CONFIDENTIALITY THROUGHOUT THE PROCUREMENT CYCLE

Practice

Procurement Planning

  1. Entities should consider whether the nature of the procurement may raise confidentiality issues for potential suppliers. Such issues can arise in a number of ways including where:
    • potential suppliers include commercially sensitive information as part of a submission; 
    • the preferred supplier seeks to protect commercially sensitive information contained in the contract; or
    • the preferred supplier seeks to protect commercially sensitive information during and after the performance of the contract.
  2. Where a procurement may give rise to specific claims for confidentiality by potential suppliers, the planning of the procurement should take account of this by:
    • managing the extent to which potential suppliers are required to submit commercially sensitive information in their submissions;
    • assessing whether any potential claims to confidentiality would be consistent with the requirements of the particular procurement. For example, if an entity is engaging a consultant to write a report that the entity intends to publish or use in other ways, a potential claim for confidentiality by a supplier to protect intellectual property in relation to the report would be inconsistent with the entity’s requirements for a published work;
    • assessing the longer-term implications of protecting information as confidential. For example, determining whether the information would need to be provided to a third party during a transition to a new supplier; and
    • clearly informing potential suppliers, for example in request documentation, of the entity’s position in relation to supplier claims for confidentiality.

Approaching the market

  1. Where the confidentiality interests of the Australian Government need to be protected during an  approach to market, entities may:
    • require potential suppliers to sign confidentiality undertakings before being given access to confidential information. For more complex procurements it may also be appropriate to consider the use of secure facilities (for example a data room);
    • use evaluation criteria to assess the ability of potential suppliers to comply with confidentiality requirements;
    • make potential suppliers aware of any legislative requirements that may apply to them if they are awarded the contract; and
    • use appropriate contractual provisions and include these in the draft contract issued with the Request for Tender.
  2. Where supplier confidentiality issues may arise, entities can:
    • invite potential suppliers with a claim for contractual confidentiality to specify in writing what information they seek to have kept confidential;
    • include an evaluation criterion that allows claims for contractual confidentiality to be considered within the assessment of value for money. For example, potential suppliers may have different positions on the protection of intellectual property; and
    • include an appropriate confidentiality clause in the draft contract.
  3. Where confidentiality issues should not arise, or where the entity is not prepared to provide protection for commercially sensitive information after the award of the contract, the entity should:
    • clearly state this position in the request documentation and the draft contract; and
    • ask potential suppliers to agree in writing that they do not require any information to be kept confidential after the award of the contract.
  4. Entities should inform potential suppliers that disclosure of information may be required, regardless of any contractual requirements to maintain confidentiality, to parliamentary committees, the Auditor-General, the public under the provisions of the FOI Act (unless exempted) and, if required, the courts. Request documentation and any draft contract should have clauses specifying that entities are required to disclose information in these circumstances.

Handling and evaluating submissions

  1. When evaluating submissions, it is open to the entity to assess the potential supplier’s ability to meet the confidentiality obligations of the Australian Government, in accordance with stated evaluation criteria.
  2. It is also open to the entity to evaluate submissions having regard to potential suppliers’ claims for confidentiality where this is consistent with the stated evaluation criteria. The extent to which potential suppliers seek protection of particular information, such as intellectual property, may impact on the overall cost and risk of the proposal, for example transition and maintenance costs.

