Key issues
2.1
This chapter discusses the key issues in relation to the bill highlighted
by submitters, namely:
-
the adequacy of the timeframe in which a supplier must lodge an
application for an injunction;[1]
-
legal standing to seek an injunction and/or compensation;[2]
-
access to justice for small and medium size business enterprises;[3]
and,
-
implementation and operational issues concerning the bill.[4]
Time limit on applications for an injunction
2.2
The bill provides that a supplier whose interests are affected by
conduct which contravenes the CPRs may make a written complaint to the 'accountable
authority'[5]
of the Commonwealth entity who must then undertake an investigation of the
complaint.[6]
If no public interest certificate is in place in relation to the particular
procurement, the Commonwealth entity must suspend the procurement until the complaint
is resolved.[7]
2.3
Concurrently, the bill also provides that the FCC must not grant an
injunction in relation to a contravention of the CPRs unless the application
was made within 10 days after either the date the contravention, or the
day the applicant for the injunction became aware, or ought to have become
aware, of the contravention, or within such longer period as the court allows.
The FCC must not allow a longer period unless the applicant's failure to lodge
the application for an injunction was attributable to the applicant's
reasonable attempt to resolve the complaint, or other special circumstances
which would warrant a longer period to lodge the application.[8]
2.4
Several
submissions expressed concern over the adequacy of the 10 day time limit in
which a supplier must lodge an application for an injunction where a
procurement entity breaches the CPRs in relation to a covered procurement
process. The Chamber of Commerce and Industry Queensland (CCIQ) and the
Australian Chamber of Commerce and Industry (ACCI) argued that the 10 day time limit
'is considered a
very short timeframe for initiating court action for an injunction'.[9]
Dr Nick Seddon was of the view that it would be impossible to
comply with the 10 day time limit.[10]
The Australian Manufacturers Workers Union (AMWU) said that the 10 day time
limit 'is too short'.[11]
2.5
Some submissions contended that it is likely for the accountable
authority to take more than 10 days to resolve a complaint.[12]
The Department of Defence (Defence) highlighted the scale and complexity of
Defence procurement, commenting:
Defence notes that complainants have ten days (or a longer
period as determined by the court) to file an application for injunction. This
gives agencies little time to investigate and address the complaint prior to
the escalation to the courts, driving an adversarial rather than a
collaborative relationship with industry.[13]
2.6
Dr Seddon suggested that the 10 day time limit should instead commence
from the time it is clear that the attempt to resolve a complaint has failed,
or that a complainant be required to submit a complaint within 10 days of the
announcement of a contract being awarded.[14]
Some submitters suggested that if there is to be a timeframe to lodge an
injunction, there should also be a timeframe in which procuring entities must
respond to a complaint.[15]
2.7
Despite the concerns raised around the 10 day time limit, it is clear
that the bill provides a discretionary power to the FCC to 'allow longer
periods' than the 10 days.[16]
Dr Seddon described this process:
The court is given a discretion to waive the failure to meet
the 10-day deadline so long as the court is satisfied that the reason for the
delay was the attempt to sort out the dispute with the procuring entity.[17]
2.8
Dr Seddon also acknowledged that the 10 day limitation does not apply to
a complainant's capacity to make a claim for compensation.[18]
A claim for compensation does not require a concurrent application for an
injunction, nor depend on success where such an application is made.
2.9
The Department of Finance (Finance) advised that Australia's potential
obligations under the GPA require a timely, effective, transparent and
non-discriminatory review procedure that provides for rapid interim measures to
preserve a supplier's opportunity to participate in a procurement, and where a
breach has occurred, for corrective action and compensation.[19]
Finance elaborated:
The default timeframe of 10 days was chosen to encourage
timely efforts, by both suppliers and the procuring entity, to resolve any
concerns about the process. The choice of a 10 day default strikes an
appropriate balance between the interests of both sides and minimises
disruption to other parties involved in the same process.[20]
2.10
As to the 10 day limit, Finance noted that a longer timeframe may apply
if deemed appropriate by the FCC.[21]
Finance acknowledged that in some circumstances 'complaint investigation[s] may
take longer than 10 days'. In all cases where a complaint is lodged, Finance
has advised that suppliers should keep detailed records of their interactions
with the procuring entity. In the event that the 10 day time limit is exceeded,
these records should be provided to the FCC 'to demonstrate that the delay in
making the application was due to their attempt to resolve the complaint with
the procuring entity'.[22]
2.11
Finance also explained why special circumstances are not strictly
defined in the bill:
The Bill does not define the 'special circumstances' required
for a longer period, because to do so would narrow the anticipated grounds
where it might be reasonable to allow extended time to apply for an injunction.
