Government procurement is a big business in Australia and abroad. For many businesses, being successful in government tenders is a key part of their strategy. Within Australia, 78,150 government contracts were entered into for the 2018/19 financial year worth a total of $64.5 billion.[1] Globally, the World Trade Organization estimates that the government procurement market is worth $1.7trillion annually, just for the 48 signatory countries to the World Trade Organisation Government Procurement Agreement (“WTO GPA”).[2]
With so many government contracts up for grabs, there is more scrutiny than ever of the government procurement process and government procurement decisions. But what happens when the procurement process isn’t followed? Can an unsuccessful tenderer actually challenge a government procurement decision? Historically, Australia has not had a clear answer to these questions and there has been no dedicated review mechanism available for government procurement decisions.
The commencement of the Government Procurement (Judicial Review) Act 2018 (Cth) (“GPJR Act”) last year marked a significant change in this position, at least at the federal level. States are now starting to follow suit with New South Wales the first to introduce similar legislation, in the form of the Public Works and Procurement Amendment (Enforcement) Act 2018 (NSW) (“PWPA Act”) which has now come into effect. But a year on, questions remain as to the extent of the practical benefits of these review mechanisms and whether businesses will be willing to take up this new opportunity to challenge government procurement decisions.
In this article, Emily Murphy and Macky Makar explain the new review mechanisms in the GPJR Act and discuss why this is a positive development on paper but has challenges in its practical impact.
Government Procurement Act: the GPJR Act at a glance
The Government Procurement (Judicial Review) Act 2018 (Cth) (“GPJR Act”) [3] is the first of its kind in Australia and marks a significant change in what options are available to businesses who are aggrieved by a tender process or outcome.
The GPJR Act provides, for the first time, a distinct complaint mechanism for “covered procurements” being, certain procurements that are subject to the Public Governance and Accountability Act 2013 (Cth). The review mechanisms in the GPJR Act can be utilised where a participant in the tender process believes there has been a breach of the Commonwealth Procurement Rules. The Commonwealth Procurement Rules set out rules that must be followed by Commonwealth entities when procuring certain goods and services. There are a number of different parts to the Commonwealth Procurement Rules, but at its core, it is about value for money, as well as efficient, effective, economical and ethical procurement.[4]
Once it is established that the GPJR Act applies and a breach of the Commonwealth Procurement Rules is suspected, the steps for a complainant are as follows.
- Complaint – A complaint to the relevant entity must be made before any review can be sought. A supplier must advise the relevant entity of its allegations of a breach of the Commonwealth Procurement Rules. Then, the parties are to attempt to resolve the issue before approaching the Court for relief. A supplier can make a formal complaint if it has “reason to believe” that there has been, or will be, a contravention of the Commonwealth Procurement Rules and that the interests of the supplier will be affected.
- Investigation – Once a complaint has been made, the relevant entity has an obligation to investigate the complaint and prepare a report. There are no timeframes in place to limit how long an investigation may take. During the investigation, if there is no “public interest certificate” issued by the relevant entity, then the procurement must be suspended until either the complaint is withdrawn or resolved; a public interest certificate is issued; or the Court determines whether or not there has been a breach of the Commonwealth Procurement Rules. There is a wide discretion here for a procuring entity to issue a public interest certificate, so even if there may be a serious breach of the Commonwealth Procurement Rules which affects the procurement, the procurement process can continue.
- Federal Court review – If no resolution can be reached during the investigation, then the supplier can make an application to the Federal Court for a review of the conduct of the relevant entity. The application must be made within 10 days of the breach occurring, or the supplier becoming aware of the breach, unless the Court is satisfied that there are circumstances allowing a longer period (such as attempts being made to resolve the issue between the parties). This timeframe is extremely short, and is likely to be unrealistic in most circumstances, and so it is likely that the Courts will use this power to allow a longer period of time in many cases.
- Remedies for the complainant – Where there is found to be a contravention of the Commonwealth Procurement Rules, the Court has the power to make orders for restraint or performance injunctions for government performance of the tender; and/or can award compensation to the complainant for expenditure in preparing for the tender or making the complaint. The ability to seek compensation is a unique feature of the GPJR Act, and is a remedy not seen in other judicial reviews mechanisms of other types of government decisions outside of the procurement context.
