Step Two - UNDERSTAND THE RULES

How does the government buy?

While the responsibility for procurement is devolved to each agency, they are guided in their purchasing decisions by the overarching procurement policy framework.

The Commonwealth Procurement Rules are issued by the Minister for Finance and Deregulation and articulate the Australian Government's procurement policy. The CPRs provide agencies with a framework of principles and standards aimed at ensuring agencies achieve value for money in their procurement activities. Included in the CPRs are a set of additional rules which must be followed when the value of the goods or services being purchased exceed the thresholds set by the Australian Government.

Value for money is the core principle underpinning Australian Government procurement. The CPRs explain how value for money is to be achieved through:

  • encouraging competition and non-discriminatory processes;
  • using Commonwealth resources in an, efficient, effective, economical and ethical manner that is not inconsistent with the policies of the Commonwealth;
  • making decisions in an accountable and transparent manner;
  • considering the risks; and
  • conducting a process commensurate with the scale and scope of the procurement

Quick Tip: Guidelines are on Finance's website

Information about the CPRs and supporting guidance on the policy framework for Australian Government procurement is available at the Finance Website.

Value for money and the procurement process

Value for money is not just about price. To get the best possible value for the money being spent, procurement decisions are based on an assessment of all the costs and benefits of each proposal.

A value for money assessment, based on the published conditions for participation and evaluation criteria, may include consideration of factors such as:

  • fitness for purpose;
  • a potential supplier's experience and performance history;
  • flexibility (including innovation and adaptability over the lifecycle of the procurement);
  • environmental sustainability (such as energy efficiency and environmental impact); and
  • whole-of-life costs.

The Australian Government considers value for money is best achieved by adopting appropriately competitive and non-discriminatory procurement processes.
Agencies must comply with a range of additional rules where the value of the goods and services they are buying exceed applicable thresholds set by the Australian Government. By following these additional rules, agencies offer you a process that is transparent, accountable and equitable for all potential suppliers.

When purchasing, agencies also are required to comply with their own specific operational procedures and guidelines. While the details of these procedures may vary from agency to agency, all align with the overall framework provided by the CPRs.

Quick Tip: Understanding procurement thresholds

The value thresholds that trigger the additional rules that agencies need to follow vary according to the type of agency and the nature of the procurement. The thresholds for all non-construction procurements are $80 000 for FMA Act agencies and $400 000 for prescribed CAC Act agencies. The threshold for procurements of construction services is $9 million for all agencies.

Business opportunities below the threshold

Where the value of goods or services sought is below the threshold, agencies have more flexibility to decide on a procurement process, commensurate with, the scale, scope and relative risk of the proposed procurement. This may be:

  • an over-the-counter purchase
  • a limited invitation to one or more suppliers for oral or written quotes
  • an approach to the market through limited invitations to tender
  • a public approach to the market through an open tender process.

For below the threshold procurements, agencies are still committed to ensuring equitable treatment of potential suppliers and achieving value for money.

Many procurements below the threshold will not be advertised publicly. It is important that officials in agencies are aware of the products, skills and capacities of the marketplace. Therefore, as a potential supplier, you need to promote your products and services as a value for money proposition for the government agency in the same way as you would when dealing with other private sector consumers.

Business opportunities above applicable thresholds

Additional rules apply to all procurements valued above applicable thresholds, unless covered by a specific exemption. You can expect these rules to be applied on a consistent basis by all agencies.

The rules are based on an underlying presumption that there will be an open approach to the market, unless certain limited circumstances apply. They allow for the following procurement methods, which are explained in the table below:

  • open tender
  • prequalified tender, usually following an open process to the market, to the short listed suppliers
  • limited tender (only permitted in limited circumstances).

Quick Tip: AusTender website

All open approaches to the market are advertised online through AusTender [External Site].

Range of Procurement Methods

Procurement Method

Approach to the Market

Description

Open tender

Open approach

Agencies use an open approach to market to invite submissions from potential suppliers:

  • interested suppliers may respond by providing the required information:
  • all responses are evaluated against the stated selection criteria
  • the preferred supplier is then selected.

Prequalified tender

Agency selects a number of potential suppliers.

Agencies may conduct a prequalified tender process from:

  • a shortlist of potential suppliers that responded to an initial open approach to market on AusTender;
  • a list of potential suppliers selected from a multi-use list established through an open approach to market; or
  • 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.

