Procurement and Commercial Contracting for Australian Government Agencies

Alexandra WedutenkoJasmine ChenAlexandra Wedutenko, Consultant, and Jasmine Chen, Lawyer, at Clayton Utz revisit the basics of government procurement and contracting. Alexandra will be delving more into this topic at the upcoming Public Sector Governance in 2021 on Tuesday 16 February 2021.


Unlike the private sector, procurement and commercial contracting by Australian Government agencies is governed by layers of legislation, policies and rules, which make up the resource management framework. Whilst this framework is essential to provide government procurements with safeguards, consistency and transparency, it adds complexity to the procurement process which can cause even the most diligent government agencies to fall afoul.

In this article, the basics of government procurement and contracting, with a focus on Commonwealth procurements, are revisited. Whilst there are many aspects of government procurements, this article will focus on the main areas which tend to cause issues, being:

  • Resource Management Framework;
  • Procurement Approach;
  • Evaluation Criteria and Methodology; and
  • Challenging and mitigating against procurement risks.


  1. The Resource Management Framework

Public Governance, Performance and Accountability Act 2013 (Cth) (PGPA Act) and the Public Governance, Performance and Accountability Rule 2014 (Cth) (PGPA Rules)

The PGPA Act provides the legislative framework for public governance, performance and accountability. It applies to all Commonwealth entities, including:

  • non-corporate Commonwealth entities (NCEs) e.g. Department of Home Affairs, Australian Tax Office; and
  • corporate Commonwealth entities (CCEs) e.g. Australian Human Rights Commission and National Library of Australia.

Under section 12 of the PGPA Act, every Commonwealth entity has an accountable authority who has a duty to, amongst other things, “promote the proper use and management of public resources for which the authority is responsible for.” To assist accountable authorities uphold this duty in procurements, the Department of Finance has released the Commonwealth Procurement Rules.


Commonwealth Procurement Rules (CPRs)

The CPRs are a set of rules to be followed when Commonwealth entities undertake a procurement. Compliance with the CPRs is:

  • mandatory for NCEs;
  • mandatory for those CCEs prescribed in section 30 of the PGPA Rule (e.g. Australian Digital Health Agency, National Portrait Gallery of Australia); and
  • considered best practice for CCEs, with compliance encouraged.

The rules in Division 1 of the CPRs apply to all procurements, with the rules in Division 2 only applying if the procurement value exceeds certain thresholds.

A core element of the CPRs is to ensure Commonwealth entities achieve value for money (VFM) in procurements. This is a holistic assessment which requires a comparative analysis of all relevant financial and non-financial costs and benefits of each response over the course of the contract term. Importantly, but often forgotten, achieving VFM does not require the procuring entity to select the lowest price response if it does not represent VFM.

Once a tenderer is identified that meets the Commonwealth’s requirements and represents VFM, NCEs must seek approval from their accountable authority under section 23 of the PGPA Act to enter into a contract with the successful tenderer. CCEs can rely on their enabling legislation and from their body corporate nature to enter into contracts.



There are some exemptions under the CPRs. Paragraph 2.6 exempts full compliance with the CPRs where it is necessary for:

  • the maintenance or restoration of international peace and security;
  • to protect human health;
  • for the protection of essential security interests; or
  • to protect national treasures of artistic, historic or archaeological value.

The extent of the exemption will only be as necessary to protect the underlying reason for obtaining the exemption. During the COVID-19 pandemic, this exemption could be relied on to fast track procurements to allow, for example, the government to directly procure urgent medical supplies rather than conduct an open approach to market procurement.

Another exemption is contained in paragraph 10.3 of the CPRs. If a circumstance listed in paragraph 10.3 applies, the Commonwealth entity may run a limited tender, rather than an open approach to market. These circumstances include:

  • where an open approach to market has failed to identify a tenderer who represents VFM;
  • for reasons of extreme urgency brought about by unforeseen events; and
  • where the procurement is in a commodity market.

It should be noted that even if an exemption is obtained under either paragraphs 2.6 or 10.3 of the CPRs, the core rules of achieving VFM and conducting the procurement in a transparent and accountable manner, continue to apply to the procurement.



The latest version of the CPRs came into effect on 14 December 2020. The main changes include:

  • procurements valued up to $200,000 from a small to medium enterprise (SME) are exempt from complying with Division 2 of the CPRs. The CPRs defines a SME as an Australian or New Zealand firm with fewer than 200 full-time equivalent employees. This amendment means that NCEs may now source procurement directly from a SME without first approaching the open market; and
  • incorporation of references to Commonwealth law and policy that have recently been introduced, including:
    • Paragraphs 4.5/4.6 – rules set out additional factors that agencies are required to consider in assessing value for money including sustainable procurement practices;
    • Paragraph 5.8 – reflects the Supplier Pay On-Time or Pay Interest Policy;
    • Paragraph 6.10 – rule reflects that it is mandatory for non-corporate Commonwealth entities to use the Commonwealth Contracting Suite for procurements under $200,000;
    • Paragraph 7.27(f) – rule amended to include an obligation to comply with the reporting requirements of the Modern Slavery Act 2018 (Cth); and
    • Paragraph3 – existing rule requiring procuring entities to consider security risks, has been slightly amended to expressly require consideration of cyber security risk.


Procurement Connected Policies

The Commonwealth has released a number of procurement connected policies, including:

  • Indigenous Procurement Policy – to encourage procuring entities to contract with suppliers who engage Indigenous suppliers and enterprises;
  • Black Economy Connected Procurement Policy – to ensure tax integrity in the supply chains for government contracting; and
  • Workplace Gender Equality Policy – to ensure suppliers to the government are committed to improving gender equality.

