27 Nov 2018

NSW Government agencies must act now to be ready for reviewable procurement decisions

With the recent passing of the Public Works and Procurement Amendment (Enforcement) Act 2018 (NSW) (Act), suppliers will soon be able to challenge NSW Government procurement decisions if they contravene (or could contravene) an "enforceable procurement provision" as determined by the NSW Procurement Board (Board). This could lead to suspension of the procurement and an associated inflation of project timelines and costs.

NSW Government agencies should take steps now to ensure that their policies and procedures are reviewed and updated to ensure compliance with these important reforms. The Act received assent on 22 November 2018, and will commence by proclamation. As at the date of writing, no date has yet to be proclaimed. However, we anticipate that the provisions of the Act will commence soon.

Why the reforms?

On 8 March 2018, Australia signed the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (TPP-11), which establishes a regime where Australia and its States and Territories must create an independent review mechanism for certain government procurements. The Commonwealth has already enacted legislation to achieve this goal. The Act is the NSW equivalent.  

What is changing in NSW Government procurement?

The Board currently has the authority under section 175 of the Public Works and Procurement Act 1912 (NSW) to issue directions regarding the procurement of goods and services by and for government agencies. The Act amends section 175 to establish that the Board can issue policies as well as directions concerning the procurement of goods and services. The Board can now also specify provisions of a Board direction or policy that are reviewable, and hence enforceable, by the Supreme Court.

What is an "enforceable procurement provision?"

An "enforceable procurement provision" is broadly defined as:

"…a provision of a Board direction or policy (or a provision of a document referred to in a Board direction or policy) that is expressed to be an enforceable procurement provision by the direction or policy." (See Schedule 1, Item 1 of the Act)

At this stage, the Board has yet to release any guidance on what it will characterise as an "enforceable procurement provision". However, the Act states that:

"All or some of the provisions of a direction or policy…relating to an international procurement agreement may be expressed to be enforceable procurement provisions." (See Schedule 1, Item 3 of the Act)

TPP-11 is an example of an international procurement agreement.

What is the review process?

As a result of the reforms, the process for reviewing the alleged or proposed contravention of an "enforceable procurement provision" will be as follows:

  1. An "affected applicant" (also referred to as the "complainant") lodges a written complaint in relation to the conduct of a government agency that it alleges constitutes a contravention, or proposed contravention, of an enforceable procurement provision with the head of the relevant government agency (Government Agency Head).

    An affected applicant is a person, partnership or group of persons that supplies, or could supply, goods or services, and whose interests are affected by an alleged contravention or proposed contravention of an enforceable procurement provision (Affected Applicant). Other categories of affected applicants may also be prescribed by the regulations.

  2. The Government Agency Head must investigate, attempt to resolve, and prepare a written report on the investigation. Subject to certain exceptions, until the complaint is withdrawn, resolved or Supreme Court proceedings are commenced in relation to it, the Government Agency Head must also suspend all processes involved in the procurement that the Government Agency Head considers would adversely affect the Affected Applicant's participation in the procurement if the processes were continued.

    However, the suspension process does not apply if a contract for the procurement has already been entered into or a "public interest certificate" has been issued with respect to the procurement in question. A public interest certificate may be issued by a Government Agency Head stating that it is not in the public interest for a specified procurement to be suspended. This has the effect of allowing the procurement to continue while the matter is being investigated.

  3. If the complaint is not resolved by internal review and the Affected Applicant has made a reasonable effort to do so, the Affected Applicant is able to apply to the Supreme Court for an injunction to remedy the alleged contravention, or to avoid the proposed contravention, of an "enforceable procurement provision". This application is subject to strict time limits. 

Subject to the Supreme Court being satisfied that certain procedural preconditions have been met by the Affected Applicant, the Act grants the Supreme Court the power to: 

  • grant an injunction forcing NSW Government agencies to refrain from a contravention or avoid or remedy a contravention; and 
  • make an order for compensation to the Affected Applicant. Subject to some exceptions, this compensation is restricted to the total of the Affected Applicant's reasonable:
    • "procurement process expenditure", such as the costs of preparing a tender and applying for inclusion on a procurement list or panel used for procurement; and
    • expenditure to make and resolve the complaint. 

What should NSW Government agencies be doing now to prepare for the reforms?

NSW Government agencies should take the following steps to prepare for the commencement of the reforms:

  • ensure procurement teams, and those undertaking procurement activities, are familiar with the reforms and their practical consequences and impact on procurement practices and procedures;
  • consider running refresher procurement training for personnel undertaking procurement activities with a focus on compliance with the NSW procurement laws and policies, including, in particular, the NSW Government Procurement Policy Framework and Board directions and policies;
  • prepare to amend tender terms and conditions to reflect the reforms, including the procurement complaint processes;
  • update their internal procurement policies and procedures to reflect the reforms and develop additional procedures to ensure compliance with the Act in relation to complaints and "public interest certificates"; and
  • review procedures for handling and investigating procurement complaints.

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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.