Judicial review of Commonwealth procurements – what will it mean for you?
New Bill would allow suppliers to seek injunctions or compensation breaches of the Commonwealth Procurement Rules
On 24 May 2017, the Government introduced the Government Procurement (Judicial Review) Bill 2017 (Bill) into the Parliament. The Bill is intended to implement Australia’s international obligations under the Trans-Pacific Partnership and the World Trade Organization Agreement on Government Procurement, to which Australia is currently attempting to accede.
The Bill would, if passed, allow suppliers to seek injunctions or compensation in the Federal Court or Federal Circuit Court for breaches of the Commonwealth Procurement Rules (CPRs), or proposed conduct that would breach the CPRs.
What procurements would the Bill apply to?
As drafted, the Bill will apply to ‘covered procurements’, being procurements that are subject to both Division 1 and Division 2 of the CPRs, and which are undertaken by non-corporate Commonwealth entities and corporate Commonwealth entities which are designated under rule 30 of the Public Governance, Performance and Accountability Rule 2014 (Cth). This includes corporate Commonwealth entities such as the National Gallery of Australia, Comcare and CSIRO.
A procurement will be subject to both Division 1 and Division 2 of the CPRs if it exceeds the relevant procurement threshold ($80,000 for a non-construction procurement by a non-corporate Commonwealth entity), and does not fall within the exemptions under Appendix A to the CPRs. Those exemptions include leasing land, procurement of motor vehicles, engaging legal counsel and procurements for certain national security agencies such as the Defence Intelligence Organisation.
As noted in our previous article on the then foreshadowed Government Procurement (Judicial Review) Bill, it will be interesting to see whether the Government will seek to amend the procurement thresholds under the CPRs, as some of the current thresholds (including the $80,000 for a non-construction procurement by a non-corporate Commonwealth entity) are significantly lower than the maximum allowable by the treaties which the Bill is trying to implement, which is about $240,000 for non-construction procurements.
If the procurement thresholds remain as they are now, up to 33 percent of Commonwealth procurement processes could be subject to the new judicial review procedures.
The Bill will only allow for review of alleged breaches of the CPRs that occur after it enters into force. It should be noted, however, that it will (as currently drafted) apply to procurements that commenced before the Bill is passed if the alleged breach of the CPRs occurred after the Bill is passed.
As anticipated in our earlier article, the Bill, as drafted, provides for two types of redress for breaches of the CPRs, namely injunctions and compensation. We have discussed the process for these actions below.
Suppliers whose interests are affected by a contravention, or proposed contravention, of the CPRs will be able to seek an injunction regarding the contravention. This would involve following the following steps:
Step 1 – Complaint to the agency
First, the supplier must make a complaint to the relevant agency. This complaint will suspend the procurement until the complaint (or any subsequent legal claim) is resolved, unless the accountable authority of the relevant Commonwealth entity issues a public interest certificate stating that it is not in the public interest for the procurement to be suspended. The agency is required to investigate the conduct of the subject of the complaint.
Step 2 – Application for injunction
Provided that the supplier has made a complaint, they will be able to seek an injunction in the Federal Court or Federal Circuit Court. The court must not grant an injunction unless the supplier:
- has made a complaint to the relevant entity
- has made a ‘reasonable attempt to resolve the complaint’ if it would be reasonable for the supplier to do so
- applied within 10 days of the alleged contravention of the CPRs, or the day on which they became aware, or ought reasonably have become aware of the contravention
- obtained an extension of time to make the application on the basis that their delay was attributable to their reasonable attempt to resolve their complaint concerning the alleged contravention, or there are special circumstances warranting a greater period.
The Bill anticipates injunctions both to compel the relevant agency to cease doing something (or not to do something) that would breach the CPRs, and injunctions requiring the agency to positively do something or take a course of action so as to comply with the CPRs. It should be noted, however, the court will not have the power to overturn a contract once it has been awarded.
If a public interest certificate has not been issued regarding the procurement, the procurement will remain suspended until the Court makes its findings.
The Bill also permits suppliers to make claims for compensation where their interests are affected by a contravention or proposed contravention of the CPRs. Such claims can seek an amount not exceeding the supplier’s reasonable expenditure in preparing their tender, making a complaint in relation to the alleged contravention of the CPRs and seeking to resolve the complaint.
As currently drafted, the Bill would allow suppliers to claim compensation without having made a complaint to the relevant Commonwealth agency first and the Bill does not provide any limitation period within which claims for compensation need to be made.
If passed in its current form, the Bill will significantly change the way agencies will have to deal with procurements, by:
- freezing procurement processes, in the absence of a public interest certificate, if a complaint or an application for an injunction is made, which could significantly delay procurement processes
- providing a process for suppliers to challenge procurements, including by seeking injunctions requiring an agency to do something required by the CPRs, or omit from doing something prohibited by the CPRs
- allowing tenderers to seek compensation where their interests are affected by a contravention or proposed contravention of the CPRs.
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