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30 Apr 2020

Queensland state and local government procurement obligations and opportunities during emergencies: new COVID-19 guide

By Jamie Doran, Erin McCormick, and Alex James

Public sector agencies, local government and their procurement teams should consider emergency procurement on a case-by-case basis.

The unprecedented COVID-19 pandemic is the latest in a series of emergencies which have afflicted Australia in the last year. Drought, severe bushfires, flooding and now the pandemic will leave many Australian businesses facing economic hardship.

In times of emergency, Queensland government agencies and local governments may need to adapt their procurement procedures to effectively respond to their procurement needs during the emergency.

While the rules for local government remain unchanged, State Government agencies now have a new Emergency Procurement COVID-19 Guide, setting out new procedures based on the category of emergency being faced and five new policy objectives which should guide procurement decision-making during the pandemic, including supporting local businesses.

Overview of Queensland State Government Procurement Policy

State government procurement in Queensland operates under a less prescriptive framework. Under the Financial Management and Performance Standard 2009, each accountable officer of a department or statutory body must comply with the Queensland Procurement Policy (QPP) when developing their expense management system.

The QPP is a principles-based policy and is centred around the following principles:

  • Value for money (primary principle);
  • Advancement of economic, environmental and social objectives;
  • Integrity, probity and accountability;
  • Leaders in procurement practice;
  • Working together to achieve outcomes; and
  • Governance and planning.

Queensland uses an agency-led procurement operating model under which agencies are responsible for their own procurement activities through a category management approach. The government still maintains whole-of-government policies and minimum standards.

Whole of government policies on procurement are based around the following categories of goods and services:

  • Information & Communication Technology;
  • Building Construction & Maintenance;
  • Social Services;
  • Transport Infrastructure & Services;
  • General Goods & Services; and
  • Medical.

Each of these categories is overseen by an agency-council which directs procurement activities. These agency-councils are overseen by the Queensland Government Procurement Committee and the CEO leadership board.

State Government Procurement Policy in Emergency Situations

In light of the unprecedented COVID-19 pandemic, the Queensland Government has released an Emergency Procurement COVID-19 Guide. The new emergency policy sets out new procedures based on the category of emergency being faced and identifies five new policy objectives which should guide procurement decision-making during the pandemic. It should be read alongside the Procurement Advisory Notices which will be release throughout the emergency period.

Emergency Response Procedures

There are three categories of emergency situations:

  • Category One – Immediate Response
  • Category Two – Sustained Emergency Relief
  • Category Three – Recovery Response

Category One – Immediate Response

An emergency situation classifies as "category one" where:

  • Immediate relief is sought to respond to critical events that have a direct impact on life and public safety;
  • The risk is catastrophic in nature; and
  • Delays would result in increased harm to individuals and the Queensland community.

Where there is a "category one" emergency:

  • Oral approval may be the only approval available and is permitted so long as the officer has the delegated financial authority to approve and the approval is followed up in writing as soon as possible;
  • The use of digital signatures should be maximised;
  • Agencies should keep file notes of decisions, rationales for approval,invoices from suppliers and details of goods and services purchased;
  • Direct procurement practices should be used on a case-by-case basis when there is no reasonable prospect of applying the usual competitive processes to meet emergency needs for goods and services; and
  • "Short form" or simplified terms and conditions should be used where appropriate.

Category Two – Sustained Emergency Relief

An emergency situation classifies as "category two" where an emergency response is required to sustain State infrastructure or other core services. There does not need to be a direct impact on human life or significant threats to environments or infrastructure.

