The Local Government Act 2020 (Vic) (2020 LGA) has been described as one of the biggest changes to procurement policy at the local council level in 30 years. The 2020 LGA will progressively replace existing procurement obligations for local government under the Local Government Act 1989 (Vic) (1989 LGA).
The 2020 LGA will have a direct impact on how local governments administer tender process contracts and negotiate contract terms and the drafting of their procurement policies.
Updating your procurement policy
The 2020 LGA provides that councils must prepare and adopt a procurement policy under the legislation which specifies:
- the contract value above which the council must invite a tender or seek an EOI
- criteria used to evaluate whether a contract provides value for money
- how councils will seek collaboration with other councils and public bodies in procuring goods, works and services
- conditions under which councils may purchase goods, works or services without inviting a public tender or EOI
- a description of the process to be undertaken in inviting a public tender or EOI
- any other matters prescribed by the regulations.
The 2020 LGA currently does not prescribe value or pricing thresholds for when a competitive tendering process must be followed (noting that this may be the subject of further regulation). This is in contrast with the 1989 LGA which currently mandates that councils must engage in a competitive tender process (whether by tender or EOI) for contracts for goods and services over $150,000 and the carrying out of works over $200,000 (including GST). The approach under the 1989 LGA was considered overly prescriptive and not suitable to the varied commercial and social needs of councils’ constituencies across Victoria.
Councils will now only be required to review their procurement policy every four years, extending the current yearly update requirements under the 1989 LGA.
Further, the 2020 LGA introduces the ‘Service Performance Principles’ which require among other things that services procured by councils be provided in an equitable manner, be responsive to the diverse needs of the community and provide value for money. The new Service Performance Principles will replace the ‘Best Value Principles’ under the 1989 LGA.
A significant portion of the 2020 LGA has already come into operation. However, key changes in relation to procurement will be introduced as part of the stage 4 transition process from 1 July 2021. Councils will be required to update their procurement policies between 1 July 2021 and 31 December 2021 to comply with the 2020 LGA. Until a new procurement policy is introduced by councils, the competitive tendering thresholds under the 1989 LGA will continue to apply.
On 1 July 2021, it is expected that the new Best Practice Procurement Guidelines under the 2020 LGA will be released and that it will be:
“…successively re-written and aligned with the transition phase applying to procurement under the 2020 Act, and will address other milestones and goals set by the State Government to contribute to the current circular economy policy environment”.
These Best Practice Procurement Guidelines are currently under review and are expected to replace the current 2013 version which is drafted in light of the 1989 LGA. Further, we expect at this stage that the Municipal Association of Victoria will also provide an update of its current draft procurement policy in due course.
The 2020 LGA provides that the Minister may regulate thresholds for when a competitive tender process is required. It is not clear at this stage if such regulations will be introduced before stage 4 commences.
Action items for councils
In preparation for 1 July 2021, councils should start to consider updating their procurement policies in light of the new requirements under the 2020 LGA.
As part of this process, councils should also:
- keep abreast of any new regulations which are passed under the 2020 LGA and may affect any competitive tendering thresholds and the release of the updated Best Practice Procurement Guidelines
- liaise with Local Government Victoria to shape the drafting of incoming ministerial guidelines
- consider the current requirements of their approach to procurement to ensure that it is suitable for their constituency’s and stakeholders’ commercial, social and other needs.