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Government Procurement (Judicial Review) Bill 2017

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2016 -2017

 

 

 

 

THE PARLIAMENT OF THE COMMONWEALTH OF AUSTRALIA

 

 

 

 

HOUSE OF REPRESENTATIVES

 

 

 

 

GOVERNMENT PROCUREMENT (JUDICIAL REVIEW) BILL 2017

 

 

 

 

EXPLANATORY MEMORANDUM

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(Circulated by authority of Senator the Hon Mathias Cormann, Minister for Finance)

 

 



GOVERNMENT PROCUREMENT (JUDICIAL REVIEW) BILL 2017

 

OUTLINE

 

The Government Procurement (Judicial Review) Bill 2017 (the Bill) will vest the Federal Circuit Court of Australia (FCC) with jurisdiction (concurrently with the Federal Court of Australia) to grant an injunction and/or order payment of compensation in relation to a contravention of the relevant Commonwealth Procurement Rules (CPRs), so far as those rules relate to a covered procurement.

 

Before a supplier takes a procurement complaint to the courts the supplier must first complain to the accountable authority of the relevant Commonwealth entity. The accountable authority must investigate the conduct of the subject of the complaint and if no public interest certificate is in force in relation to the covered procurement, the procurement must be suspended.

The Bill is consistent with recommendation 11 of the July 2014 Senate Finance and Public Administration References Committee’s report into the Commonwealth procurement procedures, for the Department of Finance to establish an independent and effective complaints mechanism for procurement processes.

 

The Bill will enable Australia to meet international obligations on government procurement that require the Commonwealth to establish or designate an impartial and independent body where suppliers can raise complaints about government procurement processes and be awarded remedies/compensation.

 

These obligations are found in the World Trade Organization Agreement on Government Procurement, to which Australia has submitted a bid to accede, and the Trans-Pacific Partnership Agreement, which was signed on 4 February 2016.

The Bill will also ensure that regional suppliers and small and medium enterprises have timely access to justice to raise complaints about procurement processes and seek remedies. The FCC is the only court at the federal level which has a continuous presence outside major capital cities. Suppliers in rural and regional Australia will have easier access to have their complaints heard without the need to attend major cities. 

 

Financial impact statement 

The Government has committed to providing $2.9 million over four years for the Federal Circuit Court of Australia, with concurrent jurisdiction with the Federal Court of Australia, to hear government procurement complaints.  

 

Funding is provided on an ongoing basis, taking into account that it is an international government procurement obligation for the Commonwealth to have a review authority to hear government procurement complaints.

 

The courts will collect filing fees consistent with current practices, with the fees to be returned to the Consolidated Revenue Fund. The fees will not be sufficient to provide full cost recovery.

 

Regulation impact statement

The Department of Foreign Affairs and Trade certified the Trans-Pacific Partnership Analysis of Regulatory Impact on Australia as meeting the requirements of a Regulation Impact Statement.

Under the Australian Government Guide to Regulation, the Office of Best Practice Regulation (OBPR) does not assess independent reviews. The National Interest Analysis was tabled in Parliament on 9 February 2016 which included the Analysis of Regulatory Impact on Australia as an attachment. This included the consideration of the supplier complaints mechanism and is available at http://ris.dpmc.gov.au/2016/04/11/trans-pacific-partnership/

 

 

 

 



GOVERNMENT PROCURMENT (JUDICIAL REVIEW) BILL 2017

 

 

NOTES ON CLAUSES

Part 1: Preliminary

Clause 1: Short title

·                      Clause 1 provides for the short title of the Act to be the Government Procurement (Judicial Review) Act 2017.

Clause 2 : Commencement

·                      Clause 2 is the commencement provision of the Bill. The whole of the Act will commence on a date to be fixed by proclamation.  However, if the Act does not commence within six months of receiving Royal Assent, it will commence on the day after the end of this six-month period. This will allow appropriate flexibility regarding the commencement of the Act to facilitate Australia’s accession to the World Trade Organization Agreement on Government Procurement following the conclusion of negotiations. It will also allow the Department of Finance to provide certainty to relevant stakeholders, including procuring entities and suppliers, regarding the commencement and operation of the legislation.

