Commonwealth Procurement Guidelines - December 2008
Introduction
1. Purpose
1.1 These Commonwealth Procurement Guidelines (CPGs) are issued by the Minister for Finance and Deregulation (Finance Minister) under the Financial Management and Accountability Regulations 1997 (FMA Regulations).
1.2 The CPGs establish the core procurement policy framework and articulate the Government’s expectations for all departments and agencies (agencies) subject to the Financial Management and Accountability Act 1997 (FMA Act) and their officials 1, when performing duties in relation to procurement.
1.3 The CPGs establish the procurement policy framework within which agencies determine their own specific procurement practices. The FMA Regulations require officials to have regard to the CPGs when performing duties related to procurement. The FMA Regulations also require that proposals to spend public money (including proposed procurement of property or services) must be approved. An approver 2 is required to be satisfied, after making reasonable enquiries, that the spending proposal is in accordance with Commonwealth policy and that it is an efficient and effective use of public money.
1.4 Bodies subject to the Commonwealth Authorities and Companies Act 1997 (CAC Act) are legally and financially separate from the Commonwealth and are generally not subject to the CPGs. However, CAC Act bodies listed in Schedule 1 of the Commonwealth Authorities and Companies Regulations 1997 (CAC Regulations) as subject to section 47A of the CAC Act (relevant CAC Act bodies) can be directed by the Finance Minister to apply the CPGs.
1.5 Obligations which must be complied with, in all circumstances, are denoted by the use of the term must in these CPGs. The use of the term should denotes matters of sound practice.
1.6 Breaches of the financial management framework, including in relation to procurement, may attract a range of criminal, civil or administrative remedies (including under the Financial Management and Accountability Act 1997, the Public Service Act 1999 and the Crimes Act 1914).
1.7 Throughout the CPGs references to days mean calendar days.
FOOTNOTES:
- Official is defined in section 5 of the FMA Act to mean a person who is in an Agency or is part of an Agency.
- FMA Regulations define an approver as a Minister, a Chief Executive, or a person authorised by legislation to approve proposals to spend public money.
2. Scope
2.1 The CPGs apply to procurement conducted by all officials in agencies and in relevant CAC Act bodies.2.2 Procurement encompasses the whole process of acquiring property 3 or services. It begins when an agency has identified a need and decided on its procurement requirement. Procurement continues through the processes of risk assessment, seeking and evaluating alternative solutions, contract award, delivery of and payment for the property or services and, where relevant, the ongoing management of a contract and consideration of options related to the contract.
2.3 In addition to the acquisition of property or services by an agency for its own use, procurement also encompasses a situation where an agency is responsible for the procurement of property or services for other agencies, or for third parties.
2.4 While procurement relates to the acquisition of property or services, it does not include:
- grants (whether in the form of a contract or conditional gift);
- investment (or divestment);
- sales by tender;
- loans;
- purchases of property or services for resale or of property or services used in the production of goods for resale;
- any property right not acquired through the expenditure of public money - for example, a right to pursue a legal claim for negligence;
- statutory appointments;
- appointments made by a Minister using the executive power - for example, the appointment of a person to an advisory board; or
- the engagement of employees - such as under the Public Service Act 1999, the Parliamentary Services Act 1999 an agency’s enabling legislation, or under the common law concept of employment.
2.5 There are three key types of documents which set out and explain the Government’s procurement policy framework:
- the CPGs, issued by the Finance Minister, which establish the procurement policy framework;
- Finance Circulars, issued by the Department of Finance and Deregulation (Finance), which advise of key changes and developments in the Government’s procurement policy framework; and
- a range of web-based and printed guidance documents, developed by Finance to assist agencies to implement the Government’s procurement policy.
2.6 The procurement policy framework outlined in the CPGs applies to all matters related to the procurement of property or services, irrespective of whether those matters are specifically mentioned in the CPGs.
2.7 Nothing in any part of these CPGs prevents an agency from applying measures determined by their Chief Executive 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, historic or archaeological value. Applying such measures does not diminish the responsibility of Chief Executives under section 44 of the FMA Act to promote the efficient, effective and ethical use of Commonwealth resources.
