Showing posts with label Contract Management. Show all posts
Showing posts with label Contract Management. Show all posts

Wednesday, 9 January 2019

Government buyers, are you up to speed on the new Local Jobs First Policy?

New Policy Overview


All Victorian Government departments and agencies procuring goods, services or construction need to consider the State's revised industry participation framework, the Local Jobs First Policy (Policy).

The Policy harnesses the Victorian Government's purchasing power to support Victorian businesses and workers by requiring certain local content and skills thresholds in procurement projects.  The Policy aims to develop local industries, create job opportunities and boost economic development in Victoria.

The existing Victorian Industry Participation Policy Act 2003 has been amended to the Local Jobs First Act 2003 (Act) which now comprises the Victorian Industry Participation Policy (VIPP) and the Major Projects Skills Guarantee (MPSG).

VIPP


VIPP applies to procurement activities funded by the State government and comes in two forms:
  1. Standard Projects are those where the procurement activity meets or exceeds either:
    1.1 $1 million in regional Victoria; or
    1.2 $3 million in metropolitan Melbourne or for state-wide activities.
  2. Strategic Projects are those where the procurement activity is valued at $50 million or more, excluding maintenance and operational costs.
The value of a project refers to the total budget allocated over the life of the project and not the value of individual contracts, excluding GST.  Depending on the project, VIPP requires that a percentage of a project's value is comprised of content from Australia or New Zealand (Local Content).

Local Content Requirements 


Standard Projects must have a minimum of 10% Local Content while Strategic Projects must meet Local Content requirements of at least:
  • 90% for construction projects;
  • 80% for services projects or maintenance projects; and
  • 80% for the maintenance or operations phase of a Strategic Project. 
Local Content requirements for other types of Strategic Projects will be set on a case-by case basis, on advice from the Industry Capability Network (ICN).

The ICN is a not-for-profit organisation funded by the Victorian Government and can assist parties in sourcing goods and services in local markets ('contestable goods or services').

Non-Contestable Goods or Services


If a good or service cannot be procured locally it is deemed non-contestable.  The cost of non-contestable goods or services may be subtracted from the Local Content requirement of a project.

MPSG


MPSG is a mandatory requirement for Victorian Government departments and agencies funding building, construction, infrastructure, civil engineering or other capital works contracts totalling $20 million or over (inclusive of GST).

MPSG requires a minimum 10% of the total labour hours for a project be performed by either Victorian apprentices, trainees or cadets, or from any combination from these groups.

The total labour hours of a project is calculated using formulas proscribed in the MPSG Guidelines published by Jobs Victoria.  Using the total cost of a project (inclusive of GST) a contractor can determine the amount of labour hours of the project in order to set a specific MPSG.

Tender Process


For projects covered by the Policy, bidders will be required to submit a Local Industry Development Plan (LIDP) for approval by ICN.

An LIDP must detail how a bidder will achieve Local Content and MPSG requirements and assists Government buyers to determine which bidder to award a contract to.

Reporting and Compliance


There are mandatory reporting and compliance requirements for any project covered by the Policy which must be included in procurement contracts.  Model clauses for reporting and compliance, (among other relevant clauses) will be released shortly.

A contractor's failure to comply with VIPP or MPSG requirements will constitute a breach of contract.  All breaches are reported to the Department Economic Development, Jobs Transport and Resources.  Non-compliance with VIPP or MPSG will be considered in any assessment or review of that contractor’s eligibility to tender for Victorian Government contracts in the future.

How we can help -further information


We provide responsive legal services exclusively for the Victorian Government and public sector and our team has extensive experience advising government buyers in a wide range of contexts.

We speak your language, share your values, and we understand the policy and accountability frameworks in which you operate.  Our ability to understand the complexities of government means we provide tailored and independent advice to help you serve the State of Victoria.

For responsive advice on procurement and the new Local Jobs First Policy please contact our team who have a long history of advising the Victorian Public Sector and are best placed to help you find strategic and practical solutions.

