Public Procurement and Government Contracts 2019 Comparisons

Last Updated April 26, 2019

Contributed By Maddocks

Law and Practice

Authors



Maddocks was founded in Melbourne more than 130 years ago, and is an independent Australian law firm working with corporations, businesses and governments in Australia and internationally. The firm advises clients across the built environment, education, government, healthcare and technology sectors from offices in Canberra, Melbourne and Sydney. Government is a key area of practice, with nearly half of the firm's work nationally being public sector-related. As a consequence, almost half of its people work for the public sector and around a quarter practise almost exclusively for public-sector clients. Maddocks has a leading Public Sector Procurement team comprising around 12 partners, eight special counsel and over 20 other lawyers, working across three offices. The team advises on the full range of public sector activities, including the establishment and structuring of procurement processes and contracts; the conduct of procurement processes and contract negotiations, including probity and bid protest issues; and contract management and disputes. Clients include numerous Commonwealth government departments and agencies, Australian state/territory governments and a large number of local authorities. While Maddocks' clients are principally public sector, subject to a careful application of the firm's conflict-of-interest policy, it also advises private-sector entities which are dealing with the public sector.

Commonwealth

The Commonwealth Procurement Rules 2019 (CPRs) regulate Commonwealth government procurement in Australia. The CPRs set out high-level rules that must be followed for the establishment of Commonwealth government contracts and govern the way that entities undertake their procurements.

The Public Governance, Performance and Accountability Act 2013 (PGPA Act), under which the CPRs are issued, is also relevant. It establishes a system of governance, performance and accountability for Commonwealth entities and their personnel, including rules regarding the general duties of public officials and regulating the use and management of public resources.

The Government Procurement (Judicial Review) Act 2018 (Cth) (GP(JR) Act) – coming into force on 20 April 2019 – is also relevant. This Act establishes a regime under which the conduct of Commonwealth entities in procurement processes may be challenged.

There is also legislation and regulation through the eight states and territories of Australia that regulates procurement undertaken by the governments of each of those jurisdictions. Examples are given below.

New South Wales (NSW)

In the state of NSW, government procurement is governed by separate legislative requirements, including the Public Works and Procurement Act 1912 (NSW) (PWPA Act), the Public Finance and Audit Act 1983 (NSW), the Public Works and Procurement Regulation 2014 (NSW) and the NSW Government Procurement Policy Framework (July 2015 is the most recent version). The Procurement Board Direction PBD-2016-01, which has set out approved procurement arrangements from 1 July 2016, is the main direction with regard to procurement. There are separate guidelines and legislation governing specific types of procurement (for example, the Code of Practice for Procurement applies to construction procurements).

Victoria

In the State of Victoria, procurement of non-construction goods and services by government departments and specified statutory authorities is undertaken in accordance with a series of binding supply policies issued by the Victorian Government Purchasing Board (VGPB) pursuant to powers under the Financial Management Act 1994 (Vic). The supply policies are binding on all departments and specified statutory agencies. They comprise the following five policies which cover the end-to-end procurement activity from planning through to contract disclosure and management:

  • governance;
  • complexity and capability assessment;
  • market analysis and review;
  • market approach; and
  • contract management and disclosure.

The supply policies apply a complexity and risk-based approach to procurement activity rather than using financial thresholds to determine the type of procurement process that is required. 

Procurement related to public construction is governed by the Project Development and Construction Management Act 1994 (Vic) and by ministerial directions issued under that Act.

Queensland

In the state of Queensland, the government conducts procurement under the Procurement Strategy 2018 and Queensland Procurement Policy 2018.

South Australia

In the state of South Australia, the government conducts procurement under the State Procurement Act 2004 (SA), which sets up the State Procurement Board.

Western Australia

In the state of Western Australia, the government has conducted procurement under the Procurement Practice Guide (December 2017), but is currently reviewing and revising its procurement processes and policies.

Northern Territory

In the Northern Territory, the government conducts procurement under the Procurement Governance Policy 2018, the Procurement Rules 2018, the Procurement Act 1995 (NT) and the Procurement Regulations (NT) 1995.

Tasmania

In the state of Tasmania, the government conducts procurement under the Treasurer’s Instructions, Probity Guidelines for Procurement (2018) and in accordance with the Financial Management and Audit Act 1990 (Tas).

In the following sections, summary information is provided in respect of NSW and Victoria. Information in respect of the other states and territories can be provided on request.

The PGPA Act applies to all Commonwealth entities, including non-corporate Commonwealth entities (NCCEs), corporate Commonwealth entities (CCEs) and Commonwealth companies.

Officials from NCCEs and from prescribed CCEs listed in Section 30 of the PGPA Act must comply with the CPRs when performing duties related to procurements.

The GP(JR) Act gives rights to suppliers whose interests may be affected due to a contravention, or likely contravention, of the CPRs by an NCCE or a prescribed CCE.

In NSW, the procurement regulations apply to all agencies, excluding state-owned corporations (unless prescribed). 

