Philip Hamilton, Politics
and Public Administration
Calls for a ‘buy Australian’ preference in Australian government procurement could fall foul of free trade agreements.
Commonwealth Procurement Rules
Procurement by public sector entities is governed
by the Commonwealth
Procurement Rules—July 2014 (CPRs). A legislative instrument
exempted from disallowance, the CPRs are issued under
section 105B of the Public Governance,
Performance and Accountability Act 2013. Compliance with the CPRs is
mandatory for all non-corporate Commonwealth entities (such as departments) and
corporate Commonwealth entities prescribed by section 30 of the Public Governance,
Performance and Accountability Rule 2014. Currently, twenty corporate
Commonwealth entities are prescribed.
The ‘core rule’ of the CPRs is the achievement of
Value for Money. For each submission to a procurement process, ‘relevant financial
and non-financial costs and benefits’ must be taken into consideration,
including whole-of-life costs, rather than simply the initial purchase price.
In general, an open tender must be undertaken for
all procurements greater than $80,000 ($7.5 million for construction). There
are also requirements to report procurement information on AusTender and elsewhere.
Under the Indigenous
Procurement Policy, non-corporate Commonwealth entities subject to the CPRs
‘can purchase directly from Indigenous small to medium enterprises (SMEs) for
contracts of any size and value’. The aim is that 0.5 per cent of domestic
contracts will be awarded to Indigenous businesses by 2015‒16, 2.5 per cent by 2018‒19, and 3.0 per cent in 2019‒20.
Further information about the operation of the CPRs
and other aspects of the procurement framework is
provided on the Department of
Finance's procurement website and in Volume
2 of the 2015 Belcher
Independent Review of Whole-of-Government Internal Regulation report.
Procurement and free trade agreements
Since December 2004, successive versions of the procurement
rules (or guidelines as they were previously known) have given effect to compliance
with provisions in free
trade agreements (FTAs) to which Australia is a signatory.
Typically, a country will specify in an FTA the
scope of government procurement open to partner countries. Specifics include government
entities covered or not covered; goods and services in or
out of scope; threshold values of in-scope procurements; and exemptions such as
the retention of preference for particular categories of domestic suppliers.
These specifics are then incorporated into the CPRs
which advise that ‘an official undertaking a
procurement is not required to refer directly to international agreements’.
Proposals for an Australian focus in government
During the 44th Parliament, crossbenchers proposed that
government procurement arrangements should be revised to include:
A central issue is how such
proposals might contend with Australia’s obligations under existing FTAs. A
Senate committee inquired
into procurement policies and procedures in 2014, and sought through its
recommendations ‘a detailed explanation of the barriers to developing a
preferencing scheme, which takes into account Australia’s free trade
response to the Senate committee’s report stated that ‘international
agreements limit the extent to which the Government can preference local
suppliers’. Similarly, a submission
to the inquiry by a legal expert concluded that ‘the Commonwealth is not free
to pursue a buy Australian policy unless an exemption applies’.
If this view is correct, there could be two avenues
for the implementation of a ‘buy Australian’ policy in government procurement:
- re-negotiation of existing FTAs to include broader ‘buy Australian’
- ensuring that future agreements include broader ‘buy Australian’
However, both avenues have the potential to result
in a patchwork of agreements that differ in their exemption provisions—the
opposite of the more uniform, non-discriminatory treatment sought by current FTAs.
Possible future agreements
Australia has taken steps to participate in two
more agreements, one of which focuses exclusively on government procurement.
In June 2015 the Government announced Australia’s intention
to join the World Trade Organization Agreement on Government Procurement. In February 2016
Australia was among 12 signatories to the Trans-Pacific
Partnership (TPP), which includes a chapter
on government procurement.
The Australian Government
has moved to ensure compliance with TPP provisions, with the 2016–17 Budget
- $12.4 million to upgrade ICT systems to ‘support greater
transparency’ in the reporting of limited tender procurements and
- $2.9 million for the Federal Court of Australia
to ‘provide a mechanism to deal with disputes about procurement decisions’.
B Belcher, Independent Review of Whole-of-Government Internal Regulation: report to Secretaries Committee on Transformation: volume 2: assessment of key regulatory areas, Department of Finance, August 2015.
Commonwealth Procurement Rules 2014.
N Seddon, Submission
to Senate Finance and Public Administration References Committee, Inquiry into Commonwealth procurement procedures
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