Division 2: Mandatory Procurement Procedures
For Covered Procurements

8. Mandatory Procurement Procedures

8.1 This Division of the CPGs outlines the Australian Government’s Mandatory Procurement Procedures. Agencies must comply with the Mandatory Procurement Procedures where the estimated value of the property or services subject to a procurement indicates that it may be a covered procurement. Covered procurements are procurements, other than those which are exempt in accordance with Appendix A, which exceed the procurement thresholds specified below.

8.2 These Mandatory Procurement Procedures enhance the delivery of value for money through consistent and transparent procedures. In particular, the procedures set out in this Division complement the principles set out in Division 1 of these CPGs and are not to be interpreted or applied in a manner that diminishes or negates those principles.

8.3 These Mandatory Procurement Procedures also incorporate the Government’s policy with respect to discharging specific international obligations in government procurement.

Procurement Thresholds

8.4 A procurement, except a procurement which is specifically exempt in accordance with Appendix A, is a covered procurement if the estimated value of the property or services being procured is above the relevant procurement threshold:

1. for procurements by FMA agencies, other than procurements of construction services, the procurement threshold is $80,000;
2. for procurements by relevant CAC Act bodies, other than procurements of construction services, the procurement threshold is $400,000; or
3. for procurements of construction services, the procurement threshold is $9 million.

Valuing Procurement

8.5 Procurements need to be valued to determine whether they are covered procurements. The procurement value is the maximum anticipated value of a contract, including options, extensions, renewals or other mechanisms that may be executed over the life of a contract.

8.6 The estimated value of the property or services being procured must include:

1. all forms of remuneration, including any premiums, fees, commissions, interest and other revenue streams that may be provided for in the proposed contract;
2. the total maximum value of the property or services being procured, including the value of any options in the proposed contract; and
3. any taxes or charges (including Goods and Services Tax).

8.7 For procurement by lease or rental, or procurement that does not specify a total price, the basis for estimating the value of the property or services being procured is:

1. for a fixed-term contract where the term is 12 months or less, the total estimated value for the contract’s duration;
2. for a fixed-term contract where the term exceeds 12 months, the total estimated value, including the estimated residual value which will be payable at the end of the contract; or
3. for a contract for an indefinite period or where there is doubt as to whether the contract is to be a fixed-term contract, the estimated monthly instalment multiplied by 48.

8.8 Where a procurement is to be conducted in multiple parts with contracts awarded either at the same time or over a period of time, with one or more suppliers, the estimated value of the property or services being procured must include the estimated total maximum value of all of the contracts.

8.9 Where the total maximum value of a contract over its entire duration cannot be estimated and the procurement does not fall within an exemption listed in Appendix A, the procurement must be treated as being valued over the threshold.

8.10 A procurement must not be divided into separate parts for the purpose of avoiding a procurement threshold.

Approaching the Market

8.11 An approach to the market is when an agency issues a notice inviting potential suppliers to participate in a procurement.

8.12 Open approaches to the market include requests for tender, requests for expressions of interest and requests for application for inclusion on a multi-use list, all of which are published on AusTender.

8.13 Select approaches to the market include invitations to tender in a select process in accordance with the requirements for select tendering.

Open Tendering

8.14 An open tender process involves publishing a request for tender and receiving all submissions delivered by the deadline.

Multi-Use Lists

8.15 A multi-use list is a list, intended for use in more than one procurement, of pre-qualified potential suppliers that have satisfied the conditions for participation for inclusion on the list.

8.16 Inclusion on a multi-use list may be used either as an essential criterion or condition for participation in an open tender process or as the basis for selecting participants in a select tender process consistent with the procedures set out in the following section.

8.17 To establish a multi-use list, an agency must publish on AusTender a request for application for inclusion on a multi-use list which includes:

1. a description of the property or services, or categories of property or services, for which the list may be used;
2. the conditions for participation to be satisfied by potential suppliers and the methods that will be used to determine a potential supplier’s compliance with the conditions for participation;
3. the name and address of the agency and other information necessary to contact the agency and obtain all relevant documents relating to the list; and
4. any time limit for submissions seeking inclusion in the list.

