Commonwealth procurement changes to address COVID-19

On 11 May 2020, the Department of Finance released the COVID-19 – Procurement Policy Note (Procurement Note) to assist Commonwealth entities who are undertaking procurements in the current COVID-19 environment or dealing with affected suppliers.

Approaching the market

Under the Procurement Note, Commonwealth entities should consider current approaches to the market on a case-by-case basis having regard to the impact of COVID-19 on potential tenderers and their ability to deliver on an entity’s requirements.

Entities considering a tender process should first consider:

• 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 could also consider undertaking an initial Request for Information or Invitation to Register process to test the market before undertaking a full tender process. 

Procurement methods

The Procurement Note highlights the following two procurement methods under the Commonwealth Procurement Rules (CPRs) that may be beneficial during COVID-19:

• Paragraph 2.6 of the CPRs which allows procuring entities to apply any measures deemed appropriate, including a streamlined procurement process, for a range of circumstances – including to protect human health
• Paragraph 10.3b of the CPRs which allows entities to use a streamlined process due to reasons of extreme urgency because of unforeseen events where the goods and services could not be obtained in time under an open tender.

As always, entities will need to satisfy themselves that the procurement method adopted will achieve the overarching obligation of value for money.

Contractual issues

The Procurement Note also provides the following guidance to Commonwealth entities on contractual issues due to COVID-19:

• relationships with suppliers should be maintained and issues approached in a collaborative manner
• where appropriate and possible, agencies should work with suppliers to ensure business continuity is maintained by providing relief, for example:
  • agreeing that termination rights will not be exercised or liquidated damages will not be claimed
  • varying the contract including minor changes to contract requirements, frequency and timing of delivery, targets and performance indicators
  • waiving specified requirements to address the COVID-19 circumstances.

Any 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.

There should also be consideration as to how these changes are documented which may be determined by the contract itself, or may need to be through a Deed of Variation.

Supplier payments

The Procurement Note further encourages Commonwealth entities to:

• pay all suppliers as quickly as possible to maintain cash flow
• reduce maximum payment terms under the Commonwealth payment policy, Supplier Pay On-Time or Pay Interest Policy, and otherwise comply with all its obligations under that Policy
• consider other payment arrangements to assist suppliers during this time including:
  • payments against revised or extended milestones
  • interim payments
  • payments on order
  • payment in advance or prepayment (if necessary).  

Conclusion

The Procurement Note recognises the significant impact COVID-19 is having on businesses of all sizes, including suppliers to the Commonwealth, and reflects the Commonwealth’s commitment to supporting at risk suppliers where possible so they are able to resume normal service delivery and fulfil their contractual obligations post COVID-19.

Commonwealth procuring entities can contact the Department of Finance via procurementagencyadvice@finance.gov.au for further information, or can consider seeking legal advice on contractual matters where appropriate.

Authors: Scott Alden & Victoria Gordon

Disclaimer
The information in this publication is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavour to provide accurate and timely information, we do not guarantee that the information in this newsletter is accurate at the date it is received or that it will continue to be accurate in the future.

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