Third party procurements occur where an entity procures on behalf of a third party (such as a state government entity or government business enterprise). The Commonwealth Procurement Rules (CPRs) note that:
2.8 In addition to the acquisition of goods and services by a relevant entity for its own use, procurement includes the acquisition of goods and services on behalf of another relevant entity or a third party.
Third party procurements also occur where an external party procures goods or services on behalf of an entity. The CPRs note that:
4.15 Procurement by third parties on behalf of a relevant entity can be a valid way to procure goods and services, provided it achieves value for money. Relevant entities must not use third-party arrangements to avoid the rules in the CPRs when procuring goods and services.
Third party procurements do not reduce or mitigate an entity's obligations to comply with Australia's international obligations and the Public Governance, Performance and Accountability Act 2013 or the CPRs.
Entities should consider early in the process how they will comply with the CPRs if procuring through a third party arrangement.
For the purpose of this guidance material, third party arrangements do not include supplier/sub-contractor arrangements.
Where an entity is procuring on behalf of a third party
Where an entity is procuring on behalf of a third-party, the entity should treat the procurement activity in the same manner as if procuring goods or services for itself.
Entities must comply with the CPRs and any internal controls such as an entity's Accountable Authority Instructions (AAIs) and Operational Guidelines.
Entities should discuss with the third party any additional policy requirements that may be sought through the procurement.
Entities are not to agree to additional conditions that are incompatible with the CPRs or procurement connected policies. Consideration of policies or requirements through the procurement that are inconsistent with the Commonwealth's would not enable the entity to demonstrate or achieve value for money.
Entities must publish procurement contracts valued at or above the relevant reporting threshold on AusTender within 42 days of entering (or amending) a contract. For AusTender reporting purposes, the procuring entity will need to report the procurement contract in line with this requirement.
When reporting these procurement contracts on AusTender, entities should report the value (if any) of the Commonwealth's commitment as the AusTender contract value and include, in the contract description, the total value of the contract liable to the third party. This will ensure AusTender data reflects the value of the Australian Government's procurement commitments.
For example, if non-corporate Commonwealth entity conducts a procurement on behalf of a third party with a total contract value of $1 million non-construction services procurement, $50,000 of which is the responsibility of the entity, the entity would report a $50,000 contract value on AusTender. The entity would also include in the description, the total value of the contract and the third party's commitment.
Where a third party is procuring on behalf of an entity
The use of a third party to conduct some or all of a procurement should be carefully considered by the entity. Third party procurements are unlikely to reduce the time or effort in conducting the procurement and will add complexity to the process.
In conducting procurements through a third party, entities should be mindful that third parties are unable to meet all of the CPR requirements. This will require entities to support, or conduct elements of the procurement themselves to meet their procurement obligations.
Possible issues that will require entity support in conducting a third party procurement includes:
understanding value for money in the context of the CPRs;
complying with relevant procurement connected policies;
complying with internal entity procurement policies and procedures (such as AAIs and Operational Guidelines);
publishing approaches to market on AusTender (approaches to market on AusTender should refer to the responsible entity and not the third party. Third parties are not to use AusTender to advertise requests for sub-contractor or similar services in fulfilling an entity procurement);
reporting procurement contract notices on AusTender;
receipt and handling of tenders, including the process for receiving and handling tenders through AusTender;
public disclosure requirements in areas such as the names of sub-contractors; and
debriefing, accessibility and non-discrimination requirements.
In procuring on behalf of an entity, third parties can procure through two ways. Either some or all of the procurement is undertaken by the third party and the:
entity contracts directly with the preferred supplier; or
third party enters into contract with the preferred supplier on behalf of the entity.
Where an entity contracts directly with the preferred supplier, the approver must be satisfied, after reasonable enquires, that the procurement achieves a value for money outcome. Responsibility is retained by the entity and delegate for entering into the contract. As such, the CPRs achieving value for money requirement as well as the entity's AAIs, PGPA Act and PGPA Rules 2014 need to be considered in the same manner as if the entity conducted the procurement itself.
Where the third party contracts with a supplier on behalf of the entity, the entity will need to regulate the third party's activities in relation to relevant money.
Other CRF Money
An entity may decide to enter into an arrangement with the third party as an 'outsider', authorised under section 29 of the PGPA Rule.
When undertaking a procurement under a section 29 arrangement, the third party is only subject to the specific conditions and requirements of the arrangement. As an 'outsider' under section 29 of the PGPA Rule, a third party's personnel are subject to the requirements of the agreement with the entity, which reflects section 29 of the PGPA Rule, rather than all PGPA Act and Rule requirements.
When establishing the section 29 arrangement, the entity must include an appropriate framework for the management of the public money, including an agreement outlining the third parties obligations to comply with the CPRs. Where this is not possible, the entity must assist the third party to comply with the requirements.
Reporting Third Party Arrangements on AusTender
In meeting the AusTender reporting requirements for procurements conducted through third parties, the overriding principle is ensuring transparency and accountability of entity procurement practices.
As a general rule entities should separately report, where above the relevant procurement reporting threshold, the supplier contract as a separate notice to the contract with the third party. This will ensure other potential suppliers are aware of the outcomes of entity procurement activities, irrespective of the approach to conducting the procurement, and will ensure ongoing transparency of entity practices
In consultation with the third party, entities should establish clear roles and responsibilities between the two parties for the procurement process. Where the third party is unable to meet the requirements of the CPRs, such as AusTender reporting requirements, this should be clearly identified and addressed.
When using third party arrangements, entities should consider the potential impacts on allowing third parties to be involved in the procurement decision. Potential issues such as conflict of interest, confidentiality and security of information should be considered prior to engaging a third party.