Clause 3: Simplified outline of this Act

·                      Clause 3 provides a simplified outline of this Bill. The outline is intended to provide assistance in understanding the substantive provisions and it is not intended to be comprehensive. It is intended that the reader should rely on the substantive provisions.

Clause 4 : Definitions

·              Clause 4 sets out the definitions of terms used within this Bill.

 

 

Clause 5: Covered procurement

·                      Clause 5 sets out the definition of a covered procurement in relation to this Bill.

·                     For the Commonwealth, a covered procurement is a procurement:

o    by an entity that is subject to the relevant CPRs

o    estimated at or above the relevant threshold of the CPRs at which additional rules apply

o    not exempt from rules that apply at or above the relevant threshold (refer to paragraph 2.6, Appendix A of the CPRs and specific defence exemptions)

o    that is otherwise not exempted by Australia’s free trade agreements.

·                      Paragraph 2.6 of the CPRs relates to procurements where the CPRs cannot be followed in their entirety due to reasons such as protecting essential security. Procurements that rely on CPR 2.6 are out of scope for supplier complaints and applications.

·                      Australia’s free trade agreements list specific areas of Department of Defence related procurement that are exempted from government procurement obligations.

·                      Subsection 1(a) sets out that Divisions 1 and 2 of the CPRs must apply to the procurement for it to be a covered procurement for the purpose of this Bill. Division 2 of the CPRs implement specific rules from the Commonwealth’s free trade agreement obligations. Division 1, while having some rules, mostly contains principles and guidance. For example, Division 1 includes the principle that the Commonwealth’s procurement framework is non-discriminatory.

·                      Where Division 2 of the CPRs applies, procuring entities must also comply with Division 1. However, not all parts of Division 1 are for the purpose of implementing international government procurement obligations. Hence, the Bill allows for a statement within Division 1 to indicate which parts of Division 1 are relevant for the purpose of the Bill. If there is no such statement in Division 1, then no parts of Division 1 are relevant for the purpose of the Bill.

·                      Subsection 1(a) sets out that a procurement is considered a covered procurement if the rules in Division 1 and Division 2 of the CPRs apply to the procurement. For clarification, the rules of Division 1 and/or Division 2 do not apply where:

o       an official applies measures determined by their accountable authority to be necessary for the maintenance or restoration of international peace and security, to protect human health, for the protection of essential security interests, or to protect national treasures of artistic, historical or archaeological value, or

o       the type of procurement is listed in the CPRs Appendix A: Exemptions from Division 2, or

o       the type of procurement is listed as a defence exemption in the Department of Defence’s Defence Procurement Policy Manual, which is derived from defence exemptions listed in Australia’s free trade agreements.

·                      Subsection 1(b) provides that additional procurements may be exempted from the CPRs if there are such provisions in Australia’s free trade agreements.

·                      Subsection 2 support subsection 1(b) by providing the Finance Minister with the power to issue a determination that a type of procurement is not a covered procurement. For clarification, the Finance Minister means the Minister administering the Public Governance, Performance and Accountability Act 2013.

Clause 6: Crown to be bound

·                      Clause 6 provides that this Bill applies to the Commonwealth and to its government procurement matters.

Clause 7: Application of this Act

·                     Clause 7 provides the extent of the application of this Bill.

·                      Subsection 1 provides that this Bill extends to every external Australian Territory. The intent of subsection 1is that if a procurement is a covered procurement it will be within the jurisdiction of the courts regardless of the location of the procurement.

·                      Subsection 2 provides that proceedings may be transferred from the Federal Circuit Court to the Federal Court under Part 5 of the Federal Circuit Court of Australia Act 1999. Proceedings may also be transferred from the Federal Court to the Federal Circuit Court under section 32AB of the Federal Court of Australia Act 1976.