In Victoria, the VGPB procurement regulations apply to all to departments and specified statutory agencies (referred to as VGPB mandated entities). Most major statutory authorities in Victoria are non-VGPB-mandated entities and are therefore not subject to the public sector procurement procedures set by the VGPB. Such authorities will generally follow procurement procedures set out in policies determined by the Board of Management of the authority.

Regulation of public construction procurement applies to all departments and agencies (unless excluded).

The CPRs are made up of two divisions. All Commonwealth procurements, regardless of their value, are subject to the requirements in Division 1 of the CPRs. Division 1 includes the core principle that the procurement must achieve value for money.

Division 2 of the CPRs only applies to those Commonwealth procurements valued above the ‘procurement threshold’ (see below) unless an exemption in Appendix A applies. Division 2 contains additional rules about the method for the procurement, the procurement documentation, time limits, issues to be taken into account and other matters.

The procurement threshold is:

  • for NCCEs, other than for procurements of construction services, AUD80,000 (including GST);
  • for prescribed CCEs, other than for procurements of construction services, AUD400,000 (including GST); or
  • for procurements of construction services by NCCEs and prescribed CCEs, AUD7.5 million (including GST).

Commonwealth entities are required to estimate the value of the procurement before making a decision about the method for the procurement. The available procurement methods are discussed in more detail below.

Division 2 of the CPRs does not apply to specific types of procurements listed in Appendix A. The list in Appendix A is fairly limited, and includes (among other things) leasing land, procurement of motor vehicles, engaging legal counsel and procurements for certain national security agencies such as the Defence Intelligence Organisation.

The most common types of Commonwealth contracts that are subject to the procurement regulations are:

  • standing offers, under which orders may be placed;
  • head agreements, under which contracts may be placed;
  • one-off contracts, which are based on a standard template (eg, for construction, defence, ICT and property contracts);
  • one-off contracts, which are based on an agency-specific template (each of the larger agencies and some of the smaller agencies have standard suites of template documents which cover a wider variety of types of procurements); or
  • one-off contracts, which are based on a bespoke contract which has been created for the particular procurement (eg, a novel managed services arrangement).

The PGPA Act and GP(JR) Act apply to all Commonwealth procurements, regardless of the procurement threshold, subject to the provisions contained within those Acts.

In NSW, agencies may procure for their own purposes or can ‘piggyback’ onto arrangements organised by another agency (known as multi-agency access contracts). In some cases, agencies must use mandated whole-of-government arrangements. Such arrangements are only created when the long-term benefits are demonstrated to outweigh the implementation costs. Standard suites of contract templates are available for agencies to use for certain types of procurements (eg, the Procure IT Framework for the procurement of technology) and for certain types of procurements, agencies must only engage suppliers from a pre-defined list of suppliers (eg, the ICT Services Scheme).

In Victoria, a number of State Purchase Contracts (SPCs) have been established. Departments and agencies can use these contracts to buy goods and services organised by category (eg, legal services, eServices, marketing services). VGPB-mandated entities must purchase under SPCs, however non-VGPB-mandated entities may opt in or out in their discretion. A basic suite of baseline contract documents is provided by the VGPB. Use of these documents is not mandatory, and the documents can be tailored to the requirements of the procurement. 

The procurement documentation will specify all requirements. Procurement processes are usually not limited to Australian entities. However, approach to market documentation and Commonwealth contracts will generally include standard requirements that may be relevant.

For example, they may require that personnel delivering services have a legal right to work in Australia, or limit transfer of or access to certain data outside of Australia. A particular kind of Australian registration or licence may be applicable. National security requirements may be relevant.

There are also requirements in the Corporations Law that are relevant to foreign entities operating in Australia.

In NSW, in order to supply to a government agency, a supplier must register on NSW eTendering. In certain circumstances, suppliers must have been appointed to a panel of pre-qualified suppliers (eg, the ICT Services Scheme) in order to supply and bid on certain public sector opportunities. Any supplier, regardless of their jurisdiction, will usually be able to apply to register on NSW eTendering or be appointed to a panel of pre-qualified suppliers.

In Victoria, the procurement documentation will specify all requirements. Procurement processes are not usually limited to Australian entities, although some procurements will include minimum local job requirements.

Division 1 of the CPRs applies to all Commonwealth contracts, irrespective of the value of the contract. Division 1 of the CPRs provides that, in relation to all procurements, relevant Commonwealth entities must, amongst other things:

  • consider whether a procurement will deliver value for money;
  • achieve value for money;
  • comply with relevant Commonwealth laws and policies;
  • encourage competition;
  • treat all potential suppliers equitably;
  • only engage in efficient, effective, economical and ethical procurement; and
  • be accountable and transparent in their procurement.

Division 2 of the CPRs also applies to procurements with an expected value above the procurement thresholds set out above (unless an exemption in Appendix A applies).

Division 2 sets out:

  • rules governing the methods of the procurement, which are further discussed below in 2.3 Tender Procedure for Award of Contract;
  • requirements for request documentation – addressing issues like specifications, mandatory conditions for participation, minimum content and format requirements and evaluation criteria;
  • minimum time limits for steps in the procurement process;
  • rules for dealing with late submissions (see below, 2.6 Time Limits for Receipt of Expressions of Interest or Submission of Tenders for more information);
  • a requirement, for procurements worth over AUD4 million, to consider the overall economic benefit of the procurement to the Australian economy;
  • rules for receiving and opening submissions and awarding contracts; and
  • rules in relation to the application of standards.

