Commonwealth Procurement Rules

1 July 2012

 


 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Department of Finance and Deregulation

(Financial Management Group)

 

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© Commonwealth of Australia 2012

 

ISBN: 978-1-921600-99-9 (printed)

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Foreword

I am pleased to issue the Commonwealth Procurement Rules under Regulation 7 of the Financial Management and Accountability Regulations 1997. 
 

The Commonwealth Procurement Rules represent the Government's policy framework under which agencies govern and undertake their own procurement. 

The Commonwealth Procurement Rules combine both Australia's international obligations and good practice.  Together, these enable agencies to design processes that are robust, transparent and instill confidence in the Australian Government's procurement activities.  This encourages agencies to design processes that allow for innovative solutions and that reflect the scale, scope and risk of the procurement. 
 

The Government is committed to improving access to the Australian Government marketplace, particularly for small and medium enterprises, Indigenous businesses and competitive disability enterprises.  Promoting the use of these competitive suppliers benefits both the Government in expanding its supplier base and in supporting the broader Australian community.
 

The Commonwealth Procurement Rules also focus on whole-of-government arrangements, in particular coordinated procurements.  Coordinated procurements have improved the value for money achieved by agencies and have reduced agency procurement and potential supplier tendering costs.  In addition to the coordinated procurements, agencies should continue to look for opportunities to establish cooperative procurements for related goods and services. 
 

Building on the success of AusTender, the Government is committed to ensuring AusTender remains the primary source for procurement information. AusTender, the Australian Government's central procurement information website, is now well established in agencies, wider government and the private sector.  AusTender provides accurate and timely procurement reporting and the Government is committed to ensuring this remains a focus of agencies.
 

To assist agencies in applying the Commonwealth Procurement Rules, a range of guidance material, templates, tools and advice has been developed by my Department (weblink).  Officials are encouraged to make use of these resources when undertaking procurement. 
 

I commend these Commonwealth Procurement Rules to Australian Government officials involved in procurement.

 

Penny Wong


 


Contents

INTRODUCTION

1. Summary of Commonwealth Procurement Rules

2. Procurement framework

3. How to use the Commonwealth Procurement Rules


DIVISION 1 - RULES FOR ALL PROCUREMENTS

4. Value for Money

5. Encouraging competition

6. Efficient, effective, economical and ethical procurement

7. Accountability and transparency in procurement

8. Procurement risk

9. Procurement method


DIVISION 2 - ADDITIONAL RULES FOR PROCUREMENTS AT OR ABOVE THE RELEVANT PROCUREMENT THRESHOLD

10. Additional rules

 

APPENDICES AND INDEX

Appendix A: Exemptions from Division 2

Appendix B: Abbreviations and acronyms

Appendix C: Definitions

Index 


1. 

1. Summary of Commonwealth Procurement Rules

1.1     Figures 1 and 2 highlight the location of the rules in the Commonwealth Procurement Rules (CPRs). Rules that must be complied with in undertaking procurement are denoted by the term ‘must’ and have been bolded throughout the CPRs.

Division 1: Rules for all procurements Value for money Achievng value for money 4.4 Coordinated procurement 4.9 Cooperative agency procurement 4.11-4.12 Contract end dates 4.13 Third-party procurement 4.14 Encouraging competition Non-discrimination 5.3 Efficient, effective, economical and ethical procurement Ethical behaviour 6.6-6.7-6.8

 

 

Division 2: Additional rules for procurement at or above the relevant procurement threshold Additional rules 10.1 Conditions for limited tender 10.3-10.5 Request documentation 10.6-10.8 Specifications 10.9-10.10-10.11

 


2. Procurement framework

2.1     The Commonwealth Procurement Rules (CPRs) are issued by the Minister for Finance and Deregulation (Finance Minister) under Regulation 7 of the Financial Management and Accountability Regulations 1997 (FMA Regulations).

2.2     The CPRs set down the rules for Australian Government procurement and articulate the Australian Government’s requirements for officials performing duties in relation to procurement.

2.3     Rules that must be complied with in undertaking procurement are denoted by the term ‘must’. Non-compliance with the rules of the CPRs is reportable in an agency’s Certificate of Compliance. The term ‘should’ indicates good practice.

2.4     The CPRs are the core of the procurement framework, which also includes:

  1. web-based guidance, developed by the Department of Finance and Deregulation (Finance) to assist agencies to implement the procurement framework;
  2. Finance Circulars, which advise of key changes and developments in the procurement framework; and
  3. Chief Executive’s Instructions (CEIs), which a Chief Executive may use to set out
    agency-specific operational rules to ensure compliance with the rules of the procurement framework.

2.5     FMA Regulation 7 requires officials to comply with the CPRs when performing duties related to procurement. The FMA Regulations also require that proposals to spend public money (including proposed procurement of goods and services) must be approved. In particular, FMA Regulation 9 requires an approver[1] to be satisfied, after making reasonable enquiries, that the spending proposal is an efficient, effective, economical and ethical use of public money that is not inconsistent with the policies of the Commonwealth.

2.6     Nothing in any part of these CPRs prevents an official from applying measures determined by their Chief Executive to be necessary for the maintenance or restoration of international peace and security, to protect human health, for the protection of essential security interests, or to protect national treasures of artistic, historic or archaeological value.


2.7     Procurement encompasses the whole process of procuring goods and services. It begins when a need has been identified and a decision has been made on the procurement requirement. Procurement continues through the processes of risk assessment, seeking and evaluating alternative solutions, the awarding of a contract, the delivery of and payment for the goods and services and, where relevant, the ongoing management of the contract and consideration of disposal of goods.

2.8     In addition to the acquisition of goods and services by an agency for its own use, procurement includes the acquisition of goods and services on behalf of another agency or a third party.