Part 2: Injunctions

Clause 8: Simplified outline of this Part

·                      Clause 8 is a simplified outline for Part 2. Part 2 sets out how the courts may grant an injunction in relation to a contravention of the Commonwealth Procurement Rules (CPRs) so far as those rules relate to a covered procurement. The intent on granting an injunction is to preserve a supplier’s opportunity to participate in a current procurement.

Clause 9: Injunctions

·                      Clause 9 provides a mechanism for the courts to grant injunctions as a corrective measure to ensure that the procuring entity complies with the relevant CPRs.

·                      Subsection 1 provides that the courts may grant an injunction to prevent conduct by a procuring entity that contravenes the relevant CPRs. The intention of this clause is that by granting an injunction, or requiring a procuring entity to do something as a corrective measure, a supplier’s right to participate in the procurement may be preserved.

·                      Subsection 2 provides that where a procuring entity proposes to, refuses or fails to act in compliance with the relevant CPRs then the courts may grant an injunction which requires the procuring entity to do an act or thing which would preserve the supplier’s right to participate in the procurement.   

Clause 10: Availability of alternative remedy of compensation

·                      Clause 10 provides for the balance of interests being in favour of compensatory remedies rather than disruption to the procurement process where a public interest certificate is issued.

·                      The intent of the balance on interest being in favour of compensatory remedies is to be expressly confined to situations where the procurement is still ongoing. Following the issuing of a public interest certificate, the procuring entity should be able to continue the procurement process, subject only to court orders.

Clause 11: Limits on power to grant an injunction

·                      Clause 11 sets out the limitations on the courts to grant an injunction in relation to a contravention or proposed contravention of the relevant CPRs.

·                      Paragraph 1(c) provides that in an attempt to resolve a complaint, in the first instance, the supplier must make a written complaint to the relevant procuring entity.

·                      Paragraph 1(d) provides that the supplier must make a reasonable attempt to resolve the complaint before seeking an injunction from the courts. For example, for completed procurements, this may include the supplier seeking to resolve their complaint through a debrief with the procuring entity - the CPRs provide suppliers who lodge a tender the right to seek a debrief.

·                      The intent of subsections 2, 3 and 4 is to ensure that complaints regarding covered procurements are made in a timely manner. The supplier should seek to raise the complaint with the courts within 10 days on which the contravention of the relevant CPRs occurred, is occurring or will occur or when the supplier became aware or should have reasonably become aware of the contravention. In the first instance the supplier should seek to resolve the complaint with the procuring entity and if the supplier has not been able to resolve the complaint, they may approach the courts for an injunction.

·                      Subsection 5 provides clarification that the courts must not accept a supplier’s complaint which occurred outside of the 10 day period, unless the reason for the delay relates to the supplier taking genuine steps to resolve the complaint with the procuring in the first instance. The supplier should raise the complaint with the procuring entity as soon as the supplier became aware, or should have reasonably become aware of the contravention of the relevant CPRs.

·                      Paragraph 5(b) provides that special circumstances, at the discretion of the court, may warrant the court allowing a longer period in which to lodge a complaint.

Clause 12: Discharge or variation of an injunction

·                     Clause 12 provides the courts with flexibility to stop or vary an injunction as it deems necessary.

Clause 13: Certain limits on granting injunctions not to apply

·                     Clause 13 provides that the courts may grant an injunction if it is satisfied an injunction is required to prevent a procuring entity or official from engaging in conduct that is in breach of the CPRs.

Clause 14: Other powers of a court unaffected

·                          Clause 14 provides that the injunction powers under this Part are additional to, not in replacement of, any other powers of the courts.

 

 

Part 3 - Compensation

Clause 15: Simplified outline of this Part

·                            Clause 15 is a simplified outline for Part 3. Part 3 sets out how the courts may order the payment of compensation for contravention of the relevant Commonwealth Procurement Rules (CPRs) so far as those rules relate to a covered procurement.

Clause 16: Compensation for a contravention of the Commonwealth Procurement Rules

·                            Clause 16 provides the courts with the authority to order the payment of compensation as a remedy to a valid supplier procurement complaint. Compensation should be reasonable expenditure incurred by the supplier in preparing to respond to a procurement, in preparing to make a complaint to the courts and the attempt to resolve such a complaint.

