".
Ultimately, only 83 of the planned 575 staff got training and only $335,000 of $1.2 million was actually paid.
COVID halted the program in March 2020.
Ms Asmar spoke frequently with advisors in the Premier's Private Office (PPO) and the health minister's office and the report is critical of the access she was able to get.
In 2021 she complained to then-health minister Martin Foley that funding from DHHS for the training program still had not come.
'Tentacles everywhere': Concerns about centralisation of power, public servants
Throughout the 128-page special report, the anti-corruption watchdog highlights the centralisation of power in Mr Andrews's private office, a criticism privately held by MPs and ministers for years.
The report highlights how it was normal practice for PPO advisors to assess proposals from stakeholders rather than passing it onto a minister's office.
"The Premier is accountable to Parliament for the conduct of his staff,'' the report said.
Ms Mikakos said the current government was "very centralised with the PPO having its tentacles everywhere".
Responding to questions about the report, Mr Andrews said he disagreed with the "sweeping contention that my office is not working hard" to deliver election commitments and deal with challenges facing the state.
While most of the findings centre on advisors working for the premier and ministers, the report also raises issue with the performance of the public service.
"Operation Daintree provides a case study of multiple occasions on which some officers in the department did not make impartial, frank and fearless decisions,'' it said.
IBAC noted that Victoria is not unique in the erosion of public service independence and observed there needs to be better protection for public servants to do their job without fear of retribution from government.
"Such fears can relate to the denial of development opportunities, such as higher duties assignments, secondments or training, or loss of chances to be promoted through to 'get(ting) your marching orders' as one DHHS witness put it,'' the report said.
The ABC has attempted to contact Ms Mikakos, Ms Hennessy and the HWU.