2.9     Procurement does not include:

  1. grants (whether in the form of a contract, conditional gift or deed)[2];
  2. investments (or divestments);
  3. sales by tender;
  4. loans;
  5. procurement of goods and services for resale or procurement of goods and services used in the production of goods for resale;
  6. any property right not acquired through the expenditure of public money (for example, a right to pursue a legal claim for negligence);
  7. statutory appointments;
  8. appointments made by a minister using the executive power (for example, the appointment of a person to an advisory board); or
  9. the engagement of employees, such as under the Public Service Act 1999, the Parliamentary Services Act 1999, an agency’s enabling legislation or the common law concept of employment.


2.10 Agencies and officials operate within an environment of legislation and Commonwealth policy. Within that broad context, the financial management framework consists of the legislation and policy governing the management of the Commonwealth’s resources. Figure 3 sets out the main elements of this environment related to procurement.


 

2.11 The procurement framework is a subset of the financial management framework related to the procurement of goods and services.

2.12 Chief Executives of FMA Act agencies may issue instructions (CEIs) on any matter that promotes the proper use[3] of the Commonwealth resources for which they are responsible. The CPRs provide the necessary framework for Chief Executives when issuing CEIs and operational requirements in relation to procurement. In the area of procurement, CEIs provide a mechanism to:

  1. apply the principles and requirements of the financial management and procurement frameworks, focusing on the agency’s operations; and
  2. provide primary operational instructions to agency officials in carrying out their duties related to procurement, in a way that is tailored to an agency’s particular circumstances and needs.
  1. Non-compliance with the requirements of the financial management framework, including in relation to procurement, may attract a range of criminal, civil or administrative remedies (including under the FMA Act, the Public Service Act 1999 and the Crimes Act 1914).

2.14 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 CPRs. However, the CPRs as amended by the Finance Minister’s (CAC Act Procurement) Directions 2009 (CAC Act Procurement Directions) are applicable to some[4] CAC Act bodies.

2.15 Australia is party to a range of bilateral free trade arrangements. These arrangements are implemented domestically by legislation and/or Commonwealth policy. Relevant international obligations have been incorporated in these CPRs. Therefore, an official undertaking a procurement is not required to refer directly to international agreements.


3. How to use the Commonwealth Procurement Rules

3.1     The CPRs set out the rules that officials must comply with when they procure goods and services. The CPRs have been designed to provide officials with flexibility in developing and implementing procurement processes that reflect their agencies’ needs. 

3.2     Achieving value for money is the core rule of the CPRs. This requires the consideration of the financial and non-financial costs and benefits associated with procurement. To assist officials to understand and undertake procurements that achieve value for money, the CPRs have two divisions:

  1. Division 1 – Rules applying to all procurements regardless of their value or whether an exemption applies to them. Officials must comply with the rules in Division 1 when conducting procurements; and 
  2. Division 2 – Additional rules applying to procurements valued at or above the relevant procurement threshold. Officials must also comply with the rules in Division 2 where the expected value of the procurement is at or above the relevant procurement threshold and where an exemption in accordance with Appendix A does not apply.

3.3     The procurement thresholds (including GST) are:

  1. for FMA Act agencies, other than for procurements of construction services, the procurement threshold is $80,000;
  2. for relevant CAC Act bodies, other than for procurements of construction services, the procurement threshold is $400,000; or
  3. for procurements of construction services by FMA Act agencies and relevant CAC Act bodies, the procurement threshold is $9 million.

3.4     Further information and guidance on applying the CPRs are available on Finance’s procurement policy website at www.finance.gov.au/procurement.

3.5     Agencies may have additional rules, guidance, templates or tools that apply when conducting procurements.


Division 1

Rules for all procurements


Division 1 – Rules for all procurements

4. Value for Money

4.1     A thorough consideration of value for money begins by officials clearly understanding and expressing the goals and purpose of the procurement.

4.2     Where a business requirement arises, officials should consider whether a procurement will deliver the best value for money. It is important to take into consideration:

  1. non-procurement alternatives;
  2. consultation with stakeholders;
  3. the business need;
  4. resourcing;
  5. pre-existing arrangements; and
  6. Commonwealth policies.

4.3     Where an agency determines that procurement represents the best value for money, those considerations will inform the development and implementation of the procurement.

4.4     Achieving value for money is the core rule of the CPRs. Approvers must be satisfied, after reasonable enquires, that the procurement achieves a value for money outcome. Value for money in procurement requires:

  1. encouraging competitive and non-discriminatory processes;
  2. using Commonwealth resources in an efficient, effective, economical and ethical manner that is not inconsistent with the policies of the Commonwealth[5];
  3. making decisions in an accountable and transparent manner;
  4. considering the risks; and
  5. conducting a process commensurate with the scale and scope of the procurement.


4.5     The price of the goods and services is not the sole determining factor in assessing value for money. A comparative analysis of the relevant financial and non-financial costs and benefits of alternative solutions throughout the procurement will inform a value for money assessment. Factors to consider include, but are not limited to:

  1. fitness for purpose;
  2. a potential supplier’s experience and performance history;
  3. flexibility (including innovation and adaptability over the lifecycle of the procurement);
  4. environmental sustainability (such as energy efficiency and environmental impact); and
  5. whole-of-life costs.

4.6     Procurement-connected policies are policies of the Commonwealth for which procurement has been identified as a means of delivery. To assist agencies in complying with policies of the Commonwealth, Finance maintains a list of procurement-connected policies, which can be found at www.finance.gov.au/procurement.

4.7     Many of these procurement-connected policies are the responsibility of agencies other than Finance. The policy agency is responsible for administering, reviewing and providing information on the policy as required.

4.8     Coordinated procurement refers to whole-of-government arrangements for procuring goods and services. A list of coordinated procurements can be found at www.finance.gov.au/procurement.

