Whilst government and private sector firms benefit by recruiting from one another, a recent IBAC report* has highlighted corruption risks and conflicts of interest (COI) that can arise when VPS employees take up private sector roles.

As with other probity dilemmas, in the twilight zone between “clearly OK” and “clearly wrong”, many real life examples exist.

A government employee who awards a tender in exchange for a promise of employment with the successful tenderer, has acted improperly. VPS employees who deliberately use their position, including access to agency information and business contacts, to improperly further their own private business interests or improve their prospects of future employment have probably crossed the line. According to the IBAC report, this scenario may be a COI under the VPS Code of Conduct, if the employee’s personal financial interests appear to influence the performance of their role.  

On the other hand, an evaluator who coincidentally receives an unsolicited job offer from a tenderer, may not have done anything improper. There may nevertheless be an adverse perception. The adverse perception can be worse the later this occurs in a tendering process and the more senior the person’s role. If the employee receives a lump sum payment or shares, the perception can become very adverse.

This type of COI is not an uncommon probity issue in VPS procurement. The Victorian Public Sector Commission website states:

There is nothing unusual or necessarily wrong in having a conflict of interest. It is crucial, however, that conflict of interest is managed to protect the public interest.

If not managed appropriately, conflict of interest can undermine confidence in the public sector and damage the reputations of organisations and individuals.

It’s increasingly common for people to move to the private sector from the VPS. Almost 300,000 people work for the VPS through a variety of employment arrangements including ongoing and fixed term employment and, increasingly resources engaged through staffing services contracts. Overlay the relatively high rate of churn and no wonder we see former public servants of all levels in private sector roles.

Many people who move between the VPS and private sector do so without there being any wrongdoing or concern. VPS employees are bound by confidentiality and COI obligations under the VPS Code of Conduct –  their colleagues who may be engaged through the staffing services arrangements or other contracts will be bound by the VPS Code of Conduct or similar obligations through the Victorian Government Purchasing Board Supplier Code of Conduct.

The IBAC report acknowledges that

… movement of people between the public and private sectors is often beneficial, as it broadens people’s experience, skills and understanding … when moving between positions, organisations and sectors, individuals will naturally leverage the skills and experience they have gained in their previous positions.

But, to avoid COI and corruption, IBAC has recommended that consideration be given to developing VPS guidance similar to the Commonwealth’s Circular 2007/3: Post Separation Employment: Policy Guidelines, which includes the following:

• advice on the management of actual and perceived COI and other probity issues when employees leave the APS to take up employment in fields that are aligned to their APS responsibilities
• restrictions on public servants from post separation employment as a lobbyist
• recognition that a key change in the nature of public sector employment is that it is no longer a “closed, entry level to retirement” career – people are moving in and out of the APS, and this, together with the widespread use of outsourcing arrangements, has made post separation employment a growing issue
• a list of important benefits arising for the private and public sectors alike from the increasing integration between them, such as:

– helping to improve the efficiency and effectiveness of Australian industry by facilitating the transfer of skills and experience between the sectors

– helping the private sector to better understand the policy and organisational culture within which the APS operates and to be more responsive and cooperative in providing services

– helping the APS attract staff that might otherwise be reluctant to join if they thought that at some later stage their options for careers in other sectors might be restricted

• common law principles that prohibit “restraint of trade” in employment (unless it can be shown that such restraint is reasonable) and legislative restrictions
• three key risks involved when an APS employee accepts employment in a field that is aligned to his or her APS responsibilities:

– that the employee, while still employed in the APS, would use their position to influence decisions and advice in favour of the prospective new employer

– that the employee would reveal confidential or sensitive Commonwealth information to their new employer or provide other information that would give the new employer an advantage in dealing with the APS and/or a competitive advantage in the market generally

– that the former employee would use their knowledge of and contacts within the APS, in other areas of the Commonwealth public sector and with the Government to lobby or otherwise seek advantage for their new employer in dealing with the Commonwealth

• recognition that agencies are best able to manage COI at the stages when an APS employee who intends to take up a private sector appointment is still employed by the Commonwealth
• reference to the APS Code of Conduct, which requires employees to:

– disclose, and take reasonable steps to avoid, any real or apparent COI in connection with APS employment

– not make improper use of:

— inside information, or

— the employee's duties, status, power or authority

in order to gain, or seek to gain, a benefit or advantage for the employee or for any other person.

• mitigations for post-separation COI risk such as:

– re-allocation of the employee's duties

– temporary movement to a different work area

– taking leave until the new appointment commences.

• a requirement for agencies to have procedures in place that:

– help all employees to understand the importance of avoiding real and apparent COI in their work

– require all employees to notify managers about private interests, both financial and personal, where they could present a real or apparent COI with their official duties

• recognition that procurement and impending contracts create high risk of COI
• distinction between  two types of information involved in the post-separation COI risk:

– official information and “in confidence” information, protected by law and off-limits

– information, knowledge and experience about subject matter and about how the APS operates and makes decisions that employees pick up through their responsibilities – this information is of particular interest to firms dealing with government – it’s legitimate for firms to gather the expertise that will best help it meet a client’s needs

• reaching agreement about restrictions on post-separation employment is easier when the person joins the APS than when they resign to go to the private sector
• it may be more convenient to restrict firms contracting with government from employing certain former public servants e.g. those involved in a tendering process.

Until Victoria has its own guidance, VPS agencies can refer to the Commonwealth material. And, like any other COI, usual VPS COI processes apply: the employment offer should be disclosed ASAP and the resulting COI managed according to an agreed plan.

* IBAC’s report Corruption and misconduct risks associated with employment practices in the Victorian public sector identifies corruption risks that can occur throughout the employment lifecycle, from recruitment through to an employee leaving the public sector.

* * *

IMAGE: Spring Street, Melbourne. By Max Goupil.

Written by