Commonwealth Procurement: can a contractor bid on a project where it advised on an earlier stage?

06 October 2021

As projects become increasingly complex and (in some cases) the contractor market increasingly specialised and therefore limited, the issue of whether a contractor is able to advise on early stages of a project (such as project definition or scope development), and then be invited to tender for the main work is becoming increasingly relevant.

The Commonwealth needs to ensure that it obtains the best advice and value for money at every stage of a project, and the contractor market is reluctant to advise on a small preliminary aspect of a project (Stage 1) if it means that it will be ineligible for the main, and inevitably more lucrative and interesting stage (Stage 2).

There are inevitable probity, procurement and compliance issues with allowing for a contractor’s involvement in both stages, and the question often asked is whether or not these can be overcome. The answer to this is that they can be overcome, but there are some specific probity measures that must be put in place in relation to all stages, in order for the probity issues to be properly managed.

The main probity issues that arise relate to the various conflicts of interest that arise from the initial engagement. These include:

  • the relationships between the agency and the contractor that arise during Stage 1, and ensuring that they remain business as usual, and the agency can remain objective in respect of the competitive Stage 2;
  • access to personnel and information during Stage 1 that may give rise to an uneven playing field in respect of Stage 2; and
  • the risk of the Stage 1 Contractor providing services and deliverables and scoping Stage 2 for its benefit, instead of the best outcome for the agency, Commonwealth or project.

Such conflicts of interest may, if not managed properly, contravene the Commonwealth Procurement Rules (CPRs) and particularly section 6.6, that requires Commonwealth entities to act ethically throughout a procurement, including recognising and dealing with conflicts of interest. These conflict of interest issues could result in a formal complaint to the agency, or a complaint made by a Stage 2 tenderer under the Government Procurement (Judicial Review) Act 2018 (Cth), purporting a breach of the CPRs.

Accordingly, it is critical that robust probity measures are put in place to manage these conflict of interest issues in both the Stage 1 engagement and contract, and the Stage 2 tender process. We highlight below some of the measures for agencies to implement in this situation.

Probity issues and management strategies

Relationships During Stage 1

As with the analogous circumstance of re-tendering an existing contract with an incumbent, there is a risk that there are deep, long term relationships that either present, or are perceived to present, conflicts of interest which may give the Stage 1 Contractor an unfair advantage during Stage 2.

This issue can be managed by ensuring that any such relationships are identified, that all relevant agency personnel are provided a comprehensive probity briefing, including an explanation of conflicts of interest to ensure they are properly understood, and conflicts of interest are declared and properly managed. Such management strategies vary from simple disclosure, to removal and replacement from personnel from the process. The Stage 1 Contractor (as well as all Stage 2 tenderers), should also be required to disclose conflicts through an appropriate tender schedule in the Stage 2 RFT.

Access to Information During Stage 1

The Stage 1 contractor will have access to information, documents and sites during Stage 1 as part of undertaking the Stage 1 Services. It is important that Stage 2 is conducted fairly and equitably with no tenderer having an unfair advantage. In order to manage this risk, the agency should ensure that it records all information that the Stage 1 contractor has access to during Stage 1, and provides this to the Stage 2 tenderers during the Stage 2 RFT process through a Data Room (in whatever form is appropriate), protected by a Data Room Access and Confidentiality Deed. The agency must also ensure that it provides access to relevant sites that may be relevant to Stage 2 that the Stage 1 contractor had access to during Stage 1.

Stage 1 Contractor Not Acting ‘Best for Project’

There is a risk that the Stage 1 contractor will provide its services, and provide advice and deliverables designed to inappropriately favour itself in terms of Stage 2 selection, rather than providing objective advice which is best for the agency, Commonwealth and the project, and therefore not best value for money.

To guard against this risk, the agency should ensure that the Stage 1 contract contains a clause providing an obligation that all advice be independent, objective and at all times best for the project and agency. If necessary, this can be backed up with a Statutory Declaration at the beginning of the Stage 1 engagement requiring this to be the case, and at the end of the services confirming this was complied with.

Other Risk Mitigation Measures

In addition to the specific measures outlined above, there are a variety of additional measures which should be considered, including:

  • Clauses in the Stage 1 Tender and Contract that whilst the agency intends to allow or invite the Stage 1 contractor to be involved in Stage 2, the agency is not obliged to and may, at its discretion preclude such involvement or invitation.
  • Disclosing in the Stage 2 RFT the involvement of the Stage 1 contractor in Stage 1.
  • Appointing a probity advisor to assist and manage throughout both Stage 1 and Stage 2.
  • Considering obtaining a Statutory Declaration from the Stage 1 Contractor that it has not obtained any information outside of the documents known to the agency.
  • A Conflict of Interest Schedule in the Stage 2 RFT requiring tenderers to identify any actual or perceived conflicts and setting out the proposed management strategy in respect of any that are identified.


It is crucial that Commonwealth entities be mindful of the probity risks that may arise when conducting procurements and ensure their procurement practices are ethical and fully probity compliant, particularly when it comes to conflicts of interest. The involvement of an entity in Stage 1, and then a subsequent related Stage 2, presents significant probity and procurement risk, but as this article has outlined, such risks are not insurmountable and can be managed.

This article was written by Scott Alden, Partner and Nathan Nguyen, Solicitor. 

Subscribe to HWL Ebsworth Publications and Events

HWL Ebsworth regularly publishes articles and newsletters to keep our clients up to date on the latest legal developments and what this means for your business.

To receive these updates via email, please complete the subscription form and indicate which areas of law you would like to receive information on.

Contact us