As the battle to reinstate the Australian Building and Construction Commission reached its climax late last year, building industry lobby groups and unions argued about the need to restore law and order in the industry and that to respect worker rights.
In exchange for their support of the bill to reinstate the building watchdog, meanwhile, the Nick Xenophon Team was able to extract what it felt were important changes to Commonwealth Procurement Rules (CPRs) which it says would ensure that local workers and suppliers have reasonable opportunity to participate in Commonwealth funded project tenders.
For the building sector, the impact could be significant. All up, the Federal Government (and its departments and agencies) awarded contracts worth more than $5 billion in 2015/16 for ‘building and construction and maintenance services’ according to data sourced from Commonwealth procurement information system AusTender and reported by the Finance Department. During that same year, a further $911 million worth of Commonwealth procurement contracts was awarded in respect of ‘structures and building and construction and manufacturing components and supplies.’
Under current law (the Public Governance, Performance and Accountability Act), officials from non-corporate Commonwealth entities as well as prescribed corporate Commonwealth entities must observe CPRs when awarding contracts for work to be performed for their agency or department by outside providers. Amongst these are requirements that the procurement deliver value for money and that procurement process should promote effective competition and should not unduly discriminate against smaller businesses.
Under the amended rules, however, three further requirements will be in place from March 1.
First, those responding to tenders will need to be able to demonstrate their capability to comply with all relevant Australian standards. The department or agency in question will have to make reasonable enquiries to determine compliance with relevant local standards (or, in the absence of local standards, any applicable international standards), including through the gathering of evidence of relevant certifications and through periodic auditing conducted by independent assessors. In the case of construction services, this requirement applies to tenders of which the value amounts to $7.5 million or greater.
Second, procurement decisions will have to take into account the tenderer’s record regarding adherence to applicable laws and regulatory frameworks. In doing so, officials must consider (but will not be limited to considering) practices regarding labour regulations and ethical employment practices, occupational health and safety and environmental management.
Finally, for tenders worth more than $4 million (or $7.5 million as in the case of construction services), officials will have to consider the benefit of the procurement in terms of the Australian economy. In doing so, the rules specify that the policy operates within the context of relevant national and international agreements (such as Free Trade Agreements) and procurement policies to which Australia is a signatory.
So what does this mean for those tendering for building projects?
According to Sarah Ross-Smith, a partner in the infrastructure practice at multi-national law firm Ashurst, there are a number of areas of uncertainty surrounding specific details as to how the Commonwealth will adapt its practices in relation to the new requirements. With regard to demonstration of the ability to meet standards, for example, it remains unclear as to whether or not the tenderer will need to supply independent third party certification.
In respect of the economic benefits test, meanwhile, Ross-Smith says it remains to be seen exactly how Commonwealth agencies will apply this in light of the over-arching requirement for contracts to deliver value for money. Likewise, precise details about how tenderers will need to demonstrate adherence to relevant laws and ethical practices (such as ethical employment practices) are not yet known.
Nevertheless, she says contractors should be prepared to be able to show an awareness of relevant standards and to demonstrate the broader economic benefits associated with their bids. They, she says, may entail some additional cost.
“The key message would be that the suppliers may need to change their bids in order to satisfy these new requirements,” she said.
“It would be worthwhile for suppliers when putting together their tenders to emphasise their awareness of Australian standards, industry best practice and other regulatory frameworks in their tender documentation.
“They should also consider the economic benefits of their proposal.”
Robert Watson, a partner at commercial law firm Sparke Helmore Lawyers, echoes broadly similar sentiments. Watson says it remains unclear exactly how the changes will be implemented by the Commonwealth in absence of further guidance, but advises tenderers to be aware of a number of important points nonetheless.
First, he says tenderers should ensure that all goods and services tendered meet Australian standards (or any relevant international standard where no domestic standard exists). In doing this, he says, they should gather appropriate documentation in order to demonstrate the capability to meet each standard as part of their tender. It was not sufficient, he says, to merely state or assert compliance with applicable standards.
In the case of construction tenders, tenderers should at a minimum be able to demonstrate their ability to deliver a built outcome which met all requirements of the National Construction Code and all standards which are referenced in the Code.
As for the requirements that officials make reasonable enquiries regarding compliance with applicable laws and ethical practice, Watson says tenderers should be prepared to include information within their tender regarding compliance with ethical frameworks even though there is no requirement specified in the new rules for them to do so. Whilst it is unclear whether or not the Commonwealth would take any tendered information into account when determining a tenderer’s compliance, Watson says inclusion of such information (particularly any third-party certification of compliance) may well reduce the Commonwealth’s evaluation burden with respect to the tender.
In a similar vein, Watson said tenderers should also be prepared to include information about the benefits of their tender to the Australian economy. Whilst precise details about how local economic advantage will be assessed remain unclear, it is possible the Commonwealth could look at areas such as the effect of their bid upon local employment, the use of local materials and any payment of local taxes, Watson says.
As with information about compliance with relevant laws, Watson said it is unclear whether or not the Commonwealth would take tendered information into account when forming a view on the benefits to the Australian economy associated with the procurement. Nevertheless, he said adopting benefits to the Australian economy as a clear theme within tenders (along with value for money) would be a sensible strategy.
Finally, Watson said preparing a successful and compliant tender is now a more complex and arguably more nuanced task, and that obtaining legal advice with regard to the changes within tender processes is advisable.
With the new Commonwealth procurement rules, Xenophon and others hope local workers and suppliers will have greater opportunities.
Once they come into effect, however, contractors and suppliers will need to be prepared to include more information within their tenders in a few specific areas.