Alert: Update to the Commonwealth Procurement Rules

The Minister for Finance has issued an updated version of the Commonwealth Procurement Rules (CPRs) on 3 December 2020 which introduce a number of new requirements for relevant Commonwealth entities to comply with. The updated CPRs have been published on the Federal Register of Legislation and will come into effect on 14 December 2020.

Relevant Commonwealth entities should review their procurement processes and templates to ensure that they align with the updated CPRs. In particular, the new CPRs allow direct engagement of Small and Medium Enterprises (SMEs) for procurements up to $200,000, implement the Australian Government’s commitment to sustainable procurement practices and emphasise the importance of paying suppliers on time.

What’s changed?

Updates to the CPRs fall into three categories:

1. introduction of a new Appendix A exemption;
2. incorporating current Commonwealth policy and law into the CPRs; and
3. other minor updates and clarifications.

1 – Appendix A exemption

SME exemption (Appendix A, item 17)

A significant change is the introduction of a new Appendix A exemption for procurements from SMEs valued up to $200,000.

This means that relevant entities do not need to apply the rules in Division 2 of the CPRs in engaging SMEs (ie an Australian or New Zealand firm with fewer than 200 full-time equivalent employees) where the relevant procurement is valued at less than $200,000. This change is significant as it would allow, for example, relevant entities to conduct a limited tender in relation to such procurements.

The new SME exemption notes that ‘the requirements under the Indigenous Procurement Policy must first be satisfied before this exemption is applied’. This means that in certain circumstances the Indigenous Procurement Policy (IPP) Mandatory Set Aside must be applied (to determine whether an Indigenous SME is capable of providing the relevant goods or services on a value for money basis) before relying on the SME exemption.

2 – Incorporation of Commonwealth policy and law

Australian Government’s commitment to sustainable procurement practices (paragraphs 4.5(e) and 4.6))

The requirement to consider the environmental sustainability of the proposed goods and services when assessing value for money has been bolstered with an express requirement for relevant Commonwealth entities to consider the Australian Government’s Sustainable Procurement Guide. The Sustainable Procurement Guide outlines:

1. the concepts of sustainable procurement, the general principles underpinning it, and options for including sustainability in procurement decisions; and
2. information about how to include sustainability considerations in all stages of a procurement process.

The Sustainable Procurement Guide is available from the Department of Agriculture, Water and the Environment’s website here: https://www.environment.gov.au/protection/waste/publications/sustainable-procurement-guide.

This requirement is complemented by amendments to paragraphs 4.6(f) and (g) which introduce new considerations for whole-of-life costs in relation to the environmental sustainability of consumables and waste disposal costs.

Cyber security (paragraph 8.3)

A new requirement has been introduced for officials to specifically consider and manage cyber security risks, in accordance with the Australian Government’s Protective Security Policy Framework.

Other existing policies and laws

The updated CPRs have also “rolled in” a number of existing procurement policies and requirements, including:

1. Commonwealth Contracting Suite: the requirement to use the Commonwealth Contracting Suite for contracts under $200,000;
2. Modern Slavery: reporting obligations under the Modern Slavery Act 2018; and
3. Supplier Pay On-Time or Pay Interest Policy: the requirement to make payments to suppliers in accordance with the Supplier Pay On-Time or Pay Interest Policy for contracts up to $1 million.

3 – Other amendments

In addition to the changes outlined above, the updated CPRs include a number of amendments that are largely directed at clarifying the application and operation of the CPRs.

What do relevant entities need to do?

The updated CPRs will apply from 14 December 2020; accordingly, officials from relevant Commonwealth entities will need to ensure that procurements comply with the updated requirements. In particular, officials should consider the following:

1. preparing updates to internal policies (including Accountable Authority Instructions) to align with the updated CPRs (particularly the new exemption for SMEs);
2. updating tender request templates to ensure that the entity is receiving sufficient information from tenderers regarding a tenderer’s approach to sustainability and managing cyber security risks; and
3. updating procurement contract templates to include:
   1. where required, appropriate cyber-security provisions and protections (which may include requirements to obtain insurance, cyber incident remediation provisions, and restrictions on data storage and use);
   2. appropriate provisions to support data gathering and reporting obligations under the Modern Slavery Act 2018; and
   3. payment provisions which are aligned with the Supplier Pay On-Time or Pay Interest Policy.

This article was written by Justin Bernau, Partner, Nicholas McMaster, Senior Associate and Jacob Mugavin, Senior Associate.