Awarding a contract

  1. The four below criteria comprise the “Confidentiality Test” which must all be met for a supplier’s commercial information to be considered confidential. These are:
    • Criterion 1:  The information to be protected is specifically identified.  A request for inclusion of a provision in a contract that states that all information is confidential does not pass this test.  Individual items of information, for example pricing, must be separately considered.  However, where an entity contract may be used for future cooperative procurements entities generally should not include provisions that would prevent other Commonwealth agencies from accessing the terms and conditions, including pricing of the contract.
    • Criterion 2:  The information is commercially ‘sensitive’.  The information should not generally be known or ascertainable. The specific information must be commercially ‘sensitive’ and it must not already be in the public domain. A request by a potential supplier to maintain the confidentiality of commercial information would need to show that there is an objective basis for the request and demonstrate that the information is sensitive.
    • Criterion 3:   Disclosure would cause unreasonable detriment to the owner of the information or another party.  A potential supplier seeking to maintain confidentiality would normally need to identify a real risk of damage to commercial interests flowing from disclosure which would cause unreasonable detriment. For example, disclosure of internet price lists would not harm the owner, but disclosure of pricing information that reveals a potential supplier’s profit margins may be detrimental. 
    • Criterion 4:  The information was provided under an understanding that it would remain confidential. This requires consideration of the circumstances in which the information was provided and a determination of whether there was a mutual, express or implied understanding that confidentiality would be maintained.  The terms included in request documentation and in draft contracts will impact on this.  For example, a request for tender and draft contract which included specific confidentiality provisions would support an assertion by a potential supplier that the entity has agreed to accept information on the understanding that it would remain confidential.
  2. Categories of information that may meet the requirements of the Confidentiality Test include:
    • internal costing information or information about profit margins;
    • proprietary information, for example information about how a particular technical or business solution is to be provided that may compromise the supplier’s commercial interests elsewhere, including competing in future tender processes;
    • pricing structures (where this information would reveal whether a potential supplier was making a profit or loss on the supply of a particular good or service);
    • artistic, literary or cultural secrets. These may include photo shoots, historic manuscripts, or secret indigenous culture; and
    • intellectual property including trade secrets and other intellectual property matters where they relate to a potential supplier’s competitive position.
  3. Commercial information that would not generally be considered to be confidential include:
    • performance and financial guarantees;
    • indemnities;
    • the price of an individual item or group of items;
    • rebates, liquidated damages and service credits;
    • performance measures;
    • clauses which describe how intellectual property rights are to be dealt with; and
    • payment arrangements.
  4. When awarding a contract, if the entity decides that information should be kept confidential, appropriate confidentiality clauses should be included in the contract.   The contract should also contain appropriate clauses to ensure information can be disclosed to Parliament, its committees or the Auditor-General to comply with accountability obligations.
  5. The reasons for agreeing to any confidentiality provisions should be documented by the entity.
  6. If an entity decides that the claimed material does not meet the requirements for confidentiality, the potential supplier must be advised of this and offered the opportunity to withdraw or provide further information in support of the claim for confidentiality.  If agreement cannot be reached and a contract cannot be awarded, the entity may need to approach the next preferred potential supplier.
  7. Where appropriate, entity should ensure that contract confidentiality provisions do not preclude the provision of contract information to other entities for comparative value for money analysis purposes.

Quality Assurance

  1. Entities should consider implementing quality assurance mechanisms when assessing suppliers’ claims for confidentiality of contractual information to help ensure that confidentiality clauses are used appropriately.
  2. For example, an entity operating a devolved procurement environment may specify that if a potential supplier requests that information remain confidential, then the line area conducting the procurement should refer the request to a central procurement and/or legal team for review before the contract is executed.
  3. Entities could also provide guidance and offer training to assist procurers to understand their obligations.

AusTender Contract Data

  1. Appropriate quality assurance processes should also be implemented prior to uploading contract data on AusTender to ensure the accuracy of reported contract information.

Management of contractual information

  1. Where a supplier’s confidential information is required to be disclosed and this is inconsistent with the terms of the contract, written notice should be given to the supplier concerned prior to disclosing the information.
  2. Depending on the terms of the contract, confidential information may remain confidential for the period of the contract, a period specified in the contract, or as governed by legislation. Confidentiality of information should only be maintained for the length of time that the information remains sensitive. Generally this should not be for an unlimited period.
  3. Where the sensitivity of confidential information has diminished, entities are open to negotiate with suppliers the removal of confidentiality provisions. If this situation arises, entities should reassess the information based on this guidance.
  4. Further guidance on confidentiality requirements relates to:

Last updated: 03 January 2019