What is the PBD 2019-05 Enforceable Procurement Provisions Direction?

The NSW Procurement Board recently released PBD 2019-05 Enforceable Procurement Provisions Direction (Direction), outlining new legal requirements for NSW Government agencies when procuring goods and services.  The Direction replaces PBD 2017-06 International Procurement Agreements and has a number of significant implications for Government procurement processes. 

The Direction give effect to Australia’s obligations under international trade agreements such as the World Trade Organisation Government Agreement and the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (see our previous discussion of the implications of the TTP for NSW Government at https://www.gtlaw.com.au/insights/trans-pacific-partnership-impact-nsw-government-procurement).

What are the implications for Government tender processes?

The Direction was released under the Public Works and Procurement Amendment (Enforcement) Act 2018 (Act) which provides suppliers with statutory rights if a NSW Government agency breaches an ‘enforceable procurement provision’. 

The remedies available to suppliers under the Act are significant.  Suppliers have the right to apply to the Supreme Court for an interim or permanent injunction to enforce compliance with enforceable procurement provisions.  Suppliers may also be awarded compensation where a Government agency has contravened, is contravening or is proposing to contravene an enforceable procurement provision. 

Under the Act, agencies are required to investigate complaints from suppliers regarding non-compliance with enforceable procurement provisions and resolve conflicts where possible.  Agencies may be required to suspend a procurement when a complaint is made by a supplier under the Act. 

The NSW Procurement Board has prepared Complaint Management Guidelines to assist Government agencies to manage their obligations to resolve supplier complaints. 

What are the enforceable procurement provisions under the Direction?

General principles for procurement

Government agencies must not discriminate against any supplier due to its degree of foreign affiliation or ownership, location or the origin of its goods or services.

Subject to certain exemptions (including the ability to benefit small and medium enterprises), Government agencies must not impose any “offset”, meaning a condition or undertaking that requires the use of local content, a domestic supplier, the licensing of technology or similar actions to encourage local development.

Government agencies may exclude a supplier if the agency has a reasonable belief regarding certain specified conditions relating to the financial affairs or prior conduct of the supplier.

Open approaches to market

Government agencies must use an open approach to market unless procuring under an established panel or procurement list or where limited tendering is permitted. An open approach to market must be published on eTendering and must include certain prescribed information including the quantity or estimated quantity of goods or services to be procured and an indication that the procurement is a procurement to which the Direction applies.
In a two stage procurement, the invitation must indicate if the Government agency will only invite further submissions from a limited number of tenderers who lodge initial submissions and the criteria for selecting those limited number of tenderers.
Limited tendering is only permitted in circumstances prescribed by the Direction.  These include (i) where no tender provides value for money (ii) extreme (and unforeseen) urgency (iii) where the goods or services can only be supplied by a particular supplier or the supply is a trial or prototype or (iv) where procuring further goods from an existing supplier if a change in suppliers would cause significant inconvenience or duplication of costs.
6 General Rules for Procurement
1. Government agencies may only impose conditions for participation in procurements that are necessary to ensure that a supplier has the legal and financial capacity, and the commercial and technical abilities, to fulfil the requirements of the procurement.
2. An agency may require a tenderer to have relevant prior experience when that experience is essential to meet the requirements of the procurement, but must not specify that that experience be in Australia or under an Australian Government contract
3. Government agencies must not use specifications to create an unnecessary obstacle to trade, or require supply by particular producers or of particular brands unless there is no other way to intelligibly describe the procurement requirement.
4. Procurement documentation must include certain mandated information including conditions for participation and the evaluation criteria.
5. Negotiations may only be conducted as part of a procurement if the agency has indicated its intent to negotiate in the invitation to market or it appears on evaluation that no submission will provide best value for money. Any elimination of suppliers through negotiation must be carried out in accordance with the evaluation criteria.
6. Agencies must award a contract to the tenderer that provides the best value for money, and value for money must be assessed having regard to matters listed in the Direction.

Who does the Direction apply to?

The Direction will apply to 41 NSW Government agencies including all principal Government departments. 

What procurements does the Direction apply to?

Agencies that are subject to the Direction must comply with its requirements if they procure:

  • construction services with an estimated value that exceeds $9,247,000 (excl. GST); or
  • goods and other services with an estimated value that exceeds $657,000 (excl. GST).

The concept of “procurement” under the Act includes a disposal, and the Direction expressly applies to a procurement affected by a build-operate-transfer contract or a public works concession contract.

Note, however, that there is a detailed list of exempt procurements in Schedule 2 of the Direction which includes in particular:

  • procurement of land, buildings or other immovable property;
  • public employment contracts;
  • intra-Government procurement;
  • procurement of health, welfare and education services; and
  • certain procurements by Transport for NSW relating to, amongst other things, transport infrastructure, the rail network or rail access. 

When will the Direction apply?

The Direction will apply from 29 November 2019.

Authors: Lesley Sutton, Andrew Hii, Catherine Gamble