Commonwealth Procurement Guidelines

The Australian Government is one of the largest purchasers of goods and services in Australia, procuring goods and services of around $24 billion annually. Australian-based goods and services represent $16.5 billion (69%) of this total.

As a result, the Government has firm guidelines around procurement processes for its agencies and departments. The Commonwealth Procurement Guidelines represent the policy framework under which agencies govern and undertake their own procurement. Chief Executives are responsible for the management of the individual agencies, however they are also required to manage within the context of the Government’s policy framework. The Guidelines also inform departments and agencies about the Government’s policy for new Coordinated Procurement Contracting Arrangements.

Changes updating the Commonwealth Procurement Guidelines were made in October 2008, taking effect on 1 December 2008. The revised guidelines focus on achieving improved value for money through the negotiation of whole-of-government procurement contracts.

“The Government awards contracts totaling about $30 billion a year to procure goods and services. Improved value for money will be achieved through aggregation of government demand and negotiating whole-of-government procurement contracts in variety of core government areas, such as IT, professional services and travel.”

Where the Government establishes coordinated procurement contracting for a particular property or service, agencies must use the contract established for that property or service unless an exemption has been provided. These arrangements will reduce duplication between agencies in meeting common procurement requirements and provide the ability for the Government to use its combined purchasing power to improve value for money.

The Rudd Government is also committed to implementing measures to assist Australian small businesses to gain access to the Australian Government procurement market.

“Where it is sensible to do so, we will be looking to standardise procurement documents to ensure consistency in format, content, application and contracts. These documents will make it easier for small businesses to sell their goods and services to the Australian Government. My Department has already developed Source IT contract templates for Australian Government agencies for a range of simple ICT procurements.”

Agencies will also be required to review operations with a focus on simplifying procurement processes, particularly examining potential to reduce burdens for SMEs participating in tenders.

Mr Tanner also noted that in order to enhance transparency, agencies must make available on request, the names of any sub-contractor engaged by a contractor in respect of a Commonwealth contract for procurement.

Summary of Key Changes

The following is a summary of the main changes to the guidelines in October 2008:

• Coordinated Procurement Contracting Arrangements: New text explaining coordinated procurement contracting arrangements and agencies’ responsibilities under those arrangements. To clarify that for certain identified goods and services mandated whole of government procurement contracts may be introduced.
• Added explanation of Chief Executives’ obligations to comply with Government policy: Clarifies FMA agencies Chief Executives’ obligations to comply with Government policies – consistent with recent amendments to section 44 of the FMA Act.
• Risk Management – Limiting a Contractor’s Liability to the Commonwealth: Revised to clearly state a balanced approach to risk allocation in contracts.
• Clarification of the definition and scope of ‘procurement’.
• Addition of a concise explanation of how policies impacting on procurement apply under Regulation 9. Allows examples of policies that impact on procurement such as the National Code of Practice for the Construction Industry to be deleted. This avoids potential confusion by having these policies stated in their own clear and comprehensive guidance by the agency with policy responsibility and allows changes to other policies without the need to update the CPGs.
• Inclusion of requirements for contractors to be able to make available details of sub-contractors to improve accountability and transparency.
• Inclusion of requirement that agencies must not enter into contracts with suppliers who have had a judicial decision against them (not including decisions under appeal) relating to employee entitlements and have not paid the claim. To ensure the Commonwealth only contracts with suppliers who meet legal obligations to employees.
• Removal of explanation of the Senate Order on Departmental and Agency Contracts. Moves towards all procurement reporting obligations being met through AusTender, which now includes information on the treatment of confidential information sought by the Senate Order. Procurement reporting rationalisation from Senate Order, Annual Reporting and CPGs requirements into a single reporting mechanism (AusTender) was recommended by the ANAO and is consistent with recommendation by the Senate Committee for Finance and Public Administration in its February 2007 report on Departmental and Agency Contracts.
• Order of Mandatory Procurement Procedures has been revised to align with the usual chronology of a procurement process.
• Clarification of Cooperative Agency Procurement. This change provides agencies with assurance that cooperative procurement arrangements are available where the approach to the market includes provision for potential future cooperative procurement.
• Appendix A: Exemptions from Mandatory Procurement Procedures – an exemption has been added for procurement of property or services from a business that primarily exists to provide the services of persons with a disability. This exemption provides agencies with the flexibility to undertake simple procurement processes for disability services where they represent value for money.

The Commonwealth Procurement Guidelines are available at http://www.finance.gov.au/publications/fmg-series/procurement-guidelines/index.html.

The Minister’s media release (10 October 2008) is available at http://www.financeminister.gov.au/media/2008/mr_312008.html.

Update – Procurement Statement

On 28 July 2009 the Government released the Australian Government Procurement Statement – a package of reforms to further improve and foster greater transparency in government purchasing.

The Minister for Finance and Deregulation, the Hon. Lindsay Tanner, said the Government was committed to opening up the tendering processes of government to ensure improved accountability and to help firms to compete for government contracts.

A key component of the statement is the appointment of a Procurement Coordinator who will have oversight of Commonwealth procurement practices and policies.

The Minister for Finance and Deregulation’s media release (28 July 2009)is available at http://www.alp.org.au/media/0709/msfind280.php.

The Australian Government Procurement Statement is available at ProcurementAustralian Government Procurement Statement July 2009.PDF.

Further information about procurement is available at the Department of Finance and Deregulation website at http://www.finance.gov.au/procurement/index.html.

Update – Funding boost

On 28 July 2009 the Minister for Innovation, Industry, Science and Research, the Hon. Kim Carr, announced a range of measures totaling $19.1 million to enhance the ability of Australian industry and workers to win government contracts.

The Industry Capability Network (ICN) will receive an extra $8.5 million over four years through the Suppplier Access to Major Projects (SAMP) program to give Australian companies a better chance of securing government work.

Eminent business specialists will be appointed as Supplier Advocates to champion Australian industry in the government marketplace and improve competitiveness ($8.2 million over four years).

Tenderers will be required to submit Australian industry participation plans that give local business a fair chance at winning major Commonwealth contracts and work on Commonwealth-funded infrastructure projects, including projects supported by the Building Australia Fund ($2.5 million over four years).

The Minister for Innovation, Industry, Science and Research’s media release (28 July 2009) is available here.