Where there is a "category two" emergency, agencies should:

  • Identify and prioritise the immediate procurement requirements and speak with other agencies, category leads and industry to identify opportunities to collaborate;
  • Use established common-use arrangements and pre-qualified supplier lists to meet demand;
  • Seek approvals and consider formalising an appropriate approval process during the emergency period;
  • Check in with suppliers for advice on frontline conditions, critical supply chain situations and to obtain assurances on immediate delivery, to the right location and the right time and price;
  • Advise suppliers that the purchase is subject to emergency arrangements that may be revoked at any point when the situation is deemed contained, and/or reverted to a normal procurement process for a longer-term solution; and
  • Confirm all arrangements in writing. If using "short form" or simplified terms and conditions and contracts, have options to vary contracts and extend should the period become sustained longer than expected.

Category Three – Recovery Response

An emergency situation classifies as "category three" where:

  • The emergency situation has been contained and activities are returning to a normal procurement process; and
  • There is no longer an urgent need to respond but there is a need to rapidly activate "non-essential" and "business as usual" activities.

Where there is a category three emergency:

  • Agencies should return to their procurement plans and processes with the view of meeting recovery needs; and
  • Sufficient rigour should be balanced with the view to accelerating procurement processes to achieve greater responsiveness to support long-term recovery.

New Policy Objectives

The emergency procurement guidelines contain the following policy objectives:

  • Preserve life, safety and wellbeing;
  • Support local businesses, including regional businesses and manufacturers;
  • Consider increasing use of small and medium enterprises, and innovative proposals;
  • Observe principles of integrity, probity and accountability; and
  • Maintain confidence – continue "business as usual" procurement as relevant period.

The key elements of the new policy objectives are.

1. Preserve life, safety and wellbeing

Under this new policy objective agencies may:

  • purchase from a supplier with a minimum of one quote where delay will prevent the agency from meeting critical community needs; and
  • use "short form" terms and conditions and contracts for essential supply, where appropriate.

"Life" includes animal life, such as ensuring the humane treatment of livestock.

Agencies can depart from common-use supply arrangements to meet urgent needs for essential services (eg. saving or preserving life, securing urgent equipment such as medical equipment) or where goods and services are to be supplied to regional or remote Queensland.

Agencies are not relieved of their responsibility to perform due diligence checks, apply the right terms and conditions as issued by relevant procurement category and ensure legally sound contracts are in place.

2.  Support local businesses, including regional businesses and manufacturers

Under this new policy objective:

  • agencies must identify and take steps to protect critical supply chains, and suppliers;
  • agencies should immediately review procurement procedures to ensure that as much as possible of the budget and decision making for routine procurement is devolved to regional offices; and
  • in seeking quotes, agencies should go only as far geographically as needed to ensure competitive supply.

3. Consider increasing use of small and medium enterprises, and innovative proposals

Under this new policy objective:

  • Where existing suppliers cannot meet demand, agencies should consider whether small and medium enterprises (SMEs) may be engaged. Agencies can also break large procurements into smaller packages to assist SMEs or work with SMEs to ensure regional SMEs can access sub-contracting opportunities. Agencies should ensure the offer processes used do not disadvantage regional suppliers or limit immediate emergency relief;
  • Agencies should review agency procurement and accounts payable procedures to make payment on correctly rendered invoices as quickly as possible;
  • Agencies should be proactive in addressing potential supplier issues and stay in contact with critical suppliers to stay updated about disruptions to the supply chain and how this may affect pricing, delivery timeframes and the ability to meet project and contract obligations;
  • Agencies should be understanding of the suppliers’ circumstances and be flexible. Agencies should employ active contract management and supplier communication to solve challenges. Agencies should consider the support needs of their suppliers and continue the flow of government investment to critical suppliers and ensure ongoing public safety;
  • In relation to offer processes currently on foot, agencies should review potentially affected offer processes and issue instructions to buyers with respect to extending closing dates where possible and the rules regarding late offers due to disaster related disruption; and
  • Agencies should be aware of unconscionable behaviour such as price gouging and profiteering as it may be in breach of the Australian Consumer Law. Report any such suspected activity to the QPP Compliance Unit.