4.9     Agencies must use coordinated procurements. Exemptions from coordinated procurements can only be granted jointly by the requesting agency’s Portfolio Minister and the Finance Minister where an agency can demonstrate a special need for an alternative arrangement.[6]


4.10 Cooperative agency procurements involve more than one agency as the buyer. Agencies can procure cooperatively by approaching the market together or by joining an existing contract of another agency.

4.11 If an agency intends to join an existing contract of another agency, the initial request documentation and the contract must have already specified potential use by other agencies.

4.12 Agencies joining an existing contract must ensure that:

  1. value for money is achieved;
  2. the goods and services being procured are the same as provided for within the contract; and
  3. the terms and conditions of the contract are not being materially altered.

4.13  Where a contract does not specify an end date it must allow for periodic review and subsequent termination of the contract by the agency, if the agency determines that it does not continue to represent value for money.

4.14 Procurement by third parties on behalf of an agency can be a valid way to procure goods and services, provided it achieves value for money. Agencies must not use third-party arrangements to avoid the rules in the CPRs when procuring goods and services.


5. Encouraging competition

5.1     Competition is a key element of the Australian Government’s procurement framework. Effective competition requires non-discrimination and the use of competitive procurement processes.

5.2     Participation in procurement imposes costs on agencies and potential suppliers. Those costs should be considered when designing a process that is commensurate with the scale, scope and risk of the proposed procurement.

5.3     The Australian Government’s procurement framework is non-discriminatory. All potential suppliers to government must, subject to these CPRs, be treated equitably based on their commercial, legal, technical and financial abilities and not be discriminated against due to their size, degree of foreign affiliation or ownership, location, or the origin of their goods and services.

5.4     To ensure that Small and Medium Enterprises (SMEs) can engage in fair competition for Australian Government business, officials should apply procurement practices that do not unfairly discriminate against SMEs and provide appropriate opportunities for SMEs to compete. Officials should consider, in the context of value for money:

  1. the benefits of doing business with competitive SMEs when specifying requirements and evaluating value for money;
  2. barriers to entry, such as costly preparation of submissions, that may prevent SMEs from competing;
  3. SMEs’ capabilities and their commitment to local or regional markets; and
  4. the potential benefits of having a larger, more competitive supplier base.

5.5     The Australian Government is committed to FMA Act agencies sourcing at least 10 per cent of procurement by value from SMEs.


6. Efficient, effective, economical and ethical procurement

6.1     The Australian Government promotes the proper use of Commonwealth resources. Proper use means efficient, effective, economical and ethical use that is not inconsistent with the policies of the Commonwealth.

6.2     Efficient relates to the achievement of the maximum value for the resources used. In procurement, it includes the selection of a procurement method that is not inconsistent with policies of the Commonwealth and that is the most appropriate for the procurement activity, given the scale, scope and risk of the procurement.

6.3     Effective relates to the extent to which intended outcomes or results are achieved. It concerns the immediate characteristics, especially price, quality and quantity, and the degree to which these contribute to specified outcomes.

6.4     Economical relates to minimising cost. It emphasises the requirement to avoid waste and sharpens the focus on the level of resources that the Commonwealth applies to achieve outcomes.

6.5     Ethical relates to honesty, integrity, probity, diligence, fairness and consistency. Ethical behaviour identifies and manages conflicts of interests, and does not make improper use of an individual’s position.

6.6     In particular, officials undertaking procurement for the Australian Government must act ethically throughout the procurement. Ethical behaviour includes:

  1. recognising and dealing with actual, potential and perceived conflicts of interest;
  2. dealing with potential suppliers, tenderers and suppliers equitably, including by

i)         seeking appropriate internal or external advice where probity issues arise, and

ii)       not accepting inappropriate gifts or hospitality;

c.        carefully considering the use of Commonwealth resources; and

d.       complying with all directions, including their agency’s CEIs, in relation to gifts or hospitality, the information privacy principles of the Privacy Act 1988 and the security provisions of the Crimes Act 1914.


6.7     Agencies must not seek to benefit from supplier practices that may be dishonest, unethical or unsafe. This includes not entering into contracts with tenderers who have had a judicial decision against them (not including decisions under appeal) relating to employee entitlements and who have not paid the claim. Officials should seek declarations from all tenderers confirming that they have no such unsettled judgments against them.

6.8     If a complaint about procurement is received, agencies must apply equitable and non‑discriminatory complaint-handling procedures. Agencies should aim to manage the complaint process internally, where possible, through communication and conciliation.


7. Accountability and transparency in procurement

7.1     The Australian Government is committed to ensuring accountability and transparency in its procurement activities. Accountability means that officials are responsible for the actions and decisions that they take in relation to procurement and for the resulting outcomes. Transparency involves agencies taking steps to enable appropriate scrutiny of their procurement activity. The fundamental elements of accountability and transparency in procurement are outlined in this section.

7.2     Officials must maintain appropriate documentation for each procurement. The appropriate detail of documentation should be commensurate with the scale, scope and risk of the procurement. Documentation should provide accurate and concise information on:

  1. the requirement for the procurement;
  2. the process that was followed;
  3. how value for money was considered and achieved; and
  4. relevant decisions, including under the FMA Regulations, and the basis of those decisions.

7.3     Agencies must have appropriate documentation with the supplier, such as a written contract or purchase order.

7.4     Documentation must be retained in accordance with the Archives Act 1983.

7.5     AusTender[7], the Australian Government’s procurement information system, is a centralised web-based facility that publishes a range of information, including agencies’ planned procurements, open tenders and contracts awarded. It also supports secure electronic tendering to deliver integrity and efficiency for agencies and potential suppliers.

7.6     AusTender is the system used to enable agencies to meet their publishing obligations under the CPRs. It also enables agencies to monitor and review their AusTender-based procurements, including approaches to market, publication of contracts and multi-use lists, and amendments to contracts and multi-use lists.


