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The Financial Management Guidance series of publications
No. 1 Commonwealth Procurement Guidelines, January 2005.
No. 2 Guidelines for the Management of Foreign Exchange Risk, November 2002.
No. 3 Guidance on Confidentiality of Contractors’ Commercial Information, February 2003.
No. 4 Commonwealth Cost Recovery Guidelines for Information and Regulatory Agencies, March 2003.
No. 5 Guidelines for Implementation of Administrative Arrangements Orders and Other Machinery of Government Changes, September 2003.
No. 6 Guidelines for Issuing and Managing Indemnities, Guarantees, Warranties and Letters of Comfort, September 2003.
No. 7 Guidelines for the Management of Special Accounts, October 2003.
No. 8 Guidance on the Listing of Contract Details on the Internet (Meeting the Senate Order on Department and Agency Contracts), January 2004.
No. 9 Australian Government Competitive Neutrality Guidelines for Managers, February 2004.
No. 10 Guidance on Complying with Legislation and Government Policy in Procurement, January 2005.
No. 11 The Role of the CFO – Guidance for Commonwealth Agencies, April 2003.
No. 12 Guidance on Identifying Consultancies for Annual Reporting Purposes, July 2004.
No. 13 Guidance on the Mandatory Procurement Procedures, January 2005.
Foreword
We are pleased to issue revised Commonwealth Procurement Guidelines under Regulation 7 of the Financial Management and Accountability Regulations 1997.
Governments carry a great responsibility for the sound management of the public resources for which they are responsible. This responsibility is a key driver behind the Government’s ongoing management and improvement of the Financial Management Framework. Within this framework, procurement is an important activity conducted by all Australian Government departments and agencies.
These Guidelines are a key mechanism to enable agencies to manage public resources efficiently, effectively and ethically when undertaking procurement.
We encourage Australian Government officials to maintain a strong focus on achieving value for money. As such, we have sought to further highlight and strengthen references to this principle in these Guidelines.
This revision of the Guidelines represents a change in the Government’s policy with regard to procurement, including prescriptions for procurement processes which have not existed in the past. These prescriptions will enhance consistency of procurement practices across Australian Government agencies, providing increased certainty and access for our competitive small and medium enterprises. They also allow agencies to act in a manner consistent with the Australian Government’s international agreements.
The Guidelines are in three parts:
Division 1 – The Procurement Policy Framework, which articulates the core principle of value for money and other elements of the procurement policy framework which apply to all procurements;
Division 2 – Mandatory Procurement Procedures, which prescribes procurement procedures for certain procurements; and
Division 3 – Other Government Policies, which describes the relationship between legislation and other Government policies which impact on the procurement policy framework.
We commend these Commonwealth Procurement Guidelines to Australian Government officials as they represent good practice in procurement and formalise many of the underlying approaches that have previously been part of the procurement policy framework.
Nick Minchin Dr Sharman Stone
Minister for Finance and Administration Parliamentary Secretary to the
1 December 2004 Minister for Finance and Administration
1.1 These Commonwealth Procurement Guidelines - January 2005 (CPGs) are issued by the Minister for Finance and Administration (Finance Minister) under Regulation 7 of the Financial Management and Accountability Regulations 1997 (FMA Regulations).
1.2 The CPGs establish the core procurement policy framework and articulate the Government’s expectations for all departments and agencies (agencies) subject to the Financial Management and Accountability Act 1997 (FMA Act) and their officials[1], when performing duties in relation to procurement.
1.3 In contrast, bodies subject to the Commonwealth Authorities and Companies Act 1997 (CAC Act) are legally and financially separate from the Commonwealth and are generally not subject to the CPGs. However, CAC Act bodies listed in the Commonwealth Authorities and Companies Regulations 1997 (CAC Regulations) as subject to section 47A of the CAC Act (relevant CAC bodies) can be directed by the Finance Minister to apply the CPGs.
1.4 FMA Regulation 8(1) requires officials to have regard to the CPGs when performing duties related to procurement. FMA Regulation 9 requires that proposals to spend public money (including proposed procurement of property or services) must be approved by an approver[2]. An approver is required to be satisfied, after making reasonable enquiries, that the spending proposal is in accordance with Commonwealth policy and that it is an efficient and effective use of public money. In particular, an approver must be satisfied that policies implementing international obligations, including those set out in these CPGs, are complied with.
1.5 Obligations in these CPGs which must be complied with, in all circumstances, in accordance with FMA Regulation 9, are denoted by the use of the term ‘must’ in these CPGs[3]. The use of the term ‘should’ denotes matters of sound practice.
1.6 The CPGs establish the procurement policy framework within which agencies determine their own specific procurement practices.
1.7 Chief Executives of agencies subject to the FMA Act may issue Chief Executive’s Instructions (CEIs) to officials on any matter necessary or convenient for carrying out or giving effect to the FMA Act or FMA Regulations. The CPGs provide the framework within which Chief Executives may prepare CEIs and associated operational guidance related to procurement in a specific agency.
1.8 Similarly, relevant CAC Act bodies are encouraged, where appropriate, to develop internal instructions in regard to procurement to promote consistency with these CPGs.
2. Scope
2.1 The CPGs apply to procurement conducted by all officials in agencies and in relevant CAC Act bodies.
2.2 Procurement encompasses the whole process of acquiring property[4] or services. It begins when an agency has identified a need and decided on its procurement requirement. Procurement continues through the processes of risk assessment, seeking and evaluating alternative solutions, contract award, delivery of and payment for the property or services and, where relevant, the ongoing management of a contract and consideration of options related to the contract. Procurement also extends to the ultimate disposal of property at the end of its useful life.
2.3 In addition to the acquisition of property or services by an agency for its own use, procurement also covers a situation where an agency is responsible for the procurement of property or services for other agencies, or for third parties.
2.4 An integral part of the procurement cycle is the ongoing monitoring and assessment of the procurement, including the property or services procured and the tasks related to procurement.
2.5 While procurement relates to the acquisition of property or services, including consultancy services, it does not include grants (whether in the form of a contract or conditional gift), statutory appointments, appointments made by a Minister using the executive power (for example, the appointment of a person to an advisory board), or the engagement of employees, such as under the Public Service Act 1999, the Parliamentary Services Act 1999 or an agency’s enabling legislation[5].
2.6 The procurement policy framework outlined in the CPGs applies to all matters related to the procurement of property or services, irrespective of whether those matters are specifically mentioned in the CPGs.
2.7 There are three key elements of the Government’s procurement policy framework:
the CPGs, issued by the Finance Minister, which establish the procurement policy framework for agencies;
Finance Circulars, issued by the Department of Finance and Administration (Finance), which advise of key changes and developments in the Government’s procurement policy framework; and
a range of web-based and printed guidance documents, developed by Finance to assist agencies and officials to implement the Government’s procurement policy.
3.1 Government agencies and officials operate within an environment of legislation and relevant Government policy. Within this broad context, the financial management framework consists of the legislation and policy governing the management of the Australian Government’s resources. Figure 1 sets out the main elements of this environment related to procurement. [6]
3.2 View image in the official sourceThe procurement policy framework is a subset of the financial management framework related to the procurement of property or services.
3.3 The main legislative provisions affecting procurement in agencies are described below (Appendix A provides extracts of the relevant sections of the FMA Act and the FMA Regulations):
Section 5 of the FMA Act defines key terms for the FMA Act.
Section 44 of the FMA Act requires Chief Executives to promote the efficient, effective and ethical use of the resources for which they are responsible. It also implicitly recognises the executive power that a Chief Executive may use to enter into agreements under which public money will, or may, become payable.
FMA Regulation 3 defines important terms for the FMA Regulations.
The Commonwealth Procurement Guidelines are issued under FMA Regulation 7.
FMA Regulation 7(3) provides that the CPGs may require that a matter must be published in the way set out in the CPGs.
FMA Regulation 8(1) requires that officials performing duties related to the procurement of property or services must have regard to the CPGs.
FMA Regulation 8(2) requires that where officials act in a manner inconsistent with the CPGs, they must document their reasons for doing so.
FMA Regulation 9(1) requires that an approver of a proposal to spend public money must be satisfied that the proposed expenditure is in accordance with the policies of the Commonwealth[7], will make efficient and effective use of the money and, if the proposal is one to spend special public money[8], is consistent with the terms under which the money is held.
In some cases, approval of spending proposals under FMA Regulation 9 may be required more than once. For example, proposals may be approved before bids are sought to set the parameters for a complex tender process and to approve amounts for advisers such as lawyers, accountants and subject-matter experts. [9]
FMA Regulation 10 requires written authorisation from the Finance Minister (or the Finance Minister’s delegate), before approving a proposal to spend public money, where expenditure under the proposal is not supported by sufficient available appropriation.
FMA Regulation 12 requires that, where approval of a spending proposal is not given in writing, the approver must record the terms of the approval in a document as soon as practicable after the approval is given.[10]
FMA Regulation 13 requires that a person must not enter into a contract, agreement or arrangement under which public money is, or may become, payable unless a spending proposal for the proposed contract, agreement or arrangement has been approved under Regulation 9 and, if necessary, in accordance with Regulation 10.
Chief Executives may issue CEIs under FMA Regulation 6, in accordance with section 52 of the FMA Act. In the area of procurement CEIs can:
interpret the procurement policy and financial management frameworks, focussing on the agency’s particular needs; and
provide primary operational instructions to agency officials in carrying out their duties related to procurement, in a way that is tailored to the agency’s particular circumstances and needs.
3.4 The main legislative provisions affecting procurement of relevant CAC Act bodies are:
Section 47A of the CAC Act empowers the Finance Minister to issue directions to the directors of Commonwealth authorities and wholly-owned Commonwealth companies listed in the CAC Regulations on matters related to the procurement of property or services.
CAC Regulation 9 lists the relevant CAC Act bodies subject to the directions issued by the Finance Minister under section 47A of the CAC Act.
The CAC Regulations are made under the CAC Act, in accordance with section 49 of the CAC Act and apply to all bodies subject to that Act.
The Finance Minister’s (CAC Act Procurement) Directions 2004 (the Directions) require relevant CAC Act bodies to have regard to the CPGs when engaged in duties related to the procurement of property or services, and to comply with the mandatory procurement procedures in all circumstances for covered procurements. The Directions also advise relevant CAC Act bodies on interpreting the CPGs within the context of the CAC Act and CAC Regulations.
3.5 The CPGs are an integral part of these frameworks, which also consist of Finance Circulars and a range of printed and web-based procurement guidance.
International Obligations
3.6 Australia is a signatory to a range of bilateral free trade arrangements. As of 1 January 2005, those arrangements which include specific Government procurement commitments include:
The Australia New Zealand Closer Economic Relations Trade Agreement (ANZCERTA) and Australian and New Zealand Government Procurement Agreement (ANZGPA);
The Singapore - Australia Free Trade Agreement (SAFTA);
The Australia - United States Free Trade Agreement (AUSFTA); and
The Thailand - Australia Free Trade Agreement (TAFTA)[11].
3.7 These arrangements are implemented domestically as Government policy and/or legislation, and hence policies and procedures to implement obligations under international agreements must be complied with in order to approve proposed procurement under FMA Regulation 9. All relevant international obligations are incorporated into the procurement policy framework as expressed in these CPGs.
4. The Principle of Value for Money
4.1 Value for money is the core principle underpinning Australian Government procurement. In a procurement process this principle requires a comparative analysis of all relevant costs and benefits of each proposal throughout the whole procurement cycle (whole-of-life costing).
4.2 Value for money is enhanced in Government procurement by:
encouraging competition by ensuring non-discrimination in procurement and using competitive procurement processes;
promoting the use of resources in an efficient, effective and ethical manner[12]; and
making decisions in an accountable and transparent manner.
4.3 In order to be in the best position to determine value for money when conducting a procurement process, request documentation needs to specify logical, clearly articulated, comprehensive and relevant conditions for participation and evaluation criteria which will enable the proper identification, assessment and comparison of the costs and benefits of all submissions on a fair and common basis over the whole procurement cycle.
4.4 Cost is not the only determining factor in assessing value for money. Rather, when assessing alternative procurement processes or solutions, a whole-of-life assessment would include consideration of factors such as:
the maturity of the market for the property or service sought;
the performance history of each prospective supplier;
the relative risk of each proposal;
the flexibility to adapt to possible change over the lifecycle of the property or service;
financial considerations including all relevant direct and indirect benefits and costs over the whole procurement cycle;
the anticipated price that could be obtained, or cost that may be incurred, at the point of disposal; and
the evaluation of contract options (for example, contract extension options).[13]
4.5 Additionally, FMA Regulation 9(1)(a) requires officials to ensure that a procurement complies with other Government policies that interact with the procurement. Officials may refer to the Finance publication Guidance on Complying with Legislation and Government Policy in Procurement[14] for further assistance on policies that interact with procurement.
5. Encouraging Competition
5.1 Competition is a key element of the Australian Government’s procurement policy framework. Effective competition requires non-discrimination in procurement and the use of competitive procurement processes.
Non-discrimination
5.2 The Australian Government procurement policy framework is non-discriminatory. All potential suppliers should have the same opportunities to compete for Government business and must, subject to these CPGs, be treated equitably based on their legal, commercial, technical, and financial abilities, and not on their degree of foreign affiliation or ownership, location or size. The property or services on offer must be considered on the basis of their suitability for their intended purpose, and not on the basis of their origin.
Small and Medium Enterprises (SMEs)
5.3 To ensure that SMEs[15] are able to engage in fair competition for Government business, officials undertaking procurement should ensure that procurement methods do not unfairly discriminate against SMEs.
5.4 Agencies should seek to ensure that procurement processes are readily communicated and accessible to SMEs and should not take action to deliberately exclude SMEs from participating in a procurement process.
5.5 Agencies need to ensure that SMEs have appropriate opportunities to compete for business, considering as appropriate in the context of value for money:
the benefits of doing business with competitive Australian or New Zealand SMEs when specifying requirements and evaluating value for money;
the capability and commitment to regional markets of SMEs in their local regions; and
supplier-base and competitive benefits of access for new market entrants.
5.6 The Government is committed to FMA agencies sourcing at least 10 per cent of their purchases by value from SMEs.
Competitive Procurement Processes
5.7 The procurement process itself is an important consideration in achieving value for money. Participation in a procurement process imposes costs on agencies and potential suppliers and these costs should be considered when determining a process commensurate with the scale, scope and relative risk of the proposed procurement.
5.8 When undertaking a procurement, agencies need to conduct an appropriately competitive process of a scale commensurate with the size and risk profile of the particular procurement.
5.9 Government policy specifies that specific procurement procedures are to be followed when the value of the property or services subject to a particular procurement is above a certain threshold. These specific procedures, which further encourage competition and in many circumstances require an open tender process, are outlined in Division 2 of these CPGs.
6. Efficient, Effective and Ethical Use of Resources
6.1 Section 44 of the FMA Act requires Chief Executives to promote the efficient, effective and ethical use of the Commonwealth resources for which they are responsible. Chief Executives mainly discharge this responsibility for procurement by ensuring that their agencies have appropriate policies, procedures and guidelines in place to achieve value for money in procurement processes.
6.3 Efficiency relates to the productivity of the resources used to conduct an activity in order to achieve the maximum value for the resources used. In relation to procurement, it includes the selection of a procurement process that is consistent with Government policy and is the most appropriate to the procurement objective under the prevailing circumstances.
6.4 Efficiency in procurement is enhanced by conducting transparent, fair and appropriately competitive processes of a scale commensurate with the size and risk profile of each particular project.
6.5 Effectiveness relates to how well outcomes meet objectives. It concerns the immediate characteristics of an agency’s outputs, especially in terms of price, quality and quantity, and the degree to which outputs contribute to specified outcomes. Officials may refer to the Finance publication Guidance on Complying with Legislation and Government Policy in Procurement[16] for further assistance on policies that interact with procurement.
6.6 Effectiveness can be achieved by ensuring that the property or service being sought will make the maximum possible contribution to the relevant outcome. This entails correctly identifying the need, accurately drafting functional specifications, rigorously assessing responses and negotiating the final contract, and then diligently managing the contract. Comprehensive monitoring and assessment at all stages of the procurement process further contributes to effectiveness.
Risk Management
Principles
6.7 Risk is part of the environment within which agencies operate. Risk management involves the systematic identification, analysis, treatment, and, where appropriate, acceptance of risks. It is integral to efficiency and effectiveness, enabling agencies to proactively identify, evaluate and manage risks, opportunities and issues arising out of procurement related activities.
6.8 Risk management should be built into an agency’s procurement processes. The extent of risk management required will vary from following routine procurement processes, to a significant undertaking involving the highest level of planning, analysis and documentation.
6.9 As shown in Figure 2 above, a variety of risks may arise from each stage of a procurement. Agencies should ensure that appropriate procedures are in place to identify and consider all relevant risks throughout the procurement cycle.[17]
6.10 As a general principle, risks should be borne by the party best placed to manage them – that is, the Commonwealth or relevant CAC Act body should generally not accept risks which another party is better placed to manage.
6.11 Agencies need to carefully monitor the terms and conditions, including pricing, on which risk allocations are determined, to ensure that they reflect value for money.
Limiting a Contractor’s Liability to the Commonwealth or relevant CAC Act body
6.12 On occasions, tenderers may request that the Commonwealth or relevant CAC Act body limit the tenderer’s potential liability. In some limited circumstances it may be necessary to do this, for example through indemnifying the supplier or capping their potential liability to the Commonwealth or relevant CAC Act body.
6.13 As part of considering such requests, FMA Act agencies need to consider the requirements set out in Finance Circular 2003/02 Guidelines for Issuing and Managing Indemnities, Guarantees, Warranties and Letters of Comfort[18].
6.14 If there is a compelling reason to agree to limit a supplier’s liability, each indemnity, liability cap or similar arrangement, must, wherever possible, be of a limited scope and with specified maximum liabilities, both in relation to each event that can cause liability to occur and the number of those events[19].
6.15 For each proposal to limit a supplier’s liability to the Commonwealth or relevant CAC Act body, a risk management process must be undertaken. In particular, agencies should undertake a risk assessment, and prepare a risk management plan where necessary. Legal advice should also be obtained as, appropriate to the complexity of the purchase and the level of risk.
6.16 Agreement to limit a supplier’s liability through an indemnity, liability cap or similar arrangement may result in direct or indirect costs to the agency. These potential costs must be considered by the agency when assessing value for money.
6.17 Arrangements to limit liability carry direct or indirect costs which must be considered within the determination of value for money. Better practice request documentation will include a draft contract with clear liability provisions, with potential suppliers required to indicate compliance against each clause of the draft contract, including liability provisions, and to clearly state and cost any alternative clauses. Request documentation may allow for any additional direct or indirect costs borne by the Commonwealth to be reflected in a commensurate adjustment to the terms of the contract where negotiations to limit a supplier’s liability occur after the nomination of a preferred supplier.
6.18 Agreements to limit a supplier’s liability to the Commonwealth or a third party that take the form of an indemnity, guarantee, warranty or letter of comfort[20] provided by the Commonwealth, come within the scope of a ‘contract, agreement or arrangement under which public money … may become payable’ under FMA Regulation 13. The full potential cost to the Commonwealth as a result of these instruments must be considered and, if necessary, authorised under FMA Regulation 10 before the spending proposal can be approved under FMA Regulation 9.
6.19 Further guidance on the treatment of indemnities and liability caps under the FMA Regulations can be found in the Finance Circular 2004/10 Using the Financial Management and Accountability Regulation 10 Delegation[21].
Ethics
6.20 Ethics are the moral boundaries or values within which officials work. Ethical behaviour encompasses the concepts of honesty, integrity, probity, diligence, fairness, trust, respect and consistency. Ethical behaviour identifies and avoids conflicts of interests, and does not make improper use of an individual’s position.
6.21 A procurement conducted in an ethical manner will enable purchasers and potential suppliers to deal with each other on a basis of mutual trust and respect. Adopting an ethical, transparent approach enables business to be conducted fairly, reasonably and with integrity.
6.22 A specific aspect of ethical behaviour relevant to procurement is an overarching obligation to treat all participating potential suppliers as equitably as possible. For example, when providing further information to potential suppliers during the course of a procurement, agencies need to ensure that procedures are in place to treat all potential suppliers fairly. The procurement process rules need to be clear, open, well understood and applied equitably to all parties to the process.
6.23 Agencies need to ensure that officials involved in procurement, particularly those dealing directly with suppliers and potential suppliers:
recognise and deal with any conflicts of interests, including perceived conflicts of interests;
deal with suppliers and potential suppliers even-handedly;
consider seeking advice where probity issues arise;
do not compromise the Australian Government's standing by accepting inappropriate gifts or hospitality;
are scrupulous in their use of public property; and
comply with all duties and obligations including the agency’s CEIs in relation to gifts or hospitality, the information privacy principles of the Privacy Act 1988, the security provisions of the Crimes Act 1914 and, where applicable, the Australian Public Service’s Code of Conduct as set out in the Public Service Act 1999.
6.24 Agencies must not seek to benefit from supplier practices that may be dishonest, unethical or unsafe.
6.25 Procurement of services ought to be conducted in a way that imposes as far as practicable the same level of accountability and responsibility on a service provider as would exist if the agency carried out the services itself.
7. Accountability and Transparency
7.1 Accountability and transparency encourage the efficient, effective and ethical use of Commonwealth resources. An agency and its officials have the responsibility of ensuring that any procurement process is open and transparent and that decisions are justified. Agencies need to have procedures in place to ensure that procurement processes are conducted soundly and that procurement related actions are documented, defensible and substantiated in accordance with legislation and Government policy.
7.2 Accountability and transparency are primary considerations throughout the procurement process from the initial identification of need through to the final disposal of any property.
7.3 A well planned, conducted and documented procurement, which accords with Government policy, is more likely to withstand external scrutiny. If a procurement is subject to scrutiny, adherence to the CPGs and full documentation of the process can be relied upon to provide substantiation of decisions.
7.4 Accountability means that officials are responsible for the actions and decisions that they take in relation to procurement and for the resulting outcomes. Officials are answerable for such activity through established lines of accountability including the agency’s executive and senior management, the Government and the Parliament, as shown in Figure 3.
7.5 View image in the official source Transparency provides assurance that procurement processes undertaken by agencies are appropriate and that policy and legislative obligations are being met. Transparency involves agencies taking steps to support appropriate scrutiny of their procurement activity.
7.6 The fundamental elements of accountability and transparency, which are outlined below, are policy and legislative obligations, documentation and disclosure.
Policy and Legislative Obligations
7.7 Officials undertaking procurement are accountable for complying with relevant general Government policies and legislative requirements. This includes the procurement-specific policies and legislative requirements set out in the CPGs, the FMA Act and FMA Regulations, and other policies and legislation that interact with procurement[22].
7.8 The provisions of the FMA Act and FMA Regulations that are of relevance to procurement include, but are not limited to, those discussed in Division 1.
Documentation
7.9 Documentation is critical to accountability and transparency. It provides a record of procurement activities and how they have been conducted, and facilitates scrutiny of these activities.
7.10 Agencies must maintain appropriate documentation for each procurement. The appropriate mix and level of documentation depends on the nature and risk profile of the procurement being undertaken. In all cases, officials need to ensure there is sufficient documentation to provide an understanding of the reasons for the procurement, the process that was followed and all relevant decisions, including approvals and authorisations, and the basis of those decisions.
7.11 Documentation relating to a procurement must be retained for a period of three years or for a longer period if required by legislation or other reason for a specific procurement. In addition, the Archives Act 1983 sets out requirements in relation to Commonwealth records, including dealings with, and access to, such records.
7.12 Some specific requirements for the preparation of documentation that supports the spending of public money are set out in the FMA Regulations:
FMA Regulation 8(2) requires that any official who takes an action that is not consistent with the CPGs must make a written record of his or her reasons for doing so; and
FMA Regulations 9 and 12 specify that, where approval of a proposal to spend public money is not given in writing, the approver must make a record of the terms of the approval in a document as soon as possible after giving the approval[23];
FMA Regulation 10 requires an approver to have first obtained the written authorisation of the Finance Minister, or the Finance Minister’s delegate, to approve a spending proposal (including potential liabilities) that is not supported by sufficient available appropriation[24].
7.13 Documentation requirements vary throughout the procurement cycle. Documentation that may be appropriate for each stage includes, but is not limited to, that shown in Table 1. It is an agency’s responsibility to ensure that adequate and appropriate documentation is kept for each stage of a procurement.
Stage Example of Documentation Requirements
Identify Need - annual procurement plan
budget papers
business case
risk assessment
legal advice
procurement method decision
evaluation plan, including selection criteria
procurement budget
time limits and timetable
advertisements, tender notices and other invitations to quote, tender or express an interest or participate through a multi-use list
prepare a probity plan
evaluation plan
request documentation (including draft contract)
due diligence process
tenders received and acknowledgements
value for money assessment
evaluation report and recommended decision
probity report
decisions (including relevant approvals/or authorisations, e.g. FMA Regulations 9 and 10 where appropriate) and their basis
contract negotiations and contract
provide advice to unsuccessful tenderers
Determine Suitable Process
Conduct Procurement Process
Manage Contract/Relationship - contract management plan
performance indicators
milestones
performance reports
correspondence between the parties
requests for variation of the contract
decisions regarding variation, records of the receipt of orders
evaluations of property and/or services
payment information
Manage Termination/ Transition/Disposal - declaration of surplus asset
valuation
record of special disposal requirements
disposal strategy
engagement of sales agent and instructions
risk assessment
evaluation plan
advertisements or other invitations to do business
responses from prospective buyers
evaluation report
probity report
decisions and their basis
contract documents
payment information, including records of deposits
Table 1 Examples of documentation requirements at different stages of the procurement process.
7.14 Where agencies have outsourced the provision of services, they are to ensure that the providers maintain appropriate systems for recording decisions relating to the outsourced services, and the reasons for those decisions.
Disclosure
Definition
7.15 Disclosure is the mechanism by which agencies make their procurement activities visible and transparent. The broad aim of disclosure is to provide confidence in the processes that an agency intends to undertake, or has undertaken, and reassurance that the Chief Executive is promoting the efficient, effective and ethical use of resources.
Annual Planning
7.16 Agencies are to plan their forthcoming annual procurement and must publish on AusTender, by 1 July each year, an Annual Procurement Plan (APP) to draw businesses early attention to potential procurement opportunities. Agencies are also required to make APPs available on request.
7.17 The APP is to contain a short strategic procurement outlook for the agency supported by details of any planned procurement. The detail should include the subject matter of any planned procurement and the estimated date of the publication of the request for tender.
Other Planning Requirements
7.18 Steps need to be taken to plan for, and facilitate, appropriate disclosure of procurement information. In particular, officials should:
include provisions in request documentation and contracts that alert prospective providers to the public accountability requirements of the Australian Government, including disclosure to the Parliament and its Committees;
where relevant, include a provision in contracts to enable the Australian National Audit Office to access contractors’ records and premises to carry out appropriate audits (model access clauses have been developed for agencies to tailor and, where appropriate, incorporate into relevant contracts)[25];
consider, on a case-by-case basis, any request by a potential supplier for material to be treated confidentially, only entering into commitments to maintain confidentiality of contractors’ information where these are appropriate, and having regard to the Finance publication Guidance on Confidentiality of Contractors’ Commercial Information[26];
be aware of the requirements for the disclosure of information consistent with the Freedom of Information Act 1982.
Notification
7.19 In all cases where an agency is required to publish a notification, or request documentation, or any other document on AusTender, as outlined in these CPGs, any other form (for example paper) of the notification, request documentation or other document must be identical to that which is published on AusTender.
7.20 Agencies must publish all open approaches to the market on AusTender[27] in accordance with the requirements set out in the Guidance on Procurement Publishing Obligations.[28]
7.21 The mandatory procurement procedures set out in Division 2 require open approaches to the market, including requests for tender, requests for expressions of interest and requests for inclusion on a multi-use list, to be published on AusTender. Furthermore, any documentation providing information on the request (request documentation) must be available, to the extent practicable, for download from AusTender.
7.22 For select tenders, agencies are required to issue all invitations to tender electronically[29] and, to the extent practicable, make tender documentation available electronically to all potential suppliers invited. Electronic invitations may also be supplemented by other documented forms of invitation.
Process
7.23 Agencies need to promptly provide, on request, to any potential supplier participating in a procurement, documentation that includes all information necessary to permit potential suppliers to prepare and lodge responsive submissions to any approach to the market.
7.24 Where an agency rejects a tenderer’s application to participate in a procurement process, the agency must promptly advise the tenderer, and on request provide a written explanation for that rejection.
7.25 Following the award of a contract, agencies must promptly inform all tenderers of the tender decision and, on request, provide an unsuccessful tenderer with the reasons its submission was not successful. On request, debriefings should also be provided to successful tenderers.
Reporting
7.26 Agencies are required to comply with a range of specific reporting obligations, detailed below, to provide broader visibility of their procurement, including to the Parliament and its Committees, and to the public.
Senate Order on Departmental and Agency Contracts
7.27 FMA agencies must place lists of contracts with a consideration of $100,000 or more, which have not been fully performed or which have been entered into during the previous 12 months, on the Internet with access through their home page[30]. The information to be included, the timeframes for reporting, and the terms of compliance are set out in Finance’s Guidance on the Listing of Contract Details on the Internet (Meeting the Senate Order on Departmental and Agency Contracts)[31].
7.28 Chief Executives of FMA agencies are required to advise portfolio ministers of any sensitivity in relation to disclosure before publishing information on contracts entered into by their agency.
Commonwealth Contracts and Agency Agreements (including Standing Offers)
7.29 Agencies must publish details of agency agreements[32] and Commonwealth contracts[33], including panel arrangements as defined in Division 2, with an estimated contract value of $10,000[34] or more , in accordance with the requirements set out in the Guidance on Procurement Publishing Obligations, within six weeks of entering into the agreement. In the event that an agency becomes aware of a failure to report within the prescribed six weeks, it must remedy that failure immediately by publishing details of the arrangement.
7.30 If the Chief Executive of an agency decides that details of an agency agreement or Commonwealth contract (including a standing offer) are exempt matters under the Freedom of Information Act 1982, the Chief Executive may then direct, in writing, that the details are not to be published.
Other Reporting and Disclosure Obligations
7.31 Annual reporting requirements are an important accountability mechanism, informing the Parliament and other stakeholders of agencies’ performance in relation to the services that they provide. Requirements for Annual Reports[35], issued by the Department of the Prime Minister and Cabinet, provides a framework for the major aspects of FMA agencies’ annual reports.
7.32 Various other reporting and disclosure obligations apply, including:
disclosure to the Parliament and its Committees, as appropriate, in line with the Government Guidelines for Official Witnesses before Parliamentary Committees and Related Matters[36];
provision of information required by the Public Service Commissioner, under section 44 of the Public Service Act 1999, for the purposes of preparing the annual report on the State of the Service;
disclosure of information consistent with the Freedom of Information Act 1982; and
disclosure of discoverable information that is relevant to a case before a court.
7.33 Where confidential information is required to be disclosed for example following a request from a Parliamentary committee, reasonable notice in writing must be given to the party from whom the information originated.
Dealing with Complaints
7.34 Procurement processes need to be based on clearly articulated and defensible evaluation criteria consistent with the procurement policy framework. Agencies’ actions in undertaking procurement processes must be robust and defensible.
7.35 The Purchasing Advisory and Complaints Service operated by Finance is occasionally the first point of contact for a person making a complaint about a procurement process. The complaint handling function is essentially confined to the provision of information relating to procurement policy, and so the person making the complaint is referred to the agency which conducted the relevant procurement process.
7.36 In the event that a complaint is received agencies should aim to manage this process internally, where possible, through communication and conciliation with the tenderer or supplier. Agencies need to have fair, equitable and non-discriminatory complaint handling procedures that take account of the following:
the process needs to be systematic and well understood by the parties involved;
senior management and officials independent of the process should be involved as appropriate;
complaints should be dealt with in writing;
each party must have sufficient time to appropriately respond to developments (no less than 10 days, unless urgent);
if a matter has been referred to an external body for review, agencies may be required to provide all relevant documents to that body as required by law; and
agencies must ensure that the initiation of a complaint process does not prejudice a supplier’s or a potential supplier’s participation in future procurement processes.
7.37 External options are available if independent review of a complaint is necessary. The primary external complaint mechanism is the civil legal system, which can be used to settle matters through a judicial process. The Commonwealth Ombudsman also has powers to investigate procurement complaints. The Ombudsman cannot override agency decisions, but aims to resolve matters by negotiation and persuasion, and if necessary, by making formal recommendations to senior levels of Government.
8.1 This Division of the CPGs outlines the Australian Government’s mandatory procurement procedures which must be followed by agencies when conducting covered procurements. Covered procurements are procurements, other than those which the Government has decided are exempt in accordance with Appendix B, which exceed the procurement thresholds specified below.
8.2 Nothing in this Division of the CPGs prevents an agency from applying measures determined by their Chief Executive to be necessary to the maintenance or restoration of international peace and security or to protect human health or the protection of essential security interests or to protect national treasures of artistic, historic or archaeological value.
8.3 These mandatory procurement procedures enhance the delivery of value for money through a more consistent and transparent application of procedures. In particular, the procedures set out in this Division complement the general principles set out in Division 1 of these CPGs and are not to be interpreted or applied in a manner that diminishes or negates those general principles.
8.4 These mandatory procurement procedures also incorporate the Government’s policy with respect to discharging specific international obligations in Government procurement. FMA agencies are required to apply these mandatory procurement procedures in accordance with FMA Regulation 9, which requires an approver to be satisfied after making such inquiries as are reasonable that a spending proposal for a proposed contract, agreement or arrangement is in accordance with the policies of the Commonwealth, as well as FMA Regulation 8(1) which deals with compliance with the CPGs. Relevant CAC Act bodies are required to apply these mandatory procurement procedures in accordance with the Finance Minister’s (CAC Act Procurement) Directions 2004.
8.5 Agencies must ensure that they comply with the mandatory procurement procedures where the estimated value of the property or services subject to a procurement indicates that it may be a covered procurement[37].
Procurement Thresholds
8.6 A procurement, except a procurement which is specifically exempt in accordance with Appendix B, is a covered procurement if the estimated value of the property or services being procured is above the relevant procurement threshold:
for procurements in FMA agencies, other than procurements of construction services, the procurement threshold is $80,000;
for procurements in relevant CAC Act bodies, other than procurements of construction services, the procurement threshold is $400,000; or
for procurements of construction services, the procurement threshold is $6 million.
Valuing Procurement
8.7 Procurements need to be valued to determine whether they are covered procurements.
8.8 The estimated value of the property or services being procured must include:
all forms of remuneration, including any premiums, fees, commissions, interest and other revenue streams that may be provided for in the proposed contract;
b. the total maximum value of the property or services being procured, including the value of any options in the proposed contract; and
c. any taxes or charges (including Goods and Services Tax).
8.9 For procurement by lease or rental, or procurement that does not specify a total price, the basis for estimating the value of the property or services being procured is:
for a fixed-term contract where the term is 12 months or less, the total estimated contract value for the contract’s duration;
b. for a fixed-term contract where the term exceeds 12 months, the total estimated contract value, including the estimated residual value which will be payable at the end of the contract; or
c. for a contract for an indefinite period or where there is doubt as to whether the contract is to be a fixed-term contract, the estimated monthly instalment multiplied by 48.
8.10 Where a procurement is to be conducted in multiple parts with contracts awarded either at the same time or over a period of time, with one or more suppliers, the estimated value of the property or services being procured must include the estimated total maximum value of all of the contracts.
8.11 Where the total maximum value of a contract over its entire duration cannot be estimated, the procurement must be treated as a covered procurement.
8.12 A procurement must not be divided into separate parts for the purpose of avoiding a procurement threshold.
Approaching the Market
8.13 An approach to the market is when an agency issues a notice inviting potential suppliers to participate in a procurement. Open approaches to the market include requests for tender, requests for expression of interest and requests for application for inclusion on a multi-use list which are published on AusTender.
8.14 Select approaches to the market include invitations to tender in a select process in accordance with the requirements for select tendering.
8.15 Any formally submitted response from a potential supplier to an open or select approach to the market is referred to as a submission.
Conditions for Participation
8.16 Agencies may specify conditions for participation which are basic requirements with which potential suppliers must be able to demonstrate compliance in order to participate in a procurement or, if applicable, class of procurement. Conditions for participation must be limited to those that will ensure that a potential supplier has the legal, commercial, technical and financial abilities to fulfil the requirements of the procurement.
8.17 Conditions for participation may require relevant prior experience where essential to meet the requirements of the procurement but must not specify, as a requirement, that potential suppliers have previous experience with the agency, with the Australian Government or in a particular location.
8.18 In assessing whether a potential supplier satisfies the conditions for participation, an agency must:
evaluate financial, commercial, and technical abilities on the basis of the potential supplier’s business activities, wherever they have occurred; and
b. base its determination solely on the conditions for participation that the agency has specified in either the approach to the market or the tender documentation.
8.19 An agency may exclude a potential supplier on grounds such as bankruptcy, insolvency, false declarations, or significant deficiencies in performance of any substantive requirement or obligation under a prior contract.
Request Documentation
8.20 Request documentation refers to documentation provided to potential suppliers to enable them to understand and assess the requirements of the procuring agency and to prepare submissions in response to an approach to the market. Request documentation must include the information necessary to permit potential suppliers to prepare and lodge responsive submissions. However, this obligation does not extend to the release of confidential information, information sensitive to essential security or information which may impede competition.
8.21 Where practicable, request documentation for an open or select tender process must be distributed electronically. Where electronic distribution is not practicable, the agency must promptly provide the request documentation, on request from any potential supplier.
8.22 In addition to the approach to the market, request documentation must include a complete description of:
the procurement, including the nature, scope and, where known, the quantity of the property or services to be procured and any requirements to be fulfilled, including any technical specifications, conformity certification, plans, drawings, or instructional materials;
b. any conditions for participation, including any financial guarantees, information, and documents that potential suppliers are required to submit;
c. all evaluation criteria to be considered in assessing submissions; and
d. any other terms or conditions relevant to the evaluation of submissions.
8.23 Agencies need to ensure that potential suppliers are dealt with fairly and in a non-discriminatory manner when providing information leading to, or following, an approach to the market. Agencies must promptly reply to any reasonable request for relevant information by a potential supplier participating in a procurement and need to take particular care when responding to enquiries from potential suppliers to avoid practices that would lead to a potential supplier, or group of potential suppliers, gaining an unfair advantage in a competitive procurement process.
Technical Specifications
8.24 Technical specifications describe the features of the property or services to be procured.
8.25 In prescribing technical specifications for property or services, an agency must:
where possible, specify the technical specifications in terms of performance and functional requirements, rather than design or descriptive characteristics; and
b. base technical specifications on international standards, where they exist and apply to the relevant procurement, except where the use of international standards would fail to meet the agency’s requirements or would impose greater burdens than the use of recognised Australian standards.
8.26 A specification must not require or refer to a particular trademark or trade name, patent, copyright, design or type, specific origin, producer, or supplier, unless there is no other sufficiently precise or intelligible way of describing the requirement. Where this type of specification is absolutely necessary words such as ‘or equivalent’ must be included in the specification.
8.27 Agencies are encouraged to ensure that requirements and specifications are developed based on a sound and unbiased understanding of market capabilities and commercial practices.
8.28 An agency may conduct market research and other activities in developing specifications for a particular procurement and allow a supplier that has been engaged to provide those services to participate in procurements related to those services. Agencies need to take positive steps to ensure that such a supplier will not have an unfair advantage over other potential suppliers.
8.29 An agency may not use technical specification or prescribe any conformity assessment procedure in order to create an unnecessary obstacle to trade.
Modification of Criteria or Technical Requirements
8.30 Where, during the course of a procurement, an agency modifies the evaluation criteria or technical requirements set out in an approach to the market or in response documentation, or amends or reissues an approach to the market or request documentation, it must transmit all modifications or amended or re-issued documents:
to all the potential suppliers that are participating at the time the information is amended, if known, and in all other cases, in the same manner as the original information; and
b. in adequate time to allow potential suppliers to modify and re-lodge their initial submissions.
Time Limits
8.31 Agencies need to provide sufficient time for potential suppliers to prepare and lodge a submission in response to an approach to the market.
8.32 The time limit for potential suppliers to lodge a submission must be at least 25 days from the date and time that an agency publishes a notice of an open approach to the market or invites potential suppliers to participate in a select tender process, except under the following circumstances where an agency may establish a time limit that is less than 25 days but no less than 10 days:
where the agency has published details of the procurement in an Annual Procurement Plan on AusTender, at least 30 days and not more than 12 months in advance, and these details include a description of the procurement, the estimated timing of the approach to the market, and the procedure to obtain request documentation;
b. where the agency procures commercial property or services[38];
c. in the case of second or subsequent approaches to the market for procurement of a recurring nature; or
d. where a genuine state of urgency renders the normal time limit impracticable.
8.33 Where an agency has not issued invitations to tender electronically, the 25 day period referred to in the preceding paragraph must be extended to 30 days.
8.34 Where an agency intends to specify conditions for participation that require potential suppliers to undertake a separate registration or pre-qualification procedure, the agency must include the time limit for responding to the registration or pre-qualification in the approach to the market. Any such conditions for participation must be published in sufficient time to enable all interested businesses to complete the registration and qualification procedures within the time limit for the procurement.
8.35 All potential suppliers participating in a procurement must be required to lodge submissions in accordance with a common deadline.
8.36 Where an agency extends the time limit for qualification or submission, or where negotiations are terminated and potential suppliers are permitted to lodge new submissions, the new time limit must apply equitably to all participating potential suppliers.
Receipt and Opening of Submissions
8.37 Procedures to receive and open all submissions must guarantee fairness and impartiality, and must treat submissions in confidence.
8.38 An agency must not penalise any potential supplier whose submission is received after the specified deadline if the delay is due solely to mishandling by the agency.
8.39 Where an agency provides potential suppliers with opportunities to correct unintentional errors of form between the opening of submissions and any decision, the agency must provide the same opportunity to all participating potential suppliers.
8.40 An agency must only give further consideration to a submission where, at the time of opening, the submission includes the minimum content and format of submissions as stated in all notices and documentation issued during the course of the procurement. That is, the submission must be in a form meeting the required format and must include all required information, statements, certifications and declarations.
Awarding of Contracts
8.41 Unless an agency determines that it is not in the public interest[39] to award a contract, it must award a contract to the supplier that the agency has determined:
satisfies the conditions for participation;
b. is fully capable of undertaking the contract; and
c. whose submission is determined to provide the best value for money, in accordance with the essential requirements and evaluation criteria specified in the approach to the market and request documentation.
8.42 An agency may not cancel a procurement, or terminate or modify an awarded contract, so as to circumvent the requirements of the CPGs.
Multi-Use Lists
8.43 A multi-use list is a list, intended for use in more than one procurement, of pre-qualified potential suppliers who have satisfied the conditions for participation for inclusion on the list.
8.44 Inclusion on a multi-use list may be used either as an essential criterion or condition for participation in an open tender or as the basis for selecting participants in a select tender process consistent with the procedures set out later in this Division of the CPGs.
8.45 To establish a multi-use list, an agency must publish on AusTender a request for application for inclusion on a multi-use list which includes:
a description of the property or services, or categories of property or services, for which the list may be used;
b. the conditions for participation to be satisfied by potential suppliers and the methods that will be used to determine a potential supplier’s compliance with the conditions for participation;
c. the name and address of the agency and other information necessary to contact the agency and obtain all relevant documents relating to the list; and
d. any time limit for submissions seeking inclusion in the list.
8.46 The request for application for inclusion on a multi-use list must either be published continuously or re-published annually on AusTender.
8.47 Agencies must include all potential suppliers that satisfy the conditions for participation on a multi-use list as soon as practicable.
Notification of Decisions
8.48 Where a potential supplier makes a submission in response to an approach to the market, the agency must promptly advise the potential supplier of its final decision regarding the submission.
8.49 On request, an agency must provide an unsuccessful potential supplier with the reasons that its submission was not successful.
8.50 Where an agency rejects an expression of interest or an application for inclusion on a multi-use list, or ceases to recognise a potential supplier as having satisfied the conditions for participation in either, the agency must promptly inform the potential supplier and, on request, promptly provide the potential supplier with a written explanation of the reasons for its decision.
Open Tendering
8.51 An open tender process involves publishing a request for tender and accepting all submissions received before the deadline for submissions from any potential suppliers who satisfy the conditions for participation.
Select Tendering
8.52 A select tender process involves issuing an invitation to tender to those potential suppliers selected in accordance with the procedures outlined below.
8.53 When using a select tender process agencies are still required to ensure that the process is non-discriminatory.
8.54 Three methods are permitted for conducting a select tender process. In the first two, an initial open approach to the market must be, or have been, undertaken to identify potential suppliers eligible and interested in participating in the select tender process. Agencies may conduct a select tender process from:
a multi-use list;
b. a list of potential suppliers that have responded to a request for expressions of interest; or
c. a list of all potential suppliers that have been granted a specific licence or comply with a legal requirement, where the licence or compliance with the legal requirement is essential to the conduct of the procurement.
Selecting From a Multi-Use list
8.55 An agency may invite businesses selected from a multi-use list to participate in a procurement, providing that the property or services sought are consistent with those described in the notice of multi-use list.
8.56 In such cases, the agency may invite all or some of the listed businesses to submit tenders, provided that the largest number of potential suppliers is selected that is consistent with an efficient procurement process.
Selecting From an Expression of Interest
8.57 An agency may publish a request for expressions of interest, and use the list of businesses who lodge a compliant submission as the basis for inviting potential suppliers to submit tenders.
8.58 A request for expressions of interest may include requests for information and/or proposals to be considered in selecting potential suppliers to be invited to make submissions. Providing that relevant requirements and evaluation criteria have been specified in the request for expressions of interest or the associated request documentation, an agency may:
assess the extent to which a submission meets the technical and performance specifications of the procurement; and
b. limit the number of businesses that it invites to tender, based on its rating of submissions, provided that the largest number of potential suppliers is selected that is consistent with an efficient procurement process.
8.59 In all other cases, the agency must invite all businesses that have responded to the request for expressions of interest and meet the conditions for participation to submit a tender.
Selecting on the Basis of a Licence or Specific Legal Requirement
8.60 Agencies may conduct a select tender from a list of all potential suppliers that have been granted a licence, or that have been determined by the appropriate agency, authority or organisation to comply with specific legal requirements that exist independent of the procurement process, provided that:
the requirement for a licence or compliance with specific legal requirements is essential to the conduct of the procurement; and
b. the complete list of such potential suppliers is maintained by the appropriate agency, authority, or organisation and is available to the agency.
8.61 Under such circumstances, the agency must invite all potential suppliers on the list to submit tenders.
Direct Sourcing
8.62 Direct sourcing refers to a procurement process, permitted only under certain conditions for direct sourcing, in which an agency may invite a potential supplier or suppliers of its choice to make submissions.
8.63 Direct sourcing must not be used for the purposes of avoiding competition, or to discriminate against any domestic or foreign business and in all such circumstances, the general procurement policy framework still applies, including the requirement to achieve value for money.
8.64 A direct sourcing process is not required to meet the requirements for request documentation or time limits stated in this Division of the CPGs, nor required to comply with paragraph 8.41 of these CPGs.
Conditions for Direct Sourcing
8.65 An agency may only conduct procurement through direct sourcing in the following circumstances:
where, in response to an approach to the market:
no submissions were received;
no submissions were received that conform to the minimum content and format of submission as stated in the request documentation; or
no potential suppliers satisfied the conditions for participation;
and the agency does not substantially modify the essential requirements of the procurement;
b. where, for reasons of extreme urgency brought about by events unforeseen by the agency, the property or services could not be obtained in time under open tendering procedures;
c. for purchases made under exceptionally advantageous conditions that only arise in the very short term, such as from unusual disposals, unsolicited innovative proposals, liquidation, bankruptcy, or receivership and which are not routine purchases from regular suppliers;
d. where the property or services can only be supplied by a particular business and there is no reasonable alternative or substitute for the following reason:
the requirement is for works of art;
the protection of patents, copyrights, or other exclusive rights, or proprietary information; or
due to an absence of competition for technical reasons;
e. for additional deliveries of property or services by the original supplier or authorised representative that are intended either as replacement parts, extensions, or continuing services for existing equipment, software, services, or installations, where a change of supplier would compel the agency to procure property or services that do not meet requirements of compatibility with existing equipment or services;
g. where an agency procures a prototype or a first good or service that is intended for limited trial or that is developed at its request in the course of, and for, a particular contract for research, experiment, study, or original development;
h. in the case of a contract awarded to the winner of a design contest provided that:
i. the contest has been organised in a manner that is consistent with this Division; and
ii. the contest is judged by an independent jury with a view to a design contract being awarded to the winner; or
i. for new construction services consisting of the repetition of similar construction services that conform to a basic project for which an initial contract was awarded following an open or select tender process, and where the initial approach to the market indicated that direct sourcing might be used for those subsequent construction services.
8.66 In accordance with the general accountability requirements set out in these CPGs, for each contract awarded through direct sourcing, agencies must prepare and appropriately file within the agency’s central filing system, a written report that includes:
the value and kind of property or services procured; and
b. a statement indicating the circumstances and conditions that justify the use of a procedure other than an open or select tender process.
Panels
8.67 A panel may be established by an agency by entering into contracts or deeds of standing offer (panel arrangements) for the provision of identified property or services. A panel is defined as an arrangement under which a number of suppliers, usually selected through a single procurement process, may each supply property or services to an agency as specified in the panel arrangements. The respective panel arrangements must contain minimum requirements, including an indicative or set price or rate as appropriate for the property or services to be procured in the period of the panel arrangement.
8.68 A panel can be established by open tender or select tender.
9.1 FMA Regulation 9(1)(a) requires that an approver must not approve a proposal to spend public money unless satisfied, after reasonable inquiry, that it is in accordance with the policies of the Commonwealth. Consequently, officials comply with legislation and relevant policies that interact with a procurement activity, irrespective of whether an action is consistent with the CPGs.
9.2 Examples of such policies, some of which impose legislated obligations on officials, include privacy, occupational health and safety, environment and heritage, industrial relations, implementation of obligations agreed to in international trade agreements, public works notification and Government advertising. Many of these policies are administered by agencies outside the Finance portfolio, and their administration is the responsibility of those agencies.
9.3 Officials in agencies are responsible for informing themselves of the legislation and policies that apply to the particular procurement that is being conducted. Officials must also refer to their agency’s CEIs for guidance.
9.4 Outsourced service providers are also often required to comply with relevant legislation and general Government policies. Agencies are expected to reflect this requirement in request documentation and in appropriate clauses in Government contracts.
9.5 Officials may refer to the Finance publication Guidance on Complying with Legislation and Government Policy in Procurement[41] for further assistance on policies that interact with procurement. This publication provides a summary of policies and legislation that may interact with procurement, compiled in consultation with agencies. It lists:
policies that potentially interact with procurement;
the agency responsible for administration of each policy;
a reference point for each policy; and
the relationship between the policy and procurement.
9.6 Officials may use the publication, Guidance on Complying with Legislation and Government Policy in Procurement to assist them to identify policies that may interact with a particular procurement task that they are conducting, and which may need to be considered within the procurement activity. Having identified those policies, the officials conducting the procurement would be expected to then refer to the agency responsible for the policy for further information if required. The Administrative Arrangements Order, provides a list of Departments of State and their responsibilities[42].
9.7 Further details on key procurement-related policies are listed below, by way of example. These policies are not, of themselves, part of the CPGs and officials should ensure that they check with the relevant agencies to confirm the currency of the policies described here.
30 Day Payment Policy
9.8 The Government’s payment policy for agencies dealing with small businesses is to use maximum payment terms not exceeding 30 days from the date of receipt of specified property and/or services and a correctly rendered invoice up to the value of $5 million. Additionally, agencies should consider, on a case by case basis, the use of late payment clauses in contracts with suppliers. Where used, late payment clauses should provide for the use of the Australian Taxation Office’s General Interest Charge and accrue daily. More information on payment policies and the use of payment clauses is available in the procurement guidance 30 Day Payment Policy for Small Business.[43]
Occupational Health and Safety
9.9 The Occupational Health and Safety (Commonwealth Employment) Act 1991 places a duty on Australian Government employers to protect the health and safety of their employees and other people at or near the workplace. Health and safety issues would be considered prior to and during any procurement. When purchasing plant or hazardous substances, Australian Government employers are required to comply with the Occupational Health and Safety (Commonwealth Employment) (National Standards) Regulations 1994.
Construction Procurement
9.10 When undertaking construction projects, agencies must comply with the requirements of the National Code of Practice for the Construction Industry and the Australian Government Implementation Guidelines for the National Code of Practice for the Construction Industry[44]. Agencies undertaking construction procurement need to seek the advice of the Department of Employment and Workplace Relations on the application of the Code. FMA agencies need to also be aware that the Public Works Committee Act 1969[45] and associated Regulations place obligations on agencies undertaking construction procurements. It is a statutory requirement that agencies submit all construction projects valued at $6 million or more to the Public Works Committee for consideration.
Private Financing
9.11 When using private financing, agencies are required to have regard to the policies outlined in the CPGs, including the core principle of value for money. Private financing proposals over $20 million in asset replacement value must be referred to the Finance Minister for approval, and the Government must be consulted for proposals exceeding $50 million. Policy and guidance material to advise on the use of private financing arrangements is contained in the Finance publication Commonwealth Policy Principles for the Use of Private Financing.[46]
Appendix A: Extracts from the FMA Act and Regulations
Extracts from the FMA Act, as at 1 December 2004
Section 44: Promoting efficient, effective and ethical use of Commonwealth resources
(1) A Chief Executive must manage the affairs of the Agency in a way that promotes proper use of the Commonwealth resources for which the Chief Executive is responsible.
(2) If compliance with the requirements of the regulations, Finance Minister’s Orders, Special Instructions or any other law would hinder or prevent the proper use of those resources, the Chief Executive must manage so as to promote proper use of those resources to the greatest extent practicable while complying with those requirements.
(3) In this section: proper use means efficient, effective and ethical use.
Section 52: Chief Executive’s instructions
(1) The regulations may authorise Chief Executives to give instructions to officials in their Agencies on any matter on which regulations may be made under this Act.
(2) An instruction cannot create offences or impose penalties.
Section 64: Guidelines by Ministers
(1) The regulations may authorise a Minister to issue guidelines to officials on matters within the Minister’s responsibility. The matters must be ones about which regulations may be made under this Act.
(2) A guideline cannot create offences or impose penalties.
Section 65: Regulations
(1) The Governor-General may make regulations prescribing matters:
(a) required or permitted by this Act to be prescribed; or
(b) necessary or convenient to be prescribed for carrying out or giving effect to this Act.
(2) In particular, the regulations may make provision:
(a) relating to any of the following matters:
handling, spending and accounting for public money;
commitments to spend public money;
recovering amounts owing to the Commonwealth;
using or disposing of public property, or acquiring property that is to be public property;
(b) generally for ensuring or promoting:
the proper use and management of public money, public property and other resources of the Commonwealth;
proper accountability for the use and management of public money, public property and other resources of the Commonwealth;
(c) for penalties for offences against the regulations by way of fines up to 10 penalty units
Note: Section 4AA of the Crimes Act 1914 sets the current value of a penalty unit.
