The Judicial Review of Government Procurement is on its way, should agencies be worried?

The Government Procurement (Judicial Review) Bill 2017 was introduced into Federal Parliament in May last year, principally to deal with the Commonwealth Government’s procurement obligations under the World Trade Organization Agreement on Government Procurement (GPA) and the Trans-Pacific Partnership (TPP). It seeks to establish a dedicated, independent and effective complaint management system for procurement processes that will bring Australia further into internationally accepted standards.

The current state of play

Internationally, there is widespread acceptance of the need to make provision for the management of complaints about public procurement rules and processes. The OECD Council, for example, recommends provision to handle complaints “in a fair, timely and transparent way through the establishment of effective courses of action for challenging procurement decisions to correct defects, prevent wrong-doing and build confidence of bidders, including foreign competitors, in the integrity and fairness of the public procurement”. In that context: “Additional key aspects of an effective complaints system are dedicated and independent review and adequate redress.”

Generally, governments manage complaints resolution in this framework through courts, specialised administrative bodies established by law, or a combination of the two. Thus, although suppliers may be required in the first instance to raise complaints with procuring entities, their resolution may be possible only through appeal to bodies that are independent and appropriately empowered. In some instances, these bodies include supervisory procurement agencies, or entities that are responsible for setting procurement rules and policies. In both cases however, the entities’ primary roles may conflict with their capacity for independent, objective and disinterested consideration of complaints.

At this time Australia doesn’t have dedicated complaint management capabilities of the kind recommended at either Commonwealth or State and Territory levels. In the Australian public sector there are no complaints-handling bodies that would pass a strict test for independence and power to provide remedies for breach of procurement rules. Some, including the Commonwealth Ombudsmen, do have the power to investigate procurement complaints and make recommendations, but not to determine redress where it is merited.

The Australian Government reviewed requirements for procurement complaints, or “bid challenge” when Australia considered the case for accession to the GPA in the 1990s, however did not proceed at the time. The Review of Membership Implications published by the Department of Foreign Affairs and Trade in 1997 did not identify barriers to review processes and included comment on the need to ensure that any complaint regime should deal with both central and sub-central (State and Territory) procurement to the extent that they might be covered by Australia’s commitments under the GPA.

In 2004, Australia and the US signed a bilateral Free Trade Agreement (AUSFTA), which came into effect on 1 January 2005. AUSFTA includes at Chapter 15, provisions relating to public procurement that are very similar in intent and vocabulary to those in the GPA. It requires both parties to “maintain at least one impartial administrative or judicial authority that is independent of its procuring entities to receive and review challenges that suppliers submit, in accordance with the Party’s law, relating to a covered procurement.” In Australia’s case however, the AUSFTA documentation includes an exchange of letters between the Trade Minister and the US Trade Representative which identifies the Federal Court of Australia (FCA) and Supreme Courts of the States and Territories as impartial authorities for the purpose of Article 15:11.

What’s proposed by the new Bill?

The Bill is still before the Parliament but has been reviewed and endorsed by the Senate Finance and Public Administration Legislation Committee following a public enquiry. The bill enables the Federal Circuit Court of Australia (FCCA) or the FCA to grant injunctions or order payment of compensation for infringements of the relevant Commonwealth Procurement Rules (CPRs), that is determined as ‘covered procurement’ whereby both Divisions 1 and 2 of the CPRs apply.

In short, a supplier that believes a procuring entity or official is breaching the CPRs or proposing to do so, and whose interests are affected may complain in writing to the relevant entity’s “accountable authority”. The accountable authority must investigate the complaint and suspend the procurement process for the time being, unless there is a certificate in force stating that it is not in the public interest for the procurement to be suspended.

The supplier may seek an injunction, in that context, from the FCA or FCCA within 10 days of becoming aware of, or ought reasonably have become aware of the breach of the CPRs. The relevant powers conferred on the courts “are in addition to, and not instead of, any other powers of the court”. The courts would have jurisdiction to grant remedies in the form of restraining or performance injunctions to ensure compliance with the CPRs, or an order for payment of compensation. Financial compensation would be limited to the supplier’s reasonable costs of making the complaint and endeavouring to settle it, together with reasonable tender preparation costs.

Considerations

The complaints process, if it proceeds as the Bill provides, is intended to comply with the obligations of the international agreements cited, however it is still only a subset of what the Organisation for Economic Co-operation and Development (OECD) Council has recommended.

While it would be premature to pass judgement until the new arrangements are in place, and being that it will not have a retrospective effect so could take some time before it’s impact is evident, some factors that may bear on any assessment could include:

  • the degree to which the expectations of involved parties on both sides are met;
  • the extent to which the meaning of terms in the CPRs are clear and consistent with international commitments:
  • whether the CPRs prohibit policies and practices that are inconsistent with Australia’s obligations;
  • the effect of relevant exemptions from the provisions of Part 2 of the CPRs;
  • how it will apply to complex or multi-stage procurements
  • whether the scope of CPRs is defined consistently with FTAs:
  • the status and relevance of guidance interpreting or explaining the provisions of the CPRs issued by the Department of Finance or by accountable authorities in covered entities.

What are the implications for States and Territories?

It is as yet unclear how future commitments in relation to State and Territory procurement complaint handling will be met. As far back as 1997, DFAT determined that it was not a matter for the States and Territories alone, as the implementation of treaties is a Commonwealth responsibility.

It seems likely that this issue arises equally in some other countries where there are sub-central commitments. In the United States, for example, there does not appear to be any detailed guidance from the Federal Government for sub-central bodies. The most informative material accessible on the Internet is provided by the National Association for State Procurement Officials (NASPO) on its website. There also does not appear to be any simple way of discerning how all the sub-central entities covered by the AGP manage complaints.

There are substantial differences among the Australian states and territories in their treatment and implementation of FTA commitments. In part, this reflects the move away from strict rules on matters such as tender period to principle-based guidelines. It is also made complicated by the difficulty in demonstrating that their rules and policies enforce conformity with treaty obligations, especially in relation to “offsets”, which the GPA prohibits except on a transitional basis for developing countries.

What should agencies be doing to prepare?

At this stage, agencies may need to prepare for potential delays that could occur at the introduction of the legislation as it will apply to any procurement process commenced or impending. Agencies should also review their internal procurement practices in terms of complaint handling and investigations so as best to avoid having to make applications for injunctions or compensation under the Act.

For more information please contact OCM’s Procurement specialists on 1300 882 633 or ocmadmin@ocm.net.au