05 May 2005
Key Points:
For Government procurements covered by the mandatory FTA, tender requirements, particularly as to late tenders and content and format requirements, will be more strictly enforced. Sole sourcing and restricted tenders for FTA covered procurements are now more difficult and will be much more limited in the future.
Chapter 15 of the Australia-United States Free Trade Agreement applies to a large number of Commonwealth and State Government agencies, and also to 33 Government enterprises, all listed in Annex 15A. The Chapter applies to all procurements whose value exceeds $81,800 for goods and services for Commonwealth central entities, $409,000 for listed Government enterprises and $666,000 for specified State and Territory Government entities; and $9,396,000 for construction services for covered Commonwealth and State Government entities.
The revised Commonwealth Procurement Guidelines (CPGs), implemented to comply with Chapter 15 of the FTA, have been in place since 1 January 2005.
Four months on, interpreting and applying the CPGs have highlighted various issues that require further consideration by covered Commonwealth entities, and will need to be addressed by tenderers attempting to ensure their tender documentation is compliant. These include the exceptions allowing selective and direct tendering, acceptance of late tenders, and the use and application of minimum content and format requirements.
Selective and direct tendering
Under the FTA, and thus the new CPGs, departments must generally use open tendering processes, requiring them to publish procurement laws, regulations and policies, and to publish a notice of intended procurement that includes all details of the procurement.
In order to conduct a select tender for covered procurements, that is, where invitations are issued to nominated suppliers, the agency must use one of three methods. Agencies may conduct a select tender process from a multi-use list, a list of potential suppliers that have responded to a request for expressions of interest, or a list of all potential suppliers that have been granted a specific licence or comply with an essential legal requirement.
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.
Direct sourcing (or sole sourcing), where an agency directly approaches a single supplier, is now only available in a very restricted set of circumstances. These circumstances include where no satisfactory submissions are received in response to an approach to the market, where extreme urgency brought about by unforeseen events makes open tendering impossible, or for purchases on a commodity market.
Agencies are also permitted to use direct/sole sourcing for additional deliveries of property by the original supplier, where a change of supplier would result in procurement of incompatible products, and for new construction services consisting of the repetition of similar construction services. In the latter case, the original construction services must have been procured through open tender and the possibility of later direct sourcing must have been indicated in the earlier tender process.
Late tenders
Under Article 15.9.3 of the FTA, a procuring entity must not penalise any supplier whose tender is received late where the delay is solely the result of mishandling on the part of the supplier. Otherwise, all tendering parties must submit tenders in accordance with a "common deadline". These requirements are reflected in the CPGs.
The Guidance on the Mandatory Procurement Procedures, issued by the Department of Finance and Administration, further states the "common deadline" to mean that late tenders must not be accepted, except where there is "mishandling" by the relevant agency - which would exclude other circumstances outside the tenderer's reasonable control.
As this new position could lead to the exclusion of an otherwise competitive bid, it will be important for agencies to draft their late tender clauses clearly to communicate the relevant policy. The implications for tenderers are obvious.
Minimum content and format requirements
Minimum content and format requirements are requirements relating to the required tender documentation, as opposed to the qualities, characteristics and qualifications of the tendering organisation. These may range from minimal requirements that the responses be in English, to requirements for executive summaries, financial viability statements or detailed plans for the management of a project.
Under the FTA, the procuring entity must provide, upon request, details of any such requirements, and may not consider a tender for award unless the tender conforms to them. This latter requirement is reflected in the CPGs, which state that "an agency must only give further consideration to a submission where… [it] includes the minimum content and format of submissions as stated in all notices".
The Guidance allows a limited measure of flexibility by allowing an agency discretion to correct a submission where a tenderer has made an "unintentional error of form". "Unintentional errors" in form are described as errors that represent incomplete information not consistent with the tenderer's intentions and capabilities, and which do not materially affect the competitiveness of the bid.
This issue requires consideration by both procuring agencies and tenderers. Agencies should consider appropriate requirements that correspond to the sophistication of potential suppliers, and that those requirements are stated clearly. They should also make clear the consequences for not meeting the requirements. Tenderers in turn will need to pay close attention to the content and form requirements in the tender documentation to avoid the exclusion of the tender for reasons not associated with the substantive merits of their bid.
The Guidelines in the States and Territories
While many State and Territory agencies and departments are listed in FTA Annex 15A, not all the current procurement policies in those jurisdictions as yet fully reflect the FTA requirements, and not to the extent of the CPGs.
For example, the NSW Procurement Guidelines do not mention the conditions for tendering methods, stating only that agencies should select a method that suits the procurement. They state that late tenders should not be considered except where the agency believes it will not affect fairness, and that it is the tenderer's responsibility to submit tenders in accordance with requirements. There is little by way of detailed further guidance regarding FTA implications.
"The Victorian Procurement Process Guide" is currently under review and development. The Guide for construction services, however, does not currently follow the FTA in relation to using open tendering, suggesting agencies invite between three and six tenderers to tender. Its Guidelines as to form and acceptance of late tenders do, however, appear to be similar to the CPGs.
For further information, please contact Brian O'Callaghan.
