News

Cyber risk, sustainability and SMEs feature in new government contract rules

08.12.2020

Important changes to Australian Government procurement come into effect on 14 December 2020. They require Australian Government officials to consider new factors in deciding how to award valuable contracts to tenderers. Knowing about these modernised considerations, relating to things like sustainability, data security and the rights of small and medium enterprises, will be fundamental to the government’s selection procedures and the success of private sector bidders.

In this newsletter, Moulis Legal’s special counsel, Lucinda Watson, considers the key elements of the revised Commonwealth Procurement Rules (CPRs); recommended reading for the success of your procurement exercises, whether big or small.

What has changed?

The Minister for Finance has issued new CPRs, by way of repeal and replacement of the previous CPRs, to commence on 14 December 2020. Those involved in offering and procuring goods and services for the Australian Government, are advised to familiarise themselves with the revised rules.

Those of us involved in Australian Government procurements will be accustomed to referring to the rules set out in the CPRs and related Department of Finance guidance when planning and undertaking procurement processes to ensure a ‘best practice’ process is implemented – one that ultimately achieves value for money.

While the framework and key principles remain largely unchanged, in a snapshot, the revised CPRs have been updated to:

  • expressly include consideration of cyber security risk in overall procurement risk management in accordance with the Australian Government’s Protective Security Policy Framework;
  • reflect the Australian Government’s commitment to sustainable procurement practices;
  • include a new exemption that allows for the direct engagement of SMEs for procurements valued up to $200,000;
  • emphasise the importance of paying suppliers on time, particularly small businesses;
  • acknowledge the Australian Government’s reporting obligations under the Modern Slavery Act 2018;
  • clarify that arrangements between non-corporate Commonwealth entities, where no other suppliers are approached, is not a “procurement”; and
  • remind officials to document transactions using the Australian Government’s Commonwealth Contracting Suite.

Protecting public information assets from malicious actors

We live in a world of mass data and increasingly sophisticated cyber-attacks. The potential impacts of not adequately maintaining data security are wide-ranging and possibly very costly. It is critical to understand your data and information, threats and vulnerabilities. A project involving particularly sensitive data will require stronger protections, and this should be considered during the early stages of procurement planning. Making data security a priority from the very beginning of a process enables entities to make informed decisions and to take a proactive approach to the management of risk.

It follows that cyber security risks are a fundamental part of risk assessments and treatments. The consideration of risk is essential throughout all stages of a procurement process, including the value for money decision through to the terms of any resulting contract.

Sustainability now front and centre

One key area of the new CPRs is the added focus on sustainable procurement practices, and in particular, consideration of environmental sustainability. The assessment of price alone is insufficient. A multi-faceted assessment of financial and non-financial costs and benefits of the procurement is needed to justify value for money.

There is now a specific obligation on officials to consider the Australian Government’s Sustainable Procurement Guide[1] as part of the value for money assessment, where there is opportunity for sustainability or use of recycled content.[2]

The Guide has the aim of ensuring procurement decisions are made in a way that results in the most positive environmental, social and economic impacts across the entire life cycle of the goods and services being procured. The principles therein will be a benchmark for officials to meet their obligations to spend public money efficiently, effectively, economically and ethically.

Sole sourcing advantage for SMEs

The new exemption to allow for the direct engagement of SMEs for procurements valued up to $200,000 will be greatly welcomed by smaller players. The CPRs already set targets for SMEs, including to source at least 10% of procurements in value from SMEs, and to procure 35% of contracts by value, with a value of up to $20 million from SMEs.

Emphasis on timely payment by government

The revised CPRs highlight the importance of paying suppliers on time, particularly SMEs, and now specifically refer to the Australian Government’s Supplier Pay On-Time or Pay Interest Policy.[3] This policy, effective from 1 January 2020, implemented maximum payment terms for payments from non-corporate Commonwealth entities to suppliers under a contract valued up to AUD1 million (inclusive of GST).[4] The policy, and its specific inclusion in the revised CPRs, is again a reflection of the Australian Government’s focus on decreasing the burden on suppliers doing business with government and its instrumentalities.

Red alert – use the right documents!

The CPRs have been updated[5] to reflect the mandatory requirement for non-corporate Commonwealth entities to use the Commonwealth Contracting Suite (“CCS”) for contracts under AUD200,000 (subject to some exceptions). This is really a big flashing reminder to officials of non-corporate Commonwealth entities, as use of the CCS is already mandated under the policy.[6] Use of the CCS is also encouraged for procurements valued between AUD200,000 and AUD1 million, and for corporate Commonwealth entities. The purpose of the CCS is to minimise the burden on businesses contracting with the Commonwealth Government and to streamline procurement processes for Commonwealth entities.

Principles that need to be observed

The key updates to the CPRs for the most part, bring the CPRs into alignment with other government rules, policies and guidance that are already in place. The revised CPRs will assist officials to understand and apply the CPRs as they interrelate to the various procurement policies and guidance, but also underscore the importance that the Australian Government has placed on those issues in the context of achieving value for money in Commonwealth procurements and engaging with businesses.

If you would like to discuss any aspect of procurement procedures or any contract management issues, please get in touch.

Moulis Legal are on the Australian Government’s legal services panel in the areas of contract law, intellectual property, and information and communications technology.

 

[1]           https://www.environment.gov.au/protection/waste/publications/sustainable-procurement-guide

[2]           Commonwealth Procurement Rules, paragraph 4.5.

[3]           https://www.finance.gov.au/publications/resource-management-guides/supplier-pay-time-or-pay-interest-policy-rmg-417

[4]                Commonwealth Procurement Rules, paragraph 5.8.

[5]                Commonwealth Procurement Rules, paragraph 6.10.

[6]           Resource Management Guide No. 420 – Mandatory use of the Commonwealth Contracting Suite for procurement under $200,000, https://www.finance.gov.au/publications/resource-management-guides/mandatory-use-commonwealth-contracting-suite-procurement-under-200000-rmg-420