The FCC is in the best position to determine access to time extensions in the
unique circumstances of each procurement, consistent with the fair
administration of justice.[23]
2.12
Finance added that in the event that a supplier is not able to seek an
injunction, the 10 day time limit does not preclude suppliers seeking a remedy
of compensation.[24]
Legal standing
2.13
The bill provides that a 'supplier whose interests are affected by the
conduct' (being the breach of the CPRs) may make an application to the FCC for
an injunction or compensation.[25]
Dr Seddon expressed a view that the ground for legal standing is more stringent
than Australia's actual or potential obligations under extant international
trade agreements, and would therefore be inconsistent with the Australian
United States Free Trade Agreement (AUSFTA) and the GPA. The wording of AUSFTA is
a 'procurement in which the supplier has, or had, an interest'. The wording of
the GPA is a 'procurement in which the supplier has, or has had, an interest'.
This wording confers standing on any supplier that tendered for the procurement
without the supplier being adversely affected by the breach of the CPRs.[26]
2.14
Dr Seddon said that the legal test that a supplier must establish that
its interests 'are affected by' the breach of the CPRs raises the issue of
causation and remoteness. The legal test does not address the circumstance of
unfair procurement processes, irrespective of the outcome. Dr Seddon explained:
It could be argued that a complainant under proposed
legislation must be able to show that the breach of the [CPRs] has impacted in
some measurable way on the complainant. This could raise some difficult issues
of causation. It could be argued that the complainant's interests were not
affected by the breach the subject of the complaint unless the complainant can
demonstrate that it would have won, or at least had a good chance of winning,
the tender absent the breach. This would be a very difficult burden to
discharge. In short, it would be possible for the procuring entity to respond
to the complaint by saying "Yes we failed to follow the Rules, but it
would have made no difference to you because your tender was not in the
running". A court may be persuaded by this argument either in refusing an
injunction or declining to award compensation.[27]
2.15
The Australian Small Business and Family Enterprise
Ombudsman (ASBFEO) and the Defence Teaming Centre (DTC) both observed that
the bill is unclear as to whether subcontractor suppliers can bring an
injunction against a prime contractor for a breach of the CPRs. The DTC suggested
that subcontractor suppliers should have access to the complaints mechanism
provided by the bill.[28]
2.16
In answers to questions taken on notice, Finance advised that 'the
supplier does not need to demonstrate that they would have been awarded the
contract had the breach not occurred'.[29]
2.17
Furthermore, Finance also noted that 'the new complaints
mechanism is therefore available to any supplier whose interests are affected
by the alleged breach of the relevant CPRs' including 'both primary contractors
and subcontractors'.[30]
Finance also clarified that
'a complaint or action must be made against the procuring entity, because they
are responsible for the procurement process and whether it adheres to the
CPRs', rather than a subcontractor making a complaint against a primary
contractor.[31]
Access to justice for small and medium size business enterprises
2.18
A number of submissions expressed concerns about the ability of small
and medium size business enterprises to utilise the FCC as a complaint
mechanism. The Australian Fair Trade and Investment Network Ltd (AFTINET) noted
that the addition of a formal judicial appeal process may discourage small and
medium-sized enterprises from tendering.[32]
The Australian Council of Trade Unions agreed, adding that the process will
bring an additional cost and resource impost that comes with layers of legal
complexity.[33]
The ACCI and the AMWU were concerned that the selection of the court as the
body to hear applications for judicial review may restrict access for some
businesses who consider the procurement process to have been unfair.[34]
2.19
The CCIQ argued that the FCC, in having been granted substantial powers
to determine the injunction and award compensation, has the result that
preparation of the necessary documentation will fall in favour of large
suppliers with legal capacity and/or funding over small and medium enterprises
(SMEs) that may have limited funding and/or legal expertise. This will limit
the capacity of those SMEs who lack internal legal expertise to raise and
escalate concerns formally, or for those organisations which may require expensive
legal expertise.[35]
2.20
The Australian Small Business and Family Enterprise Ombudsman (ASBFEO)
