Purpose
The purpose of this procurement policy note is to assist entities who are considering undertaking procurements in the current COVID-19 environment or are addressing contractual matters with affected suppliers.
Should you have any specific questions relating to these matters please contact Finance via the email: [email protected]. Entities may also consider seeking legal advice on contractual matters where appropriate.
Current environment
The outbreak of COVID-19 is unprecedented and is having a significant impact on businesses of all sizes. It is likely that many suppliers will struggle to meet their contractual obligations with Commonwealth entities and this may put their financial viability, ability to retain staff and their supply chains at risk.
Many suppliers may not be able to fulfil their contracts due to action taken elsewhere in the public sector and restrictions that are now in place, or that may be in place in the future. We expect entities to support suppliers at risk where possible so they are better able to cope with the current crises and be in a position to resume normal service delivery and fulfil their contractual obligations when the outbreak is over.
Approaching the Market
Approaches to the market should be progressed on a case-by-case basis accounting for the impact of COVID-19 on potential tenderers and their ability to deliver on an entity’s requirements.
- Those preparing to approach the market should consider factors including:
- how COVID-19 may impact plans in the immediate future
- appropriate timelines depending on the nature of the market
- the amount of time potential suppliers require to put in submissions
- the potential to structure procurements into practical achievable deliverables
- bringing forward procurements that are less reliant on substantial material supply.
Entities may wish to engage with the market (such as through a Request for Information on AusTender) to understand capability before formally approaching the market.
Throughout this process entities are reminded that they should ensure appropriate records are kept commensurate with the scale, scope and risk of the procurement, having regard to the current COVID-19 environment.
Procurement methods
The Commonwealth Procurement Rules (CPRs) provide significant flexibility when undertaking procurements. There are a number of mechanisms outlined in the CPRs which enable more streamlined processes to engage suppliers more urgently that may be appropriate. These mechanisms will need to be carefully considered by entities on a case-by-case basis. There are two mechanisms, in particular, that may be useful to entities in the current environment.
- Paragraph 2.6 of the CPRs allows Accountable Authorities to apply any measures that they deem appropriate for a range of circumstances, including to protect human health.
- As a result, an Accountable Authority could decide that it is necessary to undertake a streamlined process for particular goods or services to protect human health. Further guidance is provided on the Finance website here.
- Paragraph 10.3b allows entities to use a streamlined process due to reasons of extreme urgency brought about by unforeseen events by the relevant entity, the goods and services could not be obtained in time under an open tender.
Regardless of the procurement process, entities still need to satisfy themselves that value for money is being achieved. Appropriate records should also be maintained including relevant approvals and decisions.
Contractual issues
Contract managers are expected to maintain their relationships with suppliers and to manage any specific issues arising as a result of COVID-19 in a collaborative and sensible manner. In this context, when considering possible options with suppliers, entities should consider the requirement in the Public Governance, Performance and Accountability Act 2013 (PGPA Act) to ensure that public resources are used in an efficient, effective, economical and ethical manner. Consistent with those requirements agencies can where appropriate and possible, work with suppliers to ensure business continuity is maintained by providing relief (eg agreeing that termination rights will not be exercised or liquidated damages will not be claimed), varying the contract or waiving specified requirements to address the COVID-19 circumstances.
Variations could include minor changes to contract requirements, frequency and timing of delivery, targets and performance indicators. Changes to the terms of a contract should be limited to the specific circumstances of the situation, and considered on a case-by-case basis. Entities should ensure that appropriate records are kept in relation to contractual changes and the reasons behind them.
Supplier payments
The Government promotes the proper use and management of public resources. Proper means efficient, effective, economical and ethical.
It is important that entities pay all suppliers as quickly as possible so they can maintain cash flow. With this in mind, we expect entities to verify receipt of goods and services, including resolving disputed invoices, as soon as possible and pay suppliers promptly.
The Commonwealth payment policy Supplier Pay On-Time or Pay Interest Policy requires:
- Using payment cards as a preferred option for payments to suppliers valued below $10,000 (this means payments are made immediately); and
- Maximum payment terms of 20 calendar days for contracts valued up to $1 million, or 5 calendar days when the supplier and agency have e-Invoicing capability. Where payment is not made to a supplier by these timeframes, interest is payable.
In response to COVID-19 and the pressure suppliers are experiencing at this time, entities are expected to exceed these maximum payment terms, where practicable. For example, where entities internal arrangements enable them to pay suppliers within 7 days they should seek to do so.
Entities may also want to consider other payment arrangements to assist suppliers during this time including: payments against revised/extended milestones, interim payments, payments on order and payment in advance/prepayment, if necessary. In considering whether to apply these options entities will need to satisfy their requirements under the PGPA Act.