The issue of commercial-in-confidence has been the subject of considerable parliamentary concern and comment in many constituencies. With the greater involvement of the private sector, concerns have been expressed about commercial considerations, particularly in maintaining competitive advantage. Freedom of information legislation, such as the Freedom of Information Act 1982, provides for documents to be exempt from disclosure where they would reveal, inter alia, trade secrets and other information having a commercial value that would be, or could reasonably be expected to be, destroyed or diminished if the information would be disclosed.134
Equally, however, concerns have also been expressed about the extent to which commercial interests have been protected at the expense of eroding transparency and accountability. As one commentator noted:
While [Commercial-in-Confidence] may be good for business, it is inimical to the fragile processes of participatory democracy.135
With the increased convergence of the public and private sectors, demonstrating transparency, accountability and the ethical use of resources has the potential to become clouded unless governments take a proactive and consistent stance to the scrutiny of contracts involving public funds.136 A diminution or loss of accountability need not be a function, per se, of the chosen procurement method, whether it involves PPPs or some other method involving private sector commercial interests. To a large extent, it may be a function of the approach taken by agencies, and governments, to fulfilling their accountability obligations, whether by omission, commission or due to a lack of understanding of those obligations.
This issue was raised by the Senate Finance and Public Administration References Committee during its inquiry into the Commonwealth Government's IT outsourcing initiative, as follows:
Placing limitations on the free flow of information has the effect of bypassing parliament; reducing public scrutiny of important government decisions or programs; denying citizens access to information about programs affecting them; and restricting citizens' access to remedies in the event of poor service delivery.137
An alternative view was put in the Government Senators' minority report on that inquiry, which argued that there were legitimate reasons for not handing over these various documents including commercial-in-confidence grounds, a risk of litigation and public interest immunity.138 The minority Senators expressed the view that:
Companies considering entering into a partnership with the Government, or who have entered into a partnership with the Government should be able to provide commercially sensitive information to the Government with the confidence that it will not be made publicly available….139
One of the difficulties in addressing commercial confidentiality issues is that of precisely defining just what is being covered. While there is a broad understanding of the kinds of information contractors might regard as commercially confidential, the question is how to ensure adequate accountability for the use of public funds while ameliorating any justifiable 'confidentiality' concerns. One of the Principles put out by the Australasian Council of Auditors-General concludes that:
Some private and public sector bodies are instinctively apprehensive and protective about the disclosure of any commercial information. Bust such views often overstate the implied risks to an entity that might be occasioned by the release of commercial data. After-the-event commercial information has significantly less value than commercial information concerning events that have yet to occur. But even where commercial information might have commercial value to others, there are often overriding obligations that require it to be released. This is so for commercial information held in the private sector and, a fortiori, it applies to the public sector.140
In May 2001, ANAO completed a performance audit of the use of confidential provisions in contract with commercial providers.141 The ANAO worked cooperatively with several agencies to distil their experience into a sound framework for wider application across the Australian public/private sector interface. The ANAO reported several weaknesses in agencies handling of confidentiality provisions in contracts:
● a lack of rigorous consideration during the development of contracts of which information should be confidential;
● the failure of the confidentiality provisions in contracts to specify which information in the contract is confidential; and
● uncertainty among officers working with contracts as to which information should properly be classified as confidential.142
The ANAO developed criteria for use in determining whether contractual provisions should be treated as confidential.143 These criteria are designed to assist agencies to make a decision on the inherent quality of the information before the information is accepted or handed over - rather than focusing on the circumstances surrounding the provision of the information. The audit also gave examples of what would not be considered confidential144 and examples of what would be considered confidential.145 The Senate Finance and Public Administration References Committee in a recent report on Commonwealth contracts146 strongly supported agencies' immediate use of the set of criteria developed by the ANAO for determining whether a sound basis exists for deeming information in contracts confidential. The ANAO audit report also made three recommendations directed at increasing the level of openness of government contracts
At the Commonwealth level, in June 2001 the Senate made an Order that required Ministers to table letters of advice that all agencies, which they administered, had placed on the Internet lists of contracts of $100,000 or more by the tenth day of the Spring and Autumn sittings of Parliament. The list was to indicate, among other things, whether the contracts contained any confidentiality provisions and a statement of the reasons for the confidentiality. The Government subsequently agreed that agencies would comply with the spirit of the Senate Order. The Government advised that information regarding individual contracts would not be provided where disclosure would be contrary to the public interest, legislative requirements or undertakings given.147 Subsequent amendments to the Senate Order were aimed at strengthening and clarifying the Order.
