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16 Apr 2020

Hitting fast-forward on government procurement processes in the COVID-19 pandemic environment

By Alexandra Wedutenko, Natasha Smith

Although fast-track procedures are available, the Commonwealth's interests still must be protected and each procurement achieve value for money in accordance with the CPRs.

As the COVID-19 pandemic takes hold across Australia, Australian Government entities (Agencies) are being required to urgently procure goods and services to respond to a variety of needs.

In order to efficiently procure the goods and services Agencies need, we explore below some of the options available to Agencies to fast-track their procurement processes, while achieving value for money for the Commonwealth and complying with procurement rules, legislative requirements and associated policies.

The Commonwealth Procurement Rules (CPR)

There are a number of options available under the CPRs to enable Agencies to fast-track their procurement processes where Agencies need to urgently procure goods or services as a result of the COVID-19 pandemic.

It is essential to note that where an Agency utilises one of these options to undertake a procurement in the COVID-19 pandemic environment, the Agency should still continue to protect the Commonwealth's interests by ensuring that each procurement achieves value for money in accordance with the CPRs.

This includes complying with the duties of Accountable Authorities in sections 15 to 19 of the Public Governance, Performance and Accountability Act 2013 (Cth) (PGPA Act), the duties of officials in sections 25 to 29 of the PGPA Act and complying with the special provisions applying to Accountable Authorities (and relevant delegates) of non-corporate Commonwealth entities regarding the power in relation to arrangements and commitments (see section 23 of the PGPA Act) when undertaking procurements during the COVID-19 pandemic.

CPRs paragraph 2.6

Paragraph 2.6 of the CPRs provides the circumstances where the CPRs will not apply to a procurement process:

"These CPRs do not apply to the extent that an official applies measures determined by their Accountable Authority to be necessary for the maintenance or restoration of international peace and security, to protect human health, for the protection of essential security interests, or to protect national treasures of artistic, historic or archaeological value. "

 

This paragraph therefore provides the Accountable Authority of an Agency with the power to make a determination that a procurement is necessary:

  • for the maintenance or restoration of international peace and security;
  • to protect human health;
  • for the protection of essential security interests; or
  • to protect national treasures of artistic, historic or archaeological value.

An Accountable Authority may determine to use paragraph 2.6 of the CPRs to facilitate a speedy procurement in respect of the COVID-19 pandemic, the two most obvious headings being:

  • to protect human health; and
  • for the protection of essential security interests.

Note that there is a footnote to paragraph 2.6 of the CPRs. This footnote states:

"Where such measures are applied, because Divisions 1 and 2 do not apply in full to the procurement, this has the effect that the procurement is not covered procurement under the Government Procurement (Judicial Review) Act 2018; see section 5."

As such, where a determination is made that the procurement falls within the scope of paragraph 2.6 of the CPRs, an added advantage is that the procurement will not fall within the scope of the Government Procurement (Judicial Review) Act 2018 (Cth) (GPJR Act) and thus risk of the process being delayed due to complaints made by a supplier pursuant to the GPJR Act is mitigated.

CPRs paragraph 10.3

Paragraph 10.3 of the CPRs provides the conditions for a limited tender procurement process. Relevantly for the COVID-19 pandemic environment, paragraph 10.3(b) of the CPRs states:

"10.3 A relevant entity must only conduct a procurement at or above the relevant procurement threshold through limited tender in the following circumstances:

(b) when, for reasons of extreme urgency brought about by events unforeseen by the relevant entity, the goods and services could not be obtained in time under open tender;…"

 

Accordingly, where an Agency needs to procure goods or services in response to the COVID-19 pandemic above the relevant procurement threshold, but is unable to obtain a determination under paragraph 2.6 of the CPRs in relation to that procurement, the Agency may still be able to fast-track the procurement process by way of running a "limited tender" (rather than an open approach to market) under paragraph 10.3(b) of the CPRs.