In NSW, the overarching requirements for procurement include:

  • ensuring that agencies achieve value for money in the exercise of their functions, and act in a manner which promotes competition principles;
  • encouraging sustainable procurement;
  • preventing corruption; and
  • encouraging fairness and probity.

In Victoria, at a high level, the supply policies require VGPB-mandated entities to ensure that all procurement activity meets the following principles:

  • value for money;
  • accountability;
  • probity; and
  • scalability.

There is also a Supplier Code of Conduct which outlines minimum ethical standards that suppliers to government will strive to meet in the areas of:

  • integrity, ethics and conduct;
  • conflict of interest, gifts, benefits and hospitality;
  • corporate governance;
  • labour and human rights;
  • health and safety; and
  • environmental management.

The Commonwealth Procurement Rules (CPRs) require Commonwealth entities to publish all open tenders on the AusTender website (www.tenders.gov.au). Any additional notification through other avenues, such as print media or electronic media, must include the same details as published on the AusTender website. Any tender made public must include all relevant documentation required for a potential supplier to understand and assess the requirements of the tender, and prepare appropriate and responsive submissions, on a fair, common and appropriately transparent basis.

The CPRs require Commonwealth entities to publish an annual procurement plan. This must contain the subject matter of any significant planned procurement and the estimated publication date of the relevant approach to market. Otherwise, there is no statutory requirement to advertise tenders prior to publication on the AusTender website.

Resource Management Guide No 407 – Restrictions on Advertising for Open Approaches to Market (ATMs), in the Media Policy published by the Department of Finance, outlines that NCCEs may promote the release of an open approach to market through an official social media account or on their website in addition to publishing on AusTender, but must direct the reader to AusTender. Entities are not entitled to publish or advertise open approaches to market in the press unless they have requested and been granted an exemption. Details included in the advertisement must be the same as those published on AusTender and direct the reader to go to AusTender for further information.

In NSW, the NSW Procurement Policy Framework requires agencies to advertise, distribute, lodge and open tenders using the NSW eTendering System (www.tenders.nsw.gov.au) unless there are exceptional reasons which require print advertising.

In Victoria, VGPB mandated entities are required to comply with the Market Approach Policy. The policy is not prescriptive in terms of the form of the approach to market, but requires entities to encourage participation from the market segment relevant to the procurement.

Commonwealth, NSW and Victorian government entities may conduct a procurement in a multistep process. This could include initially seeking information, a proposal or an expression of interest from the market prior to issuing a formal request for proposal. A request for expressions of interest is considered an open approach to market under the CPRs and requires the same publication compliance as a single-step request for tender.

The CPRs (that apply to non-corporate Commonwealth entities (NCCEs) and some corporate Commonwealth entities (CCEs)) dictate the tender procedures that must be used when procuring goods and services for use by the Commonwealth.

The Commonwealth has two main procurement methods: open tender and limited tender. The approach taken is dictated by criteria in the CPRs (including the procurement thresholds that apply to the estimated value of the proposed contract). Generally, an open tender is the preferred method. The CPRs set out specific circumstances in which a limited tender can be conducted. There are different requirements for the tender procedure depending on the approach taken and whether the Division 2 procurement thresholds are reached under the CPRs or an exemption in Appendix A applies.

Procurements can also be made from a head agreement or standing offer arrangement which has been put in place by one of the above-mentioned methods. Depending on how the head agreement or standing offer has been established, further procurements under it may be exempt from Division 2 of the CPRs.

The Commonwealth also uses multi-stage procurements when appropriate – eg, commencing with a Request for Information (RFI), Request for Expressions of Interest (REOI) or Request for Proposals (RFP) stage.

In NSW, procurement processes will vary depending on the value and type of the procurement and whether or not an agency is accredited under the NSW Procurement Board’s Agency Accreditation Scheme for Goods and Services Procurement.

Accredited agencies may enter into arrangements on the terms of their accreditation.

Unaccredited agencies are required to comply with NSW Procurement Board Direction-2016-01-Approved procurement arrangements from 1 July 2016, which sets out differing requirements depending on the value and risk profile of a particular procurement activity.

Competitive approaches may include a competitive dialogue process, requests for tender, requests for information/proposal (ie, when the agency wants to 'test the market'), 'reverse auctions' (ie, where suppliers are pre-qualified and then bid for a piece of work), or direct negotiations/sole source.

In Victoria, legislation does mandate the tender procedure or procedures that may be used for the award of a contract. Whilst the Market Approach Policy applies to VGPB-mandated entities, that policy is not prescriptive as to the tender procedures that must be followed to award a contract.

Restrictions on Conduct of Negotiations

Commonwealth, NSW and Victorian government entities have an overarching obligation to achieve a 'value for money' outcome which factors in price, the quality of the goods and services offered and other considerations such as risk and satisfying business requirements. Commonwealth, NSW and Victorian government entities are able to, and do, negotiate these issues as part of the procurement process. The approach to market documentation will explain how these negotiations will be conducted in each case.

