The Commonwealth Procurement Rules (CPRs) commenced on 1 July 2012, replacing the Commonwealth Procurement Guidelines (CPGs). Three months after the commencement of the CPRs is an opportunity to reflect on whether the new rules fundamentally change the way in which procurement is to be undertaken by the Commonwealth.

Impetus for Change

In 2008, the Australian Government introduced amendments to the then CPGs which were hailed as only the beginning of the ways in which it would look to continuously improve its procurement framework. Subsequently, the Australian National Audit Office (ANAO) conducted several audits that examined aspects of procurement, which culminated in the ANAO Direct Source Audit Report 2010 – 2011, particularly the anomalies it had identified in the way in which audited agencies implemented and complied with the CPGs. Ostensibly, in response to recommendations made by the ANAO, and in furtherance of its continuous improvement of the procurement framework, the Australian Government introduced the CPRs.

Key Changes

The core principle of the CPRs remains value for money. The structure of the procurement framework has not changed significantly, although much of the guidance material and good practice detail is now web-based. Separating mandatory requirements from guidance and having it available online and in a format that can be easily amended are good developments. The CPRs, like the CPGs before them, are contained in two divisions, with the rules for all procurements set out in Division 1 and additional rules for procurements, at or above the relevant procurement thresholds, set out in Division 2. There are no policy changes. Key changes made in the CPRs include:

  • a change in terminology from guidelines to rules, with added clarity about those rules that are mandatory denoted by the use of the term must (Rule 1.1)
  • other changes in terminology and new defined terms:
    • the terms covered and noncovered are no longer used – it is now at or above or at or below the relevant procurement threshold (see Rule 9.7)
    • select tender is now a prequalified tender
    • direct sourcing is now a limited tender, and
    • property or services is now goods and services
  • the rules relating to value for money have been amended to clarify that it incorporates other policies of the Commonwealth and applies to the entire procurement process (Rules 4.1 – 4.5) – this lines up with the amendments previously made to Section 44 of the Financial Management and Accountability Act 1997 (Cth) (FMA Act)
  • the requirements for reporting contracts on AusTender within 42 days have been clarified (Rule 7.16)
  • a new requirement to provide for periodic review and termination in contracts without an end date to ensure that the contract continues to represent value for money (Rule 4.13), and
  • procurements from small and medium enterprises with at least 50 per cent Indigenous ownership have been exempted from the rules in Division 2 (Appendix A).

The changes made in the CPRs mirror those of prior revisions made to the CPGs – a continued focus on coordinated procurement and improved consistency of procurement processes across agencies to reduce unnecessary complexity and cost for agencies and small and medium enterprises (among others) who wish to access the Australian Government market place. In substance, there should be little difference in an agency’s internal processes under the CPRs. Nevertheless, those changes will require agencies to review their internal processes to ensure ongoing compliance with the detail in the new procurement framework, irrespective of the extent of their previous compliance with the CPGs.

Status Quo?

The CPRs do not alter the existing procurement framework.

On its face, the introduction of a rules-based procurement framework is a significant change. However, the obligation to comply with the procurement framework existed well before the introduction of the CPRs. Agencies and officials continue to operate within the same legislative and policy framework. A Chief Executive of an agency subject to the FMA Act must manage the affairs of that agency to promote the proper (efficient, effective, economical and ethical) use of Commonwealth resources. For procurements, this is to be done in accordance with any guidelines issued by the Commonwealth (Regulation 7 of the Financial Management and Accountability Regulations 1997 (Cth) (FMA Regulations)). The CPGs were the guidelines. A breach of the CPGs (as part of that policy framework) had the potential to attract sanctions for officials under the FMA Act, the Public Service Act 1999 (Cth) and the Crimes Act 1914 (Cth).

Uncertainty about how to apply the CPGs arose because the CPGs had force of law as delegated legislation, yet had been drafted and evolved as guidelines, with mandatory and nonmandatory processes and language.

The real challenge remains whether following the changes to section 44 of the FMA Act and removal of the discretions in Regulation 8 of the FMA Regulations in July 2009, the framework provides sufficient discretion to delegates to exercise judgment about value for money and to make good sensible procurement decisions in tune with market expectations and commercial realities. The very flexibility introduced by the FMA framework as a result of the Audit Act 1901 (Cth) and the Finance Delegations was taken away.

The introduction of a rules-based procurement framework is a clear signal by the Australian Government that it intends for agencies to govern and undertake their own procurement in compliance with the CPRs. Agencies and officials who do not comply with the CPRs will do so at their risk. Following the decision in Williams v Commonwealth of Australia [2012] HCA 23, developments overseas relating to procurement rules and directives and recent public comment about the improper use of government resources, agencies will be under even greater scrutiny. Going forward, a clear understanding of the financial management and policy frameworks (as they now operate), particularly the exemptions, will be essential.

As the CPRs bed down, we see that there will be further opportunities for improvement of the procurement framework to achieve leading practice and keenly wait for the next phase of the Australian Government’s program of continuous improvement.