explained that a review process through the FCC:
[P]resents a costly and often complex pathway for redress for
many small businesses due to the time and costs associated with the provision
of legal advice and support necessary to realise a claim lodged with a court.[36]
2.21
Submitters contended that SME suppliers should have access to an
ombudsman,[37]
or an alternative dispute resolution mechanism as a step in the process,[38]
or an industry advocate.[39]
Alternatively, jurisdiction should vest with a lower court or tribunal such as
the Administrative Appeals Tribunal rather than the FCC.[40]
2.22
In answers to questions on notice, Finance considered the FCC to be the
appropriate forum as it can hear suppliers' complaints with greater timeliness,
and it is the only court at the federal level with a continuous presence
outside the major capital cities. This is particularly important for suppliers
based in regional parts of Australia. Finance also noted that the FCC option to
be about half the cost of other options, such as the FCA to which suppliers can
currently take their complaints.[41]
Finance noted its expectation that the impact of this bill on SMEs will be
positive because suppliers:
...will have access to a more timely and effective and lower
cost complaints mechanism for government procurement. Guidance and information
on the new complaints mechanism will be available to assist them in
understanding with understanding how it will operate.[42]
2.23
Finance also observed that SMEs can access support through ASBFEO who
can 'provide assistance with resolving disputes with government agencies', and
that all existing complaints mechanisms will remain in place.[43]
Implementation and operational concerns
2.24
Some submitters commented upon a number of issues concerning the
implementation and operation of the complaints mechanism.
2.25
Defence noted its concerns, specifically:
-
its preference that consideration be given to enabling
departments to issue blanket public interest certificates for certain classes
of or categories of procurements where it is against the public interest or the
procurement to be suspended;[44]
-
that other tenderers may lodge their own complaints for
compensation on the basis of costs arising as a result of a suspended
procurement.[45]
As a consequence additional complaints may be received in the event a
complainant is successful regarding a breach of the CPRs;[46]
-
possible delays to procurement caused by the suspension of the
procurement process may have the unintended consequence of significantly
increasing the costs of tendering, or alternatively, resulting in the need for
tenderers to update or review their pricing;[47]
and
-
the impact on departmental budgets of successful claims for
compensation in the event of a breach of the CPRs.[48]
2.26
Defence indicated that it was discussing concerns with Finance and
expected that many of questions would be addressed through Finance's implementation
guidance and Defence's own policies, guidance and contract templates. It noted
that the six months allowed for commencement following Royal Assent were
expected to be used to settle administrative detail and practices.[49]
2.27
In relation to Defence's concerns as to the quantum of compensation
payable based on the reasonable expenditure incurred in preparing a tender, the
Defence Teaming Centre (DTC) stated:
It is not clear from the Bill or Explanatory Memorandum what
can be considered as the preparation of a tender. Defence procurement strategy
seeks to minimise risk. This can mean that in order to contract with Defence,
either directly or indirectly as a subcontractor through a Prime Defence
Contractor, businesses will often have to demonstrate the required
infrastructure is in place at the tender stage of the procurement. As
such, a business can be required to make a significant investment prior
to the awarding of a contract.[50]
2.28
DTC also expressed concern that the FCC has the power to suspend
procurements, noting the adverse effect to industry not involved in the
complaint through costly delays to the overall procurement. DTC contends the
delay or suspension should only apply to the specific part of the procurement
in question rather than the entire procurement.[51]
2.29
Finance indicated that covered procurements are typically procurements
of a higher value than are conducted through open tenders. Based on other
countries that have similar review arrangements, including Canada, Finance
considered that the potential number of applications for injunctions or
compensation will be low.[52]
2.30
Finance observed that to be successful in an application to the FCC a
supplier must demonstrate a breach of the relevant CPRs occurred in relation to
a covered procurement in which they have an interest. Finance's clear advice to