To satisfy the requirements of paragraph 10.3(b) for running a limited tender, the Agency will need to demonstrate that the required goods or services are not able to be obtained by the Agency via an open approach to market in the timeframe the Agency requires them due to either the urgent or unforeseen circumstances relating to the COVID-19 pandemic. (Note, we doubt that this covers a procurement process that has been under development for some time and is not adversely impacted by COVID-19 events).

Any decision to rely on paragraph 10.3(b) to conduct a limited tender instead of an open approach to market should be fully documented by the Agency and supported by appropriate evidence. While a procurement run pursuant to paragraph 10.3(b) provides an Agency with relief from complying with Division 2 (Additional rules for procurements at or above the relevant procurement threshold) of the CPRs, Agencies will still need to ensure that they comply with Division 1 (Rules for all procurements): namely, to ensure the procurement offers value for money.

Government Procurement (Judicial Review) Act 2018 (Cth)

It is important that Agencies to which the GPJR Act applies are mindful of the GPJR Act and the implications that the GPJR Act may have on the procurement processes that are being undertaken during the COVID-19 pandemic. The existence of the COVID-19 pandemic does not automatically provide Agencies from relief from the application of the GPJR Act.

In particular, relevant Agencies undertaking "covered procurements" (ie. a procurement process (in excess of $80,000 for goods and services or $7.5 million for construction services) to which the rules of Divisions 1 and 2 of the CPRs apply and which is not included in a class of procurements specified in a determination pursuant to the GPJR Act (see section 5)) should be aware that even if their procurement process relates to the procurement of goods or services required as a result of the COVID-19 pandemic, they are still at risk of being delayed by a court ordered injunction or being delayed due to a suspension of the process by an Accountable Authority, if a supplier makes a complaint pursuant to the GPJR Act and there is no public interest certificate (PIC) in place for the process.

The GPJR Act allows the Accountable Authority to issue a PIC stating that it is not in the public interest for the covered procurement to be suspended while complaints under section 18 of the GPJR Act are being investigated or applications for injunctions are being considered.

A PIC may be issued at any stage during the procurement process and it will allow the process to continue as scheduled. In some circumstances, given the scale or significance of a procurement, it may be appropriate for the Accountable Authority to issue a PIC before the approach to the market.

While the existence of the COVID-19 pandemic does not provide Agencies relief from the application of the GPJR Act, the COVID-19 pandemic may impact the conduct of the procurement process so that a PIC may be relevant to the process.

The Department of Finance has issued Resource Management Guide 422 – Handling complaints under the Government Procurement (Judicial Review) Act 2018 (RMG 422), which includes guidance on issuing PICs and a template PIC.

In accordance with RMG 422, a PIC should only be issued where suspending the procurement would have an adverse impact on the public interest that exceeds the right of the aggrieved supplier to have the procurement suspended.

Therefore, in order to issue a PIC based on the continuing COVID-19 pandemic, the Accountable Authority will need to be able to justify the decision to issue the PIC by demonstrating that suspending the procurement process would have an adverse impact on the public interest that exceeds the right of an aggrieved supplier to have the procurement process suspended. Appendix 1 of RMG 422 provides a range of factors that an Accountable Authority may have regard to in making the decision to issue a PIC.

Accordingly, where an Agency is purchasing goods or services during the COVID-19 pandemic by way of a "covered procurement" to which the GPJR Act applies, to avoid the process being delayed by a court issued injunction or suspension by an Accountable Authority as a result of a complaint by a supplier under the GPJR, an Agency should:

  • ensure that it and all relevant Agency personnel comply at all times with the CPRs in undertaking the process; and
  • ensure that, where it can be justified to do so (and it is in accordance with the GPJR Act to do so – see section 22; see also Appendix 1 of RMG 422), the Accountable Authority issues a PIC in relation to the procurement as early as possible in the process.

State and Territory Government procurement

States and Territories have their own regimes (legislative and/or policy requirements) in relation to government procurement activities. When procuring goods and services in response to the COVID-19 pandemic State and Territory agencies may be entitled to rely on urgent/emergency provisions under those regimes (see, for example, further reading on emergency provision at the State level in NSW).

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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.