7.7     In order to draw the market’s early attention to potential procurement opportunities, each agency must publish by 1 July each year on AusTender an annual procurement plan containing a short strategic procurement outlook.

7.8     The annual procurement plan should include the subject matter of any significant planned procurement and the estimated publication date of the approach to market. Agencies should update their plans regularly throughout each financial year.

7.9     Agencies must use AusTender to publish open tenders and, to the extent practicable, to make relevant request documentation available. Agencies may use AusTender to publish prequalified or limited tender approaches to market and make relevant request documentation available.

7.10 Agencies should include relevant evaluation criteria in request documentation to enable the proper identification, assessment and comparison of submissions on a fair, common and appropriately transparent basis.

7.11 In any additional notification through other avenues, such as printed media, the details selected for inclusion in the notification must be the same as those published on AusTender.

7.12 Where an agency provides request documentation or any other document, already published on AusTender in any other form (for example, a printed version) that documentation must be the same as that published on AusTender.

7.13 A notice of a multi-use list must be published on AusTender. Where a multi-use list is open to applications at any time, an approach to market inviting applications must be published continuously on AusTender for the entire period of the multi-use list’s operation. Alternatively, where a multi-use list will be updated only at specific times and according to set deadlines for application, an approach to market inviting applications must be re-published at least once every 12 months.

7.14 Officials must, on request, promptly provide, to eligible potential suppliers, documentation that includes all information necessary to permit the potential supplier to prepare and lodge submissions.

7.15 Following the rejection of a submission or the award of a contract, officials must promptly inform affected tenderers of the decision. Debriefings must be made available, on request, to unsuccessful tenderers outlining the reasons the submission was unsuccessful. Debriefings must also be made available, on request, to the successful supplier(s).


7.16 Agencies must report contracts and amendments on AusTender within 42 days of entering into (or amending) a contract if they are valued at or above the reporting threshold.

7.17 The reporting thresholds (including GST) are:

  1. $10,000 for FMA Act agencies; and
  2. for relevant CAC Act bodies

i)         $400,000 for procurements other than procurement of construction services, or

ii)       $9 million for procurements of construction services.

7.18 Regardless of value, standing offers must be reported on AusTender within 42 days of the agency entering into or amending such arrangements. Relevant details in the standing offer notice, such as supplier details and the names of other agencies participating in the arrangement, must be reported and kept current.

7.19 Agencies must make available on request, the names of any subcontractor(s) engaged by a contractor in respect of a contract.

  1. Agencies must require contractors to agree to the public disclosure of the names of any subcontractors engaged to perform services in relation to a contract.
  2. Contractors must be required to inform relevant subcontractors that the subcontractor’s participation in fulfilling a contract may be publicly disclosed.

7.20 When conducting a procurement and awarding a contract, agencies should take appropriate steps to protect the Commonwealth’s confidential information. This includes observing legal obligations, such as those under the Privacy Act 1988, and statutory secrecy provisions.

7.21 Submissions must be treated as confidential before and after the award of a contract. Once a contract has been awarded the terms of the contract, including parts of the contract drawn from the supplier’s submission, are not confidential unless the agency has determined and identified in the contract that specific information is to be kept confidential in accordance with the guidance on Confidentiality throughout the Procurement Cycle at www.finance.gov.au/procurement.


7.22 The need to maintain the confidentiality of information should always be balanced against the public accountability and transparency requirements of the Australian Government. It is therefore important for officials to plan for, and facilitate, appropriate disclosure of procurement information. In particular, officials should:

  1. include provisions in request documentation and contracts that alert potential suppliers to the public accountability requirements of the Australian Government, including disclosure to the Parliament and its committees;
  2. 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; and
  3. consider, on a case-by-case basis, any request by a supplier for material to be treated confidentially after the award of a contract, and enter into commitments to maintain confidentiality only where such commitments are appropriate.

7.23 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.

7.24 Other reporting and disclosure obligations apply to officials undertaking procurement, including:

  1. disclosure of procurement information for agency annual reporting purposes;
  2. disclosure of non-compliance with the CPRs in an agency’s Certificate of Compliance;
  3. disclosure to the Parliament and its committees, as appropriate, in line with the Government Guidelines for Official Witnesses before Parliamentary Committees and Related Matters;
  4. disclosure of information consistent with the Freedom of Information Act 1982; and
  5. disclosure of discoverable information that is relevant to a case before a court.

8. Procurement risk

8.1     Risk management comprises the activities and actions taken by an agency to ensure that it is mindful of the risks it faces, that it makes informed decisions in managing these risks, and identifies and harnesses potential opportunities.[8]

8.2     Agencies must establish processes for the identification, analysis, allocation and treatment of risk when conducting a procurement. The effort directed to risk assessment and management should be commensurate with the scale, scope and risk of the procurement. Agencies should consider risks and their potential impact when making decisions relating to value for money assessments, approvals of proposals to spend public money and the terms of the contract.

8.3     As a general principle, risks should be borne by the party best placed to manage them, that is, agencies should generally not accept risk which another party is better placed to manage. Similarly, where an agency is best placed to manage a particular risk, it should not seek to inappropriately transfer that risk to the supplier.

 


9. Procurement method

9.1     Australian Government procurement is conducted by one of three methods – open tender, prequalified tender or limited tender. These methods are detailed in this section.

9.2     The expected value of a procurement must be estimated before a decision on the procurement method is made. The expected value is the maximum value (including GST) of the proposed contract, including options, extensions, renewals or other mechanisms that may be executed over the life of the contract.

9.3     The maximum value of the goods and services being procured must include:

  1. all forms of remuneration, including any premiums, fees, commissions, interest, allowances and other revenue streams that may be provided for in the proposed contract;
  2. the value of the goods and services being procured, including the value of any options in the proposed contract; and
  3. any taxes or charges.

9.4     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 expected value of the goods and services being procured must include the maximum value of all of the contracts.

