The Local Government Legislation Amendment Regulation (No. 4) 2013 was notified on 6 December 2013 and introduces a number of changes to the local government contracting provisions under the Local Government Regulation 2012 and the City of Brisbane Regulation 2012 which will commence on 1 January 2014.
In particular, the amendments clarify the thresholds at which Councils must obtain quotes and invite tenders and changes the way they must establish their registers of pre-qualified suppliers.
Entering into particular contracts
Previously, section 224 of the Local Government Regulation defined a "medium-sized contractual arrangement" to be a contractual arrangement with a supplier that is expected to be worth, exclusive of GST, $15,000 or more but less than $200,000 in a financial year. A "large-sized contractual arrangement" was defined in a similar way, for contracts of $200,000 or more in a financial year.
Under section 224(4), the "expected value" for determining the relevant threshold was to be assessed as the total expected value of all of the local government's contracts, in the financial year, with the supplier for goods and services of a similar type.
This resulted in a lack of clarity for the treatment of contracts extending over more than one financial year. The Amendment Regulation addresses this issue by specifying that, for determining whether a contract is a medium or large-sized contractual arrangement, the total expected value relates to a financial year, or over the proposed term of the contractual arrangement.
This change is likely to be significant for some local government contractual arrangements, as it will now be necessary for Councils to consider the expected value of a contract over its term, rather than in a single financial year. This will, no doubt, result in the classification of more multi-year contractual arrangements as medium-sized and large-sized contractual arrangements when considered against their total value over the term.
Classification as a medium-sized or large-sized contractual arrangement triggers a requirement for quotes and tenders respectively, before entering into a contract.
Publishing details of particular contractual arrangements
The Amendment Regulation also amends the Local Government Regulation to clarify the requirements on local governments for publishing details of contractual arrangements worth $200,000 or more.
Section 237 of the Local Government Regulation required publication of the details of contracts worth $200,000 or more. Following the amendments, section 237 now requires publication of details of contractual arrangements worth $200,000 or more.
Having regard to the description of medium and large sized contractual arrangements at section 214 of the Local Government Regulation, the requirement for publication would be triggered where the total expected value of all of the Council's contracts with the supplier for goods and services of a similar type under the arrangement reaches $200,000. The assessment is not limited to the value of a single contract with a supplier.
In these circumstances, it would be prudent for local governments entering a new contract with an existing supplier (for a similar type of goods or services) to consider the application of the revised section 237.
Establishing a register of pre-qualified suppliers
In addition to amending the meaning of the value of contractual arrangements, the Amendment Regulation also impacts on how a local government may establish a register of pre-qualified suppliers.
Under section 232 there is an exception to the requirement to invite quotes or tenders prior to entering into a medium-sized or large-sized contractual arrangement for the supply of goods and services. The exception operates if the contract is entered into with a supplier from a register of pre-qualified suppliers. The changes to the Local Government Regulation do not alter this exception.
However, the Amendment Regulation has altered the way local governments may establish their register of pre-qualified suppliers. The Local Government Regulation had allowed the establishment of a register of pre-qualified suppliers where certain pre-conditions were met and the pre-qualified supplier had been assessed by the local government as having the technical, financial and managerial capability necessary to perform contracts on time and in accordance with agreed requirements. There was no requirement to invite tenders to establish a register of pre-qualified suppliers.
The amendments reinstate a requirement contained in historical local government legislation to invite suppliers to tender to be on a register of pre-qualified suppliers. The procedure for inviting tenders is now described at section 232(3)-(6), and requires local governments to have regard to sound contracting principles.
The Amendment Regulation also makes minor amendments to section 234 to impose the requirement to invite tenders to establish a register of pre-qualified suppliers on LGAQ (and associated wholly owned companies, including Local Buy) in respect of the exception for LGA arrangements.
Practical steps for local governments
In preparation for commencement of the amendments to the contracting provisions of the Local Government Regulation, local governments may wish to:
assess the total value of existing "contractual arrangements" with suppliers;
consider the value of existing or proposed "multi-year" contractual arrangements;
for proposed arrangements that will not be finalised prior to 1 January 2014, reconfirm classification of those arrangements as "medium-sized" or "large-sized" contractual arrangements;
adjust Council internal processes for publication of contractual arrangements; and
note the new requirement for tenders for establishing a register of pre-qualified suppliers.
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