Revised Commonwealth Procurement Rules (CPRs) come into effect on 1 March 2017. The changes were negotiated by Senator Nick Xenophon, who labeled the amendments a “sea change” and “unambiguously good for Australian industry”.
This is an exciting time for Australian suppliers to the Commonwealth Government who are well placed to take advantage of the opportunities that the updated CPRs present.
The amendments consist of three sets of major changes.
For procurements above $80,000:
- Subject to certain exceptions, Commonwealth Government suppliers tendering for government contracts will have to demonstrate the capability to meet “Australian standards” in their tender responses.
- Commonwealth officials must “make reasonable enquiries” that each procurement is carried out considering the tenderers’ practices, including relevant labour, occupational health and safety (OH&S), and environmental regulations.
For procurements above $4 million:
- The Commonwealth Government must consider the “economic benefit of the procurement to the Australian economy”. It is currently unclear how this will operate.
These amendments are likely to cause concern for suppliers who use overseas-sourced items or labour, which may not be consistent with ethical labour, OH&S, and environmental practices (including relevant regulations and regulatory frameworks) or that do not meet “Australian standards”.
However, significant opportunity exists for Australian suppliers who are able to demonstrate high levels of compliance with the new rules. Below, we provide some tips that tenderers may use to maximise their chances of being selected as the winning tenderer in this new paradigm.
Ensure the goods and services tendered comply with applicable Australian and international standards
Tenderers should comprehensively check that the goods and services they tender comply with applicable “Australian standards”, or where no Australian standard exists, international standards. This is because the Commonwealth itself must look to assess a tenderer’s compliance with international standards in the absence of Australian Standards (see paragraph 10.37 of the CPRs).
It is currently unclear precisely what is meant by “Australian standards”, as this term is not defined in the CPRs. However, it seems reasonable to assume that this would at least include standards published by Standards Australia, which are unambiguously applicable to the procurement. Other standards that form part of the “Australian standards system” may also be relevant. The Department of Finance has incorporated the Digital Transformation Agency’s Digital Service Standard into the Commonwealth Contract Suite – this standard applies to all websites and online publications.
When in doubt about which standards apply, tenderers should speak to the relevant contact listed on the approach to market (on Austender).
In summary, we recommend that tenderers:
- Check which standards published by Standards Australia are applicable to the procurement.
- When in doubt, speak to the relevant agency contact.
- Tender goods and services that are fully compliant with all applicable standards.
Demonstrate the capability to meet applicable Australian and international standards.
It is not sufficient for tenderers to simply state or assert compliance with the applicable standards in their tender documentation. Tenderers must gather and include documentation demonstrating the capability to meet each standard as part of their tender.
This is a potentially onerous task, but it may be an important factor for the Commonwealth when evaluating tenders.
We recommend that tenderers:
- Gather evidence of all applicable standards that are relevant to a procurement.
- Include this evidence with their tender.
- Where possible, tender certifications that show that the tenderer, or the goods or services tendered by the tenderer, comply with the applicable standards.
- Where it is not possible to provide certifications in respect of each standard, include a statement as part of the tender that describes the tenderer’s capability to meet the remaining standards.
Demonstrate compliance with ethical practices and compliance with Australian laws
Commonwealth officials are now required to make “reasonable enquiries” that each procurement is carried out considering the tenderer’s compliance with “regulations and/or regulatory frameworks”. This includes, but is not limited to, the tenderer’s practices regarding labour regulations, including ethical employment, OH&S and environmental practices.
While there is no requirement in the CPRs for tenderers to include information with their tender regarding compliance with regulatory frameworks, tenderers should be prepared to provide such details. It is unclear whether the Commonwealth will take tendered information into account when forming a view on the tenderer’s compliance. However, the inclusion of such information may reduce the Commonwealth’s evaluation burden.
- Include with each tender a statement detailing the tenderer’s ethical employment, OH&S and environmental practices, and its compliance with laws and regulations.
- Where the tenderer has, or is able to obtain, a third party certification of ethical practices or compliance with Australian regulations and regulatory frameworks, then it would be beneficial to include this with the tender.
- Where the tenderer is sourcing a significant portion of the goods or services tendered from another organisation (and in particular, where these goods or services are sourced from overseas), the tender should also detail the practices of the tenderer’s suppliers and subcontractors.
Show the economic benefit to the Australian economy
The Commonwealth is now required to assess the “economic benefit to the Australian economy” of each procurement. As previously mentioned, it is currently unclear how the economic benefit will be assessed by the Commonwealth. It is possible that Commonwealth agencies may focus on factors such as the effect on local jobs, the use of local materials and the payment of local taxes in forming an assessment.
While there is no requirement for tenderers to include information with their tender regarding the benefits to the Australian economy associated with their bid, tenderers should be prepared to justify their tender’s positive impact on the Australian economy. It is unclear whether the Commonwealth will take tendered information into account when forming a view on the benefits to the Australian economy of the procurement. However, it is in the tenderer’s best interests that the economic benefit to the Australian economy is a clear theme in their tender (along with value for money).
- Consider how the structure of the company or tender will impact on the Commonwealth’s assessment of the economic benefit.
- Consider what (if any) tender or company changes should be made maximise this economic benefit.
- Be prepared to include information with each tender that might assist the Commonwealth in forming a view on the economic benefits of the tender. This could range from projections of the effect of the tenderer’s proposed solution on local employment, to discussion about how the tendered solution improves the viability of local supply chains.
Obtain legal advice on compliance with the CPR changes
Tenderers should also obtain expert advice on the application of the amended CPRs to their tenders.
Ignoring the impact of these changes when tendering will inevitably reduce the likelihood of success.
Watch this space
The Commonwealth Government has alluded to the possible introduction of the Government Procurement (Judicial Review) Bill in the forthcoming parliamentary sitting period.
The text of the Bill has not yet been made public. However, we understand it aims to allow the Federal Circuit Court and the Federal Court of Australia to grant injunctions or order payment of compensation for contraventions of the CPRs.
It is possible that the Bill may provide that unsuccessful tenderers to Commonwealth Government procurement processes may seek to claim back their reasonably incurred costs when submitting tenders in situations where the Commonwealth has breached the CPRs. One such example would be when the Commonwealth does not appropriately consider the changes to the CPRs discussed in this article, such as the economic benefit of the tenderer’s bid.
Robert Watson is a government procurement specialist at Sparke Helmore. Robert is experienced in advising on complex acquisitions, including technology and communication assets, and logistics contracts. He has also advised private sector clients on tendering strategies for government contracts.