Aussie government workers are in hot water after they formed a company to bid for an IT contract and awarded it to themselves.

The Victorian government's IT agency is being investigated by Coppers after an audit revealed that the public servants awarded themselves a contract that led to work worth $1.5 million. Six contractors and staff have been fired and there is an organisation-wide review of CenITex, the body charged with centralising public sector technology services.

Two CenITex project managers used a two-day-old shelf company to bid for a tender in May last year. They then sat in on the selection panel, then awarded themselves the contract. They were able to underbid other tenderers, including IBM. They won a contract to deliver ''hosting services'' for $145,000, but since then pocketed $1.5 million for work they contracted to others.

A government audit found that CenITex failed to vet the shelf company's credentials. Police were asked by CenITex to investigate two staff members for possible fraud and obtaining secret commissions.

The problem is that that the former staff told the cops that they had declared their interest in the company, and had approval from higher levels of management for the work to be awarded to their company. This could get very messy.

More here.