‘Tentacles everywhere’: Victorian ministerial adviser improperly influenced $1.2m union contract, Ibac finds

An anti-corruption investigation has found a Victorian government adviser “improperly influenced” the awarding of a $1.2m contract to a union, with a former minister telling investigators that staff in Daniel Andrews’ office had “tentacles everywhere”.

Jenny Mikakos, the health minister from 2018 to 2020, was one of several witnesses interviewed by the Independent Broad-based Anti-corruption Commission as part its investigation into the awarding of the contract to the Health Workers Union.

The investigation, dubbed Operation Daintree, does not make any findings of corruption against Andrews, Mikakos, her predecessor, Jill Hennessy, or staff working in their offices.

Related: Victoria budget expected to slash spending on infrastructure, public service and health

But its final report, tabled in parliament on Wednesday, lays bare the “increasing influence of ministerial advisers and the centralisation of power in the PPO” – the premier’s private office.

“Around the world, commentators have observed a growing politicisation of public administration through the enlargement of political executives’ roles, political appointments at senior administrative levels, partisanship in promotions and the increased use of ministerial advisors,” the Ibac report reads.

“In Ibac’s view, Victoria has not been immune from this trend.

“Accompanying this trend has been a tolerance, or, on occasion, tacit encouragement of rule avoidance, bending and breaking.”

In her evidence to Ibac, Mikakos described the government as “very centralised with the PPO having its tentacles everywhere”.

She said there was “constant tension between ministerial offices and the PPO” and described her handover with Hennessy, health minister from 2014 to 2018, as “principally focused on how interventionist the PPO and premier had been in the health portfolio”.

• Sign up for Guardian Australia’s free morning and afternoon email newsletters for your daily news roundup

According to Ibac’s findings, the HWU and its secretary, Diana Asmar, began lobbying for a publicly funded training program in hospitals to deal with violence in 2018.

Ibac said Asmar had initially lobbied a senior adviser in the PPO before moving on to a senior adviser to the health minister – neither of whom have been identified by the commission.

The health minister’s adviser helped develop an “unsolicited proposal” for an HWU entity, the Health Education Federation, to deliver training for 575 workers.

It was then submitted by the adviser to the Department of Health and Human Services, which Ibac said had “significant concerns” about HEF’s capacity to deliver the program and the lack of a competitive tender process.

Ibac said that, during the three-month procurement process, the health minister’s adviser had contacted DHHS staff on several occasions, including to ask “why it was taking so long”.

Just hours before the government went into caretaker period on 30 October 2018 in the lead-up to a state election, the DHHS entered into the $1.2m contract with HEF, including an upfront payment of $121,500, requested by Asmar via the adviser, according to Ibac.

Ibac’s investigation found the adviser “improperly influenced” and “intruded into the process of DHHS awarding the contract to the HEF”.

“The decision by DHHS to contract with 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,” the report reads.

Ibac made no findings of wrongdoing against Asmar, accepting “in part” that neither she nor the union were familiar with DHHS’s procurement procedures.

In total, $335,000 of the contract was paid to HEF.

According to Ibac, the quality of the training was poor. But another adviser in the new health minister’s office, on occasion at the request of a senior adviser in the PPO, “dissuaded DHHS from taking steps to terminate the contract” in 2019 and 2020.

Ibac also examined a $2.2m election commitment made by the premier and Hennessy on 23 October 2018 to train 1,000 frontline health workers in partnership with the HWU.

Asmar stood alongside them at the press conference and understood the announcement to mean that HEF would deliver the training, Ibac said.

Mikakos, however, decided to go through a competitive procurement process, telling Ibac “things had not been going well with the other contract”.

She told Ibac that Asmar had “complained to the premier’s office that other unions were receiving significant election commitments and she felt her union hadn’t”.

“[Staff] would move heaven and earth to keep the union movement happy … You just need to look at all of our EBA outcomes,” Mikakos told the inquiry.

Andrews contested this in his evidence, saying the HWU’s influence on “the political fortunes of [his] government was miniscule [sic]” and denied knowledge of his adviser’s role in the saga.

Hennessy and Mikakos told Ibac they were not aware of the circumstances surrounding the HWU’s successful application for funding.

Hennessy did not contest the 2022 state election, while Mikakos resigned in September 2020 in the wake of the government’s hotel quarantine scandal.

Ibac made 17 recommendations, including allowing advisers to be called before parliamentary committees to make their roles more transparent.

A separate investigation by the Victorian ombudsman into the politicisation of the public service is also under way.