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Federal air safety agency Airservices Australia paid up $5000 a day to consultants from a company managed by the wife of a senior figure in the government agency, a National Audit Office probe has found.
Airservices has paid Canberra not-for-profit group the International Centre for Complex Project Management more than $9 million since 2012 in deals that saw single consultants paid between $1500 and $5000 to work an eight-hour day.
The consultancy rates were up to 30 per cent higher than the Defence Department was paying ICCPM, government auditors have found.
Now Airservices is in the midst of sacking up to 1000 of its workers, saying it can no longer afford them.
The Australian National Audit Office has published a scathing report into Airservices' management of consultancies during its $1.5 billion OneSKY air traffic control and navigation project, which is supposed to integrate military and civilian air traffic management across Australia by 2021.
The audit reveals a tangled web of relationships between Defence Department officials in Canberra, private defence contractors, consultants and the federal government's air traffic control agency and includes a lengthy list of ICCPM's "associations as sources of potential, perceived or actual conflicts of interest in relation to the OneSKY Australia program."
At one point, the auditors allege, an ICCPM employee working at Airservices helped draft a letter for the agency, accepting her own organisation's proposal that it be hired for the lucrative consulting job on Airservices massive Air Traffic Management Future Systems.
The woman, later became chief executive of ICCPM while her husband had moved from his role as ICCPM consultant to AirServices into a senior management position at the agency.
"In that capacity, on 22 September 2014, (the husband) signed a minute to the then Airservices CEO recommending that she approve the contracting of the Lead and Deputy Lead Negotiator via ICCPM for a further eight months at a total expected cost of $1.247 million," the audit states.
The auditors made no findings of actual conflicts of interest and are working on a follow-up probe into the broader picture surrounding the awarding of the lead contract, to defence giant Thales, which is due to be published in April.
But they did find that: "Overall, Airservices' approach to contracting ICCPM to assist with the delivery of OneSKY Australia was ineffective in providing value for money outcomes.
In response to the audit, Airservices denied any wrongdoing but admitted it needed to improve its procurement processes.
"Airservices maintains that the tender evaluation arrangements in place were robust and strongly refutes any suggestion that perceived conflicts at any stage created, or had the potential to create, an actual conflict of interest," a spokesman said.
In its published response to the audit, ICCPM, who were contacted for this story, pointed out that the ANAO had made no findings of actual conflicts of interest and that an external probity review, by law firm Allens Linklaters had made the same finding.
Airservices is set to announce on Friday that up to 1000 of its 4500-strong workforce are to lose their jobs in the next eight months, up from the 900 positions previously announced, citing its difficult financial situation.
The job losses are part of a 12-month restructure dubbed "Accelerate", which is guided by PricewaterhouseCoopers and hopes to offset losses of more than $10 million in 2015-16.
Internal briefings from chief executive Jason Harfield to his senior leadership team, obtained by Fairfax Media, revealed profitability fell by 90 per cent from $45.5 million in 2013 to $4.5 million in 2015.
In a letter to staff, Mr Harfield said the full scale of job losses would not be known until at least November.
In response to the audit, Airservices denied any wrongdoing but admitted it needed to improve its procurement processes.
"Airservices maintains that the tender evaluation arrangements in place were robust and strongly refutes any suggestion that perceived conflicts at any stage created, or had the potential to create, an actual conflict of interest," a spokesman said.