Please contact :

Rebecca Radford
Managing Principal Solicitor
9947 1403

Brendan McIntyre
Principal Solicitor
9947 1435

Benjamin Lunardi
Solicitor
9947 1440


Friday, 18 August 2017

Tips for contracting with a trustee

Contracting with a trustee increases the complexity and risk of any transaction.  It is imperative that government agencies understand and adequately manage these risks.

What are the risks of contracting with a trustee?


A trust is a relationship where one person or company (the trustee) holds assets for the benefit of another (the beneficiary).  When contracting on behalf of the beneficiaries, a trustee typically wishes to limit its liabilities to the extent to which it is indemnified out of the trust assets.

There are two major risks associated with the trustee's liability being limited in this way:


  1. The trust assets may not be of sufficient value to meet any debts incurred by the trustee.  
  2. The trust assets may not be available to meet any debts incurred by the trustee.  


What can be done to limit these risks?


If you have concerns about contracting with a trustee, there are a number of due diligence steps and contractual devices that can be used to limit these risks:

Review the trust deed


The extent of the indemnification available to the trustee from the trust assets is usually set out in a deed between the trustee and the beneficiaries.  Trust deeds are not publicly available and can only be obtained from the trustee.  Without access to the trust deed, it may be impossible to confirm the scope of a trustee's indemnity.

You can ask the trustee to provide a copy of the trust deed so you can determine the scope of the trustee's indemnification although it would not be unusual for the request to be refused on the grounds of confidentiality.  Further, there is no guarantee that the trustee and the beneficiaries will not modify the terms of the trust deed at a later date, including amending the scope of the trustee's indemnity out of the trust assets.


Obtain details of the trust's asset holdings for the particular trust


You will want to ensure that the trustee can meet any debts and liabilities arising under the contract.  Therefore, you can ask the trustee to provide details of the value of the assets which it holds on trust.  One thing to keep in mind is that even if the trust consists of assets of significant value at the time the contract is signed, there is no guarantee that the trust will still consist of those assets at the time that a relevant liability arises.

Ask the trustee to provide financial security


If there are any concerns that a trustee may not have sufficient trust assets to meet liabilities under the contract it might be prudent to require extra security.

Some of the most common forms of financial security in contractual arrangements include cash security deposits or bank guarantees.  In some cases parent company guarantees may be appropriate.
Another method of risk management is ensuring that the trustee has adequate insurance, so that the insurance policy can respond if an event covered by the policy occurs.  The type and amount of insurance should be customised to the specific contract.

Exclusions from the trustee's limitation of liability


A trustee's power to contract is subject to the limitations in the trust deed.  If the trustee incurs debt whilst acting outside of its conferred powers, or whilst acting fraudulently or negligently, these debts usually cannot be recovered from the trust assets.  In these circumstances, you should ensure that such conduct is excluded from the trustee's limitation of liability clause in your contract.


Further advice and assistance


Contracting with a trustee can add complexity to any commercial or property transaction.  For further advice and assistance, please contact:

Anthony Leggiero
Managing Principal Solicitor
Ph: 9947 1430
Email: anthony.leggiero@vgso.vic.gov.au

Brendan McIntyre
Acting Managing Principal Solicitor
Ph: 9947 1435
Email: brendan.mcintyre@vgso.vic.gov.au

Thursday, 25 May 2017

Don't buy a data breach - Privacy and data security when procuring goods and services

At our recent monthly seminar 'Information Sharing and Data Protection - Know your Value', we discussed the importance of monitoring suppliers to mitigate privacy and data breaches.  This data security theme was continued during the Commissioner for Privacy and Data Protection's recent Privacy Awareness Week.

Remember these key messages and tips to help minimise the risk of your procurement experiencing a data or privacy breach:

Value your Data

From the outset, think about the value of the data that your supplier will collect or have access to during the arrangement.  This will enable you to determine the appropriate information handling and privacy requirements you'll need.