4. Observe principles of integrity, probity and accountability

Under this new policy objective, agencies must:

  • Make sure decisions made in this rapidly moving environment withstand public scrutiny and audit. Procurement decision-makers at all levels must maintain accurate records and retain evidence of advice on decisions made for each activity, especially when diverging from agency procurement procedures; and
  • seek the advice of the agency’s Chief Procurement Officer, central procurement team, Category Council or lead category agency if there is uncertainty, particularly in relation to any departures from standard agency procurement procedures and delegations.

5. Maintain confidence – continue "business as usual" procurement as relevant period

Under this new policy objective, agencies should consider whether standing offer arrangements due to expire during the emergency period, should be extended, and exercise appropriate contractual variations or extension clauses. Agencies should not extend existing contracts due to expire during the emergency period, for unreasonable periods beyond the declared state of emergency.

Procurement Advisory Notice 9/2020 – Maintaining Ethical Standards during COVID-19

The Emergency Procurement Guide does not allow agencies to relax their commitments to do business with ethical suppliers. In particular:

1. The expectation on buyers to deal ethically and responsibly remains unchanged

All suppliers must adhere to:

  • the Queensland Government Supplier Code of Conduct; and
  • Meet the Ethical Supplier Threshold.

2. Government buyers must adhere to our professional standards, policies and procedures

All government buyers must adhere to:

  • the Code of Conduct of the Queensland Public Service;
  • the QPP; and
  • their agency procurement policies and procedures.

Overview of Local Government Procurement Policy

Procurement by local governments must comply with the prescriptive legislative requirements contained in Chapter 6 of the Local Government Regulation 2012 (Qld) (LGR). When making a contract for goods and services local governments can either take the "strategic approach" or the "default approach".

Under the default approach local governments must engage the following processes:

  • For medium-sized contracts between $15,000 and $200,000: Council must obtain three written quotes;
  • For large-sized contracts of more than $200,000: Council must obtain written tenders; and
  • For a valuable non-current asset contract: disposal of land or plant above a set value – Council must obtain written tenders or auction.

Local Government Procurement Policy in emergency situations

Under section 235(c) of the LGR, a local government may enter into a medium-sized or large-sized contract without inviting written quotes or tenders where a "genuine emergency exists". The local government may also delegate the power to make, amend or discharge a contract where the contractual action is "taken because of genuine emergency or hardship", per section 238(2)(b) of the LGR.

"Genuine Emergency"

"Genuine Emergency" is not defined in the Local Government Act 2009 (Qld) or the LGR and has not been judicially considered. The Macquarie Dictionary defines "genuine" as "as being truly such; real; authentic" and "emergency" as "an unforeseen occurrence; a sudden and urgent occasion for action". It is possible that both the recent bushfires and the COVID-19 pandemic would qualify as a "genuine emergency" under the LGR. The contract authorised, however, must be to respond to the needs of the particular emergency, such as a contract to procure face masks in response to COVID-19.

What should agencies do?

Public sector agencies and their procurement teams should consider emergency procurement on a case-by-case basis.

Where relying on the "genuine emergency" exception, local governments should not procure anything in excess of what is necessary to meet the immediate needs of emergency and should:

  • Make clear on any procurement or tender documents that the procurement is made under the "genuine emergency" exception in s 235(c) of the LGR;
  • Ensure that the contract has a defined contract period that does not exceed the needs of the local government in responding to the emergency and contains no automatic renewal provisions; and
  • Ensure the contract includes the right for the local government to cease procuring the goods and services when the emergency ends.

State government agencies should review the Emergency Procurement COVID-19 Guide and consider:

  • Which category of emergency their emergency situation falls under;
  • What procedural adjustments are permitted under that category of emergency;
  • Whether their procurement procedures are in line with the new policy objectives;
  • The steps they need to take to maintain ethical standards during the emergency procurement; and
  • Whether any further Procurement Advisory Notices have been published that might provide additional guidance.

For further information on procuring in emergency situations, please contact a member of our team.

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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.