In what the Western Australian Government is claiming as an ‘Australian-first’, a new supplier debarment regime will commence on 1 January 2022 that will potentially impose significant consequences on companies that supply goods, services or works to the State if they engage in a range of unethical and illegal conduct, including contraventions of work health and safety and employment duties.

Consequences of a debarment will include cancellation of existing contracts and prohibitions and restrictions on entering or renewing contracts with a State agency.[1] Details of the debarment will also be included on a publicly accessible register.

The reach of the new regime is potentially long and broad. It can capture:

  • conduct before the commencement of the regime, subject to a three-year limitation period (being a three-year period since the conduct occurred, or a three-year period since a conviction or penalty was imposed or since the supplier was debarred under another regime); and
  • conduct that is not related to the actual supply of goods, services or works to the State agency and conduct that has occurred outside Western Australia.

As a result, the scope of any investigation under the new regime will potentially be much broader than that of the relevant regulatory body involved. Further, the conclusion of regulatory action under employment or work health and safety laws may not be the end of the matter for a business who supplies goods, services or works to the State.

When can a supplier be debarred?

The Director General of the Department of Finance (Decision Maker) may debar a supplier from supplying goods, services or works to State agencies if satisfied, on the balance of probabilities, that:

  • the supplier’s conduct falls under Category A or B or Other Debarment Conduct; and
  • the debarment is in the public interest, which will be determined having regard to a range of factors – see more details below.

Category A debarment conduct – captures the most serious conduct and includes offences and contraventions of employment and work, health and safety legislation:

  • ‘serious contraventions’ of the Fair Work Act 2009 (Cth) (FW Act), whereby a person knowingly contravenes certain civil remedy provisions of the FW Act (such as contravening a modern award) and the conduct is part of a systematic pattern of conduct;
  • gross negligence, death or serious harm offences under the Occupational Safety and Health Act 1984 and Mines Safety and Inspection Act 1994; and
  • industrial manslaughter offence and offence of failing to comply with a health and safety duty that causes the death of, or serious harm to, an individual under the Work Health and Safety Act 2020.

Category B debarment conduct – captures less serious conduct and includes offences and contraventions of employment and work, health and safety legislation:

  • conduct that contravenes any of the following Acts or awards and agreements made under the Acts: the FW Act, Industrial Relations Act 1979Minimum Conditions of Employment Act 1993Long Service Leave Act 1958Construction Industry Portable Paid Long Service Leave Act 1985 and Superannuation Guarantee (Administration) Act 1992 (Cth);
  • conduct that contravenes the Occupational Safety and Health Act 1984, Mines Safety and Inspection Act 1994 or Work Health and Safety Act 2020; and
  • conduct in another State, a Territory or another country that would, in the opinion of the Decision Maker, have been conduct described in Schedule 2 if the conduct had occurred in Western Australia.

Other Debarment Conduct – captures conduct that does not fall into Category A or B, however the Decision Maker is satisfied that the conduct warrants debarment:

  • conduct is of such a nature that procuring goods, services or works from the supplier would be likely to have a material adverse effect on the integrity of, and public confidence in, the procurement activities of State agencies, or the reputation of the State, or the business risk to State agencies;
  • a failure to cooperate with a debarment investigation; and
  • debarment under another debarment regime, whether in an Australian or overseas jurisdiction.

A supplier may also be disbarred or suspended because of the conduct of a senior officer (being an ‘officer’, as defined in the Corporations Act 2001 (Cth) section 9). The circumstances when the conduct of a senior officer can be relied on is restricted to:

  • when the senior officer was duly acting for or on behalf of the supplier, or
  • conduct that the supplier was aware or ought to have been aware of, or
  • instances when the supplier is convicted of an offence or has a penalty imposed on it because of the senior officer’s conduct.

A debarred supplier’s affiliate (which includes entities linked to the debarred supplier by common control, ownership, senior officers, or succession) may also be debarred if the Decision Maker considers it is in the public interest.

How is the public interest determined?

In determining whether the debarment is in the public interest, the Decision Maker may consider all or any of a range of factors:

  • the seriousness of the conduct;
  • any remedial measures taken by the supplier;
  • any mitigating circumstances relating to the conduct;
  • any operational and internal control systems in place at the time of the conduct;
  • whether the supplier notified the appropriate government authority of the conduct in a timely manner;
  • whether the supplier fully investigated the circumstances in which the conduct occurred and provided the results to the Decision Maker;
  • whether the supplier fully cooperated with the appropriate government authority during any official investigation into the conduct;
  • whether the supplier has paid any applicable penalties for the conduct or agreed to make full restitution for the consequences of the conduct;
  • whether the supplier has taken appropriate disciplinary action against responsible individuals;
  • any criminal or other penalties that have been imposed;
  • any current or previous decision to debar or suspend the supplier; and/or
  • any other factor considered to be relevant.

