New Commonwealth Procurement Rules for the New Year - welcome to 2018!

What you need to know

• New Commonwealth Procurement Rules (CPRs) were registered on the Federal Register of Legislation on 18 December 2017 and will commence on 1 January 2018. 
• The new CPRs contain substantial amendments which operate in addition to the amendments that were made in March 2017.
• Prequalified tenders are now limited to procurements from the Legal Services Multi-use List (LSMUL). This means any procurements above the procurement threshold from other existing multi-use lists must now comply with the open tender requirements of Division 2 of the CPRs. 
• Relevant entities can no longer conduct a limited tender on the basis that the work is a repetition of similar construction services that conform to a basic project for which an initial contract was awarded through an approach to market (where the initial approach to market indicated that limited tender might be used for those subsequent construction services). 
• If evaluation criteria are weighted or are of different importance this must be disclosed in the request documentation.
• The minimum opening time for tenders is currently 25 days - this must be extended by five days if the approach to market was not issued electronically and/ or responses cannot be lodged electronically. 
• Other changes have been made which increase the information that relevant entities are required to provide in their tender documentation.

What you need to do

• Commonwealth entities need to review their procurement policies and procedures to ensure that these are consistent with the amended requirements. 
• Particular care needs to be taken to ensure that any processes which rely on previous exemptions from Division 2 of the CPRs, are updated.  
• Commonwealth entities also need to ensure their approach to market documentation is consistent with the expanded information requirements.

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Overview and Background

The new CPRs were registered on the Federal Register of Legislation on 18 December 2017. The new CPRs will commence from 1 January 2018. 

The Explanatory Statement to the new CPRs explains that these amendments are intended to reflect Australia's international obligations on government procurement. This has included substantial changes to the processes regarding:

• the conduct of prequalified tenders;
• the use of limited tender processes for certain construction projects;
• minimum opening times for approaches to market; and
• minimum information to be included in request documentation.

Both Division 1 (which applies to all procurements) and Division 2 (which applies to procurements at or above the relevant threshold) of the CPRS have been amended.

Prequalified Tenders and Multi-use Lists

The most significant amendments have been made in relation to multi-use lists. 

Previously rule 9.9 defined a "prequalified tender" as an approach to market inviting submissions from all potential suppliers on:

• a shortlist of potential suppliers that responded to an initial open approach to market on AusTender; 

• a list of potential suppliers selected from a multi-use list established through an open approach to market; or
• a list of all potential suppliers that have been granted a specific licence or comply with a legal requirement, when the licence or compliance with the legal requirement is essential to the conduct of the procurement.

This meant that entities did not have to conduct open tenders when procuring goods and services from a multi-use list, even though the value of the goods and services was above the relevant threshold.

A prequalified tender is now restricted to procurements from the LSMUL, as required by the Legal Services Directions 2017 (Cth).    

Procurements from the LSMUL are not limited tenders (see definition of "limited tender") so do not need to comply with any requirements applicable to limited tenders.

However, procurements under the LSMUL should comply with the new request documentation requirements under rule 10.6 (see definition of "request documentation").

Multi-Stage Procurements

The new CPRs contain a new definition and specific processes for the conduct of a "multi-stage procurement".

A "multi-stage procurement" involves an initial approach to market followed by one or more subsequent approaches to market (for example inviting expressions of interest, followed by a request for tender). 

The new CPRs require that: 

• the initial approach to market include the criteria that will be used to select potential suppliers at every stage and, if applicable, any limitation on the number of potential suppliers that will be invited to make submissions (rule 17.3); and 
• each stage be open for the minimum time periods stipulated in rules 10.21 to 10.23 (rule 10.24). 

Where the initial approach to market is an open tender it must be published on AusTender. 

If the initial approach to market is conducted by limited tender, publication on AusTender remains optional.

Where the first stage of a multi-stage procurement is an open tender, it is treated as an open tender (rule 9.8). This means the outcome of the second stage would be reported on AusTender as an open tender.

Limited Tender and Construction Projects

Rule 10.3 of the CPRs sets out those exemptions where the Commonwealth may conduct a procurement through a limited tender process, despite exceeding the procurement thresholds.

Rule 10.3(i) previously allowed the use of limited tenders where: 

"new construction services consisting of the repetition of similar construction services that conform to a basic project for which an initial contract was awarded through an open or prequalified tender, and when the initial approach to market indicated that limited tender might be used for those subsequent construction services."

This exemption has been removed. 

Minimum Open Times

Under the existing CPRs, the minimum time limit for a supplier to lodge a submission in response to an approach to market is at least 25 days for an open tender (rule 10.21) or 30 days if the approach to market documentation was not issued electronically (rule 10.22).  

Our understanding of the amendments to Rule 10.22 are that the 25 day minimum must be extended by: 

• five days if request documentation was not issued electronically;
• five days if submissions cannot be lodged electronically; and
• ten days if both circumstances apply (ie, request documentation was not issued electronically and submissions cannot be lodged electronically).

Reduced Response Times

The circumstances in which a relevant entity may reduce the opening period to less than 25 days (but no less than 10 days), have also been restricted. 

In particular:

• the exception for procurements that were previously published in a procurement plan has been narrowed to where the relevant entity has published details of the procurement in an annual procurement plan at least 40 days in advance of the approach to market (rule 10.23a). This previously required that procurement details be published 30 days in advance of the approach to market; and 
• the exception for a second or subsequent approach to market for a recurring procurement has been removed (previously rule 10.21c). 

Content of Request Documentation

Rule 10.6 has been amended to require that the following additional details be included in request documentation released to the market:

• where the quantity of the goods and services to be procured is not known, the estimated quantity (previously the quantity of goods and services only needed to be provided where this was actually known) (rule 10.6a);
• the relevant importance of the evaluation criteria, if this is applicable to the evaluation (rule 10.6d); and 
• the dates for the delivery of the goods and services, taking into account the complexity of the procurement (rule 10.6e).

These requirements will impact on the planning of procurements, as relevant entities will need to have considered these issues prior to release of approach to market documentation.

In particular, relevant entities will need to have finalised the key aspects of their evaluation methodology prior to issue of request documentation so that the documentation can accurately reflect the weightings, relative importance of criteria or value for money formulae or software which will be used in evaluation. Any change in the relevant entity's approach would also need to be communicated to tenderers through an addendum.

Anti-Avoidance

Rule 10.36 currently provides that a relevant entity cannot cancel a procurement or terminate or modify an awarded contract in order to avoid the rules of Division 2 of the CPRs.

The amended rule 10.37 now also provides that a relevant entity must not "use options" to avoid the application of Division 2 of the CPRs.

For example, it would be inappropriate to amend an executed contract to include an option to extend, so as to avoid the requirements of Division 2 of the CPRs in undertaking a subsequent procurement.  

Prescribed Corporate Commonwealth Entities

The Public Governance, Performance and Accountability Act 2013 (Cth) includes provision for the Finance Minister to make an instrument requiring corporate Commonwealth entities (CCEs) to comply with the CPRs.

From 1 January 2018, this list will be expanded to include the Australian Digital Health Agency (Digital Health) and the National Portrait Gallery of Australia.

The default position in the CPRs is that the following procurement thresholds and reporting thresholds apply:

Rule 3.7 of the CPRs overrides this default position to adopt a hybrid regime for four named entities: