29 May 2017

A spanner in the works? Australia's new government procurement review Bill

This article was written by Rachael Lewis, Annabel Griffin, Stephen Mason, Elliott Dunn and Oscar Boag-Taylor.

The Government Procurement (Judicial Review) Bill 2017 has been introduced into Federal Parliament. The Bill enables any supplier “whose interests are affected” to complain about breaches of some rules in the Commonwealth Procurement Rules (CPRs) and for federal courts to issue injunctions and mandatory orders about procurement processes found to be in breach.

Once a complaint is made, the agency must suspend the procurement (unless a ‘public interest certificate’ is in force – see below).

The Bill also allows disgruntled suppliers to get court orders to recover their tendering and related costs from agencies where there is a breach of relevant CPRs.

The Bill is limited to covered procurements – those to which Division 2 of the CPRs apply. Division 2, among other things, requires open market tendering.

The Bill gives effect to Australia’s international obligations in the Trans-Pacific Partnership and the soon to be effective WTO Agreement on Government Procurement.

What risks are there for agencies’ procurements?

Covered procurements

The Bill affects only ‘covered procurements’ – that is, where both Divisions 1 and 2 of the CPRs apply (though the Finance Minister may exempt procurements by legislative instrument – which can be disallowed by either House of Parliament).

A determination by an agency that Division 2 does not apply will not always protect the procurement from the Bill. A court may, for example, determine that Division 2 does apply. So it is likely that there will be increased scrutiny of agencies’ exemption determinations.

What breaches?

The right to complain, to seek an injunction or other order and to claim compensation only applies for breaches of the rules in Division 2 of the CPRs.

The CPRs may also specify particular Division 1 rules for this purpose – but will need to be amended to do that.

Almost anyone can complain

A complaint may be made by any “supplier” “whose interests … are affected” by the breach of the relevant CPRs. A “supplier” is anyone “who supplies, or could supply, goods or services”.

This is a very wide group. It is not restricted to companies that may be or may have been potential bidders in the procurement. It could include, as examples:

  • a supplier who was not asked to provide a tender because the Commonwealth entity used a limited tender; or
  • activist interest groups who are opposed to some aspect of the procurement (provided they also supply goods and services).

Everything stops – unless…

Once a complaint is made, the agency must properly investigate the complaint and prepare a report. The report will be available under FOI, and will likely be required to be produced in any subsequent court proceedings.

More significantly, unless a public interest certificate is in force (see below), the agency must also suspend the procurement until the complaint is withdrawn or resolved, or any federal court proceeding results in a finding about the alleged breach.

This may result in a substantial delay to the procurement.

Public interest certificate

An agency may issue a public interest certificate for a procurement.

This certifies that:

…it is not in the public interest for a specified procurement by the [agency] to be suspended while:
  1. applications for injunctions … are being considered; or
  2. complaints … are being investigated.

If there is a public interest certificate, the procurement does not have to be suspended.

However, the agency must still properly investigate the complaint and the complainant may, in accordance with the Bill, still seek injunctions and other court orders – and compensation.

The Explanatory Memorandum states that public interest certificates should only be issued when a suspension would result in real adverse consequences.

The Administrative Decisions (Judicial Review) Act 1977 will apply to decisions to issue public interest certificates, so they can be subject to judicial review.

Contracts are safe

The Bill confirms that a contravention of the CPRs does not affect the validity of a contract.

Off to court for an injunction

A supplier “whose interests are affected” by a CPR breach may apply to court for an injunction or other order about the procurement. The supplier has 10 days after the breach (or after it became aware of the breach, or ought reasonably to have become aware) to apply to court – but it is a requirement that the supplier has made reasonable attempts to resolve the complaint.

While the court has power to extend the 10 days, agencies will need to respond quickly and effectively to complaints and deal with them as soon as possible – if only to limit the period of suspension of the procurement.

The court will have regard to the existence of a public interest certificate – and the potential for court ordered compensation (see below) – in deciding whether to issue an injunction or other order.

Off to court for compo

A supplier “whose interests are affected” by a CPR breach may also seek court ordered compensation if there has been a breach of the relevant CPRs. A complaint is not a pre-requisite for compensation.

Compensation is limited to reasonable tender preparation costs, and the reasonable costs of making, and attempting to resolve, the complaint. It does not include compensation for expected revenue from a contract.

It is not clear whether tender preparation costs includes the costs of responding to pre-tender requests such as Requests for Information, Requests for Proposals and other industry engagement activities that agencies may undertake prior to formal RFT issue.

Some unresolved issues

  • It is not clear how the new regime will operate in the case of multi-stage procurements, or complex parallel track procurements, where many contracts are being let. For example, will a complaint about one element of a procurement affect all the other contracting activity being undertaken by the project?
  • Given the Bill uses the extensive definition of “procurement” in the CPRs (it includes all stages of a procurement, including the ongoing operation of a contract), it is arguable that ongoing operational contracts may have to be suspended if a complaint is made (and no public interest certificate is in force).

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