9.5     A procurement must not be divided into separate parts solely for the purpose of avoiding a relevant procurement threshold.

9.6     Where the maximum value of a procurement over its entire duration cannot be estimated the procurement must be treated as being valued above the relevant procurement threshold.

9.7     Where the expected value of a procurement is at or above the relevant procurement threshold and an exemption in Appendix A does not apply, the rules in Division 2 must also be followed. The procurement thresholds (including GST) are:

  1. for FMA Act agencies, other than for procurements of construction services, the procurement threshold is $80,000;
  2. for relevant CAC Act bodies, other than for procurements of construction services, the procurement threshold is $400,000; or
  3. for procurements of construction services by FMA Act agencies or relevant CAC Act bodies, the procurement threshold is $9 million.


9.8     Open tender involves publishing an open approach to market and inviting submissions.

9.9     Prequalified tender involves publishing an approach to market inviting submissions from all potential suppliers on:

  1. a shortlist of potential suppliers that responded to an initial open approach to market on AusTender;
  2. a list of potential suppliers selected from a multi-use list established through an open approach to market; or
  3. 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.
  1. Officials should report the original procurement method used to establish the standing offer when they report procurements from standing offers.

9.11 Limited tender  involves an agency approaching one or more potential suppliers to make submissions, where the process does not meet the rules for open tender or prequalified tender.

9.12      For procurements at or above the relevant procurement threshold, limited tender can only be conducted in accordance with paragraph 10.3, or where a procurement is exempt as detailed in Appendix A.

 


Division 2—

Additional rules for procurements at or above the relevant procurement threshold


Division 2 – Additional rules for procurements at or above the relevant procurement threshold

10.                    Additional rules

10.1         The rules set out in Division 2 are additional to those in Division 1 and must not be interpreted or applied in a manner that diminishes or negates Division 1.

10.2         A procurement, except a procurement that is specifically exempt in accordance with Appendix A, is subject to the rules contained in Division 2 if the expected value of the procurement is at, or above, the relevant procurement threshold (see paragraphs 3.3 and 9.7).

10.3         An agency must only conduct a procurement at or above the relevant procurement threshold through limited tender in the following circumstances:

  1. where, in response to an approach to market

i)         no submissions, or no submissions that represented value for money, were received,

ii)       no submissions that met the minimum content and format requirements for submission as stated in the request documentation were received, or

iii)     no tenderers satisfied the conditions for participation, and the agency does not substantially modify the essential requirements of the procurement; or

b.       where, for reasons of extreme urgency brought about by events unforeseen by the agency, the goods and services could not be obtained in time under open tender or prequalified tender; or

c.        for procurements made under exceptionally advantageous conditions that arise only in the very short term, such as from unusual disposals, unsolicited innovative proposals, liquidation, bankruptcy, or receivership, and which are not routine procurement from regular suppliers; or

d.       where the goods and services can be supplied only by a particular business and there is no reasonable alternative or substitute for one of the following reasons

i)         the requirement is for works of art,

ii)       to protect patents, copyrights, or other exclusive rights, or proprietary information, or

iii)     due to an absence of competition for technical reasons; or


e.       for additional deliveries of goods and 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 goods and services that do not meet requirements for compatibility with existing equipment or services; or

f.         for procurements in a commodity market; or

g.       where an agency procures a prototype or a first good or service that is intended for limited trial or that is developed at the agency’s request in the course of, and for, a particular contract for research, experiment, study, or original development; or

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 these CPRs, 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 through an open tender or prequalified tender, and where the initial approach to market indicated that limited tender might be used for those subsequent construction services.

10.4         A procurement at or above the relevant procurement threshold conducted by limited tender is not required to meet the rules in paragraphs 10.6-10.12 (Request Documentation), 10.17‑10.27 (Minimum Time Limits), or 10.31 (Awarding Contracts).

10.5         In accordance with the general rules for accountability set out in these CPRs, for each contract awarded through limited tender, an official must prepare and appropriately file within the agency’s records management system a written report that includes:

  1. the value and type of goods and services procured;
  2. a statement indicating the circumstances and conditions that justified the use of limited tender; and
  3. a record demonstrating how the procurement represented value for money in the circumstances.


10.6         Request documentation must include a complete description of:

  1. the procurement, including the nature, scope and, where known, the quantity of the goods and services to be procured and any requirements to be fulfilled, including any technical specifications, conformity certification, plans, drawings, or instructional materials;
  2. any conditions for participation, including any financial guarantees, information and documents that potential suppliers are required to submit;
  3. any minimum content and format requirements;
  4. evaluation criteria to be considered in assessing submissions; and
  5. any other terms or conditions relevant to the evaluation of submissions.
  1.      However, agencies are not obligated to release confidential information, information sensitive to essential security or information that may impede competition.
  2.      Agencies must ensure that potential suppliers and tenderers are dealt with fairly and in a non-discriminatory manner when providing information leading to, or following, an approach to market. Agencies must promptly reply to any reasonable request from a potential supplier for relevant information about a procurement, and when responding to such enquiries must avoid a potential supplier, or group of potential suppliers, gaining an unfair advantage in a competitive procurement process.

10.9         In prescribing specifications for goods and services, an agency must:

  1. not use specifications or prescribe any conformity assessment procedure in order to create an unnecessary obstacle to trade;
  2. where possible, set out the specifications in terms of performance and functional requirements; and
  3. 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.
  1.   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. In an exceptional circumstance where this type of specification is used, words such as ‘or equivalent’ must be included in the specification.


10.11     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 must ensure that such a supplier will not have an unfair advantage over other potential suppliers.

10.12     Where, during the course of a procurement, an agency modifies the evaluation criteria or specifications set out in an approach to market or in request documentation, or amends or reissues an approach to market or request documentation, it must transmit all modifications or amended or reissued documents:

  1. 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
  2. in adequate time to allow potential suppliers to modify and re-lodge their submissions, if required.

