By Scott Alden, Partner, Government & Commercial Law

The Commonwealth Procurement Rules have been amended and updated, effective 1 July 2024. In summary these changes positively clarify certain issues, continue to focus on sustainable procurement, and respond to recent supplier conduct issues. We have set out and commented on the more material changes below.

Clarification Changes

CPR 2.6

This is a very interesting CPR which is heavily adopted by the Department of Defence, and to a lesser extent the Department of Health. It provides that the CPRs do not apply to the extent an official applies measures determined by their Accountable Authority (or delegate) to be necessary:

• For the maintenance or restoration of international peace and security;
• To protect human health;
• For the protection of essential security interests, and
• To protect national treasures of artistic, historic or archaeological value.

The amendments include two footnotes. The first confirms that where such measures are applied such that Divisions 1 and 2 of the CPRs do not apply in full, then this has the effect that the procurement is not a covered procurement under the Government Procurement (Judicial Review) Act 2018. The second reminds officials that even where CPR 2.6 is applied, obligations under the Public Governance Performance and Accountability Act 2014 in relation to the proper use and management of public resources continue to apply.

CPR 3.2 and 3.3 – How to use the CPRs

Additional paragraphs have been included to clarify that:

• Ministers must not direct officials undertaking procurement activities; and
• Ministers may seek information on the progress of a procurement.

This issue frequently arises, and it is timely that this amendment has been made to clarify this issue which is often the subject of probity advice.

Providing Information

CPR 7.17 has been clarified to make it clear that notification to unsuccessful tenderers should be provided in writing as best practice and must be provided in writing if requested by the supplier.

Sustainability and Sustainable Procurement

CPR 2.7 – Definition of Procurement

Recognising the increasing importance of supply chain analysis in procurement, and particularly Modern Slavery, the definition of procurement has been updated to include this.

CPR 2.7 – Definition of Procurement

The text of 4.5(e) has been amended to update the language of environmental sustainability to be consistent with the revised Sustainable Procurement Guide (April 2024).

CPR 4.6(f) has been amended for consistency with the change to 4.5(e) to recognise that environmental sustainability relates to all aspects of procurement.

These are important changes as the Commonwealth continues to recognise sustainable procurement, and the impact of whole of life costs in its procurement activities.

Broader benefits to the Australian economy

For some time now the Commonwealth has been required to consider ‘broader benefits to the Australian economy’ when undertaking procurements of a value in excess of $4m. The threshold will be lowered to $1m from 1 July 2024.

This is an important requirement in Division 1 of the CPRs, and procurement teams often struggle to understand how to effectively undertake this consideration. The Department of Finance has published some guidance in relation to this ‘Consideration of broader domestic economic benefits in procurement’ (Department of Finance (last updated July 2022)’. The Department of Finance is currently seeking to update and strengthen the guidance to support procuring officials and suppliers with the practical implementation of the requirements relating to economic benefits. The Department of Finance has published a ‘Public Consultation’ paper to inform this process, with comments closing on 3 July 2024.

SMEs

CPR 5.6 has been amended to increase the commitment for NCEs to procure at least 25% of contracts by value from SMEs for contracts with a value up to $1bn. The previous commitment was 20%.

CPR 5.7 has been amended to increase the target for NCEs for procuring at least 40% of contracts by value from SMEs, for contracts with a value up to $20m. The previous target was 35%.

Appendix A – Exemption 17 has been amended to provide for an increased threshold in respect of procurement from an SME from $200,000 to $500,000.

Ethics and Supplier Conduct

CPRs Legislative and Policy Environment (Figure 1)

This has been updated to include a reference to the Commonwealth Supplier Code of Conduct. This Code will apply to all Commonwealth Contracts from 1 July 2024. The Code requires suppliers to:

• Act ethically;
• Implement proper corporate governance and business practices; and
• Ensure WHS and workplace rights

This development is a response to some of the issues encountered during 2023 and 2024 in relation to supplier conduct in Commonwealth Government contracts.

Ethical behaviour

The previous CPR 6.6 has been split into two paragraphs.  CPR 6.7 now includes a reference to corrupt behaviour and has been declared (in CPR 6.10) to be a relevant provision for the Government Procurement (Judicial Review) Act 2018.

These amendments are a welcome improvement and continued contemporisation of the CPRs in relation to clarifying areas that officials often find difficult or confusing, updating to reflect current approaches to sustainable procurement, and increasing supplier and official accountability in relation to ethics and ethical conduct.