Extracts from the FMA Regulations, as at 1 December 2004
Regulation 3: Definitions
Act means the Financial Management and Accountability Act 1997.
agency agreement means an agreement for the procurement of goods and services under which an Agency is obliged, or may become obliged, to make a payment of public money to another Agency.
approver means:
(a) a Minister; or
(b) a Chief Executive; or
(c) a person authorised by or under an Act to exercise a function of approving proposals to spend public money.
Commonwealth contract means an agreement for the procurement of goods and services under which the Commonwealth is obliged, or may become obliged, to make a payment of public money.
financial task means a task or procedure (other than a task or procedure performed under an agreement or arrangement authorised under paragraph 12 (a), or mentioned in paragraph 12 (b) of the Act) relating to:
(a) the commitment or spending of public money; or
(b) the management and control of public money.
Finance Chief Executive means the Secretary to the Department of Finance and Administration.
FMA Orders means orders issued by the Finance Minister under section 63 of the Act.
Treasury Chief Executive means the Secretary to the Department of the Treasury.
Regulation 6: Chief Executive's Instructions (Act, s 52)
(1) The Chief Executive of an Agency is authorised to give instructions (to be called Chief Executive's Instructions ) to officials in that Agency on any matter necessary or convenient for carrying out or giving effect to the Act or these Regulations, and, in particular:
(a) on any of the following matters:
handling, spending and accounting for public money;
making commitments to spend public money;
recovering amounts owing to the Commonwealth;
using, or disposing of, public property;
acquiring property that is to be public property; and
(b) for ensuring or promoting:
the proper use and management of public money, public property and other resources of the Commonwealth; and
proper accountability for the use and management of public money, public property and other resources of the Commonwealth.
(2) A Chief Executive must not issue an instruction that is inconsistent with:
(a) the Act; or
(b) these regulations; or
(c) FMA Orders.
Regulation 7: Commonwealth Procurement Guidelines
(1) The Finance Minister may issue guidelines (to be called Commonwealth Procurement Guidelines ) about matters relating to the procurement of property and services, including:
(a) matters affecting Commonwealth contracts or agency agreements; and
(b) the publication of details of Commonwealth contracts and agency agreements; and
(c) the disposal of public property.
(2) Commonwealth Procurement Guidelines must not be inconsistent with:
(a) the Act; or
(b) these regulations; or
(c) FMA Orders.
(3) Commonwealth Procurement Guidelines may require that a matter must be published in the way set out in the Guidelines.
Regulation 8: Officials to have regard to guidelines
(1) An official performing duties in relation to the procurement of property or services must have regard to the Commonwealth Procurement Guidelines.
(2) An official who takes action that is not consistent with the Guidelines must make a written record of his or her reasons for doing so.
Regulation 9: Approval of spending proposals — principles
(1) An approver must not approve a proposal to spend public money (including a notional payment within the meaning of section 6 of the Act) unless the approver is satisfied, after making such inquiries as are reasonable, that the proposed expenditure:
(a) is in accordance with the policies of the Commonwealth; and
(b) will make efficient and effective use of the public money; and
(c) if the proposal is one to spend special public money, is consistent with the terms under which the money is held by the Commonwealth.
(2) Subregulation (1) does not apply to a proposal by an intelligence or security agency to spend operational money within the meaning of section 5 of the Act as modified in accordance with Schedule 2.
Regulation 10: Approval of future spending proposals
If any of the expenditure under a spending proposal is expenditure for which an appropriation of money is not authorised by the provisions of an existing law or a proposed law that is before the Parliament, an approver must not approve the proposal unless the Finance Minister has given written authorisation for the approval.
Regulation 11: Approval of spending proposals — officials
An official must not approve a proposal to spend public money unless authorised by a Minister or Chief Executive, or by or under an Act, to approve the proposal.
Regulation 12: Approval to be recorded
If approval of a proposal to spend public money is not given in writing, the approver must record the terms of the approval in a document as soon as practicable after giving the approval.
Regulation 13: Entering into contracts etc
A person must not enter into a contract, agreement or arrangement under which public money is, or may become, payable (including a notional payment within the meaning of section 6 of the Act) unless a proposal to spend public money for the proposed contract, agreement or arrangement has been approved under regulation 9 and, if necessary, in accordance with regulation 10.
Appendix B: Exemptions from Mandatory Procurement Procedures
The Government has decided that the provisions of Division 2 – Mandatory Procurement Procedures do not apply to:
1) leasing or purchase of real property or accommodation (Note: the procurement of construction services is not exempt);
2) procurement of property or services by an agency from other Commonwealth, State, Territory or Local Government entities where no commercial market exists or where Government legislation or general Government policy requires the use of a Government provider (for example tied legal services);
3) purchases funded by international grants, loans or other assistance, where the provision of such assistance is subject to conditions inconsistent with this document;
4) purchases funded by grants and sponsorship payments;
5) procurement for the direct purpose of providing foreign assistance;
6) procurement of research and development services, but not the procurement of inputs to research and development undertaken by an agency;
7) purchases of property or services for resale or of property or services used in the production of goods for resale;
8) the engagement of an expert or neutral person, including engaging counsel or barristers, for any current or anticipated litigation or dispute;
9) procurement of property or services (including construction) outside Australian territory, for consumption outside Australian territory;
acquisition of fiscal agency or depository services, liquidation and management services for regulated financial institutions, and sale and distribution services for Government debt;
procurement of motor vehicles;
procurement, by the PSS Board or the CSS Board, of investment management, investment advisory, or master custody and safekeeping services for the purposes of managing and investing the assets of the CSS and PSS Funds;
procurement of blood plasma products or plasma fractionation services;
procurement of Government advertising services;
procurement of property or services by, or on behalf of, the Defence Intelligence Organisation, the Defence Signals Directorate, or the Defence Imagery and Geospatial Organisation.
Procurements which are exempt from the mandatory procurement procedures by the operation of this Appendix, are still required to be undertaken in accordance with the principle of value for money and with the requirements of Divisions 1 and 3 of these CPGs.
Appendix C: References
The following documents provide further information on issues discussed in this publication.
Procurement Guidance
These documents are available from www.finance.gov.au (under the Government Finances menu):
Guidance on the Mandatory Procurement Procedures
Guidance on Complying with Legislation and Government Policy in Procurement.
Guidance on Procurement Publishing Obligations
Guidance on Confidentiality of Contractors’ Commercial Information
Guidance on the Listing of Contract Details on the Internet (Meeting the Senate Order on Departmental and Agency Contracts)
Guidance on Ethics and Probity in Government Procurement
Standard Contract Clauses to Provide ANAO Access to Contractors´ Information and Reporting
30 Day Payment Policy for Small Business
Legislation
The following Commonwealth legislation is of particular relevance to procurement and/or contracting out:
Archives Act 1983
Auditor-General Act 1997
Crimes Act 1914
Criminal Code Act 1995
Financial Management and Accountability Act 1997
Financial Management and Accountability Regulations 1997
Freedom of Information Act 1982
Lands Acquisition Act 1989
Privacy Act 1988
Public Service Act 1999
Public Works Committee Act 1969
Other References
Standards Association of Australia, Australian and New Zealand Standard, AS/NZS 4360:2004 Risk Management, 2004
Australian Government Solicitor 2003, Managing Procurement Risk and Liability, Legal Briefing No. 66, AGS, available from www.ags.gov.au
Australian National Audit Office, Contract Management: Better Practice Guide available from www.anao.gov.au
Australian National Audit Office, Selecting Suppliers - Managing the Risk available from www.anao.gov.au
Australian Public Service Commission, Australian Public Service Code of Conduct available from www.apsc.gov.au
Department of Finance and Administration, Commonwealth Policy Principles for the Use of Private Financing available from www.finance.gov.au
Department of Finance and Administration, Finance Circular 2003/02 Guidelines for Issuing and Managing Indemnities, Guarantees, Warranties and Letters of Comfort available from www.finance.gov.au
Department of Finance and Administration, Finance Circular 2004/05 Financial Management and Accountability Regulation 12 available from www.finance.gov.au
Department of Finance and Administration, Finance Circular 2004/10 Using the Financial Management and Accountability Regulation 10 Delegation available from www.finance.gov.au
Department of the Prime Minister and Cabinet, Administrative Arrangements Order available from www.pmc.gov.au
Management Advisory Board, MAB/MIAC Report No. 22 Guidelines for Managing Risk in the Australian Public Service, October 1996, for availability details contact www.apsc.gov.au
National Archives of Australia, Records Issues for Outsourcing Including General Disposal Authority 25 available from www.naa.gov.au
Appendix D: Abbreviations
ANZ Australian and New Zealand
ANZCERTA Australia New Zealand Closer Economic Relations Trade Agreement
ANZGPA Australian and New Zealand Government Procurement Agreement
AUSFTA Australia - United States Free Trade Agreement
CAC Act Commonwealth Authorities and Companies Act 1997
Relevant CAC Act bodies Bodies listed in CAC Regulation 9 as subject to section 47A of the CAC Act
CAC Regulations Commonwealth Authorities and Companies Regulations 1997
CEIs Chief Executive’s Instructions
CPGs Commonwealth Procurement Guidelines
CTC Competitive Tendering and Contracting
Finance Department of Finance and Administration
Finance Minister Minister for Finance and Administration
FMA Act Financial Management and Accountability Act 1997
FMA agencies Departments and agencies prescribed for the purposes of the FMA Act
FMA Regulations Financial Management and Accountability Regulations 1997
ICT Information and Communication Technology
SAFTA Singapore - Australia Free Trade Agreement
SME Small and Medium Enterprises
TAFTA Thailand - Australia Free Trade Agreement
WTO World Trade Organisation
Appendix E: Definitions
The following definitions apply for the purposes of these CPGs:
Approach to the market – any notice inviting potential suppliers to participate in a procurement including a request for tender, request for expression of interest, request for application for inclusion on a multi-use list, or invitation to tender.