The negotiation method will depend on several factors, such as the type and scale of the procurement, the internal policies of a particular government entity, the procurement and negotiation strategy, the appetite for risk, the complexity of the procurement, the specific technical requirements and so on.

Some procurement processes include a parallel negotiation or best and final offer (BAFO) stage.

In some circumstances Commonwealth and Victorian entities audit, benchmark or otherwise verify pricing in proposals submitted by respondents. This is particularly common in large-scale, high-value and complex procurements such as defence and whole of government ICT-based procurements. Some contracts also have in-contract audit and benchmarking processes.

The Department of Defence has its own Financial Investigation Service, which is used both before entry into, and during the term of, contracts to validate pricing.

There is no statutory basis for negotiating and auditing contractor proposals, other than the general rules in the Public Governance Performance and Accountability Act and the CPRs.

The CPRs generally require Commonwealth entities to use a competitive process in respect of procurements by NCCEs valued at over AUD80,000, or by specified CCEs valued at over AUD400,000, or by either in respect of construction contracts valued at over AUD7.5 million. There are certain exemptions which can apply (see above, 2.3 Tender Procedure for Award of Contract for more information). 

At the time of the approach to market, a Commonwealth entity must make all relevant request documentation available if practicable. On request by an eligible potential supplier, the CPRs require a procuring entity to promptly provide request documentation and all information necessary to permit the potential supplier to prepare and lodge a submission.

NSW government agencies must comply with the Government Information (Public Access) Act 2009, which requires proactive disclosure of information, including information relating to procurement.

There is no statutory time limit for procurement processes that are under the relevant procurement threshold (ie AUD80,000 for procurements by NCCEs, AUD400,000 for procurements by specified CCEs, and AUD7.5 million for procurements or by either in respect of construction contracts).

For procurements over the relevant procurement threshold (unless an exemption in Appendix A applies), the CPRs impose a minimum time limit of 25 days from the date and time that a procurement is published on the AusTender website for a potential supplier to lodge a submission in response.

A Commonwealth entity may impose a longer time limit at the time of publication should it wish. A shorter time period may apply in certain circumstances, such as if there is a genuine state of urgency, although in no circumstance is it to be less than ten days. Likewise, in some circumstances, such as when the Commonwealth entity does not accept submissions electronically, the minimum time limit must be extended by five days.

When a Commonwealth entity is undertaking a multistage procurement process, it must abide by the minimum time limits for each stage of the procurement.

Regardless of the procurement process the entity follows, or any circumstances which may apply to setting a time limit in a procurement, the closing date for submissions must be a consistent common deadline for all potential suppliers.

Submissions received after the deadline must be rejected and returned to the potential supplier. If the receipt of the submission is late solely as a result of mishandling by the Commonwealth entity, the submission may be accepted. Mishandling by a courier or mail services is not considered mishandling by a Commonwealth entity for the purpose of determining if a submission is late.

In NSW and Victoria, there is no such statutory time limit.

Evaluation criteria will vary between procurements. The criteria against which a potential supplier will be evaluated must be set out in the approach to market documentation, and will vary depending on the nature of the procurement. Evaluation criteria can be broken into two primary categories: mandatory criteria and desirable criteria.

The CPRs and other policies do set out some mandatory requirements for suppliers. For example:

  • Commonwealth entities must not enter into a contract with a tenderer which has a judicial decision against it (not including decisions under appeal) relating to employee entitlements;
  • certain tenderers may need to provide a letter of compliance with the Workplace Gender Equality Act 2012; and
  • in Victoria, interested parties need to comply with the Social Procurement Framework and the Supplier Code of Conduct. Certain high value procurements will also require interested parties to comply with the Local Jobs First policy.

A Commonwealth entity may undertake a limited tender process in certain circumstances (see above, 2.3 Tender Procedure for Award of Contract for more information) or if the procurement is exempt from Division 2 of the CPRs.

A limited tender involves the Commonwealth entity approaching one or more potential suppliers to make submissions for the procurement, rather than approaching the open market.

If Division 2 of the CPRs applies to a procurement, then a limited tender can only be used in defined circumstances, including:

  • when goods or services can only be supplied by a particular business;
  • for procurements that arise due to exceptionally advantageous short-term conditions such as the result of a bankruptcy;
  • in situations of extreme urgency;
  • when the procurement is for particular replacement parts or extensions of specific services;
  • when the procurement is in a commodity market; or
  • when the potential supplier is providing a prototype good or service or providing a good or services as the result of winning a design competition. 

When a procurement is being conducted in a multistage process, the Commonwealth entity may create a short-list of potential suppliers resulting from initial expressions of interest arising from the first approach to market, provided the procurement satisfies one of the circumstances or exemptions under the CPRs. These short-listed suppliers may then be approached under a limited tender process.

In NSW, agencies use eQuote to issue, manage and award requests for quotes from suppliers on prequalification schemes and panel arrangements. The agency may select the suppliers it wishes to include.

