Procurement (Enforceable Procurement Provisions) Direction 2019 – Nsw – “clayton’s” Protection for Sme’s?

1 June 2020

This NSW provision hangs off the state “version” of the legislation the Commonwealth required New South Wales to enter into pursuant to the Trans-Pacific Partnership Agreement as incorporated into the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (TPP-11)) with the USA and others.

It is to do with, amongst other things, giving tenderers some recourse in the event of inappropriate procurement activity by NSW Government agencies. It is very differently based to that the Commonwealth introduced.

Granted it was drawn before COVID 19 changed things, but it seem, now, a bit odd to me to have provisions so intent on aiding overseas suppliers. However, that is a policy issue, distinct from legal concerns.

In some ways the Direction just seems to repeat the long standing provisions about the need to go to market in an open, transparent and open competition way.

What I find concerning, from the perspective of potential suppliers to NSW government agencies, is that the Direction has a number of “sleeper” provisions which could operate to exclude particular providers and/or exempt whole types of procurement.

“Sleeper Provisions”

Whilst I don’t see that as the intention, I draw attention to the following: –

    1. Schedule 1 lists all the government agencies to which it is applied;
    2. Oddly, the Privacy Commissioner is exempt but not the Privacy Commission [schedule 1];
    3. It is important to note that by virtue of clause 6 (4), the threshold for the Enforceable Procurement Principles (EPPs) becoming “enforceable” is $9,247,000 for “construction services” and $657,000 for goods “or any other services” [“services” not being defined];
    4. Whilst, by virtue of definitions, it is clearly to apply to “construction services” and “goods”, it would appear less certain how well it will apply to “services”;
    5. Clause 4 renders a whole string of things to be “enforceable” but, in a sense, they are nothing different to what has been seen for years and I note that, by virtue of clause 5, they override any other policies;
    6. Making general procurement policies “enforceable” does not apply, by virtue of clause 6 (2) (a), to excluded procurements listed in Schedule 2 and that includes part of procurement that is a preference measure, as set out in schedule 3;
    7. Clause 10 allows government agencies effectively to outsource procurement functions but obliges the private sector operator to comply with the legislation;
    8. Clause 12 allows government agencies to exclude suppliers on certain grounds which include “insolvency” which might technically but inadvertently exclude a lot of people during this COVID-19 recovery period and I note that “supplier” is defined in a way to include directors and managers of the “supplier”;
    9. Clause 15 deals with circumstances in which limited tendering is permitted.  The provisions are not all that unusual, though the width of the terms and breadth of exemptions are such that I fear there will be potential for the system to provide none of the suppliers envisaged by the Free trade Agreement.;
    10. I note that much of what Transport does is exempt;
    11. Given the width and loose wording of many of the items set out in Schedule 2, I fear it will be open to “interpretation”. For instance:-
      1. Does not 5, facilitate “grants”, skirt procurement requirements?
      2. Does not 6, by allowing staff to be employed from “labour hire” companies, create problems from an industrial law and recruitment policy perspective?;
      3. The words “health and welfare services” and “education services” are potentially so wide for the purposes of paragraph 9 and 10 as to undo any protection the Direction would otherwise afford;
      4. Oddly and in something of an historical throwback, paragraph 18 excludes engagements of  an “expert” on context of litigation, such as  “counsel or barristers”, but does not refer to solicitors who are often referred to as “counsel”;
      5. The width of paragraph 20, in allowing more “grant” arrangements to skirt procurement procedures is interesting and possibly concerning; This is an issue which has been of concern to me for many years as involving potential avoidance of the procurement rules;
    12. Schedule 3 lists exempt measures, including preferences and paragraph 3 is interesting suggesting that a preference to benefit “small and medium enterprise” will be exempt will not be in breach of free trade
    13. It’s also interesting that contracts to do with storage and hosting of sensitive government information are exempt. Whilst one can see some reason for that, care will have to be taken to ensure compliance with archive legislation.

Time will tell whether the protections envisage actually manifest.

The above was prepared for and is intended to provide a broad general overview of issues. It is not intended, and must not be relied upon, as definitive legal advice.

Eakin McCaffery Cox Commercial Lawyers

Level 28, 1 Market Street Sydney NSW 2000
PO Box Q1196 QVB NSW 1230; DX 1069 Sydney

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