Procurement and Contracts Operational Handbook

November 2012

Contents

Foreword

The DFAT Procurement Operational Handbooksets out the procurement policy for the department. The Handbook provides departmental officers up to date policy and guidance on procurement and contracts governance matters. The Handbookshould be used in conjunction with other departmental policy documents such as the Chief Executive's Instructions (CEIs), Finance Management Manual (FMM) and other relevant Commonwealth and departmental guidelines and templates.

The Handbook incorporates requirements under theFinancial Management and Accountability Act 1997, the Financial Management and Accountability Regulations 1997 and the Commonwealth Procurement Rules. Effective management of the procurement process, from the conception of an idea through contract to project closure and evaluation, is vital to the department in delivering its outcomes most efficiently and effectively.

The Chief Finance Officer (CFO) is the sponsoring authority for the Handbook. The ultimate objective of the Handbook is to provide clear guidance on operational procurement and contract management processes and procedures in a user-friendly and practical manner.

I trust you will find this document to be a useful and informative resource as you conduct your procurement activities in the department.

Ann Thorpe

Chief Finance Officer

Department of Foreign Affairs and Trade

Introduction

Overview

The guidance provided in the HANDBOOK incorporates mandatory procurement requirements drawn from higher level Commonwealth procurement guidance, in particular the Commonwealth Procurement Rules (CPRs). These requirements are mandatory for all departmental officials. The HANDBOOK is the primary reference document for all departmental officials involved in the procurement process. Departmental officials, for the purpose of this manual, include permanent and non-ongoing staff and contractors involved in procuring goods and services on behalf of the department or using funds of the department.

The CFO is the sponsoring authority for the HANDBOOK. Within CMD the HANDBOOK is maintained by the Procurement, Travel and Comcover section (PTC) in the Finance Management Branch (FMB) with assistance from a wide range of specialist areas.

Commonwealth Procurement Framework

Procurement conducted by Commonwealth appropriation-funded agencies is governed by a legislative and policy framework comprising:

• the Financial Management and Accountability (FMA) Act 1997;

• the FMA Regulations 1997 ; and

• the CPRs and related Department of Finance and Deregulation (DOFD) Finance Circulars.

FMA Regulation 7(2)) requires officials undertaking procurement to act in accordance with the Commonwealth Procurement Rules (CPRs).

Procurement in the Department of Foreign Affairs and Trade is further governed by a series of policy and procedural documents that apply in the following hierarchy:

• Chief Executive's Instructions (CEIs); and

• Finance Management Manual (FMM)

The FMM Section 8.7 (Procurement) requires departmental officials performing duties in relation to procurement to comply with the HANDBOOK.

What is procurement?

Procurementencompasses the whole process of acquiring and utilising goods or services. It begins when the department has identified a need and decided on its procurement requirement.

The procurement cycle continues through the processes of risk assessment, seeking and evaluating alternative solutions, contract development and award, delivery of and payment for the goods or services and, where relevant, the ongoing management of a contract and consideration of contract extension options and contract variations.

In addition to the acquisition of goods or services by the department for its own use, procurement also encompasses a situation where the department, from its appropriations, is responsible for the procurement of goods or services for other agencies, or for third parties (e.g. where we procure security services for a site and recover a portion of the cost from other co-located agencies that benefit from the service).

What is not procurement?

This Manual does not cover spending proposals that are not procurements.

While procurement relates to the acquisition of goods or services, it does not include:

grants (whether in the form of a contract or conditional gift);

investment (or divestment);

sales by tender;

loans;

purchases of goods or services for resale or of goods or services used in the production of goods for resale;

any property right not acquired through the expenditure of public money - for example, a right to pursue a legal claim for negligence;

statutory appointments;

appointments made by a Minister using the executive power - for example, the appointment of a person to an advisory board; or

the engagement of employees - such as under the Public Service Act 1999, the Parliamentary Services Act 1999 and the department enabling legislation, or under the common law concept of employment.

Roles and Responsibilities of PTC

Procurement functions within the department are highly devolved. The department employs procurement specialists to assist staff in some line areas conducting a high number of and/or high value procurements. In line areas that do not have dedicated procurement specialists (principally policy divisions and posts), procurement is undertaken by officers on a needs basis with advice and assistance from PTC, budget and divisional coordinators or Senior Administrative Officers (SAO).

PTC's role involves providing policy advice on departmental procurement matters; procedural advice on high-value, and high-profile procurements;setting and maintaining currency of the department's procurement policies and associated guidelines and templates; and providing a governance framework for procurement and contract management matters in the department through procurement policy oversight, strategic analysis of trends and reporting.

Departmental officers undertaking procurement should, in the first instance, refer to the HANDBOOK for advice regarding the department's procurement policy, processes, guidance and templates.

CHAPTER1– Risk Management

Section 1:Introduction

A documented risk assessment must be completed and kept on file for all procurements valued at or above $50,000. The result of risk assessments is an important factor in determining the type of contract to be used.

Division 1 of the Commonwealth Procurement Rules (CPRs) encourages officials undertaking procurements to have a documented risk management strategy that enables procurement officials and contract managers to examine the impact of each potential risk, meet any compliance standards, make better business decisions, plan proactive communications including management strategies and enhance the potential for the procurement success.

The risk management process detailed in this chapter is consistent with the framework contained in the DFAT Risk Management Handbook. The Risk Management Handbook provides the foundation for implementing, monitoring, review and continual improvement of risk management across the department.

Section 2: Managing risk

Background

Managing risk is an integral part of good procurement practice. The application of a risk management process improves procurement outcomes by:

• identifying and reducing exposure to risk;

• providing greater certainty and insight to support decision-making; and

• improving contingency planning for dealing with risks and their impacts.

What is risk in procurement?

Risk is the possibility that an expected outcome will not occur or that an unforeseen event, usually detrimental to the outcome sought through the procurement process, will occur.

Risk is usually measured by:consequences - what will happen; andlikelihood - the chances of it happening.

How to manage procurement risks?

Risk management identifies potential risks, analyses their consequences, and develops mitigations strategies. The aim is to achieve reliable planning, improved decision making and greater certainty of outcomes.

The risk management process is applicable to all stages of procurement and is an integral part of good procurement management. Effectively managing risk can lead to significant savings in resources, timely delivery and improved quality of services and relationships with clients.This should also include consideration of industrial relations, ecologically sustainable development, Work Health & Safety (WHS) management and economic issues.

Risk management activities should always add value to the procurement process. The effort expended in managing risk should be commensurate with:

• the nature of the procurement;

• the cost of the procurement;

• the complexity of the procurement; and

• the significance of the procurement to DFAT and the Commonwealth.

Procurement risk assessment

It is mandatory to prepare a risk management assessment, however the level of the risk assessment should be commensurate to the size and scope of the procurement. Consideration should be given to the requirement of the delegate, needs of the project, its corporate goals, the services it intends to secure, and the specific strategies adopted.

Risk management monitoring

As risks may change during the course of a procurement project, it is necessary to periodically review and, where necessary, update the initial risk assessment.

Section 3: The procurement risk management process

Background

The process outlined in this section is largely sequential. In practice, however, it is often necessary to revisit previous stages as the process proceeds and to reconsider earlier decisions when new information becomes available.

The DFAT Risk Management Handbook outlines the department's risk management process in detail. The following paragraph provides a summary of what each stage in the process entails.

Stages in procurement Risk management

Establishing the risk context

This is the preparatory stage. It results in familiarity with the proposed procurement, and identifies key parameters and assumptions. Consider those factors which may influence performance of the procurement activity, and the risks that it will be exposed to. In particular:

• What is the activity to be considered or decision to be made?

• What are the circumstances of the activity? <

Define the criteria against which to judge identified risks. In the planning stages of the procurement, the criteria will reflect strategic concerns. In the contract management stage the criteria are likely to concern efficient completion, cost control, quality and compliance. When identifying risk, it is often helpful to break the activity down into the major elements or stages. For example, procurement can generally be broken down into planning, approaching the market, evaluating submissions and contract management stages.

Identifying potential risks

This stage identifies the risks that might affect each major element of the procurement process. The aim is to create a comprehensive list of risks and document what each involves.

Consider all risks, whether or not they are under the control of the department. Think about what, why and how things might affect the action or decision.

What can happen? Compile a list of the possible events that could have an unwanted or unintended effect on the procurement. Consider the full life-cycle of the good or service, and include problems that may arise after the goods are received or the service performed.

How and why could it happen? Explore the events identified in the first question for their possible causes and implications.

Analysing risks

The next stage is to estimate the likelihood of a risk arising and its potential consequences.

Determine the overall risk level by combining estimates of likelihood, and consequence in the light of existing controls. Existing controls are the management and other systems that are already in place to control risk.

The analysis of likelihood and consequence may be undertaken to varying degrees of refinement, depending on the scale of potential risk and information available. The greater the potential risk, the greater the level of analysis required. The main questions are:

• How likely is the event?

• What are the consequences of the event?

• What is the overall magnitude of the risk?

Evaluating risks

Risk evaluation decides which risks need treatment, and determines priorities for treatment. Think about:

• Which risks are acceptable?

• Which risks should be avoided?

• Which risks require treatment?

In the first instance, you should consider whether the risks are acceptable. This may determine whether the risk needs treatment or whether the activity should be undertaken. This assessment should take account of:

• the importance of the procurement;

• the degree of control that the department has over each risk, and

• the overall impact of the risk (as assessed using the matrix).

A risk treatment is unlikely to eliminate a risk completely. It is important that the residual risk is accurately identified and that there is a clear acceptance of this residual risk. The acceptable risks and the reasons why they are acceptable should be documented, together with the results of the assessment.

Treatingrisks

Risk treatment must be appropriate to the significance of the risk and the importance of the activity.

For high priority risks requiring treatment, this stage involves:

• What are the potential treatment options?

• evaluating and selecting appropriate options; and

• What are the risk treatment plans?

Risk treatment options may include:

avoiding the risk by either discontinuing the activity or using alternative means to achieve a similar outcome;

transferring the risk. Insurance is a common risk transfer strategy. Contracts and specific terms of a contract between DFAT and its service providers are the primary means of allocating risks between the parties involved in procurement; or

accepting risk when it cannot be avoided or transferred, or the cost of doing so would not be worthwhile. It is recommended that risk reduction or impact mitigation measures and monitoring be employed in these circumstances, as appropriate.

Monitoring and reviewingrisks

Few risks remain static. Consequently it is necessary to monitor risk treatment options or plan and the effectiveness of its implementation.

It is not always sufficient to simply undertake a risk assessment at the procurement stage. Risk assessment relating to procurement should be regularly reviewed to ensure its ongoing relevance, and amended if circumstances change.

CHAPTER 2 - Probity

Section 1: Introduction

Scope and Application

Policies and principles contained in this chapter apply to all DFAT employees and anyone providing services to DFAT in the capacity of a contractor or volunteer.

Policy

Ethics and probity are to be integrated throughout the entire procurement process, from when a need is first identified through to the ongoing management of a contract.

Section 2: Ethics and Probity in Procurement

Principles

Probity is the evidence of ethical behaviour, and can be defined as complete and confirmed integrity, uprightness and honesty in a particular process.

The principles underpinning ethics and probity in Australian Government procurement are:

• Officials must act ethically, in accordance with the APS Values (set out in section 10 of the Public Service Act 1999) and Code of Conduct (set out in section 13 of the Public Service Act 1999), at all times in undertaking procurement.

• Officials must not make improper use of their position.

• Officials should avoid placing themselves in a position where there is the potential for claims of bias.

• Officials must not accept hospitality, gifts or benefits from any potential suppliers during a tender process.

• Agencies must not seek to benefit from supplier practices that may be dishonest, unethical or unsafe.

• All tenderers must be treated equitably. This means that all tenderers must be treated fairly - it does not necessarily mean that they are treated equally.

• Conflicts of interest must be managed appropriately.

• Probity and conflict of interest requirements should be applied with appropriate and proportionate measures informed by sound risk management principles.

• Value for money outcomes are best served by effective probity measures that do not exclude suppliers from consideration for inconsequential reasons.

• Confidential information must be treated appropriately during and after a procurement process.

• External probity specialists should only be appointed where justified by the nature of the procurement.

• The appointment of external probity specialists does not remove an agency's accountability for the procurement process.

Practice: Ethics and Probity in Procurement

Identification and Management of Actual, Potential and Perceived Conflicts of Interest

A conflict of interest arises where an official, an adviser or a supplier has an affiliation or interest that might prejudice, or be seen to prejudice, his or her impartiality.

The APS Code of Conduct requires APS employees to disclose, and take reasonable steps to avoid any conflict of interest (real or apparent) in connection with APS employment.

Officials should seek to eliminate actual, potential and perceived conflicts of interest. When this is not possible (such as where it would exclude needed expertise or the conflict is so widespread as to be impossible to avoid completely), effective management strategies should be implemented.

Officials must be mindful of potential conflicts of interest that might arise and must not use their position to gain or seek to gain a benefit for themselves or any other person. Officials should strive to avoid situations in which there may be actual, potential or perceived of conflicts of interest including not allowing themselves to be improperly influenced by family, personal or business relationships.

Effective management of conflicts of interest does not require conflicts to be avoided at all costs; rather, they must be managed appropriately.

Process advisers, probity advisers and probity auditors

External probity experts may include 'process advisers', 'probity advisers' and 'probity auditors':

• A 'process adviser' generally provides advice on the overall tender process to appropriately address any probity issues, as well as on specific probity related matters. Such an adviser could provide advice on drafting, implementing and monitoring compliance with a comprehensive procurement plan.

• A 'probity adviser' would typically advise on probity issues as they arise during a tender process, possibly in accordance with a probity plan that provides guidance on how probity is to be addressed during the procurement. If the probity expert is an adviser and will not be involved in auditing the process, they can offer advice and solutions if any problems occur.

• A 'probity auditor' seeks to report an objective opinion on probity issues, generally after the process has been completed. A probity auditor should not be called in during a process to try and remedy problems, but could provide sign-off after a problem has occurred to ensure the probity issues have been addressed and it is appropriate to continue with the process. If a probity expert is engaged as an auditor, they need to maintain their independence and objectivity, and should therefore not be involved in offering advice to solve any probity problems that arise during the tender process.

Appointing Probity Experts

The appointment of probity experts must be treated as a separate procurement and be undertaken in accordance with the Commonwealth Procurement Rules (CPR's).

External probity specialists should be appointed where justified, and not automatically just because an open tender process is being undertaken. The decision on whether to engage an external probity specialist should weigh the benefits of receiving advice independent of the process against the additional cost involved and include consideration of whether or not skills exist within the agency to fulfil the role.

The role of a probity expert can be addressed within either a probity plan or a procurement plan. It is important that the probity plan is carefully drafted and all parties clearly understand the role a probity expert is being engaged to perform. Before the process commences, all parties should have a clear understanding about the level of assurance that the agency will be seeking from the adviser. Probity experts should be independent and free from conflicts of interest, and have a sound knowledge of all relevant government policies and procedures. Sign-off by external probity experts cannot replace officials' own accountabilities and obligations in regard to the proper conduct of procurement activities.

