Commencement of the PID Act in NSW: What does it mean for an agency's contractual arrangements?

The focus of this article is on the requirements under the PID Act for contracted goods and service arrangements, PID Act contractual clauses and when such clauses must be included in an agency's contracts.

Who is an agency for the purposes of the PID Act?

Section 16 of the PID Act broadly defines an "agency" to include, among others, the following persons or bodies:

• a Public Service agency (as defined in the Government Sector Employment Act 2013 (NSW));
• a statutory body representing the Crown;
• an integrity agency, such as the Ombudsman, Independent Commission Against Corruption, the Auditor-General, the Privacy Commissioner and the Information Commissioner;
• a State owned corporation;
• a local government authority; and
• a Local Aboriginal Land Council.

The PID Act in a nutshell

In broad terms, the PID Act encourages public officials to report instances of "serious wrongdoing", protects public officials who report serious wrongdoings and provides for the making of, and dealing with, public interest disclosures.

"Serious wrongdoing" is broadly defined under the PID Act and includes (among other matters):

• corrupt conduct;
• serious maladministration;
• a privacy contravention; or
• a serious and substantial waste of money.

Whether an individual is a "public official" is an important concept under the PID Act, as any reported instance of "serious wrongdoing" under the PID Act must be made by a "public official". Public officials receive certain protections under the PID Act in respect of the making of public interest disclosures.

A public official mostly covers persons employed by an agency. However, it is important to note that in some situations a public official can include other persons, including volunteers and contractors providing services or exercising functions on behalf of an agency.

When are services provided by a contractor on behalf of an agency?

Whether a contractor is providing services on behalf of an agency will need to be determined by an agency on a case-by-case basis and having regard to factual context and the role of the contractor under the relevant contract.

Guidelines issued by the NSW Ombudsman provide as follows:

"… providers of contracted-out services will be covered by the PID Act as public officials only if the services they are providing are being provided on behalf of an agency, or where they are exercising functions of an agency. If neither of these is the case, and instead services are merely being provided under contract to an agency, then the extended definition of public official will not apply. For example, an entity that has a contract to clean the offices of an agency would likely be considered to be providing a service to that agency, and would not be providing services on behalf of the agency or to be exercising functions of the agency – so its staff would not be covered by the extended definition of public official in the PID Act."

Examples provided by the NSW Ombudsman of services delivered "on behalf of an agency" include:

• a specialist homelessness service that provides accommodation or support services under a contract with the Department of Communities and Justice;
• an NGO that provides out-of-home care services for children in the child protection system, under a contract with the Department of Communities and Justice; and
• private management companies or private health care providers that are contracted by Corrective Services NSW to manage correctional facilities or provide health care services in those facilities.

We would therefore anticipate that the majority of contractors would not, by virtue of their contract with an agency, be a public official for the purposes of the PID Act regime.

Some examples of contractual arrangements with contractors that we anticipate will not be captured by the PID Act are as follows:

• a contract with a supplier for the provision of licensed software pursuant to the NSW MICTA/ICTA Contracting Framework;
• a contract with a contractor for the provision of design and construction works for a new school building; and
• a contract with a contractor to provide cleaning services for government office buildings.

There are, however, likely to be some shades of grey in this area, especially in the context of some services arrangements. Ultimately the answer will lie in the terms of the relevant contract and the description and scope of the services to be performed by the contractor under the relevant contract and associated statement of work. Where an agency is unclear about whether the PID Act will apply to a contract, we recommend that the agency obtain legal advice.

How do agencies address the PID Act contractually?

Where an agency is engaging a body or person, under a contract, subcontract, or other arrangement, to provide services on behalf of an agency (including to exercise a function of an agency under section 81 of the PID Act), this will establish an "agency service contract" for the purposes of the PID Act.

Under section 82(2) of the PID Act, the agency must ensure that each agency service contract it enters into includes provisions which state that the engaged person or body must ensure that all individuals involved in providing services under the agency services contract are made aware of:

• the fact that they are "public officials" for the purposes of the PID Act;
• how to make a voluntary public interest disclosure;
• the public interest disclosure policy of the agency (Note: Under section 42 of the PID Act, an agency must have a public interest disclosure policy that addresses the content specified in section 43 of the PID Act); and
• the fact that, if a person is dissatisfied with the way in which a voluntary public interest disclosure has been dealt with, the person may be entitled to take further action under the PID Act or another Act or law.

Agency service contracts must additionally include provisions which require the engaged person or body to:

• notify the agency of a voluntary public interest disclosure of which the person or body becomes aware that complies with the PID Act;
• notify the agency when serious wrongdoing has been committed, or alleged to be committed, by an individual providing services under the agency service contract;
• use best endeavours to assist in an investigation of serious wrongdoing if requested to do so by the person dealing with the public interest disclosure on behalf of the agency;
• acknowledge the agency’s obligations to take corrective action under section 66 of the PID Act;
• acknowledge the agency’s right to terminate the contract in response to a finding of serious wrongdoing or other misconduct involving a person or body or by an individual providing services under the agency services contract; and
• ensure that any subcontract entered into contains terms that bind the subcontractor to equivalent obligations to section 82(2) of the PID Act (that is, those terms above).

The Regulations may provide for additional matters which must be included in agency service contracts.

The NSW Government has recently published template PID Act clauses for the inclusion in agency service contracts. The template PID Act clauses will need to be aligned with the relevant agency service contract (for example, in relation to the terminology used). Some PID Act requirements may potentially overlap with other provisions in an agency's contract. We therefore recommend that the PID Act clause makes it clear that the PID Act obligations operate in addition to, and do not limit or exclude, any other contractor obligations under the relevant agency service contract.

What is the consequence for an agency if PID Act clauses are not included?

The failure, where required, to correctly include PID Act clauses in an agency service contract in accordance with clause 82(2) of the PID Act will not make the contract void or unenforceable of itself. This is clarified by section 82(3) of the PID Act. However, such a failure will amount to a breach of the PID Act and may potentially expose the agency to other legal consequences, as well as reputational damage, arising from the failure to address and respond to potential serious wrongdoing within the agency effectively and in accordance with the PID Act.

It is also important to note that the inclusion of PID Act clauses in contracts also supports broader compliance with the PID Act, including section 48 of the PID Act. Section 48 of the PID Act requires, among other matters, an agency to ensure public officials are aware of certain matters associated with the PID Act, for example, how to make a voluntary public interest disclosure.

The NSW Ombudsman has the power to audit and monitor the exercise by agencies of their functions under the PID Act, including compliance with section 82.

If you require any support in relation to the application of the PID Act to your contractual arrangements, please contact us.