Legal Risks In Procurement and the New NSW Procurement Framework Presented by Scott Alden 27 March 2013 1
Overview 1. Background to the procurement framework: the process contract 2. What does the procurement framework look like? 3. The ICAC framework - ensuring fairness and probity 4. What are the reforms and what are their implications? 2
1. Background to the procurement framework: the process contract A. Legal Risks i. The Process Contract One Contract (before Hughes Aircraft) (i) Invitation to Tender (Invitation to Treat) (ii) Tender (Offer) – Validity Period (iii) Letter of Acceptance (Acceptance) 3
1. Background to the procurement framework: the process contract Two Contracts (after Hughes Aircraft ) (A) The Queen in Right of Ontario et al v Ron Engineering & Construction Eastern Ltd (1981) Canada (B) Hughes Aircraft Systems International and Airservices Australia (1997) 146 ALR 1 (C) Ipex ITG Pty Ltd (in liq) v State of Victoria [2010] VSC 480 (D) Ipex ITG Pty Ltd (in liq) (recs apptd) v State of Victoria [2012] VSCA 201 4
1. Background to the procurement framework: the process contract Can You Exclude the Process Contract? There is no intention to create legal relations by this RFP. The request may result in negotiations for the award of a contract, but of itself is not an offer that applicant / Proposers accept by submitting a proposal. To avoid doubt, no process contract will arise by the issue of this RFP. Cubic Transportation Systems Inc & Anor v State of New South Wales & 2 Ors (2002) 5
1. Background to the procurement framework: the process contract Should You Exclude the Process Contract? Ron Engineering & Construction Eastern Ltd [1981] 1 SCR 111 Canada City Polytechnic of Hong Kong v Blue Cross (Asia Pacific) Insurance [1994] HK CFI 355 6
1. Background to the procurement framework: the process contract Excluding Liability under a Process Contract Tercon Contractors Ltd v British Columbia (Transportation and Highways) 2010 SCC4 RFP exclusion of liability clause: “Except as expressly and specifically permitted in these Instructions to Proponents, no Proponent shall have any claim for compensation of any kind whatsoever, as a result of participating in this RFP, and by submitting a Proposal each Proponent shall be deemed to have agreed that it has no claim.” 7
1. Background to the procurement framework: the process contract Consequences of Breach of the Process Contract Damages for a breach of the Process Contract Loss of Profit Loss of Chance J&A Developments v Edina Manufacturer Ltd, Amoura Ltd Ors [2006] NIQB 208 8
1. Background to the procurement framework: the process contract Disclosure & Preliminary Discovery Griffin Energy Pty Ltd v Western Power Corporation [2006]FCA 1242 Telstra Corporation Limited v Minister for Communications, Information Technology and the Arts (No.3)[2007] FCA 1567 9
1. Background to the procurement framework: the process contract ii. Avoid Risks • Careful drafting of the RFT • Comply with the Process Contract • Adequate Planning • Internal Training • Proper Processes • Compliance Program • Contracting out of the Process Contract? 10
1. Background to the procurement framework: the process contract iii. General Misleading and Deceptive Conduct Section 18, Schedule 2 Competition and Consumer Act 2010 Fabcot Pty Ltd v Port Macquarie-Hastings Council [2010] NSWSC 726 Equitable Estoppel LMI Australasia Pty Ltd v Baulderstone Hornibrook Pty Ltd (unreported 10 April 2003) 11
2. What does the procurement framework look like? A. What do I have to comply with? Local Government State Government (Departments, Statutory Authorities, State owned corporations, Government Trusts) Commonwealth Government 12
2. What does the procurement framework look like? NSW Procurement Framework NSW Government is overhauling its procurement systems For Goods and Services procurement , an Interim Procurement Policy Framework currently applies to government agencies. All relevant requirements of the NSW Government Tendering Guidelines (issued December 2011) have been captured by the Interim Procurement Policy Framework (sections 2-5). The NSW Government Procurement Policy & Guidelines Paper issued in 2004 (TPP04.01) applies where it is not inconsistent with the interim framework For Construction procurement , a different set of guidelines and schemes apply (see next page) 13