In Victoria, there may be limited tendering. The Market Approach Policy is not prescriptive as to when an entity may undertake a limited tender (subject to compliance with general principles such as fairness). 

The procurement documentation will specify the mandatory and desirable criteria for the specific procurement.

Mandatory criteria dictate the minimum standards that a potential supplier must meet in order for their submission to be considered. Should a submission for a procurement fail to meet the mandatory criteria, the Commonwealth entity is required to reject the submission, as accepting the submission would be contrary to the obligations to obtain value for money. If all the responses to an approach to market fail to meet the mandatory criteria, the Commonwealth entity may potentially proceed to undertaking a limited tender process. Mandatory criteria commonly include that the tender must be written in English and expressed in Australian legal units of measurement.

Desirable criteria include additional features or characteristics of the requested goods or services that are not mandatory, but will be considered to add value to a submission. There are no statutory obligations placed on Commonwealth entities in evaluating a potential supplier against desirable criteria.

There is no statutory basis for evaluation of submission criteria, other than the general rules in the CPRs and the PGPA Act.

Following the rejection of a submission or the award of a contract, the Commonwealth entity must promptly inform any affected tenderers of its decision. On request, a debriefing must be made available to successful and unsuccessful tenderers following a decision.

If a contract is above the relevant reporting threshold value of AUD10,000 (including GST), a Commonwealth entity must publish a report on AusTender within 42 days of entering into the contract with the successful tenderer. The CPRs generally require Commonwealth entities to report on contracts with NCEs valued at over AUD10,000, or with CCEs valued at over AUD400,000, or with CCEs in respect of construction contracts valued at over AUD7.5 million.

NSW government agencies must comply with the Government Information (Public Access) Act 2009, which requires proactive disclosure of information, including information relating to procurement and includes notifying successful bidders and making such notice publicly available via NSW eTendering.

The Commonwealth Procurement Rules (CPRs) specify that Commonwealth entities must ensure that request documentation includes a comprehensive description of:

  • the evaluation criteria that will be used to assess submissions, and (when Division 2 of the CPRs applies and if applicable to the evaluation), the relative importance of any evaluation criteria;
  • any conditions for participation and minimum content and format requirements that apply to the procurement (including any information and documents that must be submitted); and
  • any other terms and conditions relevant to the evaluation of submissions.

This is to enable the proper identification, assessment and comparison of submissions on a fair, equitable and appropriately transparent basis, consistent with Commonwealth procurement requirements.

Further, any initial approach to market for a multi-stage procurement must include, for every stage, the evaluation criteria that will be used to select potential suppliers and, if applicable, any limitation on the number of potential suppliers that will be invited to make submissions.

Although Commonwealth entities are required to ensure that any request documentation includes all information necessary to permit potential suppliers to prepare and lodge submissions, the specific evaluation methodology used to evaluate submissions or suppliers is not always disclosed.

As the evaluation criteria are required to be included in the relevant request documentation, that information is made available at the time the request documentation is released to the market.

If there are any changes to the evaluation criteria during the course of a procurement, those changes are required to be notified to all potential suppliers that are participating in the procurement at the time the information is changed. The Commonwealth entity is required to provide this updated information with adequate time to allow for the modification or re-lodgement of submissions.

The CPRs specify that following the rejection of a submission or the award of a contract, Commonwealth entities are required to promptly inform affected tenderers of the decision.

Debriefings must be made available, on request, to unsuccessful tenderers outlining the reasons the submission was unsuccessful. Debriefings must also be made available, on request, to the successful supplier(s).

Debriefs do not need to be provided within any specific timeframe, but debriefings usually occur after the contract has been awarded.

There is no required format for providing any debrief to any unsuccessful or successful tenderers. Debriefings often occur in person, via telephone, and in writing.

In NSW, other than the proactive disclosure obligations under the Government Information (Public Access) Act 2009, the procurement regulations do not specify requirements regarding providing reasons for the rejection of a bid.

In Victoria, VGPB-mandated entities are required to comply with the Contract Management and Contract Disclosure Policy. That policy requires entities to disclose the key details of contracts exceeding AUD100,000 (including GST) within 60 days of contract award on the Tenders VIC website.

The CPRs specify that, following the award of a contract, Commonwealth entities are required to promptly inform affected tenderers of the decision.

There is no specific timeframe for alerting tenderers of the contract award decision or means by which this notification occurs (although this is usually done promptly after the award of the contract and in writing). However, a Commonwealth entity has up to 42 calendar days from the time the contract is executed to report the details of the contract on AusTender (the Commonwealth’s public procurement information system).

Each contract awarded by a Commonwealth entity at or above the reporting threshold value of AUD10,000 (including GST) is publicly reported on AusTender. Each contract notice displays details of the contract, including the supplier, the value, and the contract period.

Not all contracts are publicly reported. For example, details of contracts awarded below the reporting threshold value, or that are exempt from reporting requirements (eg, because they are genuinely sensitive), are not published on AusTender.

In NSW, government entitles will notify suppliers of the successful bidder via eTendering. There are no specific requirements regarding timing which apply.