Tips: Ethics and Probity in Procurement

Mechanisms for assuring probity should be applied sensibly in procurement processes, with the management of probity issues tailored to each individual process.

Care should be taken to avoid setting requirements which are not intended to be followed or will require an obligation that does not deliver value for money.

The tender evaluation criteria advertised in the request documentation must be used to evaluate the tenders and must be related to the tender response requirements.

The tender evaluation criteria in the request documentation must not be altered during the evaluation process without a formal request documentation amendment process.

Sound records management is important to demonstrating that probity has been addressed appropriately in procurement process.

Officials must appropriately protect confidential information and not use inside information (including intellectual property) provided to the agency in relation to the procurement, either for the material benefit of the official or for another person.

It is important to clearly demonstrate that all decisions were made using proper and ethical processes. Again, proper documentation of the issue is important and external assistance may be warranted.

Where elements of the APS Values and Code of Conduct are to be observed by a contractor, the relevant contract should explicitly state the obligation.

People involved in the tender process should make written declarations of any actual, potential or perceived conflicts of interests prior to taking part in the process. These people should also have an ongoing obligation to disclose any conflicts that arise through until the completion of the tender process.

The rules for the tender should:

• make clear to tenderers what steps will be taken in the event of actual, potential or perceived conflicts of interest being identified (arising prior to and during a tender process) in relation to the tenderer;

• make clear what steps will be taken in the event of actual, potential or perceived conflicts of interest being identified; and

• include arrangements to deal effectively with incumbent suppliers (if any) during a tender process.

Tender documentation, including any draft contract, should make clear the arrangements that will apply to any actual, potential or perceived conflicts of interest once a supplier is contracted. Disclosure requirements should be clear, with appropriate and proportionate measures, informed by sound risk management principles, included in the contractual arrangements to address any such conflicts of interest.

Tender documentation should make it clear that late tenders will not be accepted.

Section 3: Code of Conduct in Procurement and Contracting

Practice: Code of Conduct in Procurement and Contracting

Particular situations in which DFAT officials should exercise care include those where gifts, travel, or conflicts of interest could give rise to a perception of bias.

Gifts and Hospitality

Officials must not improperly use their position to gain a benefit, gift or hospitality.

Hospitality can include presentations, demonstrations, briefings and discussions, accompanied by meals. Travel and accommodation is covered at 3.1.2.

Social contact with potential and known suppliers should be avoided during the period an Approach to Market (RFT, RFQ, verbal and written quotations etc) is underway and before contractual arrangements are finalised. Offers of hospitality and entertainment must not be accepted by DFAT staff during these times and must be disclosed in accordance with relevant DFAT guidelines.

Travel and Accommodation

Usually, DFAT provides for the business travel and accommodation requirements of its staff. A business may only provide travel and accommodation for DFAT staff in circumstances directly related to a formal contractual arrangement and where such an arrangement cannot be seen as creating a conflict of interest.

Conflicts of Interest

Officials should ensure that all interactions with businesses will be able to withstand public scrutiny.

Examples of conflicts include officials involved in a procurement having material share holdings, controlling interests or management authority in an entity competing for the department's business, unauthorised disclosure or personal use of any information which would result in insider trading or a DFAT officials engaging in dealings with suppliers that may benefit a member of the official's family.

Whether the conflict of interest can be avoided or not, officials must declare it promptly in writing to their supervisor and arrangements must be put in place to avoid or remove the conflict. This may include excluding the official from any further participation in a procurement process.

Commercial-in-Confidence

Contracts with DFAT provide specific guidance on the identification and treatment of confidential material, personal information and freedom of information requirements.

Information exchanged between DFAT and its business partners is frequently classified as 'Commercial-in-Confidence'. As stated in the department's standard contracts, Commercial-in-Confidence information does not preclude the information being disclosed where there is a legal requirement to do so including the requirement to disclose information to the Parliament or its Committees.

Officials must follow the 'need-to-know' principle when handling information that is classified 'Commercial-in-Confidence'.

Section 4: Probity Guidelines for Evaluation Panel Members

1. Do not provide information, verbally or in writing, to any individual or organisation concerning the tender process unless you have been specifically authorised to do (see below for details of the contact officer for the obtaining of authorisation).

2. Make clear in response to any inquiry that:

a. you cannot provide information concerning the tender process unless you are authorised to do so; and

b. the inquiry cannot be made 'in-confidence' and will be referred to the contact officer.

3. Maintain a record of any requests for information, and report to the contact officer.

4. If authorised to provide information to tenderers, ensure consistent information is provided to all potential tenderers. For procurements above the relevant procurement thresholds, this may include releasing addenda.

5. Do not disclose any confidential information about a potential tenderer to other potential tenderers.

6. If authorised to respond to tenderers after the tender closing date, do not discuss any information with a tenderer that comments on or makes a comparison with another tenderer's proposal.

7. Ensure the security of all confidential information relating to the tender process.

8. Do not consider unsolicited references or submissions by tenderers outside those provided for in the tender process.

Section 5: Probity Guidelines for Management of and Access to Procurement Records

Overview

Maintaining the highest levels of confidentiality is essential to ensuring the probity and fair dealing in the department's procurement processes.

All documents containing sensitive information relating to contract management in DFAT must be classified 'Commercial-in-Confidence' and must be managed on a strictly need-to-know basis.

Roles and Responsibilities

APS staff

APS staff are responsible for ensuring that:

• only staff that have a genuine business requirement should have be able to access procurement and contract management information.

• Non-APS personnel under their supervision who have a business need to access such records complete a declaration of 'no conflict of interest', and sign a confidentiality agreement if one does not already exist. Any conflict of interest or potential conflict of interest must be managed before providing access.

• All disclosures of conflicts should be fully documented and retained on file.

Non-APS Personnel

Non-APS personnel working in DFAT are not to be granted access to records concerning the management of a procurement or contract unless the access is authorised by the delegate or contract manager, who must be an APS officer with the appropriate delegation to do so.

Non-APS personnel that have access to DFAT premises and / or systems must:

• not engage in any practice, including an improper inducement, which gives anyone an improper advantage over another;

• not engage in any form of collusive practice;

• disclose, immediately, any actual or apparent conflict of interest and take steps to avoid that conflict. They must also promptly identify and disclose to the contract manager or delegate any actual, perceived or potential conflicts of interest involving themselves, their immediate family or any other relevant relationship; and

• complete all details of any declaration of conflict of interest accurately and honestly.

CHAPTER3- APPROACHING THE MARKET

Section 1: Introduction and scope

Introduction

This chapter, Approaching the Market (ATM), takes you through the processes required to undertake an approach to the market in a manner that is compliant with Commonwealth and DFAT procurement policy.

Scope

This chapter encompasses the steps from preparing approach to market documentation, approaching the market and receiving proposals.

Processes outlined in this chapter are to be used when undertaking the following Approach to Market (ATM) types:

• Section 2: Request for Tender, Expression of Interest and Select Tender;

• Section 3: Mandatory Written Quotations $10,000 to Below $80,000;

• Section 4: Verbal Quotations;

• Section 5: Quotations from Panels; and

• Section 6: Approaching Multi Use Lists & Whole of Government Arrangements.

This guide is presented in three stages for each ATM type:

• Preparing to Approach the Market;

• Approaching the Market; and

• Receiving proposals.

For information on evaluating and finalising the procurement process, refer to the DFAT Procurement Guide – Evaluation and Selection. The DFAT Procurement Guide – Contract Management provides further guidance regarding the establishment and management of contracts.

Records Management

To ensure compliance with the DFAT Recordkeeping Policy, final approved documentation should be filed in accordance with DFAT's Record Keeping Policy and General Disposal Authority (GDA) 25 of the National Archives Act.

Stakeholder Consultation

Consider which internal and external stakeholders need to be consulted. This consultation provides an opportunity to obtain agreement about the course of action you propose to take.

Internal stakeholders

If your procurement is politically or commercially sensitive you should notify the Procurement Travel and Comcover section (PTC) early in your planning process. You should also consider consultation with key internal stakeholders such as other work units, Senior Executive, DLB, Media Liaison etc.

You must consult the following work units for certain types of procurements:

• Property / Construction / Fit out: Overseas Property Office;

• IT hardware and software: Information Management Division;

• Security equipment: Diplomatic Security Branch;

• Special Envoys: PTC;

• Legal services: International Legal Division.

Minister's office

Consider whether you need to notify the Minister's office of the procurement.

External stakeholders

You should consider consultation with key external stakeholders (such as other portfolio agencies etc) for procurements where they have a clear identified role in the procurement activity or where there are benefits in undertaking cooperative procurement approaches.

Probity issues

It is prudent to ensure that stakeholders provided with information regarding the procurement do not have a conflict of interest. For example, they should not be prospective suppliers or in a close personal or commercial relationship with prospective suppliers.

Quick Guide – Minimum Documentation Required for Various Procurement Methods
 

For $80,000 and above unless exemptions apply

For under $80,000

Procurement Process Stages

RFT

EoI

Prequalified Tender*

3 Written Quotes

Verbal Quotes

Number of Suppliers to Approach

All Suppliers through Open ATM

All Suppliers through Open ATM

All Suppliers short listed from EoI

Minimum 3

Minimum 2

Minimum Number of Proposals to be Obtained

N/A

N/A

N/A

Minimum 3

Minimum 2

Method of Approach to Market (ATM) / Method of Contacting Suppliers

AusTender Open Advertisement

AusTender Open Advertisement

AusTender Select Advertisement

Verbal or in writing

Verbal or in writing

Number of Days ATM to be Kept Open

Minimum 25 Calendar Days

Minimum 25 Calendar Days

Minimum 25 Calendar Days

N/A

N/A

Method of Receiving Proposals

DFAT Physical Tender Box in R G Casey Building

DFAT Physical Tender Box in R G Casey Building

DFAT Physical Tender Box in R G Casey Building

In writing

Verbal

Minimum documentation to be provided to the market as part of the ATM

Conditions for Participation

Yes

Yes

Yes

N/A

N/A

Minimum Content and Format

Yes

Yes

Yes

N/A

N/A

Draft Contract (including Statement of Requirement)

Yes

Yes

Yes

Depending on Risk or Type of Procurement.

Depending on Risk or Type of Procurement

Evaluation Criteria

Yes

Yes

Yes

N/A

N/A

Minimum internal documentation to be prepared (and approved) before undertaking an ATM

Procurement Plan

Yes

Yes

Yes

N/A

N/A

Evaluation Plan

Yes

Yes

Yes

N/A

N/A

Pre-ATM Regulation 9

Yes

Yes

Yes

N/A

N/A

Section 2: Request for Tender, Expression of Interest and Select Tender

Scope

This Section is presented in three stages:

• preparing to approach the market;

• approaching the market; and

• receiving proposals.

Request for Tender (RFT)

All procedures outlined in this Section apply to Requests for Tender.

Expression of Interest (EoI)

All procedures outlined in this Section apply to Expressions of Interest (EoI). An EoI is often the first step in a two-stage process and is usually followed by a Prequalified Tender. Minimum ATM advertising timeframes of 25 days apply to both an EoI and following Prequalified Tender.

Prequalified Tender (PT)

All procedures outlined in this Section apply to Prequalified Tenders. A Prequalified Tender is often the second step in a two-stage process and is usually preceded by an EoI. Prequalified Tenders are ATMs to a select group of suppliers who have been:

• shortlisted from an EoI; or

• hold a specific license; or

• are suppliers in a Multi Use List (MUL).Section 6: Approaching Multi Use Lists & Whole of Government Arrangements provides additional information regarding purchasing from MULs.

Preparing Approach to Market Documentation

You have identified that the procurement method for your procurement is to approach the market through a Request for Tender (RFT) or a Prequalified Tender. Generally an RFT or Expression of Interest (EoI) is used for an open ATM. All open ATMs must be advertised on AusTender. 

The following topics and documents must be included as part of all RFT, EoI and Prequalified Tenders and must be prepared using relevant DFAT procurement templates.

Document

Distribution

Key Topics Covered (not limited to)

Request for Tender (RFT)

All potential suppliers through AusTender.

Topics covered in RFT, EoI and PT:

minimum content and format requirements;

conditions for participation;

evaluation criteria;

any industry briefing information (if applicable)

insurance requirements;

tender rules such as closing dates, contact officer etc.

Expression of Interest (EoI)

All potential suppliers through AusTender.

Prequalified Tender (ST)

only potential suppliers shortlisted through an EoI; or

only potential suppliers who are participants in an already established Multi Use List; or

only all potential suppliers who hold a specific license.

Draft contract based on DFAT standard form contracts:

Distribution depending on the type of approach document (RFT, EoI) as outlined above.

Statement of Requirements;

Insurance requirements;

indemnities

The following documents must be prepared and approved by the relevant financial delegate (FMA Reg 9, FMA Reg 10, FMA s.44 delegate/s depending on the request) prior to any approach to market for above the relevant threshold procurements:

Document

Distribution

Key Topics Covered (not limited to)

Evaluation Plan

Only DFAT APS officers

Evaluation criteria;

Weightings for evaluation criteria;

Method of evaluation;

Tender Evaluation Board details;

Probity considerations;

Governance and approval arrangements.

Deeds of Confidentiality and Conflict of Interest Declarations

Only DFAT APS officers

 

Drafting the RFT/EOI Document

Minimum Content and Format Requirements

Suppliers need guidance on minimum content and format (MCF) requirements to submit a tender response. MCF requirements are specified by DFAT in the RFT/EoI document. DFAT's templates for RFT's and EoI contain the department's standard requirements. For example, the RFT template states that tenders must:

• be presented in English;

• unless otherwise specified, express all measurements in Australian legal units of measurement;

• contain a Compliance Statement in accordance with Section 5, Schedule 3 (Tender Response);

• Include a signed Tenderer's Declaration for Compliance with the Fair Work Principles in the form set out at Section 7, Schedule 3 (Tender Response); and

• include a signed Tenderer's Declaration in the form set out at Section 8, Schedule 3 (Tender Response)."

You should exercise care when inserting additional mandatory MCF requirements in your RFT / EoI.

Please note – that proposals that do not meet MCF requirements must be eliminated from further consideration.

Further information is provided in the DFAT Guide –Evaluation and Selection of Suppliers.

Conditions for Participation

Conditions for participation (CFP) are mandatory requirements, usually requiring a "Yes" or "No" response.

A supplier that does not comply with a CFP must be excluded from further evaluation.

CFP's describe minimum standards or essential characteristics that suppliers must meet for their submissions to be considered.  DFAT's templates for RFT's and EoI contain the department's standard requirements. For example, tenderers must demonstrate compliance with the following Condition for Participation:

• the tenderer (and any of its proposed subcontractors) must not be named as not complying with the Equal Opportunity for Women in the Workplace Act 1999 (Cwlth)."

If you wish to insert additional CFP's in your RFT/EoI, considerable care should be taken to ensure that the requirement can be evaluated through a simple yes/no analysis. If the supplier cannot answer yes or no, then it is unlikely that your requirement is a CFP. Instead you should include it as part of the evaluation criteria.