10.13     Agencies may specify conditions for participation that potential suppliers must be able to demonstrate compliance with 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.

10.14     Conditions for participation may require relevant prior experience where that experience is essential to meet the requirements of the procurement but must not specify, as a requirement, that potential suppliers have previous experience with the agency or with the Australian Government or in a particular location.

10.15     In assessing whether a tenderer satisfies the conditions for participation, an agency must:

  1. evaluate financial, commercial, and technical abilities on the basis of the tenderer’s business activities, wherever they have occurred; and
  2. base its determination solely on the conditions for participation that the agency has specified in either the approach to market or the request documentation.
  1.   An agency may exclude a tenderer on grounds such as bankruptcy, insolvency, false declarations, or significant deficiencies in performance of any substantive requirement or obligation under a prior contract.


10.17     Potential suppliers must be required to lodge submissions in accordance with a common deadline.

10.18     Agencies must provide sufficient time for potential suppliers to prepare and lodge submissions in response to an approach to market. Time limits discussed in this section represent minimum time limits to lodge submissions and should not be treated as default time limits.

10.19     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 an approach to market for an open tender or a prequalified tender, except under the following circumstances where an agency may establish a time limit that is less than 25 days but not less than 10 days:

  1. 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 those details include a description of the procurement, the timing of the approach to market and the procedure to obtain request documentation;
  2. where the agency procures commercial goods and services;
  3. in the case of second or subsequent approaches to the market for recurring procurements; or
  4. where a genuine state of urgency renders the normal time limit impracticable.
  1.   Where an agency has not electronically issued an approach to market, the 25 day period referred to in the preceding paragraph must be extended to 30 days.
  2.   The time limits stated above apply to each approach to market. That is, a single approach to market must comply with the time limits or, in the case of a multi-stage procurement (such as inviting expressions of interest followed by a prequalified tender), each approach to market must comply with the time limits stated in paragraph 10.19.
  3.   Where an agency intends to specify conditions for participation that require potential suppliers to undertake a separate registration procedure, the agency must state the time limit for responding to the registration in the approach to market. Any such conditions for participation must be published in sufficient time to enable all potential suppliers to complete the registration procedures within the time limit for the procurement.
  4.   Where an agency extends the time limit for registration or submission, or where negotiations are terminated and potential suppliers are permitted to lodge new submissions, the new time limit must apply equitably.


10.24     Late submissions must not be accepted unless the submission is late as a consequence of mishandling by the agency. 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.

10.25     Agency mishandling does not include mishandling by a courier or mail service provider engaged by a potential supplier to deliver a submission. It is the responsibility of the potential supplier to ensure that the submission is dispatched in sufficient time for it to be received by the agency by the deadline.

10.26     Late submissions should be returned unopened to the potential supplier who submitted them, to:

  1. ensure that they are not evaluated or compared with submissions which were submitted by the due time and date;
  2. demonstrate to other tenderers that the process for receiving submissions is fair and impartial; and
  3. eliminate scope for any suggestion that the submission was rejected for any reason other than because it was late.
  1.   It may be necessary to open a late submission if there is no return address or any indication of which approach to market the submission relates. Where a submission has been opened under such circumstances the potential supplier should be advised that the submission was rejected due to lateness and of the reason it was opened.

10.28     Procedures to receive and open submissions must guarantee fairness and impartiality and must ensure that submissions are treated in confidence.

10.29     Where an agency provides tenderers with opportunities to correct unintentional errors of form between the opening of submissions and any decision, the agency must provide the opportunity equitably to all tenderers.

10.30     Further consideration must be given only to submissions that meet minimum content and format requirements.


10.31     Unless an agency determines that it is not in the public interest to award a contract[9], it must award a contract to the tenderer that the agency has determined:

  1. satisfies the conditions for participation;
  2. is fully capable of undertaking the contract; and
  3. will provide the best value for money, in accordance with the essential requirements and evaluation criteria specified in the approach to market and request documentation.
  1.   An agency must not cancel a procurement, or terminate or modify an awarded contract, so as to avoid the rules of Division 2 of these CPRs.

 


Appendices and Index

Appendices

Appendix A: Exemptions from Division 2

Procurements that are exempt from the rules of Division 2 by the operation of Appendix A are still required to be undertaken in accordance with value for money and with the rules of Division 1 of these CPRs.

 

Division 2 does not apply to:

  1. leasing or procurement of real property or accommodation (note: the procurement of construction services is not exempt);
  2. procurement of goods and services by an agency from other Commonwealth, state, territory or local government entities where no commercial market exists or where legislation or Commonwealth policy requires the use of a government provider (for example, tied legal services);
  3. procurements funded by international grants, loans or other assistance, where the provision of such assistance is subject to conditions inconsistent with this document;
  4. procurements funded by grants and sponsorship payments from non-Commonwealth entities;
  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. the engagement of an expert or neutral person, including engaging counsel or barristers, for any current or anticipated litigation or dispute;
  8. procurement of goods and services (including construction) outside Australian territory, for consumption outside Australian territory;
  9. acquisition of fiscal agency or depository services, liquidation and management services for regulated financial institutions, and sale and distribution services for government debt;
  10. procurement of motor vehicles;
  11. procurement by the Future Fund Management Agency of investment management, investment advisory, or master custody and safekeeping services for the purposes of managing and investing the assets of the Future Fund;


12.          procurement of blood plasma products or plasma fractionation services;

13.          procurement of government advertising services[10];

14.          procurement of goods and services by, or on behalf of, the Defence Intelligence Organisation, the Defence Signals Directorate, or the Defence Imagery and Geospatial Organisation;

15.          contracts for labour hire;

16.          procurement of goods and services from a business that primarily exists to provide the services of persons with a disability; and

17.          procurement of goods and services from an SME with at least 50 per cent Indigenous ownership.[11]
 


Appendix B: Abbreviations and acronyms

CAC Act    Commonwealth Authorities and Companies Act 1997

CEIs     Chief Executive’s Instructions

CPRs      Commonwealth Procurement Rules

Finance    Department of Finance and Deregulation

Finance Minister  Minister for Finance and Deregulation

FMA Act     Financial Management and Accountability Act 1997

FMA Regulations   Financial Management and Accountability Regulations 1997

GST    Goods and Services Tax

SMEs     Small and Medium Enterprises

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Appendix C: Definitions

The following definitions apply for the purposes of these CPRs:

Annual procurement plan – a document published on AusTender through which agencies provide a short summary of their strategic procurement outlook for the coming year and information on significant procurements they plan to undertake.