How long does debarment last?

For Category A debarment conduct, a supplier may be debarred for up to five years.

For Category B debarment conduct and Other Debarment Conduct, a supplier may be debarred for up to two years.

In determining the actual period of debarment, the Decision Maker may again consider the same public interest factors identified above.

Other matters

The regime also sets out the process for investigations and the making of a debarment decision, deals with the provision of supplier undertakings and sets out a mechanism for the review of debarment decisions.

How are investigations for debarment conduct undertaken?

The Decision Maker may carry out, on its own initiative or on request of a State agency, an investigation into whether a supplier should be debarred if they reasonably suspect that the supplier or one of its senior officers has engaged in conduct for which they may be debarred, or if they are under official investigation for, or proceedings have been commenced in relation to, conduct of this nature.

Suspension of a supplier

The Decision Maker may suspend a supplier before making a debarment decision if they are investigating Category A debarment conduct by the supplier or one of its senior officers, and suspension is in the public interest. Suspension is limited to an initial period of 12 months. However, it can be extended by six month increments for up to five years while an investigation is pending, or the Decision Maker has not yet made a debarment decision.

Making the debarment decision

Prior to making a decision to debar a supplier, the Decision Maker must provide the supplier with a show cause notice and provide an opportunity for the supplier to make submissions on the proposed debarment.

A debarment decision:

  • cannot be made because of conduct that is Category A debarment conduct unless the supplier or senior officer has been convicted of the offence or has a penalty imposed with respect to the conduct or the Decision Maker is satisfied the conduct occurred and the supplier has not denied that in any response to a show cause notice; and
  • must be made within three years of the date of the conviction or the date the penalty was imposed on the supplier; or the date on which the conduct occurred.

The Decision Maker must give to the supplier notice of and reasons for a decision to debar the supplier.

Supplier undertaking

If a supplier has been debarred, suspended, or is under investigation, the Decision Maker has discretion to enter into an undertaking with the supplier about their future conduct, and stay all or any of the consequences of the supplier’s debarment or suspension or potential debarment or suspension.

The undertaking may contain provisions to remedy or mitigate the causes of the conduct, such as excluding particular employees from management roles, implementing compliance programs or employee training, requiring external auditing or reporting to third parties, or giving the Decision Maker access to particular documents or information.

The government has indicated it will most likely offer an undertaking, rather than debarment in the first instance, to suppliers whose conduct falls into Category B.

Can decisions be appealed or reviewed?

A supplier that has been suspended or debarred can ask the Decision Maker to review the decision in limited circumstances:

  • information that is materially relevant to the decision becomes available that was not available to the Decision Maker or the supplier at the time of the decision and that could not have been obtained by the supplier with reasonable endeavours;
  • the decision was made because of a conviction for an offence or imposition of a penalty and that has been quashed or overturned;
  • there is a genuine change in management of the supplier since the decision was made; or
  • there has been any other change in circumstance that the Decision Maker considers appropriate to justify reconsideration of the decision.

A supplier may apply to the State Administrative Tribunal for review of a:

  • suspension or debarment decision; or
  • refusal by the Decision Maker to revoke or amend a suspension or debarment decision after a request for reconsideration has been made.

The very long and wide arm of the regime

As noted earlier, the reach of the new regime is potentially long and broad.

The Procurement Act 2020 and Procurement (Debarment of Suppliers) Regulations 2021 make it clear the Decision Maker can look back and consider conduct that happened before the regime commenced so long as a determination is made within the three-year limitation period.[2]

Also, because the Decision Maker has three years post-conviction or imposition of penalty to decide to debar a supplier, regulatory action concluded after 2022 under the specific employment or work health and safety laws may not now be the final punishment.

In addition, the Decision Maker can consider conduct that is not related to the actual supply of goods, services or works to the State agency and conduct that has occurred outside Western Australia. As a result, the investigation scope will potentially be much broader than that of the regulatory body involved.

It would be hoped that the Decision Maker undertakes an investigation alongside or closely in time with any formal investigation conducted by the applicable regulatory body, or substantively piggy backs and relies on that investigation. This ‘joint’ investigative approach would seem sensible.

There is no requirement on the Decision Maker to inform a supplier that it is being investigated until any suspension decision is made or any show cause notice is issued. There is also no prescribed time period in which the Decision Maker must make a decision on a request for reconsideration of debarment or suspension. Further guidance on these matters and the content of and procedure for a supplier undertaking would seem necessary.

It is unclear whether other States and Territories will adopt similar debarment regimes.

The new regime presents a potentially significant further obstacle to be navigated for suppliers to the State government that may result in material financial impacts for a wide range of serious and less serious contraventions of various employment and work health and safety laws.