In Victoria, there are no specific requirements, the procurement documents will generally specify notification requirements for a particular procurement.

There is no automatic standstill period that applies between the decision to award a contract and the commencement of a contract.

However, on 18 October 2018 the Australian Parliament passed the Government Procurement (Judicial Review) Act 2018 (Act) (GP(JR) Act) which will commence on 20 April 2019. The Act only applies to ‘covered procurements’ which are procurements that exceed the relevant procurement threshold (AUD80,000 for procurements by NCCEs, AUD400,000 for procurements by specified CCEs, and AUD7.5 million for procurements or by either in respect of construction contracts), and do not fall within the exemptions under Appendix A to the CPRs.

Under the Act, subject to various procedural rules, suppliers have the right to make a complaint, seek an injunction, or seek compensation for certain breaches of the CPRs (if the supplier is affected by any contravention, or proposed contravention of the CPRs). The GP(JR) Act is discussed in more detail in section 4 Review Procedures, below.

If a ‘public interest certificate’ has not been issued regarding the procurement, any complaint about the procurement, or application for injunction, will suspend the procurement until the complaint is resolved.

A suspension of the procurement process under the GP(JR) Act can occur at any time. Depending on when any complaint or application for an injunction is made, a complaint or an application for an injunction could significantly delay the execution of a contract. However, a court will not have the power to overturn a contract once it has been entered into with a supplier.

There is no such standstill period in NSW or Victoria.

Generally, it is the obligation of the specific Commonwealth, NSW or Victorian government entity which entered into the contract to resolve the dispute with the supplier. If the dispute cannot be resolved and legal action needs to be taken, it will be taken in the most appropriate court in the relevant jurisdiction. This may be a federal or state/territory court or tribunal.

Prior to 20 April 2019, three main avenues were available for challenging a procurement decision made by a Commonwealth entity in a court or tribunal. These are making a claim for:

  • breach of contract, on the basis that the tender documents constitute a ‘process contract’;
  • misleading and deceptive conduct, negligent misrepresentation or estoppel, on the basis of a representation made to them in the procurement documentation or otherwise in the procurement process; or
  • for certain decisions, judicial review of the procurement process on administrative law grounds.

From 20 April 2019, the three grounds listed above remain available. Further, the Government Procurement (Judicial Review) Act 2018 (Cth) (GP(JR) Act) will establish a new regime under which the conduct of Commonwealth entities in procurement processes may be challenged in either the Federal Circuit Court of Australia or the Federal Court of Australia (see 4.4 Challenging Awarding Authority's Decisions for more information). The basis on which a challenge can be brought is for a failure to comply with the Commonwealth Procurement Rules (CPRs) or for proposed conduct that would breach the CPRs.

The nature of the claim will determine the body (or bodies) in which the dispute may be commenced.

The Australian National Audit Office (ANAO) and the Auditor-General’s functions include conducting performance audits of Commonwealth entities. This includes auditing the extent to which procurement processes comply with relevant laws and Commonwealth policies. The ANAO may make recommendations after an audit, which may be taken by the relevant Commonwealth entity. However, the ANAO and the Auditor-General do not have the authority to overturn procurement decisions.

In NSW, if a complainant has exhausted agency processes, they may submit a complaint to the NSW Procurement Board, which will decide whether or not to investigate the complaint. The NSW Ombudsman may also investigate complaints.

In Victoria, complaints need to be raised directly with the entity managing the procurement process. VGPB-mandated entities are required to have a complaints management system that sets out the entity’s procedures for addressing complaints. A complaint about a VGPB-mandated entity can be referred to the VGPB if it cannot be resolved with the entity.

The nature of the claim, and the body in which the claim is commenced, will determine the remedies available. For example, for a claim for a breach of a process contract, generally the relevant procurement documentation will impose contractual limits on a tenderer’s rights to compensation. Otherwise, general contract law principles relating to damages and other remedies will apply.

The GP(JR) Act will introduce new remedies for judicial review claims made against Commonwealth procurement processes. The GP(JR) Act will provide for two types of redress for breaches, or proposed breaches, of the CPRs – namely, injunctions and compensation. The GP(JR) Act provides for injunctions both to compel the relevant Commonwealth entity to cease doing something (or not to do something) that would breach the CPRs, and injunctions requiring the Commonwealth entity to positively do something or take a course of action so as to comply with the CPRs. The court will not have the power to overturn a contract once it has been awarded.

  • Injunctions: suppliers whose interests are affected by a breach, or proposed breach, of the CPRs will be able to seek an injunction regarding the breach. This will involve a two-step process: first, complaining to the Commonwealth entity and, second, applying for an injunction.
  • Compensation: the GP(JR) Act also permits suppliers to seek compensation when their interests are affected by a contravention or proposed contravention of the CPRs. Claims can be made for an amount not exceeding the supplier’s reasonable expenditure in preparing its tender, making a complaint in relation to the alleged contravention of the CPRs and seeking to resolve the complaint. In contrast to the injunction process, the GP(JR) Act allows suppliers to claim compensation without having made a complaint to the relevant Commonwealth entity first, and does not provide any limitation period within which claims for compensation must be made.

