Written by: Donna Kirk – Pro Leaders Academy Pty Ltd
Awarding contracts is a straightforward task and yet is often fraught with challenges. The awarding of contracts or choosing suppliers is standard practise in both commercial and government processes, however the challenges come in how the contracts should be awarded.
How do you choose a service provider? As a commercial enterprise, choosing a supplier may be decided by which supplier best aligns with the expected outcomes, be it on price, quality, or even reputation. In the commercial world, choosing can be as simple as the decision-maker of the company deciding on a gut feeling or what will provide the best bottom line. There is little in the way of public scrutiny overall.
For any level of government in Australia, it is a very different matter because the procurement process is legislated, with a legal framework under which everyone at all level of government must adhere to when awarding contracts or making purchases using public money. A higher degree of scrutiny is required PRIOR to decisions are being made and should hold up to public scrutiny that commercial enterprises are not required to provide when making decisions. This is due to the transparency that the Government must provide to the general public when spending public money.
In undertaking procurement, Federal Departments and Agencies are required to adhere to the Commonwealth Procurement Rules (CPRs) or a sub-set of these rules in their State or Local policies. The CPRs are the keystone of the Government’s procurement policy framework and underpin Australia’s international obligations in accordance with free trade agreements. The CPRs establish procurement principles that:
- promote value for money;
- encouraging competition;
- provide efficient, effective, economical and ethical use of resources; and
- increases accountability and transparency in decision making.
The CPRs outline two procurement methods that entities can use when conducting procurement:
- open; and
- limited tender.
A recent article has circulated regarding a tender for the development of the new COVID-19 tracking app that was awarded to an offshore retailer and technology giant, Amazon, was using a limited tender. Limited tender procurement involves an entity approaching a limited number of potential suppliers of its choice to make submissions, such as quotes or tenders, to provide goods or services for the Government. By its nature, limited tender is less competitive than open tender as it does not provide the opportunity for all potential suppliers to compete for the provision of goods and services.
You might be surprised to know In 2013-14, limited tender was the most widely used of the available procurement methods representing 56 per cent by number of procurements and accounted for the greatest percentage of expenditure at 48 per cent by value, $23.8 billion.
In order to encourage competition, the CPRs limit the use of non-open approaches to the market for high value procurements (generally above $80,000*) to a small number of specified circumstances, such as when an open approach to the market has failed.
It is important to note that irrespective of the tender type, the CPRs still require that for each procurement, documentation provides accurate and concise information on:
- the requirement for the procurement;
- the process that was followed;
- how value for money was considered and achieved;
- relevant approvals; and
- relevant decisions and the basis of those decisions.
When an invitation-only tender process is used, it is generally more difficult to demonstrate adherence to the CPRs around encouraging competition and ethical use of resources, however the onus is still on the entity to do so.
To summarise, there is provision for an invitation-only tender process within government procurement, however the rules still apply. The higher the value and more direct impact on the public, the more focus is required to ensure the tender is open, fair, and transparent to minimise the level of scrutiny, which is apparently not the case with the award of the COVID-19 app to the global giant Amazon.
*The Commonwealth Procurement Rules (CPRs) impose a procurement threshold (other than for procurements of construction services) of $80,000 for non-corporate Commonwealth entities and $400,000 for prescribed corporate Commonwealth entities. For the procurement of construction services the threshold is $7.5million for both types of entities.