Conditions for participation – minimum conditions that potential suppliers must meet in order to participate in a procurement process or for submissions to be considered. This may include a requirement to undertake an accreditation or validation procedure.
Construction services – procurements related to the construction of buildings and all procurements covered by the Public Works Committee Act 1969.
Covered procurement – a procurement, other than one that is specifically exempt, where the value of the property or services being procured exceeds the relevant procurement threshold. Covered procurements must comply with the mandatory procurement procedures.
Deadline for submissions – the precise time and date by which submissions must be received in response to an approach to the market.
Direct sourcing – a procurement process, available only under certain defined circumstances, in which an agency may contact a single potential supplier or suppliers of its choice and for which only a limited set of mandatory procurement procedures apply.
Electronic – for the purposes of these CPGs means any information provided on AusTender, and includes documentation provided to a supplier or potential supplier by email, facsimile or otherwise transmitted to the recipient by another electronic means.
Evaluation criteria – the criteria which are used to evaluate the compliance and/or relative ranking of submissions. All evaluation criteria must be clearly stated in the request documentation.
Exempt – a procurement or class of procurement which is exempt from the mandatory procurement procedures set out in Division 2 of these CPGs. Such a procurement is not a covered procurement irrespective of the value of the property or services being procured. Exempt procurements remain subject to other requirements of the CPGs, including the core principle of value for money.
Expression of interest – a response to an open approach to the market requesting submissions from businesses interested in participating in a procurement. The list of potential suppliers who have submitted expressions of interest may be used as the basis for conducting a select tender process.
Invitation to tender – an invitation issued to selected businesses inviting them to submit tenders in response to a select tender process or direct sourcing process.
Mandatory procurement procedures – a set of rules and procedures, outlined in Division 2 of the CPGs, which must be followed when conducting a covered procurement.
Minimum content and format of submissions – criteria that a submission must meet to be eligible for further consideration in a procurement process. These include conditions for participation where relevant.
Multi-use list – a list, intended for use in more than one procurement process, of pre-qualified businesses who have satisfied the conditions for participation for inclusion on the list.
Open tender process – a procurement procedure in which a request for tender is published inviting all businesses that satisfy the conditions for participation to submit tenders.
Panel – A panel may be established by an agency by entering into contracts or deeds of standing offer (panel arrangements) for the provision of identified property or services. A panel is defined as an arrangement under which a number of suppliers, usually selected through a single procurement process, may each supply property or services to an agency as specified in the panel arrangements.
Procurement threshold – a value above which a procurement, unless exempt, is considered to be a covered procurement.
Property – every type of right, interest or thing which is legally capable of being owned. This includes, but is not restricted to, physical goods and real property as well as intangibles such as intellectual property, contract options and goodwill.
Published – listed electronically on AusTender in accordance with Government policy, as stated in the Accountability and Transparency chapter of these CPGs.
Request documentation – documentation provided to businesses to enable them to understand and assess the requirements of the procuring agency and to prepare appropriate and responsive submissions. This general term includes documentation for expressions of interest, multi-use lists, open and select tender processes, and direct sourcing.
Request for applications for a multi-use list – a published notice inviting businesses to apply for inclusion on a multi-use list. The notice must be published on AusTender, either continuously or at least once per year.
Request for expressions of interest – a published notice inviting businesses to register an expression of interest in a procurement.
Request for tender – a published notice inviting businesses who satisfy the conditions for participation to submit a tender in accordance with requirements of the request for tender and other request documentation.
Select tender process – a procurement procedure in which the procuring agency selects which potential suppliers are invited to submit tenders. For covered procurements, a select tender process may only be conducted in accordance with certain procedures and circumstances set out in Division 2 of the CPGs.
Submission – includes any formally submitted response from a potential supplier to an approach to the market. Submissions include tenders, expressions of interest and applications for inclusion on a multi-use list.
Tender – a submission from a potential supplier making an offer to perform a procurement in response to a request for tender or invitation to tender.
Time limit – the minimum time that an agency must allow for potential suppliers to respond to an approach to the market.
Value – the total maximum estimated value of the property or services being procured, as determined in accordance with the rules in Division 2 of the CPGs. The value of the property or services being procured, except where a procurement is exempt, will determine whether a particular procurement is a covered procurement.
[1] Official is defined in section 5 of the FMA Act to mean a person who is in an Agency or is part of an Agency.
[2] FMA Regulation 3 defines an approver as a Minister, a Chief Executive, or a person authorised by legislation to approve proposals to spend public money.
[3] For CAC Act bodies, in accordance with the Finance Minister’s (CAC Act Procurement) Directions 2004 (the CAC Act Directions).
[4] The term property is used throughout this document to refer to every type of right, interest or thing which is legally capable of being owned. This includes, but is not restricted to, physical goods and real property as well as intangibles such as intellectual property, contract options and goodwill.
[5] For CAC Act bodies that are neither covered by the Public Service Act 1999, nor have specific provisions in their enabling legislation for powers of employment, the consideration of employment needs to be based on the common law concept of employment.
[7] As stated in paragraph 1.5, obligations that must be complied with, in all circumstances, in accordance with FMA Regulation 9, are denoted by the use of the term ‘must’ in these CPGs.
[8] Section 16 of the FMA Act defines special public money as public money that is not held on account of the Commonwealth or for the use or benefit of the Commonwealth. Money held by the Commonwealth on trust for another person is an example of special public money.
[9] Further guidance on the application of FMA Regulation 9 can be found in Finance Circular 2004/10 Using the FMA Regulation 10 Delegation, available from www.finance.gov.au (under the Government Finances menu).
[10] Finance Circular 2004/05 Regulation 12 of the Financial Management and Accountability Regulations 1997 provides additional guidance. The Circular is available from www.finance.gov.au (under the Government Finances menu).
[11] ANZCERTA, SAFTA, AUSFTA and TAFTA are available from www.dfat.gov.au; ANZGPA is available from www.finance.gov.au (under the Government Finances menu).
[12] This requirement is consistent with section 44 of the FMA Act for FMA agencies, sections 22 and 23 of the CAC Act for Commonwealth authorities and relevant provisions of the Corporations Act 2001 for Commonwealth companies.
[13] Procurement Circular 03/3 Evaluating Options in Procurement Contracts, available from www.finance.gov.au (under the Government Finances menu), provides further guidance on the consideration of options.
[19] For ICT procurement, the Government has announced its commitment to develop a policy in relation to setting appropriate levels of liability of suppliers. Details will be available in mid 2005. Refer to www.dcita.gov.au.
[20] Refer to Finance Circular 2003/02 Guidelines for Issuing and Managing Indemnities, Guarantees, Warranties and Letters of Comfort available from www.finance.gov.au (under the Government Finances menu).
[22] See Guidance on Complying with Legislation and Government Policy in Procurement available from www.finance.gov.au (under the Government Finances menu).
[23] Guidance on FMA Regulation 12 is available in Finance Circular 2004/05 Financial Management and Accountability Regulation 12, from www.finance.gov.au (under the Government Finances menu).
[24] Guidance on FMA Regulation 10 is available in Finance Circular 2004/10 Using the Financial Management and Accountability Regulation 10 Delegation, from www.finance.gov.au (under the Government Finances menu).
[25] Model Australian National Audit Office (ANAO) access clauses are available from www.finance.gov.au (under the Government Finances menu).
[26] Guidance on Confidentiality of Contractors’ Commercial Information is available from www.finance.gov.au (under the Government Finances menu).
[29] Electronic for the purposes of these CPGs means any information provided on AusTender, and includes documentation provided to a supplier or potential supplier by email, facsimile or otherwise transmitted to the recipient by another electronic means.
[30] The requirements for listing contract details on the Internet extend to grants, including funding agreements, that take the legal form of a contract rather than a conditional gift.
[32] FMA Regulation 3 defines an agency agreement as an agreement for the procurement of goods and services under which an Agency is obliged, or may become obliged, to make a payment of public money to another Agency.
[33] FMA Regulation 3 defines a Commonwealth contract as ’an agreement for the procurement of goods and services under which the Commonwealth is obliged, or may become obliged, to make a payment of public money’.
[34] Relevant CAC Act bodies are required to report all contracts arising from covered procurements with an estimated liability of $400,000 or more.
[37] Guidance on the Mandatory Procurement Procedures is available from www.finance.gov.au (under the Government Finances menu).
[38] Property or services of a type that are offered for sale to, and routinely purchased by, non-Government buyers for non-Government purposes, including any modifications common in the commercial marketplace and any minor modifications not common in the commercial marketplace.
[39] Guidance on the Mandatory Procurement Procedures is available from www.finance.gov.au (under the Government Finances menu).
[40] For the purposes of these CPGs a commodity market is a recognised exchange dealing in generic, largely unprocessed, goods that can be processed and resold.