Similar to the CPRs, compliance with these policies is only mandatory for procurements conducted by NCEs, whilst CCEs are encouraged to apply them. It should be noted, a CCE that does not adopt the CPRs still needs to ensure it complies with the PGPA Act. The biggest risks to procuring entities conducting a procurement that is inconsistent with government policy is reputational. Therefore, each government policy should be considered by the procuring entity to determine whether it should be applied to its procurement.


  1. Procurement approach

It is essential that the procurement approach adopted by a Commonwealth entity is appropriate and enables the procuring entity to achieve VFM. The three (3) procurement approaches are:

  • Open tender – a tender which is open to all potential suppliers in the market;
  • Limited tender – the procuring entity only approaches a limited pool of supplier(s) if a circumstance listed in paragraph 10.3 of the CPRs applies; and
  • Whole-of-Australian-Government (WoAG) arrangements – this may be:
    • coordinated – where an entity approaches a supplier who is on an established WoAG panel; or
    • co-operative – where an entity establishes a contract or deed of standing offer arrangement that other agencies can access (known as “piggybacking”), or a group of entities approach the market together (known as “clustering”).

When deciding which procurement process to use, Commonwealth entities should:

  • encourage competition to deliver the most favourable responses;
  • ensure that rules and procedures adopted do not limit competition by discriminating against particular classes of suppliers (in particular SMEs);
  • adopt procedures consistent with the complexity of the procurement, while also enabling suppliers to develop reliable, informed and competitive proposals;
  • consider options for reducing costs to industry in tendering;
  • be aware of general industry practices and expectations; and
  • recognise any industry regulation and licensing requirements.


  1. Evaluation Criteria and Methodology

Once the procurement approach has been chosen, the approach to market documentation (e.g. Request for Tender, Request for Quote, Request for Proposal, Request for Expressions of Interest) needs to be carefully drafted to reflect the needs of the procuring entity, whilst ensuring compliance with the resource management framework. One of the most important parts of the documentation is the selection of the evaluation criteria.

The evaluation criteria are the criteria against which responses from a procurement process are evaluated and tenderers are shortlisted/selected. Paragraph 7.12 of the CPRs requires evaluation criteria to be included in procurement documentation “to enable the proper identification, assessment and comparison of submissions on a fair, common and appropriately transparent basis“. Accordingly, procurement documentation should:

  • describe the evaluation criteria – including any sub criteria;
  • identify where and how the tenderer should respond to each evaluation criteria – ideally each evaluation criteria should be the subject of its own response form;
  • identify the relative importance of each evaluation criteria (this can be indicated by weightings or rankings, or if unweighted – this should be stated); and
  • set out the approach and be transparent as to how the entity intends to evaluate responses.

Prior to opening responses, an evaluation plan should be developed. Evaluation plans should clearly set out:

  • how responses will be assessed, including a description of the ratings or scoring scales;
  • steps within the evaluation process;
  • membership and roles of the evaluation teams;
  • evaluation timeline; and
  • roles of any advisors e.g. probity, legal, financial advisors.


  1. Challenging and mitigating against procurement risks

The Government Procurement (Judicial Review) Act 2018 (GPJR Act) commenced on 19 April 2019 and provides an independent complaints mechanism for procurement processes conducted by Commonwealth entities. The GPJR Act only applies to “covered procurements” which is defined as a procurement which is subject to both Division 1 and 2 of the CPRs. Hence, limited tenders, and request for quote under an existing WoAG panel are not subject to the GPJR Act.

Under the GPJR Act, affected tenderers may lodge a complaint about, and seek an injunction or compensation for, a breach of a relevant provision of the CPRs. If a complaint is made, a procurement must be suspended unless, a public interest certificate (PIC) is in force at the time of the complaint or following the complaint being withdrawn. A PIC should only be written where suspending the procurement would have an adverse impact on the public interest that exceeds the right of the aggrieved tenderer to have the procurement suspended.

Where the GPJR Act does apply, procuring entities should:

  • review and, if required:
    • update procurement and probity plans; and
    • update Approach to Market (ATM) documentation,

to ensure that they comply with the CPRs and GPJR Act, noting a common mistake is the excessive use of mandatory language in ATM documentation. Under the GPJR Act, a failure to meet a mandatory requirement of a RFT or RFQ will lead to the automatic exclusion of the tenderer from the procurement process, with the procuring entity having no discretion in this regard. Mandatory language should be reserved for minimum content and format requirements and conditions for participation;

  • ensure that internal policies for Commonwealth entities are in order e.g. prepared complaints handling processes and investigation processes; and
  • consider early on in the procurement process, whether a PIC should be prepared for the procurement.



Noting the GPJR Act and reputational risks, it is no surprise the Commonwealth adopts a risk adverse approach to procurement and contracting. Accordingly, it is important that procuring entities remain abreast of the Commonwealth’s procurement and contracting laws, policies and rules as they are updated from time to time.

A leading Government and ICT lawyer as voted by Best Lawyers Australia and Chambers Asia-Pacific, Alexandra Wedutenko has an enviable reputation for her success in strategic procurement data protection and governance. Specialising in complex services agreements in a regulated environment, ICT, select sourcing and business process sourcing, Alexandra has acted for a range of private sector and government clients. She acts for and understands the requirements of clients in industries where security and availability of supply are critical. In this regard Alexandra regularly advises on risk identification and management, data protection and cyber security issues. Connect with Alexandra via email or LinkedIn LinkedIn

Connect with Jasmine Chen via LinkedIn LinkedIn