Approach to market – any notice inviting potential suppliers to participate in a procurement which may include a request for tender, request for quote, request for expression of interest, request for application for inclusion on a multi-use list, request for information or request for proposal.
Note: the acronym ‘ATM’ is used on AusTender and other procurement documents to reference an approach to market.

Approver – is defined by the FMA Regulations as:

  1. a Minister; or
  2. a Chief Executive;

or

c.       a person authorised by or under an Act to exercise a function of approving proposals to spend public money.

AusTender – the central web-based facility for the publication of Australian Government procurement information, including business opportunities, annual procurement plans and contracts awarded.

CAC Act body – an entity that is subject to the Commonwealth Authorities and Companies Act 1997 (CAC Act). CAC Act bodies are legally and financially separate from the Commonwealth but can be directed by the Finance Minister under section 47A of the CAC Act to apply the CPRs in accordance with the CAC Act Procurement Directions if they are listed in schedule 1 to the CAC Regulations (relevant CAC Act bodies).

Chief Executive’s Instructions (CEIs) – directions issued by the Chief Executive of an agency under the authority of section 52 of the FMA Act and FMA Regulation 6.

Commercial goods and services – commercial goods and services are 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.

Commodity market – a recognised exchange dealing in generic, largely unprocessed, goods that can be processed and resold.

Conditions for participation – minimum conditions that potential suppliers must demonstrate compliance with, 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.

Contract – an arrangement, as defined by the FMA Regulations, for the procurement of goods and services under which public money is payable or may become payable. 
Note: this includes standing offers and panels.

Contracts for labour hire – a contract under which an agency engages an individual to provide labour, where the individual is engaged either directly or through a firm which primarily exists to provide the services of only that individual. This includes the appointment of an eminent individual to a special role by a Chief Executive, or the appointment of a person or persons by a Chief Executive to a governance committee (for example, an audit committee, ethics committee or steering committee), but does not include the engagement of consultants.

Days – means calendar days.

End date (in a contract) – can be defined by reference to a specific date or by reference to a specific event.

Evaluation criteria – the criteria that are used to evaluate the compliance and/or relative ranking of submissions. Evaluation criteria must be clearly stated in the request documentation.

FMA Act agency – an agency as defined in section 5 of the Financial Management and Accountability Act 1997 (FMA Act).

Goods – 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.

Limited tender – involves an agency approaching one or more potential suppliers to make submissions, where the process does not meet the rules for open tender or prequalified tender.

Minimum content and format requirements– criteria that a tenderer’s submission is required to meet, when responding to an approach to market, to be eligible for further consideration in a procurement process.

Multi-use list – a list, intended for use in more than one procurement process, of pre-registered suppliers who have satisfied the conditions for participation on the list. Each approach to a multi-use list is considered a new procurement.

Open approach to market – any notice inviting all potential suppliers to participate in a procurement which may include a request for tender, request for quote, request for expression of interest, request for application for inclusion on a multi-use list, request for information and request for proposal.

Open tender – involves publishing an open approach to market and inviting submissions.


Potential supplier – an entity or person who may respond to an approach to market.

Prequalified tender – involves publishing an approach to market inviting submissions from all potential suppliers on:

  1. a shortlist of potential suppliers that responded to an initial open approach to market on AusTender;
  2. a list of potential suppliers selected from a multi-use list established through an open approach to market; or
  3. 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.

Procurement – encompasses the whole process of procuring goods and services. It begins when a need has been identified and a decision has been made on the procurement requirement. Procurement continues through the processes of risk assessment, seeking and evaluating alternative solutions, the awarding of a contract, delivery of and payment for the goods and services and, where relevant, ongoing contract management and consideration of disposal of goods. Procurement does not include:

  1. grants (whether in the form of a contract, conditional gift or deed)[12];
  2. investment (or divestment);
  3. sales by tender;
  4. loans;
  5.                                                                                                                                                                                                           procurements of goods and services for resale or of goods and services used in the production of goods for resale;
  6. any property right not acquired through the expenditure of public money – for example, a right to pursue a legal claim for negligence;
  7. statutory appointments;
  8. appointments made by a Minister using the executive power – for example, the appointment of a person to an advisory board; or
  9. the engagement of employees – such as under the Public Service Act 1999, the Parliamentary Services Act 1999, an agency’s enabling legislation, or the common law concept of employment.

Procurement thresholds – the procurement thresholds (including GST) are:

  1. for FMA Act agencies, other than for procurements of construction services, the procurement threshold is $80,000;
  2. for relevant CAC Act bodies, other than for procurements of construction services, the procurement threshold is $400,000; or
  3. for procurements of construction services by FMA Act agencies or relevant CAC Act bodies, the procurement threshold is $9 million.


Reporting thresholds – the reporting thresholds (including GST) are:

  1. $10,000 for FMA Act agencies; and
  2. for relevant CAC Act bodies
    1. $400,000 for procurements other than procurement of construction services, or
    2. $9 million for procurements of construction services.

Request documentation – documentation provided to potential suppliers 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 tender, prequalified tender and limited tender.

