Federal govt makes changes to procurement rules, code of conduct

The Australian government is set to introduce new procurement rules from 1 July, along with a new Commonwealth Supplier Code of Conduct.

Under the changes to the Commonwealth Procurement Rules (CPRs), noncorporate Commonwealth entities (NCEs) will be committed to procuring at least 25 per cent of contracts by value from SMEs for contracts of up to $1 billion. The previous commitment was 20 per cent of all contracts.

However, the SME amendments will increase the target for NCEs for noncorporate Commonwealth entities procuring at least 40 per cent of contracts by value from SMEs, for contracts with a value of up to $20 million, with the previous target being35 per cent.

Amendments will also allow relevant entities to engage SMEs directly for procurements of up to $500,000. The SMEs must be independent rather than small or medium-sized entities supported by the resources of a larger entity.

Additionally, the Department of Finance has required officials to consider the economic benefit of a procurement to the Australian economy when determining value for money for higher-value procurements.

Officials will be required to consider the economic benefit to the Australian economy for procurements above $4 million.

The Department is seeking to update and strengthen the guidance further to support procuring officials and suppliers in implementing the economic benefits requirements.

The business community and the public sector are encouraged to provide comments and suggestions for consideration in developing revised guidance.

At the same time, the government is introducing is new Code, which dictates suppliers are expected to conduct themselves with high standards of ethics and consistently act with integrity and accountability. Ethics is considered to encompass, at a minimum, honesty, integrity, probity, diligence, and fairness.

Ethical behaviour also extends to not improperly using an individual’s position or benefiting from practices that may be dishonest, unethical, or unsafe. Suppliers’ behaviour and actions should demonstrate ethical behaviour and be supported by appropriate governance arrangements.

Suspected breaches of the Code that could constitute serious and systemic corrupt conduct will be notified to the National Anti–Corruption Commission as soon as reasonably practicable.

In a radio interview with RN Breakfast, Senator and Minister for Finance Katy Gallagher said the changes were due to the government identifying issues with “not just the Big Four consultancy firms” but with all contracted work.

“The supplier code of conduct sets out what we expect to see from people who are procuring work with the Commonwealth,” she said. “So, you act responsibly in line with APS Values, you conduct yourself in an appropriate way, you manage conflicts of interest – all of these issues.”

Gallagher said in the interview that “one of the issues that was identified with the PwC matter”—and “although that wasn’t a procurement matter”—required the government to look at procurement processes.

“It was that there wasn’t as much guidance or response to that problem that we should have had,” she said. “That’s why we’ve been working on these matters like supplier code of conduct and other work now that we’ve got this committee report.”

The Code will also give more opportunities to use First Nations businesses when subcontracting. This will “help stimulate First Nations entrepreneurship, business and economic development and should ensure partnerships with Aboriginal and Torres Strait Islander peoples are entered into with free, prior and informed consent and are fair, equitable and deliver genuine benefits to the First Nations party”.