An early Christmas present for Departments and SMEs: New Commonwealth Procurement Rules (December 2020)

New Commonwealth Procurement Rules (CPRs) have been issued by the Minister for Finance under section 105B(1) of the Public Governance, Performance and Accountability Act 2013 (Cth) (PGPA Act) and will come into effect on 14 December 2020.

The amendments update the CPRs to make it easier for agencies (specifically non-corporate Commonwealth entities) to procure goods and services valued up to $200,000 from small to medium sized enterprises (SMEs) (firms with fewer than 200 full-time equivalent employees) and to incorporate existing Commonwealth legislation and procurement policies.

Key changes

The key change is the inclusion of a new exemption in Appendix A to exempt procurements from complying with Division 2 of the CPRs where an agency procures goods and services valued up to $200,000 from an SME. This exemption applies provided that the agency has first determined that an Indigenous SME could not deliver the required good or service on a value for money basis, as set out in the Indigenous Procurement Policy.

This exemption offers opportunities to reduce barriers and costs for SMEs to provide goods and services to agencies and provides agencies with the flexibility to directly engage with SMEs without undertaking an open approach to market (as required by Division 2 of the CPRs).

The amended CPRs also incorporate references to Commonwealth legislation and procurement policies that have recently been updated or introduced. These changes include:

• Rule 4.5 and 4.6 (Achieving value for money): These rules set out additional factors that agencies are required to consider in assessing value for money. These factors emphasise the Australian Government's commitment to sustainable procurement practises, including as set out in the Sustainable Procurement Guide available from the Department of Agriculture, Water and the Environment's website.
• Rule 5.8 (Small and Medium Enterprises): This rule reflects the Supplier Pay On-Time or Pay Interest Policy (Resource Management Guide No. 417) and requires agencies to make all payments to a supplier, particularly SMEs, under a contract valued up to A$1 million (GST inclusive) within the maximum payment terms, which is 5 calendar days for electronic invoicing and 20 calendar days for all other invoices;
• Rule 6.10 (Commonwealth Contracting Suite): This rule reflects that it is mandatory for non-corporate Commonwealth entities to use the Commonwealth Contracting Suite for procurements under $200,000 (Resource Management Guide No. 420); and
• Rule 7.27f. (Other obligations): The rule has been amended to include an obligation to comply with the reporting requirements of the Modern Slavery Act 2018 (Cth).

From 14 December 2020, agencies should be aware that for procurements valued up to $200,000 they can directly approach SMEs without having to comply with Division 2 of the CPRs. Agencies should review their procurement documentation (including any internal procurement documentation and approval templates) and consider if any amendments may be required to align with the updated CPRs. Suppliers should be aware that agencies may propose to source directly from SMEs without issuing an open approach to market.

Please get in touch with us if you would like to discuss these new amendments and how they apply.