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Statutory procurement remedies move closer in Australia

Out-Law Analysis | 18 Oct 2018 | 12:46 pm | 4 min. read

ANALYSIS: A new bill recently introduced to the Australian Senate would give the construction industry a statutory basis to challenge tender decisions as a result of non-compliance with the Commonwealth Procurement Rules (CPR).

If passed in its current form, the Government Procurement (Judicial Review) Bill 2017 would also enable the Federal Court or the Federal Circuit Court of Australia to grant an injunction and/or order payment of compensation for a contravention of the relevant CPR, to the extent that that CPR relates to a "covered procurement", on the application of a "supplier whose interests are affected by the conduct".

The Bill defines a "covered procurement" as a procurement to which the rules in divisions 1 and 2 of the CPR apply, and where the procurement "is not included in a class of procurements specified in a determination" made by a minister under subsection 5(2) of the Bill.

The Bill was introduced to the House of Representatives in May 2017 and passed on 19 September 2018. It was introduced to the Senate on 20 September 2018. The Bill covers all of Australia, including external territories, and its coverage extends to "acts, omissions, matters and things outside of Australia".

This article summarises some of the main aspects of the Bill.

Complaints by suppliers

A supplier who believes a Commonwealth entity or an official of a Commonwealth entity has engaged or is proposing to engage in conduct that contravenes the CPR, and whose conduct would affect that supplier, may make a complaint to the accountable authority of the entity.

The term "supplier" is currently drafted very widely, and includes:

  • a person who supplies, or could supply, goods or services; or
  • a partnership or other group of two or more persons that supplies, or could supply, goods or services.

Importantly, this wide definition of "supplier" means that a supplier does not necessarily have to be a bidder in any procurement process. For example, it could include a supplier who was not invited or permitted to be part of a tender process.

"Accountable authority" has the same meaning as in the Public Governance, Performance and Accountability Act 2013 (Cth). If a supplier makes a complaint to the accountable authority, the authority then must investigate the conduct that is the subject of the complaint, and prepare a report on the investigation.

Suspension of the procurement process

Once a supplier has made a complaint, and at that time there is no "public interest certificate" in force in relation to the procurement, then the accountable authority must suspend the procurement until the earliest of the following occurs:

  • the supplier informs the accountable authority that it considers the complaint to be resolved;
  • the supplier withdraws the complaint;
  • the accountable authority issues a public interest certificate in relation to the procurement. A public interest certificate is a written certificate stating that it is "not in the public interest for a specified procurement by the entity to be suspended";
  • if proceedings are instituted in a court under the Bill in relation to the conduct, a finding either that the conduct was in contravention of the relevant CPR (insofar as those rules relate to a covered procurement), or that the conduct was not in contravention of the relevant CPR (insofar as those rules relate to a covered procurement).

The potential impact of these provisions is that, if a supplier makes a complaint, there could be substantial delay to the affected procurement. It is not clear what the impact will be in large-scale procurements with multiple packages, or whether a complaint made in respect of one package will affect the procurement of other packages.

Injunctions

The Federal Court or the Federal Circuit Court may grant two types of injunction on the application of a supplier whose interests have been affected. These are:

  • a restraining injunction - this restrains the Commonwealth entity or Commonwealth official from engaging in the conduct or if, in the court's opinion it would be desirable to do so, requires the Commonwealth entity or Commonwealth official to do something; or
  • a performance injunction – this is an order requiring the Commonwealth entity or Commonwealth official to do an act or a thing where it has refused or failed, is refusing or failing or is proposing to refuse or fail to do an act or thing and the refusal or failure would be in contravention of the relevant CPR (insofar as it relates to a covered procurement).

Under subsection 11(2) of the Bill, any complaint must be made within 10 days of the supplier becoming aware of the breach or suspected breach, or when the supplier reasonably ought to have become aware of the breach or suspected breach. The supplier must also be able to demonstrate that reasonable steps have been made to resolve the complaint.

Compensating affected suppliers

A supplier whose interests are affected by a relevant Commonwealth entity or an official of a relevant Commonwealth entity's contravention of the CPR may also apply to the Federal Court or the Federal Circuit Court for compensation.

The amount of compensation that the court may order varies depending on the entity which has contravened or is proposing to contravene the relevant CPR. For example, if the Commonwealth entity is a corporate Commonwealth entity, the court may order it to compensate the supplier with an amount not exceeding the sum of:

  • reasonable expenditure incurred by the supplier in preparing a tender for the procurement;
  • reasonable expenditure incurred by the supplier in connection when making a complaint under section 18 to the accountable authority of the relevant Commonwealth entity about the contravention or proposed contravention; and
  • reasonable expenditure incurred by the supplier in connection with making a reasonable attempt to resolve the complaint.

Suppliers should also note that a contravention of the relevant CPR does not affect the validity of a contract.

What types of procurement are exempt?

Certain types of procurement are exempt from the scope of the Bill, including the exemptions listed in Appendix A to the current CPR. Relevantly for the construction industry, these include:

  • procurement of goods and services by a relevant entity from another Commonwealth state, territory or local government entity;
  • procurement of goods and services, including construction, outside Australian territory, for consumption outside Australian territory;
  • procurement of goods and services by, or on behalf of, the Australian Signals Directorate, the Defence Intelligence Organisation or the Australian Geospatial-Intelligence Organisation;
  • procurement of goods and services from a small or medium enterprise (SME) with at least 50% Indigenous ownership;
  • contracts for labour hire;
  • the engagement of an expert or neutral person, including engaging counsel or barristers, for any current or anticipated litigation or dispute; and
  • procurement including leasing of land, existing buildings or other immovable property or any associated rights. Note that this does not exclude the procurement of construction services.

Melanie Harwood and HollyAnn Walters-Quan are construction procurement experts at Pinsent Masons, the law firm behind Out-Law.com.