Example of a CFP:

If your requirement is for services in which the industry has certification standards, such as accounting services which require that the personnel have a Certified Practicing Accountant (CPA) qualification, you may require the suppliers to state if they have this qualification in the form of a Yes / No answer. You might then ask the suppliers to provide evidence of the CPA qualification as part of the minimum content and format requirements.

Example of what is not a CFP:

"The tenderer must have extensive experience providing accounting services to Commonwealth Agencies".

This is not a CFP because the response could be subjective. It would be better to include this question in the Statement of Requirements or as one of the evaluation criteria.

Contact Officer

You must nominate a contract officer for all RFT's and EoI's. Contact information must include:

· position of the contact officer;

· generic email address (not the person's email address)

o    you should use or create a specific email address for your tender or panel. This email address should ideally reflect the name of the process;

o    it is your responsibility establish a unique email address for the ATM. This can be done by getting your delegate to email the Global Support Centre with a suggested title for the email account and a list of APS officers who should have access to the mailbox.

All contact from prospective tenderers MUST be in writing.

Lodgement details

The process and address for lodgment of responses must be specified in the RFT/EoI. Responses for Canberra based procurement processes must be submitted at the DFAT Tender Box in hard copy. Standard DFAT templates include the R G Casey Building tender box address. State Offices and Posts may nominate their own lodgment location as long as tenders can be kept safely and not be opened until after the nominated closing time for the process.

Electronic Tender Submissions

All RFT and EoI responses must be lodged in hard copy at the designated tender box.  DFAT does not currently accept RFT and EoI submissions in any other format.

Conducting industry briefings or Site Visits

It is not mandatory to conduct industry briefings or site visits as part of the procurement process. You should consult PTC if you are considering conducting industry briefings or site visits. You should also consult your probity adviser if you have appointed one. It is important to ensure that all potential tenderers have equal access to information about the tender.

Purpose of Industry Briefings

Industry briefings are usually only conducted if the procurement subject matter is very complex. The industry briefing is used to explain the procurement and ensure that suppliers have understood the requirement. Industry Briefings can sometimes be useful to:

• explain certain aspects of the statement of requirement;

• avoid uncertainties on the part of potential bidders;

• clarify any problems or difficulties potential bidders may have;

• clarify for procurement staff the abilities and capabilities of the marketplace; and

• provide a forum to promote mutual understanding of each party's position and requirements.

Purpose of Site Visits

A site visit is usually conducted where suppliers are not able to accurately respond to the RFT/EoI unless they have visited the site. For example, suppliers that wish to respond to a building fit-out may need to see the interiors of the building because the floor plans may not provide sufficient information.

Industry Briefing/Site Visit Documentation

An industry briefing or site visit can be either optional or mandatory for tenderers to attend. Where mandatory, it must be stated as a condition for participation in the ATM document. All tenderers that do not attend the mandatory briefing or site visit must be eliminated from further consideration as they will not have complied with the conditions for participation.

In all instances, whether mandatory or optional, relevant details of industry briefings or site visits must be specified in the ATM document and should be brought to the attention of suppliers through the AusTender advertisement and, if required, any other media advertisement.

Probity when Conducting Industry Briefings/Site visit

You should consider the following factors when conducting an industry briefing or site visit:

• require attendees to provide their details (ie. company name, name, position, contact details) for information , security purposes and, where applicable, registering in the Visitor Management System;

• appropriate venue - you may need to book a meeting room;

• if you are expecting a large number of attendees you may wish to limit the number of people attending on behalf of each tenderer.

A checklist is attached at Attachment 1 – Industry Briefing Checklist.

Attendance Register

An attendance register containing relevant details should be prepared. DFAT should ensure that all attendees sign the register.

Non-English Speaking Background

Potential respondents who may not be conversant in English are welcome to bring an interpreter with them to ensure that they do not miss opportunities to ask questions and seek clarification.

Evaluation Criteria

Evaluation criteria are at the core of the evaluation process and are used to establish the capability and capacity of suppliers to meet the department's requirements. Evaluation criteria also provide information to the supplier about what you are looking for in a supplier.

Generally, as the value, risk and complexity of procurement increases, so does the importance of the evaluation criteria. Great care needs to be taken in the choice of evaluation criteria. Evaluation criteria should be measurable, clear and transparent.

The DFAT RFT / EoI template lists general criteria. You can change these criteria as required to meet your evaluation needs.

Developing evaluation criteria

Evaluation Criteria may be weighted or a combination of weighted and non-weighted criteria.

Weighted Criteria

Weighted evaluation criteria should be measurable, clear and transparent and align with the statement of requirements. Each criterion should be scored using a scoring system. A standard 5 or 10 point scale is recommended, based on how well the offer satisfies the criterion (eg. 2/5 or 3/10).

Weighted Criteria: Must Total 100%

Weighted criteria (Total 100%)

Criteria

Examples to check suitability

Capability

Infrastructure - whether the tenderer has the internal infrastructure to support delivery of the good/service e.g. enough manpower, support etc

a) Organisation structure and profile of top management team
b) Quality Assurance systems/procedures
c) Staff training and WHS policies/procedures
d) Demonstrated experience delivering similar goods / services.

Capacity

Experience - relevant experience and organisational capacity to deliver

Personnel - the relevant experience, extent and availability of personnel specified for the project

Proposal

Timeframe - delivery/response times

a) The degree to which the project proposal or proposed project methodology will achieve the desired project performance
b) outcomes/deliverables set out in the Statement of Requirement [SOR]
c) Risks inherent in the offer

Non-weighted criteria

Non-weighted criteria often include cost, financial viability risk, agreement with contractual terms, and special value add features of the tender.

Changing evaluation criteria during the approach to market

Where there is a requirement to change the evaluation criteria or plan (including weightings) prior to closing an approach to market, you must consult PTC. You will also have to issue an addendum to communicate the change, extend the timeframe, or potentially cancel the procurement.

Allow the industry sufficient time to address any changes in their submissions before the tender closing time

Developing the Draft Contract

A draft contract MUST be attached to and distributed with all RFT/EoI. For an open ATM, the RFT/EoI document and draft contract must be attached to the advertisement on AusTender. The draft contract should be based on DFAT's standard form contracts.

Prospective suppliers need to know the department's terms and conditions when formulating their proposal and price.

Developing the Statement of requirement

The Statement of Requirement (SoR) is part of the contract. You should use the department's Statement of Requirement template included in DFAT's standard form contracts as the basis for preparing your SoR.

A well written SoR will present the department's requirement in a manner that addresses the following key areas: 

Functional: characteristics that define the function or duty to be performed, e.g. an automated recordkeeping system;

Performance: characteristics that define the performance required, e.g. an automated recordkeeping system that allows multiple users to edit the same record at the same time; and

Technical:characteristics that define the technical and physical specifications, e.g. an automated records keeping system that allows multiple users to edit the same record at the same time and is based on the Microsoft Active Directory server platform.

Where possible, requirements should include goals and objectives which translate to outcomes and outputs rather than simply being focused on processes. For example, in the SoR tell suppliers what property or services you want provided rather than how to provide the service.

Other Internal Documentation

Procurement Plan

All procurements valued at or above $80,000 must have a procurement plan that is approved by the relevant financial delegate before proceeding to a formal approach to market (RFT, EoIetc). A procurement plan differs from a business case in that a business case explains why procurement is being undertaken, while the procurement plan explains how the procurement will be undertaken. The procurement plan maybe attached to the request for approval to approach the market if required.

The DFAT Procurement Plan Template can be used to prepare your Procurement Plan. The procurement plan must summarise the following:

1. Introduction:

2. Purpose;

3. Background;

4. Justification for the procurement:

5. Analysis of market and possible suppliers;

6. Proposed method of procurement;

7. Evaluation criteria;

8. Indicative Tender Evaluation Plan;

9. Probity plan;

10.      Confidentiality measures (mandatory for procurements with risk rating of high and above);

11.      Indicative timetable;

Additional Governance Arrangements

Procurements that are highly sensitive or carry a risk rating of high or above may require additional governance arrangements such as steering committees or secretariats to assist in procurement and decision making processes.

Indicative Timetable

The Timeline for the procurement should be developed early in the process using P3M3 principles. Depending on the complexity of the procurement, you should plan on the process anywhere from six (6) to eight (8) months from inception to completion.

The example provided below is based on the timeline for an above the relevant threshold procurement of reasonable complexity:

Key Planning Milestone

(All days are working days)

Cumulative Days

From the indicative contract signing date, count back 15 days. This period is to allow for contract negotiations, updating of contract terms and execution of contract.

15 days

From the date of commencement of contract negotiations, count back 30 days. This is the period after tender close and finalising evaluation recommendations. During this period, the Tender Evaluation Board would assess all compliant tenders, prepare an evaluation report and secure delegate approval to commence contract negotiations with shortlisted suppliers.

45 days

From the date of tender close count back 25 days. This is the minimum duration for which tenders must be kept open on AusTender.

60 days

From date of tender release count back five (5) days if you require advertise the tender on media other than AusTender.

OR

From date of tender release count back one (1) day for PTC to release (advertise) the tender only on AusTender.

65 days

From date of forwarding tender documents (for release) to PTC count back 30 days required for preparation of tender documents and pre-approach to market FMAA Regulation 9 for the spending proposal and tender documentation including draft contract.

95 days

Count back 30 days from commencement of preparation of tender documents for approval of procurement project. This includes preparation and approval of a procurement plan.

125 days

Count back 30 days from commencement of preparing the procurement plan to allow time for identifying and defining the procurement need and procurement method. This includes further developing the concept, market research and considering alternate methods of procurement such as procuring from an existing panel.

155 days

TOTAL DAYS

155 days

Evaluation Plan

A formal evaluation plan is required for all approaches to market. The evaluation plan should be finalised and approved by the Evaluation Committee and relevant delegate before an approach to market.

You should use the department's evaluation plan template as the basis for preparing your evaluation plan. Further guidance is held within the Evaluation Plan template.

The evaluation plan includes key matters about the evaluation process such as evaluation criteria (including weightings), Evaluation Board and probity requirements.

Evaluation Board

The role of the evaluation board is to evaluate the responses received and make a recommendation, to the financial delegate, regarding the preferred supplier.

The committee should be structured on the following basis:

• the committee should be comprised of at least three individuals, one of which takes on the role of chairperson;

• members should possess the necessary technical/subject matter knowledge to effectively assess submission;

• each member should possess a sound understanding of department's procurement-related probity guidelines.

Probity Plan

The DFAT Procurement Guide – Probity in Procurement provides guidance regarding probity principles. The majority of procurements undertaken will generally use the DFAT evaluation plan template which incorporates a section on probity. If your procurement is high risk, commercially sensitive or politically sensitive you may need to seek expert probity advice and draft a separate probity plan that details how the process will be managed with particular references to how probity risks will be managed. [Contact GCL if you require expert probity advice.]

Approaching the Market

Formal approaches to the market must not be undertaken without approval. Once all documentation has been approved by the appropriate delegate you need to approach potential suppliers to invite them to tender for the work.

Approaches to Be Open for 25 Days

In most cases, open approaches to market must be advertised on AusTender and be open for submissions for at least 25 calendar days. If the procurement has already been listed on the DFAT Annual Procurement Plan for at least 30 calendar days, the mandatory open approach period for that procurement can be reduced to no less than 10 days. The delegate has the discretion to increase approach open times based on the complexity of the procurement.

Mandatory Advertising on AusTender

All open ATMs such as RFT's and EoI's must be published in AusTender through PTC.

AusTender, www.tenders.gov.au, is the Australian Government's procurement information system. It is mandatory under the Commonwealth Procurement Rules for DFAT, as an FMA agency, to publish on AusTender advertisements of all open approaches to market (ATM).

In Australia, it is generally the case that only procurements valued at or above $80,000 are undertaken as open ATMs (open tenders).

Other Media Advertising (non-AusTender)

All open approaches to market must be advertised on AusTender. In addition to this, an open approach to the market can also be advertised in the media. AusTender is generally well known across the commercial market in Australia. Media advertising is often used where there is a niche market or an industry that would generally not use the internet for day to day business.

The content of your media advertisement must be the same as what is provided on AusTender. Your media advertisement must direct suppliers to the AusTender website for further information.

How to advertise in the media

All ATM advertising must be placed with Adcorp, the whole-of-government contract provider. You should inform PTC regarding media advertising requirements as soon as possible to avoid missing booking deadlines.

Communications with suppliers about an approach to market

When answering questions from suppliers regarding the advertisement date or a proposed RFT/EoI, you should state that all open business opportunities are advertised on AusTender, www.tenders.gov.au. Suppliers can register on AusTender to receive email notifications of particular categories of open business opportunities or to receive notifications of all opportunities.

Out to market

Probity

It is a legal requirement that all suppliers are given the same, clear information at the same time and essential that any change in requirements is not perceived as favouring a particular supplier or group of suppliers.

Tenderers are advised through the RFT/EoI document that additional information may not be sent to them directly, but will be published as addenda on AusTender.

The RFT/EoI document states that the department will not respond to any request for clarification from a Tenderer, if received less than five (5) business days prior to the closing time.

Publishing responses to questions from suppliers

All questions from potential suppliers must be received in writing to the contact officer through the mechanism specified in the RFT (e.g. email).

All clarifications and responses to questions must be de-identified so that a supplier's commercial position is not compromised by including information that identifies the supplier.

Create a register or file to record communications with any third party

You must file all correspondence and file notes pertaining to suppliers that request further information and clarification regarding the request documentation. It should at a minimum record:

• the time and date of contact;

• the name of supplier representative and DFAT representative;

• the contact details for supplier representative;

• the question asked and answer provided; and

• whether, and how, the question and answer were published to other prospective suppliers.

Changes to Requirements

An addendum must be published on AusTender if DFAT identifies a need to change DFAT's statement of requirements or the procurement process outlined in the RFT. You must contact PTC in the first instance to discuss changes in requirements and the need for issuing addenda. In some circumstances, you may have no other choice but to cancel a procurement process or extend the tender closing time where changes are considered material and would result in the industry not having sufficient time to respond in a timely and adequate manner.

Issuing Addenda

All suppliers that have registered for the RFT / EoI and accessed the documents will receive an automatic email notifying them of the addenda and providing instructions regarding accessing them.

Probity adviser

Where there is an appointed probity adviser for your process, it is strongly recommended that the probity adviser attend briefings/site visits and that he or she clears any information prior to its dissemination, including scripted answers.

Attendance record

You should keep a record of attendees at any industry briefings or site visit. 

Off-site considerations

When conducting industry briefing on premises outside of DFAT you should consider if there are any insurance and security issues. The procurement of the off-site location or facility in itself may have to be undertaken as a separate procurement process.

After the Industry Briefing

Following an industry briefing you should draft an addendum that includes information provided at the briefing and questions and answers. The addendum should then be emailed to PTC at procurement@dfat.gov.au to publish on AusTender. .