Part 4 - Complaints

Clause 17: Simplified outline of this Part

·                          Clause 17 is a simplified outline for Part 4. Part 4 allows a supplier to complain to the accountable authority of a relevant Commonwealth entity about a breach of the Commonwealth Procurement Rules (CPRs). Once the complaint is received the accountable authority must investigate and attempt to resolve the complaint with the supplier. The procurement must be suspended if no public interest certificate is in force in relation to the procurement. 

Clause 18: Complaint made by supplier

·                          Clause 18 allows a supplier to make a written complaint to the accountable authority of a relevant Commonwealth entity where they have reason to believe that the CPRs have been breached or it has been proposed to be breached. When a supplier complains to the accountable authority the intent is to resolve the complaint with the procuring entity.

 

 

Clause 19: Investigation by accountable authority

·                      Clause 19 requires accountable authorities to investigate complaints made by suppliers or potential suppliers. The intent of the investigation is to resolve the complaint with the supplier and to keep a record of the attempt to resolve the complaint and any agreement reached.

·                      Subsection 2 provides that the accountable authority may discontinue the investigation into the complaint if the supplier chooses to withdraw the complaint or the supplier considers the complaint to be resolved.

·                      Subsection 3 requires the accountable authority to stop the investigation if the complaint is taken to court and the continuation of the investigation would prejudice the outcome of the court action.

Clause 20: Suspension of procurement

·                      Clause 20 provides that the accountable authority must suspend a procurement where there is no public interest certificate in force in relation to that procurement.

Part 5 - Miscellaneous

Clause 21: Simplified outline of this Part

·                      Clause 21 is a simplified outline of Part 5. Part 5 sets out that an accountable authority may issue a public interest certificate where a delay to the procurement would be contrary to the public interest. Public interest certificates are issued by the accountable authority as part of an administrative process when conducting procurements. Part 5 also sets out that a contract remains valid even if the court determines that the Commonwealth Procurement Rules (CPRs) were contravened. Further, an injunction or compensation cannot be sought where a contravention of the CPRs occurred prior to the commencement of the Bill.

Clause 22: Public interest certificate

·                      Subsection 1 provides that the accountable authority of the procuring entity may issue a certificate stating that it is not in the public interest for the procurement to be delayed. A public interest certificate should only be written where a suspension would result in real adverse consequences. The court’s decision regarding an injunction does not prevent applications or complaints being made or limit the courts ability to consider the procurement matter or to award compensation as an additional remedy to an injunction, or as the only remedy. The intended effect of the certificate is simply that the procurement would not be suspended while the application or complaint was being considered.

·                      While the public interest certificate is an administrative decision it is not intended that the decision would be subject to a merits review. The consideration of whether it would not be in the public interest to suspend a procurement is a preliminary decision that does not prevent a supplier from applying for an injunction and/or compensation.

·                      The public interest certificate is a necessary feature of the procurement complaint mechanism to prevent real adverse consequences to the public interest if a particular procurement was suspended. Procuring entities will receive guidance on the circumstances where a public interest certificate can be issued.

·                      Where a procuring entity issues a public interest certificate, the procuring entity will be required to promptly publish the certificate on its website.

Clause 23: Contravention of the Commonwealth Procurement Rules does not affect the validity of a contract

·                      Clause 23 subsection 1 sets out that the court is not able to overturn the awarded contract where it is found by the court that the CPRs have been contravened.

·                      Subsection 2 sets out that that subsection 1 applies for contracts awarded both prior and after the commencement of this Act.

Clause 24: Delegation by accountable authority

·                      For clarification, the delegation powers in Section 110 of the Public Governance, Performance and Accountability Act 2013 (PGPA Act) do not apply to Corporate Commonwealth Entities as their accountable authorities use common law authorisations to direct officials to undertake certain functions.

Clause 25: Transitional

Clause 25 sets out that where a contravention, or proposed contravention occurred before the commencement of this Bill, compensation or an injunction will not be granted.