Limited tender

Direct approach to one or more suppliers.

Agencies directly approach one or more potential suppliers where the process does not meet the rules for open tender or prequalified tender. Specific circumstances include:

  • cases of extreme urgency beyond the control of the agency
  • where an unsolicited and highly-advantageous opportunity arises, representing an unusual value for money opportunity
  • where the goods or services can be provided by only one supplier, like a work of art
  • for additional deliveries of property or services for reasons of compatibility with existing equipment or services.

When applying this procurement method, many of the additional rules that are relevant to open tendering and prequalified tendering are not required.

Multi-use lists

Multi-use lists are lists of all suppliers who have satisfied certain preconditions to supply particular goods or services. Multi-use lists can be established by a single agency or by multiple agencies. They are typically established for goods or services that agencies procure on a regular basis. Multi-use lists must be open for new applicants continuously, or at least annually.

Request to be included on a Multi-use List

This process creates a list of pre-qualified suppliers for specified goods or services:

  • one or more conditions for participation are set by the agency
  • interested suppliers can request inclusion
  • suppliers who meet the conditions for participation will be added to the list
  • agencies can then invite suppliers on the list to participate in competitive tender processes for the specified goods or services.

Multi-use lists provide only a starting point as agencies must still undertake an open or prequalified tender process to make a purchase. However, it is a useful tool available to agencies to streamline future tender processes. Agencies can decide that being listed on a multi-use list is a condition for participation for an open tender process. Agencies are permitted to undertake prequalified tenders where they select participating suppliers from a multi-use list.

Being included on a multi-use list that is used by more than one agency may raise your profile in the broader government market. While being on a multi-use list is no guarantee of work, it does mean that agencies have recognised your capacity to provide particular goods or services. As multi-use lists can be used to conduct prequalified tender processes, inclusion on a list could mean the difference between being invited to compete for a particular opportunity or not.

Panel arrangements

A panel is an arrangement established through a tender process, under which multiple suppliers are selected to supply agreed goods and services. Agencies may then purchase directly from suppliers on the panel, as required. As a member of a panel, you can supply goods or services that the agency needs on an ongoing or intermittent basis without the need to repeatedly participate in tender processes. Typical services provided through panels include legal, accountancy, human resources, building and maintenance, and design services.

Panels are an attractive option for many agencies because the tender process only needs to be carried out once to test the market and to establish the panel. To be included on a panel:

  • respond to a request for tender to become a panel member, this is usually issued through an open approach to the market, although in some cases prequalified tendering may be used
  • if successful, you will then enter into a contract or deed of standing offer with the agency to provide the goods or services as required for a specified time
  • you can then provide your goods or services directly to the agency as required, either by invitation or through providing competitive quotations for specific jobs.

As a supplier, it is worth remembering that panels are often in place for multiple years and you will be held to the terms and conditions of the contract or standing offer, including any price/fee structure you quoted. While no minimum amount of work is guaranteed, being on a panel greatly improves your chance of receiving future work from the agency. It is not possible to later join an existing panel, so take the opportunities to bid for inclusion when they are first published on AusTender.

It should be noted that agencies may include a non-exclusivity clause to allow the purchase of similar services from suppliers outside the panel. However, in cases where the value of the proposed purchase exceeds the procurement threshold, the agency will be obliged to undertake a full tender process if it wishes to allow non-panel suppliers to participate.

Cooperative procurements among agencies

Cooperative agency procurements are arrangements that involve more than one Government agency as the buyer of goods or services. Agencies can procure cooperatively by approaching the market together or by joining an existing contract of another agency. In such cases, one agency is usually nominated as the lead agency to manage the tender process and be the liaison point with potential suppliers. Agencies are required to advise potential suppliers in the initial request documentation and contract of the specified potential use by other agencies.

The other form of cooperative procurement is where one agency approaches the market but signals its intention to allow other agencies to join the contractual arrangement at a later date (described as 'piggybacking'), for the goods or services specified in the approach to the market. When such requests arise, agencies should consult with their suppliers to ensure that they have the capacity to supply those goods or services to the additional agency(ies).

Coordinated Procurement Initiatives

The Australian Government will undertake whole-of-government arrangements from time to time for procuring goods and services, these are known as Coordinated Procurements. All FMA Act agencies are required to use the coordinated procurement arrangements.