The report states
Amendments to the Commonwealth Procurement Rules came into effect on 1 March 2017. The amendments aim to ensure that the full benefit of Commonwealth procurement will flow to the Australian economy. The amendments will also ensure that Australian regulations and standards are upheld. The amendments are designed to mitigate the disadvantages faced by Australian suppliers accessing government procurement opportunities.
The evidence received by the Committee showed overall support for the amendments to the Commonwealth Procurement Rules. However this support was tempered by concerns about effective implementation. Many of the new clauses lack clarity or leave too much to the discretion of officials. The Committee has made suggestions to tighten up the clauses by refining or expanding the terms.
The Committee heard about several problems with the implementation of the previous Commonwealth Procurement Rules. These include a procurement culture that focuses on lowest cost rather than value-for-money, a lack of accountability and transparency, and unacceptable risk shifting. There is also a perception that–due to a lack of technical skill and expertise–the government has become an uninformed purchaser. The absence of a requirement to comply with Australian standards is also considered a deficiency.
There are several flow-on risks that may have a detriment on Australia more broadly. These include the loss of a skilled workforce, safety, economic and environmental risks and potential wastage. The procurement system may also create barriers to domestic businesses to even attempt to take advantage of procurement opportunities. Comprehensive guidelines are essential to address the current deficiencies and ensure that the implementation of the new clauses is successful. New guidelines are required to remove the discretionary nature of decision making and replace it with specific standards that must be met, as well as mandate the evidence required from tenderers. Economic benefit, in particular, requires explicit definition and weighting to properly assess suppliers claims. There must also be specific, detailed guidance on negotiating the complex area of human rights.
Additional procurement connected policies are needed to provide guidance for environmental sustainability and human rights. These guidelines and policies should be supplemented with a public service wide training program. Improved record keeping is essential to address the lack of transparency and accountability in the current system.
Contract management can be better utilised to control implementation and maximise procurement and contract outcomes. Good contract management ensures that tenderers meet their obligations and responsibilities.
If the amended Commonwealth Procurement Rules are to encourage Australian suppliers, the Australian Government must not enter into international trade agreements which diminish the benefits that underpin these amendments. Additionally, procurement officers must be better informed of the exemptions currently available in the international agreements to preference domestic businesses.
A range of best practice models are available for Australia to draw on to improve the procurement system.
The Committee believes that a three pronged approach is necessary to address the implementation issues identified in this report and ensure the new rules are applied consistently, transparently and to maximum effect. It would like to see:
- the publication of comprehensive implementation guidelines coupled with public service wide training to support officials to apply the rules in the manner in which they are intended;
- the introduction of procurement connected policies to safeguard the Australian Government’s role as a model procurer; and
The Committee' recommendations are
- the formation of an independent Industry Participation Advocate modelled on the South Australian system to facilitate consideration of Australian economic benefit required by clause 10.30.
R1 - that the Department of Finance revise clause 10.9(c) of the Commonwealth Procurement Rules to require all goods purchased by the Australian Government to comply with Australian standards unless none are applicable.
R2 - that the Attorney-General’s Department oversee the introduction and application of a procurement connected policy requiring Commonwealth agencies to evaluate suppliers’ compliance with human rights regulation.
R3 - that the Department of Environment oversee the introduction and application of a procurement connected policy requiring Commonwealth agencies to evaluate the whole-of-life environmental sustainability of goods and services to be procured.
R4 - that the Department of Industry, Innovation and Science enhance the procurement connected policy for Australian Industry Participation Plans, requiring that good procurement practices are implemented down through the supply chain so that both prime and subcontractors: implement best practice terms and conditions; and are contractually obligated to report on those terms and conditions.
R5 - that all Commonwealth contracts contain a similar clause to Commonwealth Contracting Suite clause 10, ensuring that the obligations of prime contractors apply to all sub-contractors.
R6 - that rural and regional small and medium businesses be added to the list of exemptions under Appendix A: Exemptions from Division 2 of the Commonwealth Procurement Rules.
R7 - that the Department of Finance and the Department of Industry, Innovation and Science jointly develop and implement a framework to collect relevant data on the degree of Commonwealth procurement that is supplied by Australia-owned businesses, contains Australian-manufactured goods, or uses Australian-based services.
R8 - that, in negotiating future trade or World Trade Organisation agreements, Australia not enter into any commitments that undermine the Australian government’s ability to support Australian businesses.
R9 - that the Department of Finance, or the proposed Australian Industry Advocate, publish comprehensive implementation guidelines for the new Commonwealth Procurement Rules as a matter of priority. The guidelines should:
- explicitly define what constitutes economic benefit;
- prescribe a minimum 15 per cent weighting across a tender in accordance with the economic benefit criteria;
- procuring agency or Minister to retain discretion to increase weighting to leverage economic benefit;
- encourage maximisation of economic opportunities and benefits when assessing a tender for the degree of local content and participation;
- outline how rubrics or weighted criteria may be used to compare the unique economic benefits offered by different suppliers and in assessing economic benefit as part of the overall tender evaluation;
- describe techniques for assessing the veracity of suppliers’ claims of economic benefit and for ensuring these benefits are delivered; and
- encourage the consideration of innovative solutions during the scoping and design stage of procurement projects.
R10 - that, in order to limit discretionary decision-making, promote consistency and safeguard transparency, the guidelines prohibit the use of qualitative assessments across whole tenders.
R11 - that the guidelines specifically require that, for all procurements over $4 million, a record is created including: the reason for the tender approach chosen; the reason for the selection of the preferred tenderer; and details of the economic benefit score.
R12 - that the Department of Finance design and deliver a public service wide training program to support the effective implementation of the new Commonwealth Procurement Rules in line with new guidance material.
R13 - that the Australian government ensures that all departments and agencies must ensure that an individual has successfully undergone procurement training before that individual can be delegated a procurement authority.
R14 - that the Australian Government legislate as a statutory authority under the responsibility of the Minister for Industry, Innovation and Science an Australian Industry Advocate to:
- aid Commonwealth agencies to design procurement processes which maximise benefits to the Australian economy and increase opportunities for SME participation;
- support Australian businesses to access Commonwealth procurement by promoting opportunities and assisting businesses to promote the economic benefits they can offer;
- provide independent, transparent and consistent evaluation of the unique economic benefits offered by different suppliers;
- guide Commonwealth agencies’ application of weighted criteria and assessment rubrics to overall procurement evaluations; and
- monitor suppliers’ delivery of contracted economic benefits.
R15 - that the Department of Finance incorporate supplier feedback, including on the rewording of clauses identified in this report, into its 12 month review of the new Commonwealth Procurement Rules. It also recommends that the findings of the review are made public.
R16 - that a Parliamentary inquiry is established by March 2018 to evaluate: supplier feedback, including on the rewording of clauses identified in this report; interaction with the Anti-dumping framework and the tax system; and; recent changes to the Australian Industry Participation Plan policy. The inquiry should report by the end of 2018.