In NSW, disappointed bidders may lodge a complaint at the agency level if they believe that the procurement has not been conducted in accordance with the relevant legislation. Procuring agencies have a responsibility to resolve complaints in the first instance. Once a complainant has exhausted agency processes, it may submit a complaint to the NSW Procurement Board, which will decide whether or not to investigate the complaint. The NSW Ombudsman may also investigate complaints. Agencies which are considered not to have complied with the requirements will be required to take corrective action in relation to future procurement action. The NSW Procurement Board may issue directions and policies regarding corrective action.

In Victoria, complaints need to be raised directly with the entity managing the procurement process. VGPB-mandated entities are required to have a complaints management system that sets out the entity’s procedures for addressing complaints. A complaint about a VGPB-mandated entity can be referred to the VGPB if it cannot be resolved with the entity. The VGPB can require the entity to audit its application of the supply policies in relation to the procurement, inform the relevant minister of further action that could be taken and/or note the outcome of its review in its annual report to Parliament.

At general law, it is possible (although difficult) to obtain an injunction to suspend a procurement process.

For suppliers to Commonwealth entities, that process will become simpler from 20 April 2019. Under the GP(JR) Act a complaint made to a Commonwealth entity will suspend the procurement process until the complaint (or any subsequent legal claim) is resolved, unless the accountable authority of the relevant Commonwealth entity issues a public interest certificate stating that it is not in the public interest for the procurement to be suspended.

The Commonwealth entity is required to investigate the conduct which is the subject of the complaint. If a public interest certificate has not been issued regarding the procurement, the procurement will remain suspended until a court makes its findings or the complaint is withdrawn.

Under the GP(JR) Act, suppliers whose interests are affected by a contravention, or proposed contravention, of the CPRs will have standing to seek an injunction or compensation regarding the contravention. A supplier is defined as a person, or partnership (or other group) that supplies, or could supply, goods or services. A supplier can only seek relief, whether by injunction or otherwise, if their ‘interests are affected by the conduct’ of the Commonwealth entity forming the basis for the complaint.

Similar standing rules apply with respect to any judicial review challenge. There is no power to overturn a contract that has been entered into.

For a breach of contract challenge, the entity must establish that it has suffered loss as a result of the awarding authority’s decision.

To obtain an injunction under the GP(JR) Act, a supplier will be required to apply to the court within ten days after either the alleged contravention of the CPRs, or the day on which they became aware, or ought to reasonably have become aware, of the contravention. As a complaint must have been made to the relevant Commonwealth entity before the court can make an injunction, such a complaint will also need to be made within that same period and will stop the procurement process.

The GP(JR) Act provides that an extension of the ten-day period can be granted if the delay was attributable to the supplier’s reasonable attempt to resolve their complaint concerning the alleged contravention, or there are special circumstances warranting a greater period.

Outside of the GP(JR) Act, breach of contract claims must be brought within three years of the alleged breach.

As noted above in 4.1 Responsibility for Review of Awarding Authority's Decisions, certain decisions may be subject to judicial review on administrative law grounds under the Administrative Decisions Judicial Review Act 1977 (ADJR Act) or under the common law. Claims under the ADJR Act for judicial review must generally be brought within 28 days of the impugned decision. Judicial review challenges at common law must be brought within a reasonable period. Such proceedings are very uncommon in Australia.

Currently, there is no typical length of proceedings relating to a procurement claim. The commencement of the GP(JR) Act from 20 April 2019 may result in a more predictable timeline for a procurement claim against Commonwealth entities.

Claims outside the GP(JR) Act context can take some time to progress through the courts if they are complex. While a judicial review challenge is likely to be resolved within 12 months, a breach of contract claim could take two years to resolve. Such proceedings are very uncommon in Australia.

As the GP(JR) Act does not come into operation until 20 April 2019, no proceedings have been instituted under that regime. It is therefore not possible to say how many procurements will likely be challenged under that regime.

In the 2017-18 financial year, 73,458 procurement contracts were reported to the Department of Finance from across the Commonwealth. However, not all of those procurements would be open to challenge under the GP(JR) Act. That is because the GP(JR) Act applies to ‘covered procurements’, being procurements that are subject to both Division 1 and Division 2 of the CPRs, and which are undertaken by non-corporate Commonwealth entities (NCCEs) and corporate Commonwealth entities (CCEs) which are designated under rule 30 of the Public Governance, Performance and Accountability Rule 2014 (Cth). A procurement will be subject to both Division 1 and Division 2 of the CPRs if it exceeds the relevant procurement threshold (AUD80,000 for procurements by NCCEs, AUD400,000 for procurements by specified CCEs, and AUD7.5 million for procurements or by either in respect of construction contracts), and is not within the exemptions under Appendix A to the CPRs. Those exemptions include leasing land, procurement of motor vehicles, engaging legal counsel and procurements for certain national security agencies such as the Defence Intelligence Organisation.

By way of example, if 1% of all procurements over AUD80,000 were subject to challenge, this could amount to approximately 280 procurement challenges per year under the GP(JR) Act on 2017-2018 financial year figures.

