A secret consultancy contract between the Department of Health and Ernst and Young that saw procurement rules violated to inflate a $700,000 contract to more than $4.3 million through variations has been referred to the ICAC by the Opposition and an independent MLA, after an Auditor General’s investigation was made public.

The debacle has also raised calls for Health Minister Natasha Fyles to resign for lying to the public about how the contract was awarded.

The NT Independent revealed on Tuesday that Ernst and Young was the company identified in the Auditor General’s report as being awarded a government contract in April 2020 under the pretence of a review into the government’s COVID-19 response, that quickly expanded to include a full organisational restructure of the Territory’s health system without going to public tender.

Auditor General Julie Crisp found the massive variations of the contract breached procurement rules.

Her report also provided evidence that the department and Ms Fyles misled the public when they claimed the contract did not have to go to public tender due to an “emergency procurement exemption” early on in the COVID-19 pandemic that was found not to have existed and that the “direct contracting” criteria to award the contract was not met by the department.

Ms Fyles had also earlier this year repeatedly refused to disclose the full cost of the contract to Ernst and Young – the company that had recently hired former Department of Business chief executive Michael Tennant – citing cabinet-in-confidence reasons.

Both the CLP Opposition and independent MLA Robyn Lambley were scathing in their assessments of the deal yesterday after the Auditor General’s revelations, with both referring the matter to the Independent Commissioner Against Corruption for further investigation.

CLP health spokesman Bill Yan, who had previously criticised the Gunner Government’s secrecy around the Ernst and Young consultancy contract, said Ms Fyles needed to resign for refusing to explain the $4.3 million consultancy debacle.

“Territory taxpayers deserve to know how their money is being spent, and have every right to be outraged that the Auditor General has found procurement rules were breached throughout this process,” he said.

“For a government that came to power on a platform of openness and transparency, Labor has absolutely failed. The fact they attempted to conceal this report and a major cost blowout under the cover of COVID is outrageous. And begs the question: what else are they hiding?”

Mr Yan pointed to the crisis at Royal Darwin Hospital that has seen repeated staff and bed shortages result in elective surgeries cancelled for Territorians, a slow vaccine rollout in remote communities and the new revelations Ms Fyles misled Territorians about the consultancy contract as grounds for resignation.

“Natasha Fyles has failed at every turn,” he said. “Will she finally resign as the Territory’s worst Health Minister?”

‘Heads should roll, but I’m not holding my breath’: Lambley says action must be taken to restore the public’s confidence

Robyn Lambley said the Auditor General’s findings into the consultancy contract were “yet another startling example of alleged mismanagement and possible corruption within the NT Government” and that “heads should roll”.

But she questioned why several recent reports of similar procurement and governance lapses were not being addressed by the government, or seemingly, the ICAC.

“How does a contract balloon from $700k to more than $4.3 million, with six variations, and not follow the legal procurement process? This looks like a scam of grand proportions. Heads should definitely roll, but I’m not holding my breath,” she said.

“ICAC was established in the NT to stop this kind of systemic abuse of power and position, and misconduct within government.

“Ironically, the integrity of government has deteriorated since the inception of ICAC under the Gunner Government.”

ICAC Michael Riches has made it clear he does not comment on potential investigations. However, in a general report to Parliament tabled at the last sittings earlier this month, Mr Riches reiterated his intention to refer some matters raised with his office back to departments to handle, while providing “oversight”.

It’s unclear whether the Health Department’s Ernst and Young consultancy contract would fall under this scenario or if anyone will be publicly held accountable for the breaches of policy and misleading Territorians.

Ms Crisp’s report found a multitude of failures with how the department handled the EY contract, including that contract management staff weren’t trained properly, that contractor performance reports were not undertaken, that the contracts were awarded without proper review, that standard terms and conditions of the contracts were not issued, that price negotiations did not occur and that some of the contracts were not properly disclosed.

She also found that conflicts of interest, “either actual, potential or perceived”, were not clearly documented and that conflicts of interest declarations were not filed by everyone involved in the procurement process and subsequent contract management.

Variations of six separate “procurement activities” between the department and Ernst and Young ranged from $140,000 to $1.5 million.

“The significant number of high value variations is indicative that the scope of works was not well considered nor well defined at the outset,” Ms Crisp found.