Executive Summary

This report presents the findings of the Joint Select Committee on Government Procurement which was established on 1 December 2016 to inquire into the Commonwealth Procurement Framework, particularly the amended Commonwealth Procurement Rules.
Amendments to the Commonwealth Procurement Rules came into effect on 1 March 2017. The amendments aim to ensure that the full benefit of Commonwealth procurement will flow to the Australian economy. The amendments will also ensure that Australian regulations and standards are upheld. The amendments are designed to mitigate the disadvantages faced by Australian suppliers accessing government procurement opportunities.
The evidence received by the Committee showed overall support for the amendments to the Commonwealth Procurement Rules. However this support was tempered by concerns about effective implementation. Many of the new clauses lack clarity or leave too much to the discretion of officials. The Committee has made suggestions to tighten up the clauses by refining or expanding the terms.
The Committee heard about several problems with the implementation of the previous Commonwealth Procurement Rules. These include a procurement culture that focuses on lowest cost rather than value-for-money, a lack of accountability and transparency, and unacceptable risk shifting. There is also a perception that–due to a lack of technical skill and expertise–the government has become an uninformed purchaser. The absence of a requirement to comply with Australian standards is also considered a deficiency.
There are several flow-on risks that may have a detriment on Australia more broadly. These include the loss of a skilled workforce, safety, economic and environmental risks and potential wastage. The procurement system may also create barriers to domestic businesses to even attempt to take advantage of procurement opportunities.
Comprehensive guidelines are essential to address the current deficiencies and ensure that the implementation of the new clauses is successful. New guidelines are required to remove the discretionary nature of decision making and replace it with specific standards that must be met, as well as mandate the evidence required from tenderers. Economic benefit, in particular, requires explicit definition and weighting to properly assess suppliers claims. There must also be specific, detailed guidance on negotiating the complex area of human rights.
Additional procurement connected policies are needed to provide guidance for environmental sustainability and human rights. These guidelines and policies should be supplemented with a public service wide training program. Improved record keeping is essential to address the lack of transparency and accountability in the current system.
Contract management can be better utilised to control implementation and maximise procurement and contract outcomes. Good contract management ensures that tenderers meet their obligations and responsibilities.
If the amended Commonwealth Procurement Rules are to encourage Australian suppliers, the Australian Government must not enter into international trade agreements which diminish the benefits that underpin these amendments. Additionally, procurement officers must be better informed of the exemptions currently available in the international agreements to preference domestic businesses.
A range of best practice models are available for Australia to draw on to improve the procurement system.
The Committee believes that a three pronged approach is necessary to address the implementation issues identified in this report and ensure the new rules are applied consistently, transparently and to maximum effect. It would like to see:
the publication of comprehensive implementation guidelines coupled with public service wide training to support officials to apply the rules in the manner in which they are intended;
the introduction of procurement connected policies to safeguard the Australian Government’s role as a model procurer; and
the formation of an independent Industry Participation Advocate modelled on the South Australian system to facilitate consideration of Australian economic benefit required by clause 10.30.
The Committee has made sixteen recommendations to that effect.

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