Research and development – research is described as systematic enquiry or investigation into a subject in order to discover facts or principles. Research includes surveys, market research, scientific research and educational research. Development applies to the function of creating/producing new and improved products, devices, processes or services. Development also extends to design, proof of concept and the production of prototypes.

Small and medium enterprises (SMEs) – an Australian or New Zealand firm with fewer than 200 full-time equivalent employees.

Specification – a description of the features of the goods and services to be procured.

Standing offer – an arrangement setting out the terms and conditions, including a basis for pricing, under which a supplier agrees to supply specified goods and services to an agency for a specified period.

Submission – any formally submitted response from a potential supplier to an approach to market. Submissions may include tenders, responses to expressions of interest, applications for inclusion on a multi-use list or responses to request for quote.

Supplier – an entity or person who has entered into a contract with the Commonwealth.

Tenderer – an entity or person who has responded with a submission to an approach to market.

Index

accountability and transparency, 20–3

annual procurement plans, 21, 32

definition, 39

approach to market, 21, 26, 28–34

definition, 39

approver, 8, 14

definition, 39

audit, 23

AusTender, 20–2, 26, 32

definition, 39

awarding contracts, 29, 34

 

CAC Act bodies, 11–2, 22, 25

definition, 39

Certificate of Compliance, 8, 23

Chief Executive’s Instructions (CEIs), 8, 11, 18

definition, 39

commercial goods and services, 32

definition, 39

commodity market, 29

definition, 39

competition, 29–30

encouragement of, 17

conditions for participation, 28, 30-2, 34

definition, 39

confidential information, 30

treatment of, 22–3

confidentiality

submissions, 22-3, 33

construction services 12, 22, 25, 29

definition, 40

 

 

 

 

 

 

late submissions, 33

legislative and policy environment, 10
limited tender, 21, 25–6, 28–9

definition, 40

 

minimum content and

format requirements, 28, 30, 33

definition, 40

minimum time limits, 29, 32

modification of evaluation criteria or specifications, 31

multi-use list, 20–1, 26

definition, 40

 

non-discrimination, 17

notifications to the market and AusTender, 21

 

open approach to market, 26

definition, 40

open tender, 20–1, 25–6, 28–9, 32

definition, 40

opening of submissions

see receipt and opening of submissions

 

potential suppliers, 15, 17–8, 20–1, 23, 26, 30–3

definition, 41

prequalified tender, 21, 25–6, 28–9, 32

definition, 41

probity issues, 18

procurement, 9

definition, 41

procurement framework, 8

procurement methods, 25–6

procurement risk, 9,14, 24

procurement thresholds, 12, 25–6

definition, 41

procurement-connected policies, 15

proper use of Commonwealth resources, 11, 14 definition, 18

 

 

contract end dates, 16

definition, 40

contracts, 9, 16, 19–25
definition, 40

see also awarding contracts

contracts for labour hire, 37

definition, 40

cooperative agency procurements, 16

coordinated procurement, 15

 

disclosure, 22–3

Division 1: Rules for all procurements, 12, 14–26

Division 2: Additional rules for procurements

at or above the relevant procurement threshold, 12, 28–34

exemptions from, 25–6, 28, 36–37 documentation, 20

see also request documentation

 

evaluation criteria, 21, 30–1, 34

definition, 40

expected value of procurement, 12, 25, 28
 

financial framework, 10

FMA Act agencies, 11–2, 17, 22, 25     

definition, 40

 

gifts, 18

goods

definition, 40

 

international obligations, 11

 

 

 

 

 

 

 

 

providing information, 21–2, 30

 

receipt and opening of submissions, 33 records, 20, 23, 29

reporting arrangements, 22 reporting thresholds, 22

definition, 42

request documentation, 16, 21, 23, 28–32, 34 definition, 42

research and development, 36 definition, 42

risk see procurement risk

 

small and medium enterprises (SMEs), 17, 37 definition, 42

specification, 30–1 definition, 42

standing offer, 22, 26 definition, 42

subcontractors, 22

submissions, 17, 21–2, 26, 28, 30–3 definition, 42

supplier, 18, 20–5, 28–31 definition, 42

 

tenderer, 18–9, 21, 28, 30–1, 33–4 definition, 42

third-party procurement, 16

 

value for money, 12, 14–7, 20, 24, 28–9, 34
value of procurement

requirement to estimate, 25

 

web-based guidance, 8

 

 

[1] FMA Regulations define an approver as a Minister, a Chief Executive, or a person authorised by legislation to approve proposals to spend public money. Chief Executives commonly delegate this power to officials in their agency.

[2] As defined in FMA Regulation 3A.

[3] When the CPRs commenced, ‘Proper use’ was defined in section 44 of the FMA Act as ‘efficient, effective, economical and ethical use that is not inconsistent with the policies of the Commonwealth’.

[4] The CAC Act bodies subject to the Finance Minister’s (CAC Act Procurement) Directions 2009 are listed in Schedule 1 to the Commonwealth Authorities and Companies Regulations 1997.

[5] This reflects the requirement in section 44 of the FMA Act that a Chief Executive must manage the affairs of the agencies for which they are responsible in a way that promotes the proper use of Commonwealth resources.

[6] Or where the coordinated procurement specifies an alternative approach for obtaining exemptions.

[7] AusTender is available at www.tenders.gov.au.

[8] Department of Finance and Deregulation, Comcover Better Practice Guide – Risk Management.

[9] Public interest grounds generally arise in response to unforeseen events or new information that materially affects the objectives or reasons underlying the original procurement requirement as specified in the request document.

[10] This includes information and advertising services for the development and implementation of information and advertising campaigns.

[11] FMA Regulation 7b – Commonwealth Cleaning Services Guidelines (Act s64) must be complied within the use of this exemption for the procurement of cleaning services.

[12] As defined in FMA Regulation 3A.