The next steps

The chapter on Evaluation and Selection of Suppliers provides guidance on receiving and evaluating submissions and selecting a preferred suppli

Section 3: Mandatory Written Quotations $10,000 to Below $80,000

SCOPE

This Section is presented in three sections:

• Preparing to Approach the Market;

• Approaching the Market; and

• Receiving proposals.

Preparing Approach to Market Documentation

You must obtain at least three (3) written quotations for all procurements valued between $10,000 to $79,999. You must secure written approval from the financial delegate if you do not intend to meet this requirement. This approval could be part of the FMA Regulation 9 approval minute.

Minimum documentation

Requesting Written Quotations

When seeking written quotations for procurements valued between $10,000 and $79,999, you may approach suppliers verbally or in writing. PTC recommends you approach them in writing and use the DFAT Formal Quotation Template to do so.

Receiving Written Quotations

A written quotation must be provided by a supplier in writing and could be in the following forms:

• email;

• formal letter from the supplier on the supplier's letterhead;

• facsimile from the supplier

A supplier's written quotation may include terms and conditions, possibly in one of the following forms:

• link to intranet page that specifies the suppliers terms and conditions;

• an attachment to the quotation;

• part of the quotation.

It is common for such quotations to contain terms that, by default, signifies DFAT's acceptance of terms and conditions when the department responds (either by signing, where indicated, or by email). Where you have identified that the supplier has included their terms and conditions as part of a quotation you must seek advice from GCL or PTC to ensure that they are acceptable to DFAT.

Other considerations

Industry Briefings and Site Visits

Where you decide to conduct industry briefings or site visits you must ensure that a consistent approach is adopted and that all suppliers are given access to the same information. This means that you will need to establish clear procedures and protocols in advance of any industry briefings or site visits.

Evaluation Criteria

All procurement decisions must be based on some form of evaluation. The extent of the evaluation should be commensurate with the complexity and risk of the procurement. The underlying principle in all cases must be obtaining best value for money and thus evaluation considerations should not be limited to price alone.

$10,000 to $49,999

Recommended.

$50,000 to $79,999

Mandatory.

For procurements valued at or above $50,000, you must identify and seek written delegate approval for a set of evaluation criteria as part of your in-principle approval to proceed.

Procurement documentation approval

You should seek in principle approval from the financial delegate in writing prior to approaching the market for written quotations.

Approaching the Market

Method of seeking written quotations

You must ensure that all suppliers are provided the exact same information when seeking quotations.

Duration of Approach

There is no minimum duration that approaches to market for written quotations need to be kept open for. It is recommended that suppliers be provided with at least 7 calendar days. However, the duration should be based on the complexity of the requirement and the supplier's ability to provide a quality response in the timeframe provided.

Out to market

Responding to questions from suppliers

It is recommended that, where possible, all questions be received in writing and clarifications and responses to questions be de-identified and communicated in writing to all suppliers.

Closing the Approach to Market

All quotations should be received by the timeframe specified in your communications to suppliers. You should ensure that late quotations are excluded from further consideration to ensure a fair and equitable procurement process.

Section 4: Verbal Quotations $1,001 to $9,999

Scope

All procurements valued at $1,001 to $9,999 must seek more than one verbal quotation.

In circumstances where only one quotation is able to be obtained, you must provide sufficient information to enable the delegate to make an informed decision regarding value for money.

All verbal quotations must be recorded in writing (eg: as part of the Regulation 9 minute).

In all cases, the method of procurement and the level of competition used should be commensurate with the size and risk profile of the particular procurement.

Evaluate Offers and Select a Supplier

Procurements valued at $1,001 to $9,999 usually do not have detailed evaluation criteria or evaluation plans. You are required to make a value for money assessment on the basis of the price offered, quality, fitness for purpose and compliance with delivery requirements and any mandatory requirements.

It is important to record evaluation and selection decisions, together with their rationale for accountability, audit purposes and as a means of informing others involved with managing and monitoring the procurement.

Obtain financial approvals and execute the contract

Once a preferred supplier is determined, seek delegate approval for FMA Regulation 9.

It is common for procurements valued at or below $10,000 to be largely for "off-the-shelf" or pre-fabricated goods or already designed services such as public training programs. The most common type of contract in such circumstances would be purchase orders that are sent to suppliers or registration forms that are forwarded with credit card or invoicing details.

Execute the contract

In instances where there is no formal contract, procurement officers should ensure that the agreement is documented in writing. This could be a letter or an email to the supplier outlining what the department is procuring and the agreed price.

In the case of purchase of pre-defined or off the shelf goods, the issue of a purchase order or completing and signing an order form will generally create a contract.

In instances where there is a formal contract, where possible, two copies of the final contract (original plus one duplicate) should be signed first by the supplier and then by the departmental representative in order to reflect the final agreement reached by the parties. The supplier is given a copy of the final contract and the department retains the original contract. In instances where this is not possible it is still important to retain a copy of signed documents for your records.

Section 5: Quotations from Panels

SCOPE

For the purpose of this Section, the document used for placing orders under a standing offer panel will be called "Form of Order". A Form of Order is also commonly known as Work Order. A Form of Order is the document that forms the contract under a panel arrangement.

Financial Approval for Forms of Order

Placing an order against an already established standing offer panel requires the following financial approvals:

• Regulation 9 approval and if required Regulation 10 prior to approaching suppliers;

• Section 44 approval before signing / executing the Form of Order

Orders placed under a standing offer must be publicised on AusTender where they are valued at $10,000 or more.

Competitive approaches within a standing offer Panel

The form in which you must seek quotations from panel members will usually be specified in the Deed of Standing Offer that the supplier entered into with DFAT. The Deed of Standing Offer specifies the agreed terms and conditions, pricing and the scope of services that the panel will provide.Some Deeds specify the number of suppliers you must approach to seek quotations. Other Deeds may permit you to seek as many quotations as you wish, ie. one or more.Where the Deed does not specify a minimum number of quotations, you should follow the following DFAT policy:

$1,001 to $9,999

2 Verbal Quotes Recorded in Writing

$10,000 and above

3 Written Quotes Mandatory(Form of Quotation – template usually included in the Deed)

If the DFAT Deed of Standing Offer template was used to establish the panel, there is a request for quotation template, called a Form of Quotation, contained within the Deed. The Form of Quotation includes guidance notes on the fields that you are required to complete. You should send the Form of Quotation to each supplier that you approach. The Deed may specify the manner in which you must contact suppliers, however, it is common for a Form of Quotation to be emailed to suppliers.

Duration of Approach

You should check the Deed to determine if suppliers are required to respond within specific timeframes. If a period is not specified, a general rule of thumb is 7 calendar days for suppliers to respond. However, the duration should be based on the complexity of the requirement and the supplier's ability to provide a quality response in the timeframe provided.

Responding to questions from suppliers

It is recommended that, where possible, all questions be received in writing and clarifications and responses to questions be de-identified and communicated in writing to all suppliers.

Closing the Approach to Market

All quotations should be received by the timeframe specified in your communications to suppliers. You should ensure that late quotations are excluded from further consideration to ensure a fair and equitable procurement process.

Section 6: Approaching Multi Use Lists & Whole of Government Arrangements

SCOPE

This chapter defines Multi Use Lists (MUL) and Whole of Australian Government (WoAG) arrangements and provides guidance regarding procuring from such arrangements.

Usually, MULs and WoAG arrangements are established at the Whole of Government level to benefit FMA Act agencies when they procure goods and services. WoAG arrangements may take the form of a contract or Deed of Standing Offer.

These contracts and arrangements have been established by various lead agencies including the Department of Defence and the Department of Finance and Deregulation (DoFD). Some WoAG contracts and arrangements are mandated and others recommended.

Existing MULs and WoG Arrangements

Where a Multi-Use List orWoAG arrangement is mandated DFAT must use it.

Multi Use Lists

An MUL is simply a list of suppliers capable of providing goods or services relating to the particular mandated procurement who have been shortlisted by a lead agency (most likely DoFD) from an Expression of Interest process.

If an MUL that falls within the scope of your procurement exists, you may approach the suppliers on the MUL through a Prequalified Request for Tender (Prequalified Tender).

The manner in which you approach suppliers will be dependent on the value of your procurement and any specific rules that may apply to approaching suppliers on a particular MUL.

In the event a procurement process is not mandated, you should then follow the procurement process specified for your approach to market.

For example, if your procurement is between $10,000 and $49,999, three quotes must be obtained. If your procurement is valued at $80,000 or more, you must follow the procurement method for a prequalified tender.

Whole of Government / Coordinated Procurement Arrangements

The Government may decide that for certain goods or services a WoAG arrangement will deliver better value for money than individual agency contracts. These WoAG arrangements are referred to as "coordinated procurement arrangements". Where the Government establishes a coordinated procurement arrangement for certain goods or services, DFAT must use the arrangement unless an exemption is provided. An exemption will only be granted if both the Minister for Foreign Affairs and the Minister for Finance are satisfied that DFAT has a special need for the alternative supply.

When procuring any good or service, you must first confirm whether there is a WoAG arrangement that mandates the use of that arrangement. A listing of all mandated coordinated procurement arrangements are available at DoFD'sCoordinated Procurement Contracting website. Please contact PTC for guidance in the event a WoG arrangement applies to your procurement.

Financial Approval

Procuring from MuLs and WoAG arrangements require the same financial approvals that apply to all procurements.

• Regulation 9 approval and if required Regulation 10 prior to approaching suppliers;

• Section 44 before signing / executing the Form of Order

Attachment 1 – Industry Briefing Checklist

INDUSTRY BRIEFING CHECKLIST

PROCUREMENT TITLE:

BRIEFING DATE:

BRIEFING LOCATION:

BRIEFING TIME:

BRIEFING PREPARATION

Ensure briefing details (venue, date and time) are in the Approach to Market (ATM) documentation (e.g. RFT, EOI or select tender)

Ensure access for physically impaired people

Prepare attendance register

Prepare briefing team

CONDUCTING THE BRIEFING

Welcome and introduce briefing team and their roles

Remind attendees to register

Reiterate published ATM documentation including scope of task, desired outcomes, timing

Brief explanation of the Commonwealth Government procurement evaluation processes

Record all questions of significance for later distribution in writing to all potential respondents (de-identified)

      Explain that if discrepancies exist between the responses given at the briefing and the released addendum, the addendum takes precedence.

Express appreciation for attendance

POST BRIEFING

Respond to questions in writing (including a record of Industry Briefing) by issuing a published procurement documentation addenda

Maintain an audit trail of the briefing on the tender file

CHAPTER 4 – Evaluation & Selection of Suppliers

Section 1: Introduction and scope  

Introduction

The processes outlined in this chapter are to be used when evaluating quotations received as a result of approaching the market through a Expressions of Interest (EOIs), Select Tender or a Request for Tender (RFT).

While the guide is focused on procurements of a more complex nature, principles outlined in this guide can also be used for evaluation procurements undertaken through a quotation process.

This Guide takes you through processes required to be followed in order to undertake a successful evaluation. It includes the following stages:

1. receiving submissions

2. evaluating submissions

3. short listing

4. selecting a preferred supplier; and

5. notifying successful and unsuccessful suppliers

6.  

You must not open submissions until such time a formal evaluation plan has been prepared and approved by the financial delegate. The DFAT Evaluation Plan template can be used to prepare the evaluation plan.

Composition of the Evaluation Board

For EOIs, Select Tenders and RFTs, all evaluations must be undertaken by an evaluation board. The role of the evaluation board is to evaluate the submissions received and make a recommendation regarding the preferred supplier.

The board should be structured along the following lines:

• comprised of at least three individuals, one of which takes on the role of chairperson;

• each member of the board should make a declaration that no conflict of interest arises with respect to the procurement, however where a conflict does arise (whether at the commencement or during the procurement process) the relevant member should make a declaration to this effect and include details of the conflict;

• where a member has made a declaration that a conflict of interest exists, the chairperson of the board should decide whether the member can continue to participate as a member of the board, or where the member continues to participate on the board, how the conflict may be managed by the board;

• the chairperson of the board should report any conflicts of interest, and management strategies to resolve, to the relevant authority (e.g. chair of the steering board, probity advisor or internal auditor) as set out in the governance arrangements of the submission evaluation plan;

• members should possess the necessary technical/subject matter skills to effectively assess submission; and

• each member should possess a sound understanding of the requirements to run a fair, unbiased process and to maintain confidentiality and probity.

At the outset, it is critical that the board agrees on the substance of the request document and the submission evaluation plan as these provide the criteria on which the evaluation will be based. At this early stage, the board should also agree and formalise a management strategy for dealing with any inquiries on the procurement which arise during the process. This should also be described in the submission evaluation plan.

It is permissible for an external expert(s) to be brought in for the technical part of a submission evaluation. They will be required to agree to abide by confidentiality requirements and will need to make a declaration that they have no conflict of interest. The expert is not a board member.

Section 2: Receiving Submissions

Receiving quotations

The way in which quotations or tender submissions are received depends on the methodology specified in the approach documentation

Receiving Tenders and Expressions of Interest

DFAT Tenders and EoI cannot be lodged electronically via AusTender

DFAT Tenders and EoI must be physically delivered to the nominated tender box. This requirement must be specified within the request and evaluation documentation.

Tender box keys for Canberra are held by the Procurement, Travel and Comcover Section (PTC). The contact officer nominated in the request documentation (or other nominated personnel) will need to liaise with PTC prior to the closing time to arrange for a PTC officer to be present to open the tender box. Two tender personnel are required to be present at the DFAT Canberra Security Desk at the closing time, or other time as agreed with PTC. Only tenders that specify the relevant tender reference number will be signed out to the tender personnel. Any tenders that do not specify the relevant tender reference number will be signed out by PTC. PTC will review the contents of the package, and contact tender personnel for collection if appropriate or return the package to the tender box.

Tender personnel should ensure that ample secure storage is available for all tenders.

If you are closing a tender in a location other than the tender box in Canberra please contact PTC. Some things to consider include:

• Submissions should be lodged in a safe and secure location.

• There should be provisions to security screen packages received.

• Receiving staff should register, but not open, the receipt of the submissions (time received, number of packages).

• A minimum of two staff must collect the submissions and ensure any late tenders are identified.

Late Tenders

Late tenders and EoImust be excluded from further consideration unless a tender is late as a consequence of DFAT mishandling.

All late tenders and EoI must be returned, with a covering letter in the DFAT Late Tender Notification Letter for RFT or EOI template, to the tenderer within 10 working days of tender close.

Late tenders and EoIsare tenders that are submitted after the closing time indicated in the approach document. Late tenders and EoIsmust be excluded from evaluation unless the tender or EoIis late as a consequence of DFAT mishandling.

DFAT mishandling does not include mishandling by a courier or mail service provider engaged by a potential supplier to deliver a tender.

In Canberra, security guards maintain a register of the time of submission for all submissions to the DFAT Tender Box. Security guards also issue a receipt to all tender box deliveries. Posts and state offices undertaking tenders and EoIs must maintain a similar system for all tender submissions.

