What you need to know
- New Commonwealth Procurement Rules (CPRs) will commence on 20 April 2019.
- The changes support the commencement of the Government Procurement (Judicial Review) Act 2018 (the Act).
- The new CPRs declare specific provisions of Division 1 as "relevant Commonwealth Procurement Rules" for the purposes of the Act.
- Two key provisions have been moved from Division 2 to Division 1, taking the review of compliance with those provisions outside of the scope of the Act.
- The new CPRs place an increased emphasis on procurement from Small to Medium Enterprises (SMEs).
What you need to do
- Get familiar with the declared provisions of Division 1 and other changes to the CPRs.
- Review your internal procurement policies, processes and decision making and record keeping procedures in light of the heightened scrutiny associated with the declared provisions of Division 1, and all of Division 2.
Highly anticipated changes to the CPRs have arrived, revealing the full list of provisions captured by the Act. The changes are accompanied by a number of other material and minor updates, all of which will commence on 20 April 2019.
The Act
The Act gives suppliers the right to make formal complaints, seek injunctions and compensation where there has been a contravention of "relevant CPRs" in relation to a "covered procurement".
"Covered procurements" are procurements:
- where the rules in Division 1 and 2 of the CPRs apply; and
- that are not included in a class of procurements specified in a determination by the Finance Minister as not being covered.
The Act defines "relevant CPRs" as:
- a provision of Division 1 which is declared to be relevant; or
- all provisions of Division 2.
Relevant CPRs in Division 1
Rule 6.9 (Judicial Review) of the new CPRs declares the following rules as relevant provisions:
Rule 4.18 – While agencies can engage third parties to procure goods and services on their behalf, they must not use third-party arrangements to avoid complying with the CPRs.
Rule 5.4 – Agencies must treat potential suppliers equitably throughout the procurement process. Potential suppliers should be evaluated based on their commercial, legal, technical and financial abilities and not be discriminated against due to their size, degree of foreign affiliation or ownership, location, or the origin of their goods and services.
Rule 7.2 - Throughout the procurement process, agencies must maintain documentation which is commensurate with the scale, scope and risk of the procurement. Proper record keeping is a practical necessity to enable the timely management of complaints and claims under the Act and is now itself a reviewable requirement under the Act.
Rules 7.10, 7.13 – 7.15 – Agencies must use AusTender to publish open tenders and, if practicable, make request documentation available. Agencies must otherwise ensure that information provided in other ways is consistent with the information published on Austender. Importantly, for multi-stage procurements, the initial approach to market must include the evaluation criteria for each stage.
Rule 7.16 – 7.17 – Agencies must provide to eligible potential suppliers request documentation that includes all information necessary to prepare and submit their tender. Agencies must notify tenderers of a decision to reject a submission or award a contract and make debriefs available to tenderers upon request.
Rules 7.18, 7.20 – Agencies must report standing offers, contracts and amendments on AusTender within 42 days of entering into those arrangements.
Rules 9.3, 9.4 – Before a decision on a preferred procurement method is made, the expected value of the procurement needs to be estimated. When an agency estimates the value of a procurement, the maximum value of the goods and services must include:
- all forms of remuneration and the value of the contract and any options in the proposed contract;
- any taxes or charges; and
- if the procurement is conducted in multiple parts, the maximum value of all the resulting contracts.
Rule 9.5 - While there may be situations where agencies need to divide goods and services into bundles or phases, they must not divide procurements into separate parts solely to avoid a relevant procurement threshold.
Rule 9.6 - If an agency cannot estimate the maximum value of a procurement, the procurement must be treated as being valued above the relevant procurement threshold (and so subject to the Division 2 requirements).
These changes significantly expand the circumstances in which a supplier may make a complaint or application under the Act. Consequently, agencies should, as a matter of course, take steps to document their actions and decisions, particularly with respect to the relevant provisions of Division 1 and Division 2 requirements, throughout the procurement process.
Additional changes to the CPRs
Relocation of Rules
Additional changes to the CPRs include the relocation of the rules:
- regarding consideration of the broader benefits to the Australian economy for procurements valued over $4 million (or $7.5 million for construction services) (previously Rules 10.32 – 10.33, now Rules 4.7 and 4.8); and
- contract management and standard verification (previously Rule 10.39, now rule 7.26),
from Division 2 to Division 1. These changes take these provisions outside of the scope of review under the Act.
Definition of "procurement"
The definition of "procurement" has been narrowed and so no longer includes the words "the delivery of and payment for the goods and services and, where relevant, the ongoing management of the contract and consideration of disposal of goods".
These changes mean that activities that are typically regulated by the terms of a contract are not included in the definition of "procurement" for the purposes of the application of the CPRs.
SME target
Another notable amendment is that the Commonwealth now has a target of non-corporate Commonwealth entities procuring from SMEs 35% of contracts by volume, with a value of up to $20 million. This is reflected in new Rule 5.7.
Rule 2.6
The drafting of Rule 2.6 has also been amended to assist in clarifying the application of the CPRs. Procurements to which the CPRs do not apply in full, because of an exemption provided under rule 2.6, will not be covered procurements for the purposes of the Act.
Authors: Sarah Ross-Smith, Partner; Hyans Mach, Counsel; Tess Hemming, Senior Associate; Cale Woods, Lawyer; Derek Smith, Lawyer.
