Question

In December 1999, IBM-GSA was one of three tenderers for the IT outsourcing contract for the Departments of Health, Aged Care and the Health Insurance Commission (the Health Group), along with CSC and EDS. During the tender process, IBM-GSA was supplied with computer disks containing critical information relating to final pricing of their rival tenderers. IBM-GSA subsequently revised its tender after the due deadline and the minister announced they were the successful bidder. At the time, the Office of Asset Sales and Information Technology Outsourcing (OASITO) described giving IBM-GSA details of their rival’s bids as an ‘inadvertent error’. The minister dismissed the Opposition's call for an immediate halt to the tender process. Three years later, the minister, now retired, admitted that the $350 million tender should have been cancelled. He told the Audit Office in September 2002: “When the disc containing all three bids was delivered to IBM GSA in error my reaction on being informed directly by OASITO was to cancel the tender. I could not see that a tender process with integrity could continue. At the conclusion of the tender I was both disappointed and annoyed at the limited role of the Probity Auditor and the absence of a separate report on the issue.” Not only did the tender continue, with IBM-GSA being awarded the contract, but the minister's claim that the Probity Auditor’s role was limited was contradicted by evidence provided by OASITO to a Senate Estimates hearing on 8 February 2000. OASITO representatives told Senate Estimates that the management of the tender: “…was conducted in accordance with the advice from both the probity auditor and our legal advisers engaged for the initiative. All parties concurred at the time that the process could continue unchanged [OASITO] briefed the probity auditor in person [who] immediately came back to us with a proposed course of action…We engaged the probity auditor to participate in all of our discussions to make sure that he fully witnessed the nature of the discussions…and he was happy that we had delivered the messages in accordance with his proposed course of action.”

Q1. What are the ethical issues and implications?

Q2. What can be done about it?

Q3. What are the options?

Q4. Which option is best - and why?

Answer 1

1) Ethical issues and its implications include the planning and audit by the auditor accountant and analysis of the case by the legal advisors where it was found that sensitive information of the tender quotations of the various firms was passed on to IBM-GSA by the company OASITO in the form of computer discs. This led to the revision in the policies of the prices of the tenders and quotations of IBM in the market. This is an ethical issue with breach of conduct of the policies of the various companies by the company IBM. The tenders were cancelled and there were many errors in the auditor files due to the revising of the range of money and its value as declared in the market tenders leading to severe discrepancies in the accoounting process.

2) Legal advisor action should be taken against the breaching of the sensitive information and legislative laws should be developed for preventing the organizations from getting corrupt and getting engaged in illegal activities.

3) The risk evaluation criterion and threshold study should be analyzed with the analysis of the values of the tenders and its market premium prices. Appropriate measures should be taken for preventing the leak of information and sealing of the tenders before they reach the market. The risk involved should be less with implementation of policies for successful investment of funds for trading of the tenders in the market. ID numbers should be appropriate and the naming of the tender files should be according to the policies of the company. The eomployees should be loyal in the company.

4) There should be partnership of the organization and authorization by the steering committee before the declaration of contracts and signing of the managind director with his approval should be there before the selling of the tenders in the market. The finance ministry and legislative council should set standards for the selling of contracts. OASITS and other healthcare companies should sign contracts regarding preventing the leakage of sensitive information and imposition of heavy taxes and compensation by money if sensitive information is transferred to the other companies with offering of bribes to the employees of the company who is interested in selling tenders in the market.