2. What does the procurement framework look like? NSW Procurement Framework Goods and Services Procurement Construction Procurement An Interim Procurement Policy Construction procurement guidelines apply for Framework is in place for purchasing procurements valued below the $1 million Goods and Services (available at threshold for the Agency Accreditation Scheme www.procurepoint.nsw.gov.au) from 1 for Construction (see next page) January 2013 From 1 July 2013, a revised version of An Agency Accreditation Scheme for this framework will be in place Construction applies for the planning and/or delivery phases of construction projects valued at $1 million or above The NSW Government Procurement NSW Treasury appraisal/monitoring Policy & Guidelines Paper (TPP04.01) requirements apply for major projects with a applies where it is not inconsistent cost of over $50 million with/overridden by these newer policies 14
2. What does the procurement framework look like? NSW Procurement Framework - construction Approved quote/tender requirements from 1 July 2013: Construction Goods and Construction Related Other Services Value Consultancy Consultancy (no (where Pre- existing qualification State Scheme exists) Contract) ** Up to $30,000 1 1 1 1 $30,000 - 3 1 3 * 3 50,000 3 3 3 * 3 $50,000 - 150,000 3 * 3 3 $150,000 - Open 250,000 Tender * 3 Over Open Tenders Open Open $250,000 Tender * Tender * * Where a pre-qualification scheme is used, adopt the number specified by the scheme. If not specified in the prequalification scheme, a minimum of 3 is recommended. ** This is in accordance with the State Contracts Control Board general purchasing delegation for non-construction work. 15
2. What does the procurement framework look like? Public Sector Employment and Management Act 2002 (NSW) Section 149 Obligations of government agencies (1) A government agency is to exercise its functions in relation to the procurement of goods and services in accordance with: (a) any policies and directions of the Board that apply to the agency, and (b) the terms of its accreditation (if any) by the Board, and (c) the principles of probity and fairness. (2) A government agency is also to ensure it obtains value for money in the exercise of its functions in relation to the procurement of goods and services. (3) A government agency is, at the request of the Board, to provide information to the Board about its activities in relation to the procurement of goods and services. (Emphasis added) 16
2. What does the procurement framework look like? The Gateway Review System The Gateway Review System was intended by the NSW Government to "help agencies improve their procurement discipline and achieve better service results from their activity" (Procurement NSW website) A Gateway Review is mandatory if a project meets strategic review or business case criteria (see next page) under Treasury Circular 10/13. 1. Submission of a project proposal for a Gateway Review requires agencies to complete an online Risk Assessment Tool. 2. A small team of experienced procurement practitioners conduct the reviews based on service delivery, affordability, value for money, sustainability, governance, risk management and stakeholder management and change management. 3. Review results are summarised in a report which may include recommendations. 17
2. What does the procurement framework look like? The Gateway Review System Strategic Review Business Case Review Estimated total cost over $10 million; AND All projects with an estimated total cost over $10 million and commencing in the upcoming budget year, OR Commencing in years 2-4 of the upcoming Estimated total cost over $1 forward estimates period OR million (if requested by Treasury) Proposed for State Infrastructure Strategy publication or other public statement 18
3. The ICAC Framework and Ensuring Fairness and Probity "Several ICAC investigations have exposed corrupt conduct and identified common corruption risks in procurement processes." - ICAC Website under 'Preventing Corruption' 19
3. The ICAC Framework and Ensuring Fairness and Probity Dragan Marijan v Rail Corporation NSW T/A RailCorp [2012] FWA 5639 Employee's engagement of a particular service provider which was not a member of RailCorp's approved panel of suppliers, and which later charged RailCorp an inflated price for services it had subcontracted. FWA found that the employee had accepted that he had breached RailCorp's procurement policy, that "he was well aware of the need to comply with RailCorp's policy" and breached the policy repeatedly – and therefore lawfully dismissed. In particular, where panels are used for procurement, departure from using service providers on those panels can undermine the system. Future and existing service providers may form the view that the agency may not follow procurement processes and be discouraged from applying. 20
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