New WA procurement regulations raise the stakes for government suppliers

25 Nov 2021
Suppliers to the WA Government should now take positive steps to mitigate and close out recent incidents (dating back three years), and ensure that your company is maintaining best practice standards and internal control systems, or risk losing Government contracts.

The WA Government's new procurement Regulations, made under the Procurement Act 2020, empower the Department of Finance to exclude companies from State procurement contracts on the grounds of breaching a wide range of corporate, criminal, consumer, environmental and WHS legislation, both within and outside of WA.

The novel regime in the Procurement (Debarment of Suppliers) Regulations 2021 (WA) will commence on 1 January 2022.

Under it, debarred suppliers will be precluded from being awarded contracts (or extensions of existing contracts) for the supply of goods, services or works to a State agency.

Further, debarred suppliers cannot represent another supplier in relation to a Public Contract, and any supplier proposing to sub-contract to a debarred or suspended supplier will be similarly excluded.

The Department can also debar affiliates (including subsidiaries) of debarred suppliers.

All debarred suppliers will be put on a public register.

It important to note that State agencies for the purposes of the Regulations do not include State owned enterprises such as Synergy, the Water Corporation or port authorities.

Categories of conduct

The Regulations create a two-tiered system of categories of non-compliance that enliven the debarment power (Category A conduct and Category B conduct), and otherwise provide for debarment where a supplier's conduct is such that the provision of services to the State would compromise:

  • the integrity of, and public confidence in, the procurement activities of State agencies;
  • the reputation of the State; or
  • the business risk to State agencies.

Category A conduct (which attracts a maximum debarment term of 5 years) comprises 27 items that range from serious criminal offences (bribery, fraud, money laundering) to significant offences under environmental and WHS legislation.

Category B conduct (which attracts a maximum debarment term of 2 years) is even broader, extending to any non-compliance under consumer, anti-discrimination, WHS, tax and environmental legislation.

Both categories extend to cover similar conduct in other jurisdictions. This, in combination with the affiliate debarment power, enables the Department to preclude Australian subsidiaries of international corporations from consideration for public contracts in WA.

Notably, in respect of Category B conduct, there is no requirement for the relevant conduct to constitute an offence or contravention of the law in the other jurisdiction, as long as the conduct would be unlawful in Western Australia.

Looking back at previous behaviour

The Department can debar suppliers for conduct occurring within the past three years. As the Act provides a retrospective power, the 1 January 2022 commencement date means that conduct dating back to 1 January 2019 may be relevant.

Mitigating factors

The Regulations provide a list of factors that the Department may consider when deciding whether to debar suppliers, including:

  • remedial measures taken;
  • whether the supplier had effective standards of operation and internal control systems in place;
  • investigations undertaken by the supplier; and
  • whether the supplier promptly brought the conduct to the attention of, and fully cooperated with, the appropriate government authority.

Accordingly, Government suppliers should ensure that they effectively close out any recent non-compliances with relevant authorities, and that they implement best practice standards and internal control systems going forward.

For advice or assistance with implementing best practice environmental, WHS and governance controls, please get in touch.

Clayton Utz communications are intended to provide commentary and general information. They should not be relied upon as legal advice. Formal legal advice should be sought in particular transactions or on matters of interest arising from this communication. Persons listed may not be admitted in all States and Territories.