8.18 The request for application for inclusion on a multi-use list must either be published continuously or re-published annually on AusTender.

8.19 Agencies must include all potential suppliers that satisfy the conditions for participation on a multi-use list as soon as practicable. (Conditions for participation are discussed later in this Division.)

Select Tendering

8.20 A select tender process involves issuing an invitation to tender to those potential suppliers selected in accordance with the procedures outlined below.

8.21 When using a select tender process agencies are required to ensure that the process is non-discriminatory.

8.22 Three methods are permitted for conducting a select tender process. In the first two, an initial open approach to the market must be, or have been, undertaken to identify potential suppliers eligible and interested in participating in the select tender process. Agencies may conduct a select tender process from:

1. a multi-use list;
2. a list of potential suppliers that have responded to a request for expressions of interest; or
3. a list of all potential suppliers that have been granted a specific licence or comply with a legal requirement, where the licence or compliance with the legal requirement is essential to the conduct of the procurement.

Selecting From a Multi-Use list

8.23 An agency may invite potential suppliers selected from a multi-use list to participate in a procurement, providing that the property or services sought are consistent with those described in the notice of multi-use list.

8.24 In such cases, the agency may invite all or some of the listed potential suppliers to submit tenders, provided that the largest number of potential suppliers is selected that is consistent with an efficient procurement process.

Selecting From an Expression of Interest

8.25 An agency may publish a request for expressions of interest and use the list of potential suppliers who lodge a compliant submission as the basis for inviting potential suppliers to submit tenders.

8.26 A request for expressions of interest may include requests for information and/or proposals to be considered in selecting potential suppliers to be invited to make submissions. Providing that relevant requirements and evaluation criteria have been specified in the request for expressions of interest or the associated request documentation, an agency may:

1. assess the extent to which a submission meets the technical and performance specifications of the procurement; and
2. limit the number of potential suppliers that it invites to tender, based on its rating of submissions, provided that the largest number of potential suppliers is selected that is consistent with an efficient procurement process.

8.27 In all other cases, the agency must invite all potential suppliers that have responded to the request for expressions of interest and that meet the conditions for participation to submit a tender.

Selecting on the Basis of a Licence or Specific Legal Requirement

8.28 Agencies may conduct a select tender from a list of all potential suppliers that have been granted a licence or that have been determined by the appropriate agency, authority or organisation to comply with specific legal requirements that exist independent of the procurement process, provided that:

1. the requirement for a licence or compliance with specific legal requirements is essential to the conduct of the procurement; and
2. the complete list of such potential suppliers is maintained by the appropriate agency, authority, or organisation and is available to the procuring agency.

8.29 Under such circumstances, the agency must invite all potential suppliers on the list to submit tenders.

Direct Sourcing

8.30 Direct sourcing refers to a procurement process, in which an agency may invite a potential supplier or suppliers of its choice to make submissions under the conditions in paragraph 8.33.

8.31 Direct sourcing must not be used for the purposes of avoiding competition or to discriminate against any domestic or foreign supplier. In all such circumstances, the general procurement policy framework still applies, including the requirement to achieve value for money.

8.32 A direct sourcing process is not required to meet the requirements for request documentation, the time limits stated in this Division of the CPGs or the requirements of paragraph 8.70 of these CPGs.