The Senate Order requested the Auditor-General to undertake twice-yearly examinations of agency contracts required to be listed on the Internet and report as to whether there had been any inappropriate use of confidentiality provisions. I agreed to that request and, to date, two audit reports have been tabled.148 Both audits found that a high percentage of the contracts examined had been inappropriately classified as confidential when considered using the criteria endorsed by the Senate committee. ANAO noted that this was not unexpected, given that the majority of contracts were entered into by agencies before they had started to make the changes necessary to put into place the new accountability framework and without guidance to determine if information in a contract should be protected as confidential. In most cases, agencies agreed with the ANAO's assessment.149 The second of these audits found that guidance provided by agencies for officers to determine confidentiality provisions and the reasons for confidentiality should be more comprehensive to enable greater consistency in agency assessments, and noted that the Department of Finance and Administration was in the process developing guidance in this regard, which it expected to issue to agencies in late 2002.150
In placing the onus on those who wish to keep the information confidential to argue that the confidentiality is warranted, the Senate Order sought to invoke the reverse onus principle, which has been described as follows:
In order for the court to be persuaded to protect a government secret, the government must establish that it is in the public interest that the information not be disclosed. Further, the courts have been sceptical of governments wishing to keep matters secret so that the onus on the government is a heavy one.151
The Senate Finance and Public Administration References Committee recently reported152 in fulfilment of the requirement of part (7) of the Order to consider and report on the first year of the operation of the Order, that is, from 1 July 2001 to 30 June 2002. The Committee has closely monitored the Order over its relatively short history and, soon after it became operational, recommended changes to the Order that were accepted by the Senate and implemented as of 27 September 2001 (referred to earlier). The Committee concedes that the establishment of the Order has been a catalyst for action on the part of government agencies to ensure greater accountability and transparency in relation to government contracting.153 It noted that the new requirements regarding accountability that were included in the revised Commonwealth Procurement Guidelines of October 2001 were in response to the Order. The Committee made seventeen recommendations and an extensive range of conclusions on specific issues.154
The approach taken to this issue in other Australian jurisdictions has varied. For example, the policy statement on private sector participation in public infrastructure provision released by the Tasmanian government in July 2000 requires that a contract summary including key elements of the contract be prepared within 90 days of finalising the contract, which the Treasurer, in consultation with the Responsible Minister, may decide to make public in the interests of public accountability. The policy statement further provides that, in the event the contract summary is made public, any matters which, if disclosed would substantially disadvantage the contracting firm commercially with its competitors, will be deleted from the summary.155
Some other jurisdictions have taken their response to this issue even further, with some taking the approach of introducing policy or legislative requirements for the public disclosure of contracts based on the reverse onus principle. Measures taken by State governments include the following156:
● In response to the findings of an independent Audit Review of Government Contracts commissioned by the government in January 2000, the Victorian policy places the burden of proof to disclose government contracts on government agencies.157 If there is a compelling reason, information need not be disclosed but such non-disclosure extends for only a limited time. Details of all departmental contracts worth more than $100 000 are accessible on the internet and contracts over $10 million are published in full on the internet. If a clause has been removed from a contract, a statement is required to explain the reason for and scope of the exclusion.
● In Western Australia (WA) the details of contracts over $10 000 are to be published on the internet after the contract is signed. All government contracts must include disclosure clauses which advise that contractual documents may be disclosed if required by law, under the WA Freedom of Information Act 19888, by tabling the documents in State parliament or under a court order.
● Principles and Guidelines for the Treatment of Commercial Information Held by ACT Government Agencies outlines how information in a contract can be determined as confidential at the time a contract is being negotiated. The Public Access to Government Contracts Act 2000 (ACT) requires that agencies prepare a public text of a contract within 21 days of making the contract. The public text only excludes clauses deemed genuinely confidential according to provisions of the Act. The ACT Auditor-General maintains a register of contracts containing confidentiality clauses.
• The policy for privately financed projects released by the New South Wales government in November 2001 states that the Government will require the publication of a contract summary for privately financed projects, with the summary audited by the Auditor-General and tabled in Parliament.158
It has been noted that these legislative and policy responses:
…still respect the need for genuinely confidential material to remain undisclosed. Each system makes clear that governments are accountable for agreeing to non-disclosure and must be prepared to justify their decisions.159
Ultimately, the successful maintenance of transparency and accountability for the expenditure of public funds in an environment of increased public sector involvement is likely to continue to rely upon the approach taken to the issue by governments and agencies. As the Audit Office of NSW has observed, a contract can be written to maintain or even enhance accountability and access, or can be written to diminish both.160 The Senate Finance and Public Administration References Committee has similarly noted:
Unfortunately, in the context of government contracts the reverse onus principle is in a precarious position because, as it stands, the reverse onus principle may be bypassed by contractual provisions.161
The Senate Committee has reported that, in order that open government is not deliberately or unwittingly compromised in the context of Commonwealth contracting, it favours reinforcement of the reverse onus principle by legislation requiring all government contracts to be publicly available unless particular exemptions apply.162