FOOTNOTES:
- Property refers to every type of right, interest or thing which is legally capable of being owned. This includes, but is not restricted to, physical goods and real property as well as intangibles such as intellectual property and goodwill.
3. The Legislative and Policy Framework
3.1 Government agencies and officials operate within an environment of legislation and relevant government policy. Within this broad context, the financial management framework consists of the legislation and policy governing the management of the Australian Government’s resources. Figure 1 sets out the main elements of this environment related to procurement.
Text description of Figure 1 - Legislative and Policy Environment
3.2 The procurement policy framework is a subset of the financial management framework related to the procurement of property or services.
3.3 Chief Executives of agencies subject to the FMA Act may issue Chief Executive’s Instructions (CEIs) to officials on any matter necessary or convenient for carrying out or giving effect to the FMA Act or FMA Regulations. The CPGs provide the framework within which Chief Executives may issue CEIs and associated operational guidance related to procurement in a specific agency. In the area of procurement CEIs can:
- interpret the procurement policy and financial management frameworks, focussing on the agency’s particular needs; and
- provide primary operational instructions to agency officials in carrying out their duties related to procurement, in a way that is tailored to the agency’s particular circumstances and needs.
3.4 The Finance Minister’s (CAC Act Procurement) Directions 2004 (the Directions) require relevant CAC Act bodies to have regard to the CPGs when engaged in duties related to the procurement of property or services and to comply with the Mandatory Procurement Procedures in all circumstances for covered procurements.
Coordinated Procurement Contracting Arrangements
3.5 The Government may decide that for certain property or services improved value for money will be achieved through aggregation of government demand and negotiating whole-of-government procurement contracts. These processes are known as coordinated procurement contracting arrangements and may include the establishment of whole of government panels which agencies are required to use unless specifically exempted.
3.6 Where the Government establishes coordinated procurement contracting for a particular property or service, agencies must use the contract established for that property or service unless an exemption has been provided. Exemptions may only be provided where an agency can demonstrate a special need for alternate supply and approval is granted by the relevant portfolio minister and the Finance Minister.
3.7 These arrangements will reduce duplication between agencies in meeting common procurement requirements and provide the ability for the Government to use its combined purchasing power to improve value for money.
International Obligations
3.8 Australia is a party to a range of bilateral free trade arrangements. These arrangements are implemented domestically as government policy and/or legislation. All relevant international obligations are incorporated in the procurement policy framework as expressed in these CPGs and therefore when an agency undertakes procurement they should not seek to directly implement measures contained in international agreements.
Policies that Interact with Procurement
3.9 The FMA Regulations require that an approver must not approve a proposal to spend public money unless satisfied, after reasonable inquiry that it is in accordance with the policies of the Commonwealth. 4
3.10 While Chief Executives are responsible for the management of their agencies, they are required to manage within the context of the Government’s policy framework. Under the FMA legislation, Chief Executives must promote the proper use of resources within the framework of policies that the Government has set for them. In effect, this means that achieving efficient, effective and ethical procurement outcomes, as required by section 44 of the FMA Act, involves doing so consistently with Government policies that may impact on procurement. This obligation is reinforced by the requirement in FMA Regulation 9 that Chief Executives and other approvers of public expenditure must be satisfied that the proposed expenditure is in accordance with the policies of the Government.
3.11 Many of these policies are the responsibility of agencies outside the Finance portfolio. The agency administering a policy is responsible for providing further information if required. The Administrative Arrangements Order includes a list of Departments of State and their responsibilities. 5
3.12 Outsourced service providers may at times be required to comply with relevant legislation and general government policies. Agencies are to reflect requirements for contractors to comply with legislation in accordance with paragraph 6.20. Any requirement for an outsourced service provider to comply with a specific general policy must be reflected in request documentation and in appropriate clauses in government contracts.
FOOTNOTES:
- Examples of such policies include privacy, public works notification and government advertising.
- The Administrative Arrangements Order is available from www.pmc.gov.au.