Conditions for Direct Sourcing

8.33 An agency may only conduct procurement through direct sourcing in the following circumstances:

1. where, in response to an approach to the market:
   1. no submissions were received (this includes where no submissions were received which represented value for money);
   2. no submissions were received that conform to the minimum content and format of submission as stated in the request documentation; or
   3. no potential suppliers satisfied the conditions for participation,
   and the agency does not substantially modify the essential requirements of the procurement;
2. where, for reasons of extreme urgency brought about by events unforeseen by the agency, the property or services could not be obtained in time under open tendering procedures; or
3. for purchases made under exceptionally advantageous conditions that only arise in the very short term, such as from unusual disposals, unsolicited innovative proposals, liquidation, bankruptcy, or receivership and which are not routine purchases from regular suppliers; or
4. where the property or services can only be supplied by a particular business and there is no reasonable alternative or substitute for the following reason:
   1. the requirement is for works of art; or
   2. to protect patents, copyrights, or other exclusive rights, or proprietary information;
   3. due to an absence of competition for technical reasons; or
5. for additional deliveries of property or services by the original supplier or authorised representative that are intended either as replacement parts, extensions, or continuing services for existing equipment, software, services, or installations, where a change of supplier would compel the agency to procure property or services that do not meet requirements of compatibility with existing equipment or services; or
6. for purchases on a commodity market ¹⁴; or
7. where an agency procures a prototype or a first property or service that is intended for limited trial or that is developed at its request in the course of, and for, a particular contract for research, experiment, study, or original development; or
8. in the case of a contract awarded to the winner of a design contest provided that:
   1. the contest has been organised in a manner that is consistent with this Division; and
   2. the contest is judged by an independent jury with a view to a design contract being awarded to the winner; or
9. for new construction services consisting of the repetition of similar construction services that conform to a basic project for which an initial contract was awarded following an open or select tender process, and where the initial approach to the market indicated that direct sourcing might be used for those subsequent construction services.

8.34 In accordance with the general accountability requirements set out in these CPGs, for each contract awarded through direct sourcing, agencies must prepare and appropriately file within the agency’s central filing system, a written report that includes:

1. the value and kind of property or services procured; and
2. a statement indicating the circumstances and conditions that justify the use of a procedure other than an open or select tender process.

Panels

8.35 A panel may be established by an agency by entering into contracts or deeds of standing offer (panel arrangements) for the provision of identified property or services. A panel is defined as an arrangement under which a number of suppliers, usually selected through a single procurement process, may each supply property or services to an agency (or agencies where it is intended that a number of agencies will access the panel arrangements). The respective panel arrangements must contain minimum requirements, usually including an indicative or set price or rate as appropriate for the property or services to be procured in the period of the panel arrangement.

8.36 A panel can be established by either open tender or select tender.

8.37 An agency can only approach another agency to procure property or services from an existing panel if the original request documentation and the existing agreement with the suppliers states this possibility.

Cooperative Agency Procurement

8.38 Cooperative Agency Procurement refers to procurement involving more than one agency as the buyer. Agencies can procure cooperatively by approaching the market together (known as clustering) or by joining the contractual arrangement or standing offer arrangement of another agency.

8.39 The ability of agencies to join contractual arrangements of other agencies depends on the original request documentation issued by the agency holding the contract as well as on the terms and conditions of the contract itself. Potential use by other agencies needs to have been specified in the request documentation at the start of the procurement process and be within the terms of an existing contract that an agency intends to join.

8.40 Agencies joining an existing contractual or standing offer arrangement must ensure that:

1. value for money is achieved;
2. the property or services being procured are the same as provided for within the contract or standing offer; and
3. the scope of the contract or standing offer is not being altered.

Request Documentation

8.41 Request documentation refers to documentation provided to potential suppliers to enable them to understand and assess the requirements of the procuring agency and to prepare submissions in response to an approach to the market. Request documentation must include the information necessary to permit potential suppliers to prepare and lodge responsive submissions.

8.42 Accordingly, request documentation must include a complete description of:

1. the procurement, including the nature, scope and, where known, the quantity of the property or services to be procured and any requirements to be fulfilled, including any technical specifications, conformity certification, plans, drawings, or instructional materials;
2. any conditions for participation, including any financial guarantees, information and documents that potential suppliers are required to submit;
3. any minimum content and format requirements;
4. all evaluation criteria to be considered in assessing submissions; and
5. any other terms or conditions relevant to the evaluation of submissions.

8.43 However, agencies are not obligated to release confidential information, information sensitive to essential security or information which may impede competition.