There is no typical amount of costs involved in challenging an awarding authority’s decision. The commencement of the GP(JR) Act from 20 April 2019 may result in more predictable expenditure in challenging a procurement process undertaken by a Commonwealth entity under that Act.

Costs for procurement challenges outside the GP(JR) Act are highly variable. Judicial review proceedings would generally be less expensive than breach of contract proceedings – however, either type of proceedings would be expected to cost at least AUD50,000 and could cost significantly more than that, depending on the complexity of the matter and the size and significance of the procurement.

In NSW, making a complaint to the NSW Procurement Board and/or NSW Ombudsman is free.

In Victoria, making a complaint to the VGPB is free.

The modification of contracts after their award is permissible. However, entities which are subject to the Commonwealth’s legislative procurement framework (the Public Governance, Performance and Accountability Act 2013, and the Commonwealth Procurement Rules made under that Act) have an ongoing obligation to ensure their contracts reflect the proper use and management of public resources, promote the achievement of the purposes of the entity and promote the financial sustainability of the entity.

There are several ways in which Commonwealth entities may provide for future modification, as detailed below.

  • Entities may pre-agree flexibility in their contracts. An example would be a contract that allows an entity to vary the volume of a cloud services product that it uses, with the pricing designed to allow for the cost to vary depending on actual usage. Another example is a contract under which the entity can vary the number of cars it leases, following a pre-agreed lease and lease charges process. These sorts of mechanisms allow entities to ensure their contracts reflect possible changes in the volumes of required products or services, without having to formally amend or re-negotiate the contracts. These sorts of mechanisms are intended to avoid the need for further negotiation. Initial procurement approvals should cover foreseeable use of these mechanisms.
  • Entities may pre-agree mechanisms for variation to their contracts. These mechanisms provide a process for entities to agree amendments to their contracts with their vendors, such as templates for submission of a change proposal, approval requirements and a price basis. These are administrative processes that the parties to the contract can use to agree on modifications of their contracts after award.
  • Agencies may agree to amendments to their contracts, if circumstances change. There is nothing in the applicable legislative framework that prohibits an entity from agreeing to a modification, subject to the general requirements referred to above that govern use of public resources and the variation process in the contract. There can be tender probity issues if a contract is changed soon after entry in a way which is unfair to other tenderers.

The same applies in NSW and Victoria. However, in NSW, there may be certain circumstances where the modification of a contract will be required to be approved by DFSI (ie, in relation to contracts entered into under the ICT Services Scheme).

Entities which are subject to the Commonwealth’s legislative procurement framework can award contracts directly to a specific vendor but only in limited circumstances (see above 2.3 Tender Procedure for Award of Contract for more information). 

The rules on direct contracts are more flexible for lower value contracts, but entities are bound to ensure that all contracts into which they enter represent value for money.

For higher value contracts, entities can award contracts directly to vendors that are included on an existing standing offer panel (when the vendors have already been selected for inclusion on the panel). Entities can also conduct a limited tender, by which they approach only one or a small group of potential vendors for a proposal. There are limits to when this option can be utilised, including extreme urgency and limitations in the market.

In NSW and Victoria, government agencies are not prohibited from awarding a contract directly to a specific vendor.

Currently, there are no legislative amendments publicly announced which may affect the award of Commonwealth, NSW or Victorian government contracts.

However, the Government Procurement (Judicial Review) Act is due to come into force on 20 April 2019. This Act provides a mechanism by which entities which have tendered for some Commonwealth contracts can make a complaint and possibly access remedies (including the right to seek an injunction and possibly receive compensation) if they claim that the relevant Commonwealth entity has breached the Commonwealth Procurement Rules (see section 4 Review Procedures for more information). This process may result in the suspension of the relevant procurement.

Commonwealth entities need to keep this regime in mind when awarding Commonwealth Contracts because the risk of complaint and possible litigation may result in significant delays to the procurement process, and potential financial liability for the Commonwealth.

Maddocks

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Anthony.Willis@maddocks.com.au www.maddocks.com.au
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Law and Practice in Australia

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Maddocks was founded in Melbourne more than 130 years ago, and is an independent Australian law firm working with corporations, businesses and governments in Australia and internationally. The firm advises clients across the built environment, education, government, healthcare and technology sectors from offices in Canberra, Melbourne and Sydney. Government is a key area of practice, with nearly half of the firm's work nationally being public sector-related. As a consequence, almost half of its people work for the public sector and around a quarter practise almost exclusively for public-sector clients. Maddocks has a leading Public Sector Procurement team comprising around 12 partners, eight special counsel and over 20 other lawyers, working across three offices. The team advises on the full range of public sector activities, including the establishment and structuring of procurement processes and contracts; the conduct of procurement processes and contract negotiations, including probity and bid protest issues; and contract management and disputes. Clients include numerous Commonwealth government departments and agencies, Australian state/territory governments and a large number of local authorities. While Maddocks' clients are principally public sector, subject to a careful application of the firm's conflict-of-interest policy, it also advises private-sector entities which are dealing with the public sector.