The GPJR Act applies to covered procurements from 19 April 2019, and almost a year later, there have been no known test cases before the Federal Court. Much is still unknown about how the Court will interpret and apply the GPJR Act and in particular, how it will award “reasonable compensation” to complainants.
WTO GPA: Complying with Australia’s international obligations
The underlying purpose of the GPJR Act is really to comply with Australia’s international obligations. It was introduced in order to fill a gap in the law that was preventing Australia from ascending to the World Trade Organisation Government Procurement Agreement (“WTO GPA”).
Following a lengthy four year accession process, last year Australia became the latest country to become a signatory the WTO GPA. But this was only possible after it was able to demonstrate an express right to review government procurement decisions, in a way which complied with the WTO GPA. As this was a right that did not previously exist in a clear way, Australia enacted the GPJR Act which then paved the way for its ascension to the WTO GPA.
Challenges of putting government rules into practice
Whilst upstanding in theory, there are significant challenges in the application of the GPJR Act. An obvious limitation is that this is federal legislation and so is only applicable to Commonwealth procurement processes. Even at the Commonwealth level, there are some limitations with not all tenders meeting the threshold requirements to be considered a “covered procurement” in which the Commonwealth Procurement Rules apply. Also, it is not applicable to state government procurement processes, which is a significant shortcoming given the large amount of state-based procurement that occurs in Australia.
States are expected to slowly begin to follow suit in introducing similar schemes. New South Wales has enacted the Public Works and Procurement Amendment (Enforcement) Act 2018 (NSW) which came into effect on 29 November 2019 and provides similar review rights to the GPJR Act. It is the first (and at this stage only) state to do so. Victoria’s approach is for arbitration clauses to be inserted into request for tender documents. This means that where complaints are made and a solution cannot be found between the parties, the next step is for an arbitration to occur (in lieu of making an application to the Federal Court like in the GPJR Act).[5] Other states have processes for complaints to be made to the relevant procuring entity and relevant ombudsman, but none (other than NSW and to a lesser extent, Victoria) have go so far as to introduce an independent review mechanism similar to that contained in the GPJR Act.
More practically, whether the mechanisms in the GPJR Act will be used and will reach the intended aim remains to be seen. It is questionable how many businesses will voluntarily challenge the departments that run ongoing tendering processes. Even if unsuccessful in one tender, businesses will often tender again at some point in the future for the same procuring entity. With potential long term relationships in mind, many business that rely on successful tendering may be reluctant to take such drastic steps in challenging a questionable tender outcome. Although it is unlikely to formally affect any future tender prospects, some businesses may simply not want to risk any unconscious bias or reputational harm that may come from formally challenging a tender outcome in the Court. These are the issues which raises questions about the practicality of the GPJR Act and present challenges to its application on a day-to-day basis.
The success of the GPJR Act relies on an appetite to challenge tender decisions, and utilise the new review mechanism now available. It remains to be seen how businesses will react and how far the states will go to follow the GPJR Act example. Overall, it is a positive development on paper that allows Australia to tick the box for its international obligations, but the commercial realities of business mean that there are some challenges to overcome in how this new review mechanism will work in practice to have a positive and practical impact on businesses.
This memo presents an overview and commentary of the subject matter. It is not provided in the context of a solicitor-client relationship and no duty of care is assumed or accepted. It does not constitute legal advice.
© Moulis Legal 2020
[1] Statistics on Australian Government Procurement Contracts, Australian Government Department of Finance, <https://www.finance.gov.au/government/procurement/statistics-australian-government-procurement-contracts->.
[2] Revised Agreement on Government Procurement (Annex to the Protocol Amending the Agreement on Government Procurement, WTO Doc GPA/113 (adopted 30 March 2012) (WTO GPA).
[3] The GPJR Act came into effect on 19 April 2019.
[4] Commonwealth Procurement Rules, Rule 3.
[5] https://www.buyingfor.vic.gov.au/international-agreements