In Canberra, late tenders which are present in the DFAT Tender Box at the time of tender collection will be signed out to the two tender personnel. PTC will notify the contact officer of any late tenders that arrive after the time of tender collection.

All late tenders must be returned to the tenderer within 10 working days of tender close. Late tenders must be returned unopened to the tenderer to:

• ensure that they are not accidentally evaluated or compared with tenders which were submitted by the due time and date;

• demonstrate to other tenderers that the process for receiving tenders is fair and impartial; and

• eliminate scope for any suggestion that the tender was rejected for any reason other than because it was late.


It may be necessary to open a late tender where there is no return address or any indication of which tender process the tender is for.

Opening and registering tenders and EoI

You must not open submissions until such time a formal evaluation plan has been prepared and approved by the financial delegate.

Evaluation personnel should work in pairs when registering tenders received to prevent intermingling between packages and avoid disputes regarding what was received. This is also a sound probity practice as it mitigates any claims of intentional misconduct by DFAT.

A registration number must be allocated to each submission (original and copy), notated on the cover of the document and on a separate register / list established for this purpose, and initialled by both team members.

All documents must be:

• marked commercial in confidence;

• kept in locked cabinets and not left unattended in work areas; and

• not removed from DFAT premises unless there is no practicable alternative.

Checking if tenders/EoIs are compliant

• The tender opening team must check that:

• the tender is complete;

• tenderer's declaration is signed and witnessed;

• any amendments or deletions are initialled by the tenderer;

• any page/length limits are adhered to;

• approved Australian Industry Participation (AIP) Plan with approval letter from Department of Innovation when procurement valued at $20 million or greater

• any other matters, as outlined in the tender rules or the evaluation plan, which the tender opening team is to check; and

• any minimum content and format requirements and/or any conditions for participation have been met.

Conditions for Participation Checks

Conditions for participation are basic mandatory requirements with which potential tenderers must be able to demonstrate compliance in order to participate in the procurement. In accordance with paragraph 10.13 of the CPRs, conditions for participation must be limited to those that will ensure that a potential supplier has the legal, commercial, technical and financial abilities to fulfil the requirements of the procurement.

The conditions for participation listed below are the department's standard conditions for participation.

• the Tenderer (and any of its proposed subcontractors) must not be named as not complying with the Equal Opportunity for Women in the Workplace Act 1999 (Cwlth).

• the Tenderer (and any of its proposed subcontractors) must not be named on the list of persons and entities designated as terrorists under the Charter of United Nations (Terrorism and Dealing with Assets) Regulations 2008;

• the Tenderer (and any of its proposed subcontractors) must not be bankrupt or insolvent;

• the Tenderer (and any of its proposed subcontractors) must not have any judicial decision against it relating to employee entitlements (not including decisions under appeal), that has not been met in full by the Tenderer;

• the Tenderer (and any of its proposed subcontractors) must comply with the relevant requirements of the Fair Work Principles.

Procedures for opening, registration and compliance check of submissions should be covered in detail in the Evaluation Plan.

Section 3Evaluation of submissions and Short listing

General evaluation tips that apply to all procurements

For those submissions which proceed past the compliance checking stage, the evaluation board should, in accordance with the Evaluation Plan:

• assess the quality of the proposed solution against the pre-established Weighted Evaluation Criteria to determine how well the proposed solution meets the requirements of the department

• consider the whole of life cost of the solution as part of the evaluation;

• assess overall best value for money taking into account the quality and the total cost of the solution; any other special features (e.g. value added component above minimum requirements and whether the cost of the proposed solution is within the budget allocated for the procurement)

• document your assessment of each submission;

• ensure consistency in allocating scores across submissions; and

• explain and document reasons for selecting the preferred supplier in the Evaluation Report to the delegate.

Additional tips for evaluating the procurement of goods

In addition to matters outlined under paragraph 0, when evaluating goods consider the supplier's terms and conditions for delivery. Issues to look out for include:

• clauses seeking an indemnity from the Commonwealth;

• clauses requiring payment before delivery of goods – the Commonwealth's standard position is that payment should be made within 30 days after delivery;

• clauses seeking to limit the supplier's liability, e.g. for defective goods; and

• clauses specifying that ownership or title to goods pass to the Commonwealth before delivery of the goods.

You must record in writing the reasons for the decision you have made.

You must also check the department's website Australia's Implementation of United Nations Security Council Financial Sanctionsto ensure the prospective supplier is not on the list of persons or entities designated as terrorists.

General evaluation tips that apply to EoI evaluation

In addition to matters outlined under paragraph 0, EoIs should be evaluated to assess the submission's overall compliance with the terms and conditions of the EoI as set out in the EoI request documentation.

You should:

• assess the extent to which a submission meets the technical and performance specifications of the procurement; and

• limit the number of businesses that you invite to participate in the ensuing Select Tender process, based on ranking of submissions from the largest possible number of potential suppliers, consistent with an efficient procurement process.

Clarifying Reponses

Bid Shopping

'Bid shopping' is not permitted in departmental procurement. Bid shopping refers to the practice of revealing one service provider's price to another in an attempt to seek lower prices. This practice is unethical.

Officers are however allowed to negotiate, in good faith, with all suppliers to obtain the best value for money from procurements. Seeking best and final Offers is one such negotiation tactic.

Best and Final Offers (BAFOs)

After you have performed an initial evaluation of tenders/quotes, it is permissible to ask suppliers for best and final offers (BAFOs) in order to come in closer to the budget range.

All requests for BAFOs must be made in writing to all shortlisted suppliers.

When calling for BAFOs, suppliers can only be asked to revise their bid, and/or drop any additional work they have chosen to add to the department's base requirement.

You should have a delegate approved shortlist of suppliers before proceeding to a BAFO. This means that all suppliers are given an equal chance to proceed to the BAFO stage.

The BAFO process effectively triggers a second round of evaluations and may lead to revised rankings.

You must set a closing date and time that allow suppliers reasonable time to prepare their BAFO. The same rules that apply to late tenders apply to late BAFOs.

Short listing Suppliers

Short listing is the process of eliminating unsatisfactory proposals, usually with the intention of subjecting the remaining short-listed suppliers to further evaluation (e.g. asking suppliers to make presentations).

Short-listing is generally not necessary in a quotation or select tender process, where there are only a small number of offers to evaluate.

It is a legal requirement that you evaluate ALL compliant tenders to assess comparative value for money. This means that before compiling a short list you must conduct an initial evaluation process taking into account all the evaluation criteria set out in the RFT (other than financial viability risk and agreement with contractual terms).

You must be satisfied that the short listed tenders are the tenders that represent better value for money. Your reasons for eliminating unsuccessful tenders must be documented so that the rationale for the decision can be justified and explained.

Any short list must be approved by the delegate.

Short list Approval

Delegates should not approve a short list unless they are satisfied that an initial evaluation has been properly conducted, and that the short listed tenderers are the tenderers that represent better value for money.

Who can approve the short list

It is prudent to seek clearance from the same delegate who gave the initial approval to proceed with the procurement.

Financial Viability Assessments

A financial viability assessment is only required in circumstances where you feel that assessing a supplier's financial viability will contribute towards determining the selection outcome. You do not have to conduct a financial viability assessment of all tenderers.

Procuring financial viability assessments must be undertaken as a separate procurement exercise and must be undertaken in accordance with value based thresholds.

The department's standard RFT templates contain clauses that reserve the department's right to undertake financial viability assessments where we deem them necessary. The department's standard evaluation plan templates contain words regarding how and when financial viability assessments may be undertaken. Financial viability assessments:

• identify organisations that are in financial distress or may be heading towards financial problems;

• provide a check on the history of directors and proprietors; and

• confirm the proper legal name of the entity to ensure that we contract with the correct organisation.

A positive outcome on an assessment provides reasonable assurance that a supplier has the financial resources to deliver contracted services. Negative assessments do not prevent you from contracting with the supplier, but allows the delegate to:

• make an informed decision, balancing the degree of risk against program priorities; and

• consider what risk mitigation measures could or should be put in place.

Section 4: Selecting a Preferred Supplier

Completing the evaluation report and supplier recommendation

An evaluation report must be approved by the financial delegate prior to announcing the outcome of any procurement process. The report outlines the process used to assess the responses and provides a recommendation for a preferred contractor.

In the case of procurement processes where an Evaluation Report is not mandated, the FMA Regulation 9 Minute must outline the reasons for recommending a particular supplier/s.

Where a decision has been made to reject potential suppliers based on the evaluation of their quote/tender then the reasons for rejecting the unsuccessful suppliers must be documented.

Notifying Suppliers

When to Notify Unsuccessful Suppliers

Unsuccessful supplier/s should generally be notified at the same time that the result of a procurement process is announced. DFAT's standard RFT and EoI templates have provisions stating that the bidder's 'offer' remains open to be accepted by the department until a specified date or until the bidder is notified they were unsuccessful.

How to notify unsuccessful suppliers

Unsuccessful suppliers must be offered a verbal debriefing upon request where an EoI, open or select tender process has been used. A formal letter using the using the DFAT Unsuccessful Letter Template should be forwarded to unsuccessful bidders informing them:

• they were unsuccessful;

• the name of the successful tenderer; and

• that they can request that the department provide a verbal debrief to advise the reasons why the submission was unsuccessful.

Debriefing Unsuccessful Suppliers

It is acceptable to provide verbal debriefings over the telephone provided that you keep a careful written record of the conversation.

Notifying Successful Suppliers

Once the delegate has approved the selection of your preferred supplier, the successful supplier should be immediately notified in writing.

For simple procurements, this notification can be done via email. For complex procurements, this notification should be done via a formal letter.

Record Keeping

Original copies of submissions must be kept on a file (EDRMS or paper file) in a manner that is consistent with the DFAT Record Keeping Policy.

Chapter 5 – Handling Complaints

Section 1: Policy and Legislative Basis

Background

This chapter applies to complaints received in relation to a DFAT procurement exercise, including the conduct of the procurement process or its outcome.

This guide DOES NOT cover matters relating to complaints or disputes arising out of a contract.

The use of the word 'You' in this document refers to DFAT officials that undertakes or is involved in procurement activity.

The document highlights a number of mandatory obligations indicated by the use of the word must. The term should has been used to identify recommended practice.

Policy

Officers undertaking procurement are to follow the principles outlined in this chapter when handling complaints relating to procurement. These procedures apply to procurements of all values.

The existence of a complaint does not, in itself, preclude DFAT from concluding the procurement process that is the subject of the complaint.

Legislative BasIS

Procedures outlined in this chapter have been established in accordance with the principles outlined in the Commonwealth Procurement Rules (CPRs).

Clause 7.10of the CPRs requires that Agencies' actions in undertaking procurement processes must be robust and defensible.

Clause 6.8 of the CPRs outlines the requirements for complaint handling in procurement matters. In particular, these clauses highlight the importance of applying fair, equitable and non-discriminatory complaint handling procedures.

Section 2: Departmental Complaints Handling Procedure

2.1 Receiving and Responding to a Complaint

In order to lodge a complaint about a procurement process or its outcome, complainants are required to raise the complaint in writing with the contact person nominated in the tender documentation. You must ensure a written complaint is received before commencing any departmental action in response.

For procurements above the relevant procurement threshold, an appropriate staff member must be appointed as a Complaints Officer. For procurements that are below the relevant procurement threshold, where a complaints officer has not been appointed, one must be appointed upon receipt of a complaint.

The Complaints Officer should respond to the complainant in writing within 10 business days. The complainant should be advisedthat the complaint has been received and outline the role of the Complaints Officer. The letter should also request any further information that may be required from the complainant in order to conduct the review.

The Complaints Officer is responsible for:

• ensuring all correspondence in relation to the complaint is recorded and filed appropriately;

• investigating the complaint and preparing a response;

• preparing necessary briefs for the tender evaluation committee and financial delegate;

• advising the complainant in writing of the outcome.

The Complaints Officer may seek assistance or advice from subject matter experts and probity and/or legal advisers from within and outside the department.

The final response to the complaint should be in writing and outline:

• the complaint that has been raised;

• an assessment of the complaint and the action that has been taken to examine the it;

• options that may be available to the complainant should they be dissatisfied with the department's response.

Independent Internal Review

Where a complainant remains dissatisfied with the department's response, they may lodge a request, in writing, to the Assistant Secretary - Finance Management Branch (AS FMB).

Upon receipt of the complaint, the AS FMB should respond the complainant, in writing,within 10 business days, to advise of the receipt of the complaint and outline in the letter their role in the review process and how the complaint will be handled. The letter should also request any further information that may be required from the complainant to conduct the review.

The issue will be examined by AS FMB. The AS FMB may request assistance from the Director, Procurement Travel and Comcover Section, other subject matter experts and probity advisers from within and outside the department.

All officers and external experts involved in the independent review must have been, to this point, at 'arms length' from the complaint and the process or decision in dispute. Where this is not the case, a suitable alternate staff member or external expert must be appointed.

This group may require access to any tender documentation or other correspondence in relation to the matterhaving regard to the commercial-in-confidence nature of the information.

AS FMB may agree with, vary or overturn the complaints officer's initial assessment. Upon conclusion of the review, the complainant should be provided with the outcome in writing. The response should outline:

• the issues raised (i.e. the complaint);

• the examinations carried out;

• an assessment of the complaint;

• the fact that the agency considers the complaint investigation closed; and

• a list of other options available to the complainant if they are not satisfied with the outcome.

External Review

A complainant may seek external review of a complaint where it has not been resolved to their satisfaction through DFAT's internal processes.

Complaints may be made to the Commonwealth Ombudsman (www.ombudsman.gov.au) or the Department of Finance and Deregulation's (DoFD) Procurement Coordinator (www.finance.gov.au/procurement/procurement-coordinator/index.html).

The Commonwealth Ombudsman has powers to investigate procurement complaints. The Ombudsman aims to resolve matters by negotiation and may make recommendations to senior levels of the department and Government in the context of continuous improvement to Commonwealth administrative processes.

The DoFD Procurement Coordinator's role includes handling complaints from suppliers and interested external parties and reviewing complaints regarding contract administration.

Neither the Commonwealth Ombudsman nor the DOFD Procurement Coordinator is able to overturn DFAT's procurement decisions, nor specifically direct DFAT to vary it.

If a matter is referred to an external body for review, DFAT must provide all relevant documents to that body as required by law.

Chapter 6- Contract Management

Section1: Introduction to Contract Management

1.1      Purpose

This chapter has been developed to provide information and practical advice regarding the management of procurement contracts. It provides information specific to the Department of Foreign Affairs and Trade (DFAT), and covers various elements of contract management including contract development, formalisation, management and ending the contract.

This guide has been modelled on the ANAO Better Practice Guide: Developing and Managing Contracts – February 2012, and has been modified for the purposes of DFAT.

1.2      Scope

This guide applies to the management of all procurement contracts within DFAT and covers contracts for goods or services – including those executed from panel arrangements and standing offers.

Contract law can be very technical area. As such, this document is not exhaustive and is not intended to replace professional legal advice. This document should be used as general guidance only. If you require legal advice please ensure you seek advice from a legal professional.