8.44 Where practicable, request documentation for an open or select approach to the market must be distributed through AusTender. Where distribution through AusTender is not practicable, the agency must promptly provide the request documentation, on request from any potential supplier. ¹⁵

8.45 Agencies need to ensure that potential suppliers are dealt with fairly and in a non-discriminatory manner when providing information leading to, or following, an approach to the market. Agencies must promptly reply to any reasonable request for relevant information about a procurement from a potential supplier and need to take particular care when responding to such enquiries to avoid a potential supplier, or group of potential suppliers, gaining an unfair advantage in a competitive procurement process.

Specifications

8.46 Specifications describe the features of the property or services to be procured.

8.47 An agency must not use specifications or prescribe any conformity assessment procedure in order to create an unnecessary obstacle to trade.

8.48 In prescribing specifications for property or services, an agency must:

1. where possible, set out the specifications in terms of performance and functional requirements; and
2. base technical specifications on international standards, where they exist and apply to the relevant procurement, except where the use of international standards would fail to meet the agency’s requirements or would impose greater burdens than the use of recognised Australian standards.

8.49 A specification must not require or refer to a particular trademark or trade name, patent, copyright, design or type, specific origin, producer, or supplier, unless there is no other sufficiently precise or intelligible way of describing the requirement. In exceptional circumstances where this type of specification is absolutely necessary words such as ‘or equivalent’ must be included in the specification.

8.50 An agency may conduct market research and other activities in developing specifications for a particular procurement and allow a supplier that has been engaged to provide those services to participate in procurements related to those services. Agencies need to ensure that such a supplier will not have an unfair advantage over other potential suppliers.

Modification of Criteria or Specifications

8.51 Where, during the course of a procurement, an agency modifies the evaluation criteria or specifications set out in an approach to the market or in request documentation, or amends or reissues an approach to the market or request documentation, it must transmit all modifications or amended or reissued documents:

1. to all the potential suppliers that are participating at the time the information is amended, if known, and in all other cases, in the same manner as the original information; and
2. in adequate time to allow potential suppliers to modify and re-lodge their initial submissions.

Conditions for Participation

8.52 Agencies may specify conditions for participation which are requirements with which potential suppliers must be able to demonstrate compliance in order to participate in a procurement or, if applicable, class of procurement. Conditions for participation must be limited to those that will ensure that a potential supplier has the legal, commercial, technical and financial abilities to fulfil the requirements of the procurement.

8.53 Conditions for participation may require relevant prior experience where essential to meet the requirements of the procurement but must not specify, as a requirement, that potential suppliers have previous experience with the agency, with the Australian Government or in a particular location.

8.54 In assessing whether a potential supplier satisfies the conditions for participation, an agency must:

1. evaluate financial, commercial, and technical abilities on the basis of the potential supplier’s business activities, wherever they have occurred; and
2. base its determination solely on the conditions for participation that the agency has specified in either the approach to the market or the tender documentation.

8.55 An agency may exclude a potential supplier on grounds such as bankruptcy, insolvency, false declarations, or significant deficiencies in performance of any substantive requirement or obligation under a prior contract.

Minimum Time Limits

8.56 All potential suppliers participating in a procurement must be required to lodge submissions in accordance with a common deadline.

8.57 Agencies need to provide sufficient time for potential suppliers to prepare and lodge a submission in response to an approach to the market. Time limits discussed in this section represent minimum periods and should not be treated as default time limits for potential suppliers to lodge submissions.

8.58 The time limit for potential suppliers to lodge a submission must be at least 25 days from the date and time that an agency publishes a notice of an open approach to the market or invites potential suppliers to participate in a select tender process, except under the following circumstances where an agency may establish a time limit that is less than 25 days but no less than 10 days:

1. where the agency has published details of the procurement in an Annual Procurement Plan on AusTender, at least 30 days and not more than 12 months in advance, and these details include a description of the procurement, the estimated timing of the approach to the market and the procedure to obtain request documentation;
2. where the agency procures commercial property or services ¹⁶;
3. in the case of second or subsequent approaches to the market for procurements of a recurring nature; or
4. where a genuine state of urgency renders the normal time limit impracticable.

