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New ability to challenge Commonwealth procurement decisions: the Government Procurement (Judicial Review) Bill 2017

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13 Jun 2017

Disappointed suppliers currently face an uphill climb if they wish to challenge the outcome of a Commonwealth procurement process, even if they suspect that the process may not have complied with the ]]>Commonwealth Procurement Rules]]> (CPRs).   This may be about to change if the ]]>Government Procurement (Judicial Review) Bill 2017]]> (Bill), introduced into the House of Representatives on 25 May 2017, is enacted.  The Bill will create a new statutory basis to challenge a procurement decision for non-compliance with the CPRs. 

When will the Bill apply?

The Bill will apply to any “covered procurement”, which is a procurement that is:

  • by a Commonwealth entity that is subject to the relevant CPRs;
  • estimated to be valued at or above the relevant threshold at which both Division 1 and Division 2 of the CPRs apply;
  • not exempt from the requirements of Division 2 of the CPRs (e.g. under paragraph 2.6 or Appendix A of the CPRs, or a defence exemptions listed in Australia’s free trade agreements); and
  • not excluded by a Ministerial determination or otherwise exempted by Australia’s free trade agreements. 

Remedies may be available to a supplier of goods or services if their interests are affected by previous, current or proposed conduct by a relevant Commonwealth entity in contravention of the “relevant CPRs” in a covered procurement.  The “relevant CPRs” are those contained in Division 2 of the CPRs, and prescribed provisions in Division 1.

Complaint process

The first step a supplier must take if it wishes to seek a remedy under the Bill is to make a complaint to the accountable authority of a relevant Commonwealth entity.  The supplier should raise the complaint as soon as it becomes aware of the contravention of the relevant CPRs.

If a supplier makes a complaint, the accountable authority of the Commonwealth entity will be required to:

  • investigate the conduct the subject to a complaint;
  • prepare a report of the investigation; and
  • suspend the procurement.

The requirement to suspend the procurement will not apply if a “public interest certificate” is in force in relation to the procurement when the complaint is made.  A public interest certificate is a written certificate issued by the accountable authority that it is not in the public interest for a specified procurement to be suspended while complaints are being investigated or applications for injunctions are being considered. 

The ]]>Explanatory Memorandum]]> to the Bill states that a public interest certificate “should only be written where a suspension would result in real adverse consequences”.  The accountable authority will need to comply with any applicable guidelines in issuing a public interest certificate, and publish any certificates on the entity’s website.  The decision to issue a public interest certificate will be an administrative decision, that is not subject to merits review. 

Injunction

The Federal Court or Federal Circuit Court will be able to grant two types injunction in relation to a previous, current or proposed contravention of relevant CPRs relating to a covered procurement:  a “restraining injunction” or a “performance injunction”.  The court will be able to restrain the Commonwealth entity or an official of that entity from engaging in the relevant conduct and, if the court considers it desirable to do so, require the Commonwealth entity or official to do something that is required to comply with the relevant CPRs. 

An injunction can only be granted: 

  • if the court is satisfied that the applicant has made a complaint to the accountable authority about the contravention, and made a reasonable attempt to resolve the complaint; and
  • within 10 days of the later of the day on which the contravention occurred or the applicant became aware, or ought reasonably to have become aware, of the contravention.  The court can only extend this period if the delay is due to reasonable attempts at resolution of the complaint, or there are special circumstances that warrant allowing a longer period.

Where the supplier has also applied for compensation, the court may refuse to grant an injunction where a public interest certificate is in force in respect of the procurement concerned if the court is satisfied that the injunction would result in a significant delay to the procurement concerned and that compensation would be a more appropriate remedy. 

Compensation

The court may order compensation for a contravention of relevant CPRs in a covered procurement.  The amount of compensation payable may not exceed the reasonable expenditure incurred by the supplier in:

  • preparing a tender;
  • making a complaint to the accountable authority; and
  • making a reasonable attempt to resolve the complaint. 

The amount of compensation will not include any payment for lost business opportunity. 

Effect on contracts

A supplier may be able to obtain an injunction to prevent the Commonwealth entity from entering into a contract in certain circumstances, particularly when a public interest certificate is not in force.    

However, a contravention of the CPRs will not affect the validity of a contract that has already been signed when a challenge is made.  Where a contract has already been signed, a supplier’s remedies will be limited to compensation.

Implications of the Bill for Commonwealth entities

The Bill, if enacted, will have significant implications for Commonwealth entities when they are conducting covered procurements.  Each Commonwealth entity should:

  • Update its procurement processes to accommodate the consideration of an issue of a public interest certificate for each procurement, at an early stage in the process.  While a public interest certificate should only be issued in accordance with any applicable guidelines where a suspension would result in real adverse consequences, having a public interest certificate in force will reduce the risk that the entity’s timeframe for the procurement process is delayed by a suspension to investigate a supplier complaint, or that an injunction could prevent the entity from signing a contract with its preferred supplier.  
     
  • Implement new complaints handling processes for receiving and managing complaints from suppliers under the Bill, including investigation and reporting processes and mechanisms to suspend procurements where no public interest certificate has been issued. 
  • Review its approach to market documentation, to ensure that it is consistent with the Bill, to identify whether a public interest certificate has been issued in respect of the relevant procurement, and to describe how the supplier may make complaints.  As any statutory remedies available under the Bill will be additional to existing common law rights, the approach to market documentation should retain the current standard language excluding the formation of a process contract.
     
  • Prepare a template public interest certificate, including supporting documentation, identifying the matters the decision-maker will be required to be satisfied of to issue the certificate.
     
  • Provide training for its procurement and legal teams outlining the effect of the Bill and the entity’s revised procurement and complaints processes. 

Implications of the Bill for suppliers

As tendering costs for major procurements can be very high, there may be a significant commercial benefit to a supplier in a successful claim under the Bill.  Suppliers will need to be quick and pro-active if they want to be able to take advantage of these remedies.  A court is unlikely to grant an injunction to a supplier that submits its application more than 10 days after it became aware (or should have become aware) of the contravention of the relevant CPRs, unless the delay was due to an ongoing complaints resolution process.

Once informed that their tender in a covered procurement has not been successful, suppliers should always seek a debrief as soon as possible.  Attending a debrief is best practice in any event, as it can assist suppliers to better understand the Commonwealth’s requirements, and make their future tenders more competitive. 

If a supplier is unhappy with the outcome after the debrief, it should promptly consider the extent to which the outcome may have been the result of a contravention by the relevant Commonwealth entity of a relevant CPR rather than simply because an alternative tender was more competitive.  If a supplier, in consultation with its legal adviser, believes a contravention of a relevant CPR may have taken place, it should consider making a complaint to the Commonwealth entity, following the published complaints handling procedure.  If the complaint cannot be resolved successfully, an application to the court for compensation or (depending on the stage of the procurement process and whether a public interest certificate has been issued) an injunction may be appropriate.