The Department of Industry, Science, Energy and Resources has been called out for not complying with commonwealth procurement rules, managing contracts incorrectly and treating competing tenders unfairly.

Findings released on Friday by the Australian National Audit Office relate to the Entrepreneurs' Programme, announced in the 2014/15 budget by the former coalition government, which helps businesses grow by giving them grants for advice and financial support.

A re-design of the program saw tender requests issued in September 2019 for new delivery partners, but the audit found the department failed to follow proper processes to ensure transparency, consistency and fairness.

Seven contracts were entered into with providers at a cost of $144 million, five of which had previously supplied services for the program.

The department did not engage ethically with the procurement process, resulting in incumbent providers receiving higher consideration, the audit found.

It also found the department was not managing the new contracts correctly.

The audit made 10 recommendations, including not to extend the existing contracts when they expire in 2023. The department must run a new procurement process that fully follows the rules.

Responding to the audit, the department said it took the results seriously and was working to address all recommendations as a priority.

It admitted to falling short of the appropriate standards, particularly in late 2019 and early 2020.

But it argued the Entrepreneurs' Programme has "successfully supported over 22,000 Australian companies to strengthen and grow since its launch in 2014".

"Businesses participating in the growth element of the program have experienced average increases of 3.5 new jobs and an additional $1.47 million in turnover," the department said.

Australian Associated Press