DFAT Standard Contract Templates

Using the department's standard contract templates to form contracts will help ensure compliance with relevant Commonwealth policies connected to procurement and contracts.

DFAT has standard contract templates for:

• Long and Short form contracts - Standard contracts used by DFAT for the purchase of goods and services;

• Deed of Standing Offer (DoSO) – Used mainly for establishing Panel Arrangements;

• Form of order – Used to order goods / services from panels;

• Memorandum of Understanding (MOU) - MOUs are non-binding and non-contractual agreements between Commonwealth agencies. Even though MOUs do not have the same legal status as contracts, DFAT officers managing the arrangement should manage MOUs with the same degree of rigor, and apply policies and procedures within this guide;

• Special Envoy Contract – Standard contracts for engaging special envoys and high profile contractors. You must consult PTC prior to establishing this type of contract;

• IT Contracts – Managed by the Information Management Division's (IMD) procurement area; and

• Construction contracts – Managed by the Overseas Property Office (OPO).

Contract Type

DFAT's standard contracts templates must be used when developing contracts. Using these templates without modification is recommended for consistency and predictability.

1.3      Legislative and Policy Framework

The contract management process takes place within a legislative and policy framework. The following is a list of legislation and policies that must be adhered to when undertaking contract management:

Financial Management Accountability Act 1997 (FMA Act) and associated FMA Regulations;

• Specific Program legislation;

• the Commonwealth Procurement Rules 2012 (CPRs) and Circulars;

• the Commonwealth Grants Guidelines 2009 (CGGs) and Circulars;

• DFAT Procurement Policy;

• The DFAT Finance Management Manual (FMM);

Financial Management Guidance No. 19: Public Private Partnerships Contract Management – December 2006;

Financial Management Guidance No. 10: Guidance on Complying with Legislation and Government Policy in Procurement – January 2005;

Financial Management Guidance No. 15: Guidance on Procurement Publishing Obligations – July 2007;

• the ANAO Better Practice Guide: Developing and Managing Contracts – February 2007;

• the Archives Act 1983;

• Records Issues for Outsourcing including General Disposal Authority 25

• the Privacy Act 1988;

• the Freedom of Information Act 1982;

• DFAT Chief Executive Instructions (CEIs);

• DFAT Risk Management Framework;

• DFAT Records Management Policy;

Public Service Act 1999 (PS Act), including the APS Code of Conduct;

• The A New Tax System (Goods and Services Tax) Act 1999; and

• Any relevant Divisional and or Post based Guidelines.

NOTE: This is not an exhaustive list and there may also be other legislation and policies that apply to contract management.

Section 2: Contract Management -Principles

Criteria for a contract

A contract details the legal rights and obligations that are enforceable by law. There is potential for legal issues and liabilities to arise in the event that any of the parties fail to honour their obligations in the contract

There are two tests which must be met in order for an arrangement to be classified as a contract. These are:

Offer and acceptance (agreement):

• does it require both a clearly stated offer to do something and definite acceptance of the terms of the offer?;

Consideration:

• does it involve the exchange of something of value?, i.e. consideration. Usually, this is in the form of money but it may be a right, promise or asset of value;

In addition to this, there are some key requirements that must be met to enable the creation of a legally enforceable contract:

Intention and capacity:

• is it for lawful undertakings?;

• is it a result of an intention to form binding relations?, i.e. the parties to the agreement must understand that the agreement can be enforced at law; is it between parties legally capable of forming contractual arrangements?; and

• has the contract been entered in to with genuine consent? That is not:

• through misrepresentation and mistake;

• under duress; or

• through undue influence.

Verbal agreement Vs Contract

It is legally possible to enter into a verbal contract. The conduct of the parties – what they said, meant and did – must be examined to determine if a "meeting of the minds" really took place. A verbal agreement, to be considered a contract, must meet the tests outlined above. A verbal agreement:

• may be preliminary and very general.;

• there must be proof of a real 'meeting of the minds' with objective evidence. Evidence can be based on conduct. For example, what would an impartial bystander think has been agreed?

• must be entered into freely, with equality in bargaining power and must be of conscionable conduct.

You must ensure that a contract meets all criteria (offer, acceptance, consideration, intention and capacity) before it can be treated as a contract for enforcement and reporting purposes.

You must ensure that the contract is executed in writing before the contractor begins work. This means that arrangements that have been made through verbal exchange should be confirmed in writing. A written contract is also the most appropriate means for managing risk (this is in conjunction with adherence to departmental risk management policy).

Drifting into Contract

One can enter into a legally binding contract by acceptance of conduct (by Implied Terms). However, sometimes the arrangements between parties are so vague that it is not possible to establish if there is an identifiable offer and acceptance, even by conduct. In the event of a dispute, where it is not possible for a court or adjudicator to determine if a contract exists, it may resort to external evidence such as conversations, letters and emails to determine this.

Where, on the other hand, a written contract does exist, the court will most probably exclude any other evidence such as conversations, letters or emails from consideration.

How not to drift into a contract when negotiating arrangements?

The safest way to ensure that a document is not a contract is to insert the words "subject to contract" on the document itself. This means that the document and any negotiations are subject to the drawing up of a written contract. A contract will be formed only when this written contract is executed (signed).

Contract Management

Contract management encompasses all aspects of a contract's life cycle from the initial or original development of a Statement of Requirement (SoR) (project requirement) through to performance management, evaluation and contract conclusion. The central aim of contract management is to obtain the goods or services as agreed and to achieve value for money.

When a contract is awarded, you must assign a DFAT representative to manage the relationship between DFAT and the contractor, including managing any risks that arise, monitoring the performance of the contractor, and to ensure that the objectives of the project are being met.

Value for Money

Value for money is one of the core principles relating to the expenditure of public money. Value for money, in relation to contract management, encompasses not just the contract cost but also the cost of managing the contract and how well the contract deliverables have been met. A key objective for the management of any contract is to ensure that it continues to achieve value for money over time.

Value for money in relation to contract management is supported by the underpinning principles of Efficient, Effective and Ethical use of public money in a manner that is consistent with Commonwealth policies.

Efficient, Effective and Ethical use of Resources

Section 44 of the FMA Act requires agency heads to manage the affairs of their Agency in a way that promotes proper use of Commonwealth resources – that is, in ways that are efficient, effective, ethical and economic and that are not inconsistent with policies of the Commonwealth. This applies to contracts and their associated procurement processes.

Risk Management

Risk management is the process of measuring, or assessing the risk and developing strategies to manage it. Risk management should be an on-going process through the contract life-cycle and, as such, it is important to identify all possible risks early and assess the likelihood of the risk occurring as well as the consequences that may follow.

Records Management

Records ensure that the Commonwealth's processes are seen to be open and transparent. Well recorded and documented information and decisions also help the preservation of corporate memory.

The success of a contract will depend on the accuracy and the credibility of the documentation that is recorded. It is therefore important to maintain and review information gathered pertaining to the contract and keep it organised for easy access. Recordkeeping is also important to demonstrate that actions taken are justified and decisions can be sustained through any administrative, parliamentary or judicial review.

Documentation of decisions, together with copies of the contract and relevant correspondence, variations, etc, must be placed on file.

Conflict of Interest

Actual or perceived conflicts of interest are potentially damaging for DFAT and its reputation, therefore, governance arrangements need to identify how any real or apparent conflicts of interest should be handled.

You should be aware that all dealings with suppliers can be publically scrutinised and as such you must ensure that your actions in undertaking a procurement process are robust and defensible.

Probity

Probity is the evidence of ethical behaviour. It encompasses complete and confirmed integrity, uprightness and honesty. In conforming to the standards of probity, clear procedures must be established, understood and observed from the outset.

You must ensure that your behaviour in managing contracts is and can be proven to be ethical and impartial in accordance with the Commonwealth legislative and policy framework which is applicable to all APS employees.

Youneed toensure that you:

• always behave in accordance with the law (including regulations), government policy and with departmental rules (for example, Chief Executive's Instructions);

• behave with the highest ethical standards, in accordance with relevant requirements of the Public Service Act 1999;

• keep commercially sensitive information secure and never use it for personal gain;

• disclose information that the government requires to be notified; and

• disclose to DFAT any form of current or prospective personal interest that might create a conflict of interest in contract management.

Confidentiality

The principle of accountability and transparency suggests that contracting information should not be confidential unless there is a sound reason, informed by legal principle, for maintenance of confidentiality of information.

You should ensure that contracts contain clauses relating to how confidential information is to be identified, handled, and returned on completion of the contract. These clauses must be in accordance with Financial Management Guidance No.3 – Guidance on Confidentiality in Procurement. DFAT standard Contract Templates contain these clauses. When information in the contract is to be kept confidential, you will need to ensure that it is properly managed, protected and that the fact that certain aspects of the contract are confidential, reported as part of the Senate Order on Government Agency contracts (Murray Report). Refer to the DFAT Procurement Guide - Central Contracts Database for further information regarding reporting of confidentiality clauses.

Section 3: Developing a Contract

Developing a Contract – Checklist

The checklist set out below outlines important stages in the contract management process. Paragraphs in this chapter have been arranged to sequentially address each of these steps.

 

Have resource needs been identified?

 

Has there been consultation with stakeholders, including posts where appropriate?

 

Is the contract based on a standard DFAT contract template?

 

If not using a standard DFAT contract, have you discussed the contract with PTC or GCL?

 

Have roles and responsibilities of parties to the contract been clearly outlined?

 

Have the contract deliverables been clearly worded?

 

Has a variation clause been included (including price variation clause if necessary)?

 

Does the contract contain a detailed dispute resolution clause?

 

Have you agreed to any contingent liabilities and if so secured necessary approvals (including FMAA Regulation 10 if necessary)?

 

Have performance indicators been identified?

 

Has a Risk Management Plan been developed and included appropriate risk mitigation clauses in the contract?

 

Has a Performance Monitoring Plan been developed and included in the contract?

 

Have all reporting requirements on the Central Contracts Database been undertaken (if applicable)?

 

Does the contract address transition arrangements?

 

Does the contract specify the circumstances under which DFAT may terminate the contract?

 

Has the payment clause been clearly outlined?

Identify Resource Needs

Appropriate resources need to be available for contract development. Sound contract development requires appropriate skills, knowledge and experience. For more complex contracts it may be necessary to obtain professional advice at different stages on matters such as defining the contract deliverables, developing technical performance measures, and the inclusion of particular contract provisions.

Assign Responsibilities

Throughout the life of a contract, there will be many stakeholders within DFAT and the contractor's organisation, who will have roles and responsibilities in relation to the contract. This may include developing the contract, defining contract deliverables, obtaining stakeholder input and establishing a performance regime. Identifying roles and responsibilities clearly is essential to the overall contract management process.

You must ensure that contract officers from DFAT and the contractor's organisation are clearly identified in the relevant section of the contract and their roles and responsibilities are clearly identified.

Statement of Requirements

All contracts will include some form of statement of requirements or contract deliverables. Larger contracts usually have a separate schedule outlining all the deliverables agreed under the contract. Deliverables outline the outcomes or results required under the contract. It is essentially a statement of work/requirement.

This section of the contract is crucial as it contains the details of what outputs and outcomes are required for the project.

Contract deliverables must be specified together with the standard to which they are to be delivered and in what timeframe the project is to be completed. The emphasis on results and outcomes, rather than on outputs and processes used by the contractor, can allow the contractor the opportunity for flexibility and innovation. Many contracts also use supporting Key Performance Indicators (KPIs) to manage these deliverables and expectations.

Depending on the requirements of the contract, deliverables should be written in functional and performance terms rather than in technical terms.

Contract deliverables should also indicate the importance of each deliverable or each part of the deliverable where appropriate.

Term of Contract

The maximum term of a contract is something that needs to be assessed depending on the type and value of the procurement. The important thing to consider in setting contract terms is assessing how value for money will be delivered throughout the term of the contract. If the type of good/service you are procuring is likely to change in value or capability (i.e. changes in technology result in the same services being delivered more economically or additional functionality being available for the same price), a shorter contract term may be appropriate.

Contract Variations

Contract variations are changes to the contract which are agreed between the parties. Proposed contract variations must be closely examined to determine the effect on:

• contract price and the payment schedule;

• the delivery schedule;

• the scope of goods and/or services previously agreed under the contract;

• the risk allocation under the contract;

• other existing terms and conditions of the contract; and

Where relevant, you must seek additional FMA Reg 9 and 10 approvals before entering into contract variations. Please consult the FMM for further information.

Contract variations leading to change in scope may result in the requirement to undertake a new procurement. Please consult PTC in such circumstances.

Most long term or complex contracts change over time and it is the responsibility of the contract manager to manage all variations to the contract.

All contract variations that result in the total value of the contract equalling or exceeding $10,000 must be registered in the Central contracts Database.

Dispute Resolution Procedures

Contractual disputes can occur, for example, over the interpretation of the contract conditions, project specifications, the performance of either party under the contract, or the effects of unexpected events. The contract manager can reduce the risk of disputes by maintaining close liaison with the contractor and resolving disputes as soon as they arise to avoid escalation. Early recognition and prompt attention to the underlying cause of the dispute provides the greatest likelihood of a solution, which is in the best interest of all parties.

DFAT standard contracts contain a dispute resolution clause that sets out specific processes which need to be followed by the parties when disputes arise.

Indemnities

Indemnities, guarantees, warranties and letters of comfort are forms of contingent liabilities.

At law, an indemnity is a legally binding promise by which one party undertakes to accept the risk of loss or damage another party may suffer. Essentially, it is a promise to 'hold harmless'.

Australian Accounting Standards Board standard - AASB147 defines contingent liabilities as those items that are not recognised as liabilities on the balance sheet because they are possible obligations, as it has yet to be confirmed whether the entity has a present obligation that could lead to an outflow of resources in the future.

Generally DFAT seeks indemnities, guarantees, warranties etc. from its suppliers and these are contained in DFAT standard contracts. The most appropriate way to manage the risks associated with the performance of the contract is for the party best able to manage the risk to have responsibility for doing so, and it is for this reason that the contractor is asked to indemnify DFAT – the contractor is generally best able to manage the risks associated with contract performance.

Hotel and Venue Hire Contracts

It is common for venue hire and hotel contracts to contain indemnity clauses that indemnifies the venue or hotel for any damage caused to the room or for any claim by a third party against the hotel for personal injury or property damage as a result of a departmental function or an officer staying there. Such indemnities usually do not extend to damage or injury caused by the hotel or its staff.

Officers must inform the Comcover Liaison Officer and PTC before agreeing to any indemnity clauses. The department's insurance arrangements require us to inform our insurance provider, Comcover before agreeing to any form of indemnity.

Intellectual Property Rights

Intellectual property rights relate to rights protected by legislation including copyright, patents, registered designs and trademarks, together with confidential information and trade secrets protected under common law or by contract. The contract manager should ensure that provisions are included in the contract to deal with the ownership and rights to use intellectual property rights created within the scope of the contract and outside the contract.