procurement entities is to maintain clear records documenting their procurement
processes, including decisions made, evaluation reports, delegate approvals,
and communication with suppliers, all of which will assist in responding to any
complaint from a supplier, and demonstrating to the FCC that the procurement
entity has complied with the requirements.[53]
2.31
In response to Defence's concerns around the budgetary impacts of
compensation claims, Finance noted that 'procuring entities need to be aware '
of the costs incurred by suppliers that 'participate in a procurement process'.[54]
Finance also noted that:
potential compensation is limited to the reasonable costs
incurred by the supplier in connection with preparing their tender, making a
complaint, and attempting to resolve the complaint. [55]
2.32
Finance also explained that the purpose of suspending a procurement is
'to preserve the supplier's ability to participate in the procurement if the
outcome of the complaint is in their favour'.[56]
A procurement may only remain suspended so long as the complaint is being dealt
with by the procuring entity or the FCC.[57]
Committee view
2.33
The committee supports the legislation as a necessary step to meet
Australia's expected obligations at international law on the World Trade
Organisation Agreement on Government Procurement (GPA), and the Trans-Pacific
Partnership Agreement (TPP) entering into force. The GPA is an important
opportunity to expand market access for Australian businesses, to enable the
sale of goods and services to foreign governments. Further, the bill recognises
the Senate Finance and Public Administration References Committee's finding
that there is a 'lack of effective complaints process' for government
procurement and a need to 'establish an independent and effective complaints
mechanism for procurement processes'.[58]
This is particularly important for Australian small businesses, who can obtain
more affordable access to justice through the FCC.
Time limit for applications for an
injunction
2.34
The committee is satisfied that the 10 day time limit is appropriate to
ensure that complaints are lodged in a timely manner. When suppliers are presented
with genuine circumstances that prevent them from lodging their complaint
within 10 days of the alleged infringement of the CPR's, the court has a very
wide discretionary power to grant exemptions.
2.35
The committee also notes Finance's advice to procurement entities is to
maintain clear records documenting their procurement processes, including
decisions made, evaluation reports, delegate approvals, and communication with
suppliers,[59]
all of which will assist in responding to any complaint from a supplier in a
timely manner.
Legal standing
2.36
The committee considers the legal test for standing in the bill to be
appropriate to the circumstances. In limiting applications for judicial review
to those suppliers who have a direct and meaningful interest in a procurement,
the process avoids spurious applications. The committee notes Finance's advice
that suppliers do not need to demonstrate that they would have been awarded the
contract, but simply that a breach of the CPRs has occurred. The committee also
highlights that both primary contractors and subcontractors are able to make
complaints directly to the procuring entity, both prior to, and as part of
complaint to the FCC. The content of the CPRs as they relate to fair processes
appropriately remains a matter for the executive government.
Access to justice for small and
medium enterprises
2.37
The committee agrees that the FCA and FCC provides an accessible,
cost-effective and timely mechanism for procurement complaint resolution for
all businesses involved in Australian Government procurement. The judicial
review mechanism is in addition to, and not in substitution of, existing
mechanisms. The mechanism is cost effective compared to existing avenues for
redress, and therefore to the benefit of SMEs in respect of accessibility, cost
and timeliness. The committee highlights that the resources of the ASBFEO will
continue to be available to SMEs who require assistance lodging complaints
relating to government procurement.
Implementation and operational
concerns
2.38
The committee notes that there are implementation issues which require
further consultation, however, these issues are machinery matters. It is
appropriate that issues with respect to implementation are addressed after the
passage of the bill. The committee strongly encourages Finance to consult
closely with the broader public service on the implementation and operation of
the complaints mechanism.
Recommendation 1
2.39
The committee recommends that the Senate pass the bill.
Senator James Paterson
Chair
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