Suppliers will soon have considerably wider options for seeking redress if they believe a Commonwealth entity conducting a covered procurement has breached the Commonwealth Procurement Rules (CPRs), following the passage yesterday of the Government Procurement (Judicial Review) Bill 2017, which will come into effect in the next few months.
That means it's crucial that all Commonwealth entities get their internal procurement policies and procedures ready now for the Bill's wide-ranging changes, which will:
- create new rules for investigating and handling complaints;
- allow complainants to seek compensation from the courts for reasonable expenditure incurred by a supplier in preparing tender documentation (but not for loss of opportunity); and
- allow complainants to seek injunctions,
for breaches of Commonwealth Procurement Rules related to "covered procurements" (that is, a procurement that is subject to the rules in Divisions 1 and 2 of the CPRs).
How (and why) the new procurement laws will work
The then Minister for Small Business the Hon. Michael McCormack outlined the dual purpose of the Bill as:
- to strengthen review rights for suppliers taking part in Commonwealth procurement activities (particularly for SMEs); and
- to enact future treaty obligations (specifically the World Trade Organization Agreement on Government Procurement and the Trans-Pacific Partnership Agreement).
The Bill will apply to procurements to which Division 1 and Division 2 of the CPRs apply (ie. if the relevant procurement threshold is met and the procurement does not fall within an exemption in Appendix A [Exemptions from Division 2] to the CPRs).
A "supplier" is defined broadly in section 4 of the Act as "a person who supplies, or could supply, goods or services or a partnership (or other group) of 2 or more persons that supplies, or could supply, goods or services".
There are currently several ways to challenge a procurement decision of a Commonwealth entity:
- make a complaint to the Commonwealth Ombudsman;
- commence an action for breach of contract;
- seek judicial review of the procurement process; or
- commence an action for misleading and deceptive conduct.
The Act introduces the availability of damages and injunctions, allowing suppliers to have access to far more effective remedies than currently available. The Act has the potential to significantly impact upon "covered procurements" in terms of both time and expense.
Effect of the Act on procurement activities for Commonwealth entities
Under section 18 of the Act, if a supplier has reason to believe that a relevant Commonwealth entity or an official of a relevant Commonwealth entity has engaged, is engaging or is proposing to engage, in any conduct in contravention of the CPRs and the interests of the supplier are affected by the conduct, the supplier may make a written complaint about the conduct to the accountable authority of the entity.
If a supplier makes a complaint under section 18 of the Act, section 20 of the Act provides that the Commonwealth entity must suspend the procurement (unless a public interest certificate is in force, discussed below) until the complaint is resolved or withdrawn or the court makes a finding in relation to the proceeding.
A supplier will be able to lodge an application in the Federal Court of Australia (FCA) or the Federal Circuit Court (FCC) seeking either or both an injunction or other order from the Commonwealth entity responsible for the breach.
A supplier is not required to wait for the outcome of its complaint with the relevant Commonwealth entity before making an application to the FCA or FCC and has 10 days after a breach (or becoming aware of the breach) to apply to the court.
To be successful in an action in the FCA or FCC against a Commonwealth entity, an affected supplier will need to show:
- that they have an interest in the covered procurement; and
- a contravention or proposed contravention of the CPRs occurred in relation to that procurement.
Importantly, the supplier will not need to show that they would have been awarded the contract had the breach not occurred.
A supplier will also be able to seek compensation from the FCA or FCC for its reasonable costs incurred in preparing a tender, making a complaint and in connection with making a reasonable attempt to resolve a complaint. A supplier will not be able to recover compensation for expected revenue from the award of a contract.
If a supplier has made applications for both an injunction and compensation, and a court considers that the grant of an injunction would result in a significant delay to the procurement, it may, in certain circumstances outlined in section 10 of the Act, make an order for compensation as an "alternative remedy" to granting an injunction.
A court will not be able to overturn the award of a contract, even in instances where a breach of the CPRs has been found.
Public interest certificate
Once a complaint has been received or an application for an injunction has been lodged, a Commonwealth entity must suspend the relevant procurement process unless a certificate has been or is issued by the relevant entity under section 22 of the Act (a "public interest certificate").
A Commonwealth entity can issue a public interest certificate if it determines that a delay to the procurement would be contrary to the public interest. It is expected that the Department of Finance will publish guidance on the circumstances in which a public interest certificate can be issued prior to the Act commencing, however it is important to note that the issue of a public interest certificate by a Commonwealth entity will be an administrative decision under the Administrative Decisions (Judicial Review) Act 1997 (Cth).
When does the Act commence?
The Act will commence on the earlier of 6 months from the day the Act receives royal assent or a day fixed by proclamation.
The operative provisions of the Act will not apply to a contravention of the relevant CPRs that occurred before the commencement of the Act. However, the provisions will apply to contraventions of the CPRs that occur after commencement, even if the procurement process began before commencement of the Act.
Action Commonwealth entities can take now
Now that the Bill has passed and will shortly become law, there are a number of things Commonwealth entities should do in order to prepare:
- update your internal procurement policies and ensure all officials undertaking procurement activities are familiar with those procurement policies and the CPRs;
- consider running refresher training for officials undertaking procurement activities with a focus on compliance with the CPRs;
- review procedures for handling and investigating procurement complaints.A supplier must first complain to the "accountable authority" and make a reasonable attempt to resolve the complaint before seeking an injunction;
- inform relevant staff and delegates of the practical changes the Act proposes to introduce and the impact these changes may have on covered procurements.This may include consideration of when a public interest certificate may be sought and procedures for suspending procurements where no public interest certificate is in place; and
- prepare to amend tender terms and conditions as well as any relevant procurement policies in line with any legislative requirements.