8.59 Where an agency has not electronically issued a notice of approach to the market, the 25 day period referred to in the preceding paragraph must be extended to 30 days.

8.60 The time limits stated above apply to each approach to the market. That is, a single approach to the market must comply with the time limits; or in the case of a multi-stage procurement process (such as inviting expressions of interest followed by a select tender process) each approach to the market must comply with the time limits stated above.

8.61 Where an agency intends to specify conditions for participation that require potential suppliers to undertake a separate registration or pre-qualification procedure, the agency must state the time limit for responding to the registration or pre-qualification in the approach to the market. Any such conditions for participation must be published in sufficient time to enable all potential suppliers to complete the registration and qualification procedures within the time limit for the procurement.

8.62 Where an agency extends the time limit for qualification or submission, or where negotiations are terminated and potential suppliers are permitted to lodge new submissions, the new time limit must apply equitably.

Late Submissions

8.63 Late submissions must not be accepted unless the submission is late as a consequence of agency mishandling. An agency must not penalise any potential supplier whose submission is received after the specified deadline if the delay is due solely to mishandling by the agency.

8.64 Agency mishandling does not include mishandling by a courier or mail service provider engaged by a potential supplier to deliver a submission. It is the responsibility of the potential supplier to ensure that the submission is dispatched in sufficient time for it to be received by the agency by the deadline.

8.65 Late submissions should be returned unopened to the tenderer to:

1. ensure that they are not accidentally evaluated or compared with submissions which were submitted by the due time and date;
2. demonstrate to other tenderers that the process for receiving submissions is fair and impartial; and
3. eliminate scope for any suggestion that the submission was rejected for any reason other than because it was late.

8.66 It may be necessary to open a late submission where there is no return address or any indication of which tender process the submission is for. Where a submission has been opened under such circumstances the tenderer should be advised the submission was rejected due to lateness and was opened only to either obtain a return address or establish which tender process it was for.

Receipt and Opening of Submissions

8.67 Procedures to receive and open all submissions must guarantee fairness and impartiality and must ensure submissions are treated in confidence.

8.68 Where an agency provides potential suppliers with opportunities to correct unintentional errors of form between the opening of submissions and any decision, the agency must provide the same opportunity to all participating potential suppliers.

8.69 Further consideration can only be given to submissions which meet minimum content and format requirements.

Awarding of Contracts

8.70 Unless an agency determines that it is not in the public interest ¹⁷ to award a contract, it must award a contract to the supplier that the agency has determined:

1. satisfies the conditions for participation;
2. is fully capable of undertaking the contract; and
3. whose submission is determined to provide the best value for money, in accordance with the essential requirements and evaluation criteria specified in the approach to the market and request documentation.

8.71 An agency may not cancel a procurement, or terminate or modify an awarded contract, so as to circumvent the requirements of the Mandatory Procurement Procedures.

Notification of Decisions

8.72 Where a potential supplier makes a submission in response to an approach to the market, the agency must promptly advise the potential supplier of its final decision regarding the submission.

8.73 On request, an agency must provide an unsuccessful potential supplier with the reasons that its submission was not successful.

8.74 Where an agency rejects an expression of interest or an application for inclusion on a multi-use list, or ceases to recognise a potential supplier as having satisfied the conditions for participation in either, the agency must promptly inform the potential supplier and, on request, promptly provide the potential supplier with a written explanation of the reasons for its decision.

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FOOTNOTES:

14.  For the purposes of these CPGs a commodity market is a recognised exchange dealing in generic, largely unprocessed, goods that can be processed and resold.
15. The requirement of this paragraph in no way diminishes the operation of paragraph 7.17.
16. Commercial property or services are of a type that are offered for sale to, and routinely purchased by, non-Government buyers for non-Government purposes, including any modifications common in the commercial marketplace and any minor modifications not common in the commercial marketplace.
17. Public interest grounds generally arise in response to unforeseen events or new information which materially affect the objectives or reasons underlying the original procurement requirement as specified in the request document. See Guidance on the Mandatory Procurement Procedures.

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