THE Gillard government has made an extraordinary intervention in an official tender process to stop Sky News Australia, partly owned by Rupert Murdoch, winning a $223 million contract to broadcast Australia's overseas television service.
An aggressive bid to expand Australia's presence in China helped push Sky News over the line in a fierce contest with the ABC to win the rights to the station, known as Australia Network.
An independent panel of public servants set up to evaluate the competing tenders saw Sky as the better bid - only for the government to baulk at stripping the contract from the publicly funded ABC to hand it to a company part-owned by News Ltd, Channel Seven and the Nine Network.
Labor then made late changes to the rules of the tender, sidelining the role of the independent panel and throwing the legitimacy of the process into doubt.
Australia Network broadcasts news, drama and sport to 44 countries in Asia and the Pacific, as well as programs to teach English language skills.
At present the ABC holds rights to broadcast the network, but the government put a new 10-year deal out to competitive tender in February with an outcome originally set for May 2.
It is understood Sky News proposed setting up a dedicated channel for China to run separately from the rest of the network as a way of expanding Australia's reach in the Asian powerhouse, where censorship restrictions limit foreign news broadcasts.
No licences to broadcast into China have been granted in recent years but the Foreign Affairs Department has said it is keen to gain access for Australia's public diplomacy channel.
The proposal for China was only part of the reason Sky was favoured, with the full tender details still secret.
But the winner of the contract remains in doubt after the government used the cover of recent upheaval in the Middle East and Africa to request more information from the ABC and Sky News.
The government has also asked the bidders to explain their operations ''in light of the increasing influence of key emerging markets on the global economy'' - a phrase often used to describe China.
But the government is yet to release an amended call for tenders, despite promising a decision by September.
The department of the Foreign Affairs Minister, Kevin Rudd, had previously been in charge of the tender process, with final approval in the hands of departmental chief Dennis Richardson following the recommendations of the independent panel.
That system has now been scrapped, two months after the decision was due, and the final approval now rests with the Communications Minister, Stephen Conroy, after being referred to cabinet.
Senator Conroy is also the minister with responsibility for the ABC - although his office has denied opposition claims of a conflict of interest.
Senator Conroy's office told the Herald he only became involved following a cabinet discussion shortly before the government announced the changes late on Friday evening, June 24.
But a Senate hearing on June 2 made it clear the government had long held doubts about where the tender was heading, with Mr Richardson unwilling to state then who would give final approval for the deal.
The panel is believed to have submitted its report ahead of the May 2 deadline.
It is unclear whether it made a final recommendation before the process was abruptly changed.