Developing Performance Evaluation Checklists

Contract managers should develop performance measures, as well as payment schedules that relate to the work in relation to contracts that they manage. These performance indicators determine which activities are critical to the success of the contract. Performance measures should be explicitly identified within the contract and selected on the basis that they are measuring something that is important and achieving the contract deliverables.

Reporting Requirements: Central Contracts Database

The contract manager is responsible for ensuring all reportable contracts (including verbal arrangements, Work or Official Orders and MOU's) with an actual or estimated value of $10,000 or more are recorded in DFATCentral Contracts Database (CCD).

The CCD is used to fulfil a number of DFAT monitoring and reporting obligations. It issues each contract with a unique contract number (CRN).

Details of all contracts and agency agreements, including panel and standing offer arrangements valued at or over $10,000, unless specifically exempt, must be recorded on the CCD as soon as possible after entering in to the arrangement.

Contract Transition out Plan and Novation

Transition out Plan

The transition phase of the contract relates to the period where one contractor completes their contract and a potential new contractor takes over.

A transition out plan is requiredto ensure effective contract succession at the termination of the contract and the orderly introduction of services by the new contractor at the commencement of the new contract.

In circumstances where a transition in phase is required, the contract should comprehensively cover this including:

• specify the period of the transition. This may be after a specified period of time or at the date of the achievement of agreed milestones or service levels; and

• detail the contractors (incoming and outgoing) responsibilities during this period. This will often involve the contractor preparing a detailed transition in strategy or plan that requires the approval of DFAT. This document should provide for a formal evaluation or review at the conclusion of the transition period.

The foundations for managing transition to new contractual arrangements should be addressed in the initial contract and approach to market documentation or in plans to manage the procurement. The plan should cover agreed timeframes, transfer of records, maintenance of services and information or equipment required.

Novation

A novation refers to the transfer of obligations under a contract, and all the benefits arising from that contract to a third party. A novation is generally used where a party to an existing contract wishes to be substituted by a new party (normally due to a company takeover). A contract transferred through a novation process effectively terminates the original contract and transfers rights and obligations of that contract to a new contract owner, including liabilities.

Contract End Date

Contracts often include a specific End Date on which the contract will come to an end. You must ensure that there is always an End Date to ensure it is clear to all parties of the contract when the contract will expire to mitigate any disputes.

It is important to note that even if the date of completion of the contract has passed, this does not mean all contractual obligations have 'expired' or can be terminated. Some examples are insurance requirements, any other matters inserted under survival clauses in the contract etc. A contract, or part of it, may remain current unless and until all the obligations on either side have been fulfilled, or is terminated as a result of a breach or by mutual agreement.

Payments

Payment clauses specify the quantum and timing of payments as well as any conditions that must be met before DFAT is liable for payments under the contract.

The contract should ensure that there is a legal right for DFAT not to pay the contractor or vary payments in circumstances where the contractor has not met their obligations under the contract. Payments to the contractor should only be made where there is compliance with all of the obligations under the contract.

Late payments by DFAT outside the agreed terms and conditions can have a serious impact on small to medium enterprises, and even larger enterprises. DFAT must comply with relevant Commonwealth policies relating to payments, including those relating to payments of small businesses – see Finance Circular 2008/10 - Procurement 30 Day Payment Policy for Small Business for further information.

Section 4: Formalising the Contract

4.1 Formalising the Contract - checklist

The checklist set out below outlines important stages involved in finalising a contract. Paragraphs in this chapter have been arranged to sequentially address each of these steps.

 

Has a financial viability assessment been undertaken?

 

Have contract negotiations been undertaken and approvals received from the relevant delegate (if applicable)?

 

Has GCL or PTC advice been sought for changes to standard clauses prior to finalising the contract?

 

Has the contract been approved by the relevant delegate?

 

Has the contract been signed by both parties?

 

Has the successful supplier been notified of the outcome?

 

Have the details of the contract awarded (worth more than $10,000) been entered in the CCD?

 

Have unsuccessful tenderers been notified and offered a debriefing (where applicable). Mandatory to notify for open approaches to market such as RFTs)?

 

Have the relevant approvals been sought for contract variations (if applicable)?

 

Are contracts being monitored and performance assessments undertaken?

 

Has the contractor been informed of underperformance (if applicable)?

Financial Viability Assessment

Financial Viability Assessments provide a useful tool in determining whether a contractor has the financial capacity to carry out the activity.

Contracting With Specific Types of Entities

Contracting with a Trust

A trust is a relationship or association between two or more persons whereby one party holds property on trust for the other. The property could be land, shares, money or personal property. The first party is vested with property. The holder of the property is called the trustee. The other party (for whom the property is held) is called the beneficiary. Trusts may be made expressly in writing or implied from the circumstances. A company, for example, may trade as trustee of a trust.

Trusts enter into agreement via the trustee. However, a trustee may only enter into an agreement on behalf of a trust if the trustee has the power to do so under the trust deed. When entering into an agreement, it is important to ensure that a trustee has the power to enter into an agreement and thereby bind the trust. You can do this by obtaining a copy of the Trust Deed.

The primary obligation of a trustee is to act in the best interests of the beneficiary or beneficiaries under the trust. Sometimes the trust deed will specify other duties and obligations on trustees. Certain powers are also normally given to trustees under the trust deed.

Contracting with a Sole Trader

There are specific risks to both the contractor and the department in entering into sole trader contracts. Any decision regarding entering into a contract with a sole trader must be made on the basis of consultation with and advice provided by PTC and GCL and approved by the relevant financial delegate.

The following issues must be considered when entering into a contract with a sole trader.

Issues to Consider – Sole Trader Contracts

When entering into a contract with a sole trader, the department may have additional legal obligations to the individual that it would not have if it was contracting with an entity. For example, the law might require the department to:

• pay superannuation for the individual; and

• deduct income tax from the amount paid to the individual.

Also, depending on the nature of the work to be done and the manner in which it is done, the individual may be classified by the law as an employee of the department even though the individual is described as a 'contractor' or a 'consultant' in a contract. If the law classifies the individual as an employee of the department, the department must also consider issues such as:

• employment law issues such as

• minimum wages and conditions

• termination provisions, leave entitlements, etc; under awards and agreements;

• the department's liability for loss or injury caused by the individual to third parties (ie, vicarious liability).

In all cases officers must apply the core principle of value for money. If a contractor needs to be engaged directly in the capacity of a sole trader, officers need to consider the type of contract to be used:

• Letter of appointment;

• Special envoy Contract;

• Short Form Contract; or

• Long Form Contract.

Withholding Tax

If entering into a contract with a sole trader, they are required to quote their Australian Business Number (ABN) in a correctly rendered 'tax-invoice'. The department is required to withhold 48.5% in the event that the sole trader does not have an ABN.

Superannuation Guarantee Contribution

Officers must check whether DFAT has an obligation to pay Superannuation Guarantee Contributions (SGC) when entering into contracts with sole traders. SGC is not payable when entering in to contracts with an entity such as a company or partnership. The Department of Finance and Deregulation (DoFD) has issued a Superannuation Circular No. 2006/9 'Superannuation for Contractors after 1 July 2006)' to assist Commonwealth departments and agencies to determine which persons (or contractors) they are liable to pay superannuation for after 1 July 2006. The Circular states that "superannuation is payable for contractors who have been engaged directly (usually not through a labour hire firm) by Australian Government employers wholly or principally for the labour of the contractor."

Details regarding any SGC to be paid by the department must be clearly reflected in the contract. Further guidance is available at: http://www.ato.gov.au/nonprofit/content.asp?doc=/content/4540.htm

The ATO has a questionnaire that will assist officers in determining this and is available at: http://www.ato.gov.au/individuals/content.asp?doc=/content/00188597.htm&pc=001/002/064/002/010&mnu=42869&mfp=001/002&st=&cy=1

Contract Negotiations

Negotiation is a common feature of contract formalisation for both straightforward and complex contracts. Negotiations may be required for various reasons including:

• to achieve a full understanding between the parties;

• to refine the performance measures;

• make changes to the timeframes;

• to clarify issues or objections to contract provisions; and

• to explore any complex issues.

You should not advise or give any impression that the (or any other) tenderer has been awarded the contract until the contract negotiations have been concluded and delegate approval has been received.

Contract Document Approval and Signing

It is crucial that the relevant FMA Section 44 Delegate approves the content of the contract. This must be done prior to the contract being signed. It is best practice for the delegate responsible for the contracting process to also sign the contract.

An FMA Regulation 10, if applicable, approval must be obtained prior to entering into (executing) a contract. Entering into an agreement can be undertaken by a departmental officer with an appropriate FMA Act section 44 delegation. By signing the agreement the delegate is signifying that they approve the terms of the agreement and are satisfied that it represents a proper use of resources.

The FMA Section 44 delegate should ideally NOT sign the contract:

• prior to the supplier sending two signed original copies to DFAT;

• if the contract been changed from what was already approved in principle*; or

• if it is not in the best interests of the Commonwealth to do so.

Two copies of the contract must be forwarded to the contractor to be signed. This allows for a copy of the contract to be kept with each party. It is important for the final contract to be checked for accuracy.

It is best practice for the contractor to sign the contract first as this allows DFAT to ensure that the final contract has not been varied in any way from that which was agreed upon between the parties. On receipt of acceptance of the contract by the preferred tenderer (i.e. receipt of two signed copies of the contract by the department) the FMA Section 44 delegate is required to sign both copies.

*to mitigate the risk of suppliers altering agreed terms and conditions prior to our signature, you could initial the bottom right-hand corner of each page on all originals prior to sending the contract to suppliers.

Contract Options and Variations

Variations including Verbal and Informal Variations

Contract variations are changes to the contract which are agreed between the parties and include changes to any term, condition or schedule of the contract. All contract variations regardless of whether the contract value or scope is increased require a value for money assessment before proceeding. The process for contact variations must be consistent with, where applicable, the process outlined in the contract.

DFAT contract managers should take care not to enter into any verbal or other informal contract variations.

The courts have found that parties can vary a contract by conduct, even if there is an express contractual provision stating that variations will only be effective in writing. An example is where a contract required quarterly meetings that, by conduct, have never been held.

Contract Options

Contract options are clauses included in the contract under which a party to the contract may extend the period of the contract or require the performance of additional work. Contract options, if agreed, could be by unilateral action. This means that it can be affected by the by unilateral action of the nominated party (in the contract) and without further agreement from the other party. An example of a unilateral contract option is a clause that enables the contract to be extended for a particular period of time by DFAT giving written notice to the supplier.

The procedure for exercising a contract option is governed by the terms of the option clause in the contract and usually involves written notice within a specified period.

Further information on evaluating extension options is available from DOFD.

If an existing contract has no option for extension, then any proposed extension should be treated as a new procurement in accordance with the CPRs. The exercise of a contract option is an expenditure related decision. As such, the principle of value for money applies and necessary financial approvals must be obtained.

Price Escalation Clauses

Price escalation clauses provide a mechanism under which the pricing schedule in a contract may be adjusted under a set formula. This type of clause can be used when contractors are uncertain about the level of costs which will be incurred by performing the contract. Examples of the circumstances in which price variation clauses might be used include:

• Consumer Price Index: or

• fuel levies.

You should carefully consider the operation of price escalation clauses when seeking financial approvals.

Financial Approvals of Contract Options and Variations

Where a proposed variation (regardless of value) or the exercise of a contract option impacts on terms of the original spending proposal and involves an increase in contract expenditure, you must seek FMA Act Regulation 9 delegate approval (and FMA Act Regulation 10 authorisation if applicable) for the revised total contract expenditure from an appropriate delegate.

Increase in contract scope and corresponding increase in price

This would require approval by a delegate under FMA Regulation 9 (and if necessary, the approval of the spending proposal must be authorised in accordance with FMA Regulation 10).

The approval should be obtained from a delegate who holds sufficient delegation to approve a spending proposal for the aggregate contract value (i.e. the remaining amounts yet to be paid under the contract including any increase from the variation). Refer to the FMM for further information.

Reduction in contract scope, no increase in expenditure

Although there is no proposed increase in expenditure under the contract, a contract variation that significantly reduces the contract scope will impact on the terms of the original spending proposal.

The same approach as set out in section 4.7.4.1 should be taken here.

Change in contract scope, increase in expenditure

This would require approval by an appropriate FMA Regulation 9 delegate (and if necessary, the approval of the relevant spending proposal must be authorised in accordance with FMA Regulation 10).

The approval should be obtained from a delegate who holds sufficient delegation to approve a spending proposal in respect of the amount of the increase in contract expenditure above the initial FMA Regulation 9 spending approval. Refer to the FMM for further information.

No impact on original spending proposal and contract expenditure

If the proposed variation does not impact on terms of the original spending proposal, for example an administrative change to contact information, and does not involve additional expenditure, the variation does not require approval by an FMA Regulation 9 delegate.

The procedures for execution of a contract variation are the same as execution of a contract.

Monitoring of Contracts

Contract monitoring is an important part of contract management. It involves ongoing or periodic review of contract performance in comparison with agreed performance indicators and broader contractual obligations.

Direct Contract Monitoring by DFAT

DFAT officers collect, analyse, report and act on data and information about the contractor's performance. This approach ensures DFAT controls the timing, scope and quality of the monitoring process.

Contract Monitoring Performed by the Contractor

The contractor can be made responsible for collection, analysis and reporting of performance information to DFAT. Even if the responsibility of monitoring performance is devolved to the contractor, accountability for contract outcomes remains with DFAT. It may be necessary to test the accuracy and reliability of the contractor's responses through audit, site visits, spot checks etc.

In some instances such monitoring is by written reports on progress. Such reports typically provide an update of the work completed, an assessment of how the service delivered compares with the contract requirements, performance in relation to established performance indicators, and a comparison of work with the previous period and a detailed explanation of costs incurred. These reports provide basis for ongoing dialogue between the contractor and DFAT. It is important to note that any opportunity for necessary performance management might be lost if the contract manager does not action such reports in a timely manner.

Independent Third-Party Monitoring

Independent third party monitoring can be performed directly, by giving the responsibility over to an external monitoring body, or indirectly through an accreditation process. In such a process, service standards are set, reviewed and monitored generally through an independent body.

Audits of Contractor Performance

Audits are often, though not solely, used for important corporate services such as telecommunications contracts, travel contracts and provision of IT network services. These functions are characterised by the service being delivered to many individuals across the organisation, thereby making monitoring by an individual officer managing the contract a difficult task.

An audit provides an independent, third party option as to whether contractor performance meets requirements. Audits can assist DFAT to effectively manage specific risks that may arise from engaging a particular contractor and to take appropriate risk management actions. Depending on the nature of the project the audit may be the main means of measuring performance or it may be in addition to regular monitoring processes.

Regular Meetings with the Contractor

Regular, scheduled meetings between DFAT and the contractor are an important avenue for monitoring the performance of both parties. Such meetings also form the foundation for building, developing and maintaining an effective relationship. Regular meetings are particularly important for long-term contracts. Quarterly and annual reviews are standard contract meeting times but they can be conducted more frequently if necessary or appropriate. Ideally, such meetings would complement other forms of performance monitoring.