Choose the Right Supplier 

Ensure that your information handling and privacy requirements are part of your sourcing plan and clearly set out in your market facing documents.  Award a contract to a supplier who can demonstrate a good track record of understanding and implementing privacy and data security.

One size does not fit all  

Your risk management strategy needs to be proportionate and tailored to the size and activity of your procurement.  Data heavy supply arrangements may need to consider additional protections, including how information will be managed when a supplier transitions out.

Monitor your supplier's performance against the contract 

The words in the agreement are important, but ongoing contract management is necessary for early detection of possible data and privacy breaches.

If you'd like assistance on managing your suppliers to meet your information handling obligations, please contact:

Rebecca Radford
9947 1403

James Stephens
99471422

Snezana Stojanoska
9947 1412

Thursday, 26 November 2015

Lease vs Licence - What difference does it make? (Part 2)

Based on the public and personal feedback, our blog topic from September 2015 on the differences between leases and licences certainly seems to have been quite topical.

One reader requested that we provide some more examples for Government practitioners of circumstances where a lease or a licence might be appropriate.  Of course, the particular circumstances of the transaction will determine the form of tenure that is appropriate for the intended use of premises.  With that in mind, we provide some further examples of where a lease or licence might be appropriate for the intended use of the premises.

Lease examples

In short, a lease will be appropriate where the tenant requires exclusive use of land and/or premises for the permitted use.  Where government is the tenant, such uses include delivery of long term projects and services, for example prisons, hospitals and police and court house facilities. 

Where government is the landlord, such uses would include:
  • commercial or trading purposes where the operator will undertake a fitout and install furniture, computers, etc;
  • sensitive and important community services such as the provision of child care facilities; and
  • provision of education services, such as by a TAFE institute.

Licence examples

The granting of exclusive possession and other leasehold rights is not necessary for all land uses.  Common examples of where a licence of land may be appropriate include:
  • installation of power line infrastructure by an electricity generation company;
  • special event licences for community, cultural or sporting events;
  • site investigations for development proposals;
  • construction licences or licences for the installation of services and utility infrastructure; and
  • cutting or taking away fallen or felled trees for domestic use as firewood.

If you would like further advice regarding land use arrangements and other property issues, the VGSO Property Team is well placed to assist you.  Please contact:

Margaret Marotti
Managing Principal Solicitor
9947 1410
margaret.marotti@vgso.vic.gov.au

Anthony Leggiero
Managing Principal Solicitor
9947 1430
anthony.leggiero@vgso.vic.gov.au

Elizabeth Wortley
Senior Solicitor
9947 1433
elizabeth.wortley@vgso.vic.gov.au

Friday, 4 September 2015

Lease vs Licence - What difference does it make?

The State and its agencies own and manage vast tracts of land in Victoria, much of which offers potential economic or other benefits to the private sector.  For example, the State often makes land and buildings available to a business operator for the purposes of running its business or a community group so it can  hold meetings, workshops and/or training sessions.  Alternatively, the State may wish to make land available for use by the private sector in the furtherance of particular significant policy objectives.

Preliminary considerations


Before deciding on the nature of the tenure which your department or agency should grant over a piece of land, it is important to step back and ask a few questions. For example, you should consider:

·         Who wants to occupy the land and for what purpose?
·         Does the Government want to make the land available to achieve a particular policy objective?
·         Does achieving that purpose require exclusive possession or is a lesser form of tenure sufficient?
·         Does the future tenant need to put up the tenure as security for raising capital so they can finance the project?
·         Will the department or agency or third parties need to access the land while it is occupied?

The answers to these questions will assist with determining which form of tenure you should offer to the prospective occupant and the terms and conditions of that tenure.

When is a lease appropriate?


