Government Snapshot: Proposed Procurement Enforcement Regime

There has been a lot of discussion around the proposed changes to the way Commonwealth Government procures goods and services, in the form of the Government Procurement (Judicial Review) Bill 2017 (the Bill). The Bill was presented before the House of Represenatives on 25 May 2017.

Of great importance is the introduction of a mechinism which allows the Federal Circuit Court of Australia and the Federal Court of Australia to grant an injunction, or order payment of compensation, where there is a breach of the Commonwealth Procurement Rules (CPR) for that particular tender.

Key takeaways

The key items of importance for Commonwealth Government include:

  1. Application: The Bill applies to all agencies who are required to comply with the CPRs, and are procuring goods/services above the threshold.
  2. Claimants: A supplier “whose interests are affected by the conduct” may apply to the Courts to grant an injunction in relation to a procurement. This puts a stop on the procurement process to allow the potential supplier to participate in the procurement. Importantly, the scope of this provision is broader than those who submitted a tender response and any invited to tender. Arguably, any potential supplier can invoke these provisions.
  3. Court orders: The Courts may also order an agency to partake in a corrective measure, to otherwise preserve the right of the potential provider to participate in the procurement.
  4. Dispute resolution: Potential suppliers are required to attempt to resolve the complaint with the relevant agency in the first instance. If the potential supplier is unable to resolve the dispute with the agency, then they may make an application to the Courts.
  5. Time limits: Potential suppliers are required to make an application for an injunction within either 10 days of the contravention occurring, or within 10 days of the potential supplier becoming aware of the contravention. The Court may grant an extension to this timeframe in special circumstances considered within the context of the Bill.
  6. The application must be dismissed unless the Court otherwise orders that a longer period should apply for such an application, if a special circumstance applies.
  7. Compensation: If there is a public interest certificate for the procurement process, compensation is the preferred remedy rather than blocking the continuance of the procurement process. The preference is for the agency to continue with the procurement process, subject only to court orders
  8. Damages: Compensation may be awarded to a potential supplier if an agency has breached the CPRs. Compensation is considered the reasonable expenditure incurred by the supplier in preparing to respond to a procuremnt, preparing to make a complaint and any costs incurred in attempting to resolve a complaint.
  9. Investigation: If a complaint is received, the agency must investigate and attempt to resolve the complaint. The agency must suspend the procurement if there is no public interest certificate in place.
  10. Contracts not invalidated: The Courts cannot invalidate a contract that has been awarded to a successful tenderer, even where there has been a breach of the CPRs. In such a situation, the unsuccessful tenderer may be entitled to compensation.

Commentary

The introduction of this Bill increases the accountability of all agencies and increases the risk of non-compliance with the CPRs. The legislation gives the CPRs a significant degree of enforceability.

The ramifications to an agency for non-compliance are significant and place the agency at risk of:

  • litigation;
  • reputational damage and adverse publicity;
  • financial cost to restart the process;
  • complaints to the Minister’s office;
  • compromising value for money;
  • external review by the ANAO, Commonwealth Ombudsman, Auditor-General, Royal Commission.

What next?

All agencies should be well-informed of these changes and begin to consider how they will implement such changes. Agencies should carefully consider the expertise and knowledge of staff in the application of the CPRs and probity principles to mitigate the risk of such claims. Agencies cannot assign their compliance with such principles and procurement officers are expected to be aware of and understand probity and the CPRs to a significant extent.

The much awaited Bill garnered a lot of interest in the lead up to publication and will continue to do so as it progresses to a second-reading. The industry will continue to watch this space as the Bill is discussed and further debated. There is much still to consider prior to the Bill’s introduction in the detail of the overall framework and structure.

We anticipate with the additional focus on government procurement, more agencies will begin to engage external probity advisors and probity auditors to oversee their procurements.

Griffin Legal is pre-qualified for the provision of consultancy and business services to Commonwealth Government. For assistance on matters of probity, please contact Managing Partner Claire Carton and Partner Carina Zeccola.

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