Site Inspections

Site inspections may be appropriate in the case of certain contracts. They should be considered where other performance monitoring methods cannot give sufficient guarantee of the desired outcome. They are particularly useful for long term contracts where the activity takes place away from DFAT premises or for high value capital works projects.

Security Incidents at Premises of Contractors

Contractors have obligations to maintain a secure environment at all times for the handling and storage of physical and electronic contract related material i.e. hardcopy file records, staff/client data, private mail addresses etc. 

Incidents of physical break-ins or hacking of electronic data systems of a contractor's premises including computer systems is a potential risk to DFAT contract related material. Contract terms must include necessary clauses that require the immediate reporting of such incidents to DFAT.

Monitoring MOU's

The officer managing the agreement must ensure that the MOU is monitored and reviewed regularly over the life of the arrangement. The officer managing the agreement must ensure that it continues to fulfil its objectives and that all parties to the MOU continue their commitment to the relationship.

Performance Assessment

Performance evaluation is an important consideration in assessing whether value for money has been obtained from the contract. Monitoring and evaluating performance helps maintain accountability and ensures value for money is achieved.

Once a contractor has been selected and the buyer-contractor relationship has commenced, it is important to immediately start monitoring and assessing the contractor's overall performance. The purpose of this is to enhance the relationship and thereby control performance. Contractors should be briefed regarding expectations of their performance and methods for measuring that performance.

Under-Performance

Effective performance monitoring should provide the contract manager with a timely warning if the contractor is having difficulty in meeting the terms of the contract or the agreed performance indicators. Act early if monitoring reveals a shortcoming in the contractor's performance, as preventative action can be taken to minimise the risk of significant problems developing. Additionally, if you do not advise the contractor of the shortcomings as soon as they are discovered by DFAT, the courts may view DFAT lack of action as a contract variation based on implied terms.

Strategies for dealing with poor performance may include:

• increasing communication between the parties e.g. by way of progress meetings and reviews;

• setting more frequent milestones;

• closely monitoring performance;

• addressing whether a contract variation may be an appropriate solution and then negotiating the variation; and/or

• terminating the contract and seeking damages from the contractor (this should be used as a last resort). Please seek legal advice before undertaken this option.

You must not hesitate to inform a contractor where there is evidence that performance is inadequate or behind schedule. Records must be kept of all feedback given and the contractor's response to the feedback.

Performance management must be the first course of action when managing under performance in contracts. Termination of contracts is an absolute last option and should be pursued only if all other courses of action fail. You must not terminate a contract or seek compensation from the contractor without first obtaining legal advice from GCL.

Section 5: Contract End

Evaluate Contract Performance at the End of Contract

All contracts for procurement of goods and services should be evaluated upon completion. This is to identify the strengths and weaknesses in the procurement process and lessons that can be applied to other procurements.

The final evaluation of contractor performance should be based on the performance criteria established at the commencement of the contract. The evaluation should cover all aspects of the procurement.

As well as DFAT providing feedback to the contractor, it may also be important to invite the contractor to provide feedback to DFAT concerning contracting policy and procedures. This activity promotes a partnering relationship, where both parties share information and are willing to adapt their activities to achieve the best possible results. The results of the contractor feedback can be fed into best practice strategies, standard documentation, Departmental practices and procedures.

Contract End

When a contract has ended, required closure activities should be completed as soon as possible after the contract expiry takes effect. Contract closure activities that may be required include:

• verifying that all contractual obligations have been satisfactorily completed, including payments and final accounting;

• ensuring that all disputes under the contract have been resolved;

• completing records and ensuring there is an appropriate audit trail;

• post activity evaluation, analysis and reporting;

• ensuring that any transition arrangements required under the contract have been implemented;

• documenting lessons learnt;

• where the contract is terminated, ensuring that any requirements set out in the deed of settlement are met.

Glossary

Accountability: requires purchasing officers to be answerable for their plans and actions and the consequences of these.  Openness and transparency in administration, by external scrutiny through public reporting is an essential element in accountability.

Agency Agreement: an agreement for the procurement of goods or services under which an agency is obliged, or may become obliged, to make a payment of public money to another agency. An agency agreement will normally take the form of a MOU.

Audit: an examination or review. They are performed to ascertain compliance.

Best Practice: a cooperative and integrated approach to managing, organising and improving operations during all stages of the procurement process.  It equates to the adoption of consistent standards, policies and procedures, and the use of benchmarks.  Best practice is an ever evolving goal whose performance indicators move higher as it is acknowledged that someone else is doing better.

Conflict of Interest: arises where a person makes a decision or exercises a power in a way that may be, or may be perceived to be, influenced by either material personal interests (financial or non-financial) or material personal associations.

Contract: a legally enforceable arrangement which creates rights and obligations between the parties.

Contractor: include service/property providers, grant recipients, business partners, and any other individuals/organisations/agencies that DFAT has a contract with.

Contract Deliverables: the goods or services to be delivered under the contract.

Contract Management Plan: a plan outliningthe way in which a contract is to be managed

Contract Type: consultancy contract, general services contract or property contract

Debriefing: the process of advising unsuccessful bidders, on a no commitment basis, of deficiencies in their bids which, if remedied, would make them more competitive for the future needs. (Can also be used for successful tenderers).

Delegate: an appointed person who holds a delegation. The delegate provides the authority of an activity to be carried out.

Dispute: an argument or failure to agree

Ethical Behaviour: in the context of procurement, behaviour which ensures that individuals and organisations are trusted and respected by those with whom they deal.  It also ensures that all parties conduct business efficiently, in a fair and reasonable manner, and with integrity.

Guarantee: a warranty by a manufacturer or supplier that the property being supplied are free from defective workmanship and materials, together with an understanding that if such defects arise within a specified period of the use the manufacturer or supplier will rectify such defects at their own expense.

Gazettal: the process of inserting notices on to the AusTender website in order to facilitate open and effective competition by allowing members of the public to compete for Government contracts and notification of the results of any contracting process.

Insurance: a contract where a person (called the insurer) agrees that money paid to them (called the premium) by another person to indemnify that second person against loss resulting to them on the happening of certain events.

Intellectual Property: legal property rights to things that are created or invented. Examples include patents, copyrights, and trademarks.

Liabilities: liabilities are the future sacrifices of economic benefits that DFAT is presently obliged to make to other entities as a result of past transactions or other past events. In short a debt which DFAT owes to another entity.

Memorandum of Understanding (MOU): non-binding and non-contractual agreements between Commonwealth agencies. Even though MOUs do not have the same legal status as contracts, DFAT officers managing the arrangement should manage MOUs with the same degree of rigor, and apply policies and procedures within this guide.

Negotiation: a bargaining process between two or more parties.  Each party has its own viewpoints and objectives but seeks to reach a mutually satisfactory agreement on, or settlement of, a matter of common concern.

Officer Managing the Contract: a staff member performing the contract management role and having the responsibility for all aspects of the contract including ensuring stakeholders are kept informed about relevant matters and contract developments.

Performance: is the efficiency and effectiveness with which outcomes are being achieved against the objectives set by the Government, the appropriateness and quality of processes, and the probity with which processes are conducted to achieve the outcomes.

Performance Indicator: provide a way of measuring how well an organisation is performing so that it can be compared with others or with past achievements. Performance indicators are often linked with targets and objectives.

Performance Standard: a criterion or benchmark with which actual performance is compared.

Policy: the objectives, ethos, and body of principles underlying the activities of an organisation.  A settled objective or course of action, determined by appropriate authority, prescribed to be followed by individuals or groups owning some kind of obedience to that authority.  Policy is usually based on principle.  Effective policy also recognises the practical considerations which will bear upon implementations.

Probity: having the consideration of ethical issues. It relates to having strong moral principles such as uprightness, honesty and integrity.

Procurement: isthe acquisition of property and/or services

Risk Management: the process of implementing and maintaining appropriate management controls, including policies, procedures and practices to reduce the effects or risks to an acceptable level. The process involves identifying, analysing, assessing, treating and monitoring risk in all areas of departmental operations and business.

Stakeholder: internal or external parties whether an individual or group with an interest in the success of an organisation in delivering intended results and maintaining the viability of the organisations products and services. Stakeholders influence programs, products and services.

Standard Contract: a standardised contractual document adopted by an organisation to cover all standard commercial and non-commercial requirements.

Statement of Requirement: the exhaustive list of requirements that define a product or service.

Terms and Conditions: a general phrase used to describe all of the provisions, agreements, obligations and rights pertaining to a contract.

Value for Money: a way of comparing alternatives for the supply of property and services. The concept of value for money is not restricted to price alone. The value for money assessment must include consideration of:

  • contribution to the advancement and implementation of government policies and priorities;
  • non-cost factors such as fitness for purpose, quality service and support; and
  • cost related factors including whole- of- life costs associated with acquisition, use, holding, maintenance and disposal.

Variation: a change to the contract which is agreed upon between the parties involved.

Warranty: an undertaking either expressed or implied that a certain fact regarding the subject matter of the contract is presently true or will be true.

Chapter 7- Work Health & Safety in Procurement

Policy and Legislative Basis

Introduction

The States, Territories and the Commonwealth committed to enacting new work health and safety laws. The Occupational Health and Safety Act 1991 (OHS Act) changed to the Work Health and Safety Act 2011 (WHS Act) from 1 January 2012. This is a significant and historic change to OHS laws in Australia and represents a time for review and change in how we look at work health and safety.

Consideration of Work Health and Safety (WHS) is an important part of procurement risk management practice.

The WHS Framework

The WHS Framework, as espoused in the WHS Act, sets out the health and safety duties of officers undertaking procurement.

Specified Roles in the WHS Act

Primary Duty Holder

The primary duty holder, under the Act, is a Person Conducting a Business or Undertaking (PCBU) who is responsible for its overall operation.

The Commonwealth is the PCBU and the department implements the requirements of WHS law on behalf of the Commonwealth.

PCBUs owe a duty of care to all workers. They must ensure the health and safety of all workers, so far as is 'reasonably practicable'. PCBUs also have duties to other persons.

Officer

An Officer is an officer of a PCBU.

An Officer is a person who makes, or participates in making, decisions that affect the whole or a substantial part of the business. Officers in the department include Secretary, permanent members of the Departmental Executive and HOMs.

An officer of a PCBU has a duty to exercise 'due diligence' to ensure that the PCBU complies with its duty.

Worker

A Worker is a person who carries out work in any capacity for a PCBU and includes an employee, a contractor or subcontractor, an employee of a contractor or subcontractor, a labour hire worker, an outworker, an apprentice or trainee, a student gaining work experience or a volunteer.

A worker must take 'reasonable care' for themselves and others, comply with reasonable instructions and cooperate with reasonable policies and procedures of the PCBU.

Others

Persons who find themselves at a workplace, whether or not they have another duty.

Persons must take 'reasonable care' for themselves and others and comply with reasonable instructions of the PCBU.

WHS Act and Procurement

PCBUs, Officers and Workers must comply with relevant WHS duties as part of the procurement process, including identifying risk and considering what is 'reasonably practicable' to ensure the health and safety of workers and others.

The extent to which WHS considerations will require specific treatment in the procurement will depend on what is being procured, what type of contractor will be involved and how the procurement is conducted. Risks for consideration include those arising during the:

• procurement process;

• contract period; and

• ultimate use of the goods or services procured under the contract.

Reasonably Practicable

Deciding on what is 'reasonably practicable' to the ensure health and safety of workers and others requires taking into account and weighing up all relevant matters including:

• the likelihood of a hazard or risk occurring;

• the degree of harm that might result from the hazard or risk;

• what the relevant person knows or ought to know about the hazard or risk, and ways of eliminating or minimising the risk;

• the availability and suitability of ways to eliminate or minimise the risk; and

• the cost associated with the ways of eliminating or minimising the risk, including whether the cost is grossly disproportionate to the risk.

WHS issues to consider when procuring goods and services

from the planning stage for the procurement.

• Is this type of activity or equipment new for the department? What are the new WHS risks?

• Is this the type of activity or equipment where there are known WHS risks?

• What WHS risks are inherent in the goods or services? How will the risk be best managed? Who is best placed to manage these risks?

• How will you ensure all potential workers adhere to the same health and safety vision as the persons conducting a business or undertaking (PCBU)?

• Have you considered legal advice?

WHS risks when developing the specification.

• Does the specification clearly address WHS standards, training requirements, and performance metrics?

• Are there any specific WHS reports, certificates or information to include in the specification?

• What will the department do with the goods or services after delivery? Clearly state the purpose of the goods or services.

specific WHS requirements that may apply to the activities covered by the contract.

• Are there any specific Commonwealth WHS codes of practice, safety standards or departmental policies relevant to the goods or services, or the purpose to which they will be put?

• Does the contractor hold any necessary licences (for example, an asbestos removal licence or a high-risk work licence)?

• Will contractors and their employees need to be involved in consultation, representation and participation activities? How will you communicate expectations?

Be clear in the contract who is responsible in relation to WHS duties.

• Does the contract clearly define WHS roles and responsibilities between parties? How are obligationsand shared responsibilities for WHS matters allocated in the contract?

• How will any disputes in relation to WHS issues be resolved?

• How will you approach approval of subcontractors, plans, etc under the contract?

• Does the contract make clear the intentions of the department regarding taking responsibility for particular types of risk?

Use an evaluation methodology that takes account of WHS.

• What information will you need to determine if the proposed goods or services will meet your required WHS standards (as set out in the specification)?

• Will WHS be a specific evaluation criterion or part of the overarching risk consideration?

• Have you considered the cost associated with controlling a risk against the likelihood of the risk occurring and the harm that would result?

Ensure that you have the necessary resources and expertise to select a suitable contractor/product.

• How will you assess compliance with the requirements of your specifications?

• Do you have in-house expertise to consider suitability or do you need to hire-in?

• Can you rely on the tenderers statements, or do you need to independently verify compliance and suitability?

• Do you need documentation from the contractor (and subcontractor) regarding health and safety records, WHS policies and procedures, WHS prosecutions and workers compensation coverage?

Ensure that all parties understand WHS responsibilities.

• Ensure officers and others involved in the procurement process are aware that they will be liable to prosecution for a criminal offence if they fail to comply with their health and safety duties.

• Ensure contract managers understand WHS responsibilities that might be relevant to managing the contract such as responsibilities for agency staff on contractor premises and responsibility for contractor staff.

• Monitor performance metrics and review them as part of a post-contract evaluation.

• Assess, execute and review orientation and training wherever reasonably practicable.

Consider the impact of WHS laws on workers travelling or based overseas

• Consider how the same duty of care as Australian based workers will be provided to workers travelling or working overseas.

• Ensure the PCBU takes reasonably practicable measures to eliminate or control risks in the overseas environment.

• Ensure officers, workers and others are aware that WHS law may apply outside of Australia.

Further information

Work Health and Safety Act 2011 http://www.comlaw.gov.au/Details/C2011A00137

AGS Fact sheets http://www.ags.gov.au/publications/agspubs/factsheets/index.htm

No. 18 Work Health & Safety – Procurement

No. 17 Work Health & Safety – Officer's duty