Australia: The updated Commonwealth Procurement Rules: An emphasis on SMEs and sustainability

As 2021 moves full steam ahead, this note provides a quick reminder about some of the key updates to the Commonwealth Procurement Rules that took effect in December 2020. Those updates were largely targeted at making it easier for small and medium businesses to engage with relevant Commonwealth entities but also focus on sustainability.

Background to the updated CPRs

As 2020 drew to a close, the Minister for Finance issued an update to the Commonwealth Procurement Rules (CPRs). On releasing the update, the Minister focussed on the benefits for small and medium enterprises (SMEs) from the changes, noting:¹

There is increasing pressure for both private and public entities to prioritise environmental sustainability. It is therefore unsurprising that the updated CPRs also place more of an emphasis on ensuring that procurement practices are environmentally sustainable.

What are the CPRs and who has to comply with them?

The CPRs are made by the Minister for Finance under the Public Governance, Performance and Accountability Act 2013 (Cth). The CPRs provide the basic compliance framework for regulated Commonwealth entities in undertaking procurements.

The CPRs apply to procurements undertaken by non-corporate Commonwealth entities and the corporate Commonwealth entities that are listed in section 30 of the Public Governance, Performance and Accountability Rule 2014 (Cth), such as for example, the Australian Human Rights Commission, Export Finance Australia and the Regional Investment Corporation.

The CPRs are not the only rules that need to be taken into consideration for procurements. Commonwealth entities must also consider compliance with other relevant regulations and frameworks and value for money in undertaking procurements – for example, workplace health and safety as well as environmental compliance and modern slavery regulations must be considered. Compliance with the Indigenous Procurement Policy and the Australian Industry Participation Framework are other examples of requirements that must be addressed.

What changes were made in 2020?

Some of the key amendments made to the CPRs in 2020 are discussed below.

1. Encouraging engagement with SMEs: A new exemption

Procurements of goods and services from SMEs valued between $80,000 and $200,000 (inclusive of GST) are now an exempt category of procurement under the CPRs. This means SMEs may be directly engaged for procurements up to this limit, without an open approach to market. However, value for money must still be demonstrated and the exemption may only be used after the Indigenous Procurement Policy has been complied with.

This provides a significant incentive for those Commonwealth entities to which the CPRs apply to engage with SMEs.

2. Paying SMEs on time

Although the previous version of the CPRs recognised the importance of paying suppliers on time, the amended CPRs take a further step forward. Reflecting the Government's focus on improving payment outcomes for SMEs, the CPRs have been amended to specify that non-corporate Commonwealth entities must make payments to suppliers under contracts valued up to $1 million (inclusive of GST) within the maximum payment terms set out in the Government's Supplier Pay On-Time or Pay Interest Policy. That Policy came into effect on 1 January 2020 and applies to non-corporate Commonwealth entities, however corporate Commonwealth entities are also encouraged to comply.

3. Environmental considerations in achieving value for money

The CPRs have been amended to reflect the Government's focus on environmental sustainability by introducing additional environmental considerations that must be taken into account when assessing value for money.

The CPRs now provide that, in addition to officials being required to consider the environmental sustainability of goods and services to be procured, entities must consider the Government's Sustainable Procurement Guide in appropriate cases. The Guide sets out what is meant by sustainable procurement and assists in determining how to incorporate sustainability in value for money assessments.

When assessing the value for money of a procurement, officials are required to consider "whole of life costs". The changes in 2020 expanded the meaning of "whole of life costs" to include environmental sustainability of consumables. Decommissioning and remediation costs must also now be considered, as must waste disposal costs.

What does this mean for Commonwealth entities?

Entities that are subject to the CPRs should ensure their procurement processes are fully compliant with the updates made in late 2020. Assistance for SMEs and a focus on environmental sustainability are issues that are particular priorities as a result of the 2020 changes.

Footnote

¹Media release available here.

This publication does not deal with every important topic or change in law and is not intended to be relied upon as a substitute for legal or other advice that may be relevant to the reader's specific circumstances. If you have found this publication of interest and would like to know more or wish to obtain legal advice relevant to your circumstances please contact one of the named individuals listed.