A lease is an agreement between an owner of land and a tenant which grants a right of exclusive possession to the tenant.  This means the tenant can exclude the whole world, including the landlord, from accessing the land for the term of the lease as long as the tenant complies with its obligations under the lease agreement.  Even if a tenant breaches a condition of the lease and risks 'forfeiting' the lease, a leasehold tenant can apply to the Court for the equitable remedy of relief against forfeiture.  If the tenant is successful, the Court will permit the tenant to remain on the land, subject to prompt rectification of the existing breaches and compliance with other conditions.

The rights under a lease will attach to the leased land - if the tenant assigns the lease to a third party, for example if the tenant sells its business, the third party will also enjoy the same right of exclusive possession of the leased premises. 

Another aspect of a lease is that it is capable of being registered on the title to the land.  Registration of the lease also enables registration of any mortgage granted over the leasehold interest.  So if a tenant has granted a mortgage to a bank as security for money borrowed against the lease and the tenant defaults in its mortgage repayments, the bank will be able to access the important statutory powers applicable to a mortgagee in Part IV of the Transfer of Land Act 1958.  These include a mortgagee's power of sale, the power to take possession of the land and a right to seek an order for foreclosure.  As a result, banks may be more willing to provide finance to a tenant with a registered leasehold interest.

These aspects may make a lease an attractive option to someone who wants to operate a business from the premises and needs to raise investment capital for its start up and who also wants the flexibility of later transferring the leasehold interest, along with the business, to a third party. 

Of course, a downside for a tenant is that a higher commercial value is likely to attach to the lease consistently with the powerful bundle of rights held by a leasehold tenant.

When might you grant a licence?


Like a lease, a licence grants a right to a party to access and occupy land subject to the terms of the licence. 

Unlike a lease, the occupant under a licence does not have the right to exclusive possession of the licensed premises - in other words they may have to share occupation with the licensor and third parties or may only be able to use the licensed area at certain times or days.

Another key difference of a licence to a lease is that the rights of a licensee are not assignable to a third party (unless the agreement specifically permits this).  Additionally, a licence interest cannot be registered on title.

Therefore, a licence is likely to be suitable where an occupant needs specific rights to an area of land, water or airspace, but it is not necessary or appropriate for the occupant to have the right to exclude the rest of the world from the premises.  Examples of where licences are commonly used in Government include granting a right to a telecommunications company to install a mobile telecommunications tower on State owned land and allowing community groups to use school buildings and facilities.

As property law experts within Government, the VGSO Property Team is well placed to assist you with land use arrangements and other property issues.  Please contact:

Anthony Leggiero
Managing Principal Solicitor
9947 1430
anthony.leggiero@vgso.vic.gov.au


Friday, 7 August 2015

Transforming procurement

In February 2013, the Victorian Government Purchasing Board introduced a new policy framework designed to support a more strategic and efficient approach to procurement.  As part of this reform, the VGPB adopted five new policies, intended to replace more than 30 policies previously in place.  The reform seeks to reposition procurement as a core business function for departments.

Of course, the procurement profile of each department is quite different.  Departments were given an extended period to transition to the new framework and they have progressively done so.  As of 1 January 2015 all departments had transitioned to the new policy framework. As part of these reforms, each department now has a Chief Procurement Officer.  

VGSO have met with a number of these CPOs to discuss the challenges they have faced in implementing the new policies and improving procurement practices and outcomes across their departments.  While their experiences varied, there were a number of common themes.  A key concern was the need to increase capability in various areas.  These areas include:
  • understanding probity considerations, including conflicts of interest;
  • preparing sourcing documentation; including the importance of clear evaluation criteria and setting clear mechanisms for evaluation;
  • increasing understanding of issues encountered in negotiation and award of contracts including how to drive value and the inclusion of appropriate price review clauses;
  • risks involved in incorporating external documents including specifications into the final contract; and
  • the importance of clear, measurable and achievable KPRs with clear consequences. 

Last year, we held a seminar dealing with this final point: 'Managing Performance under Contracts'.  During August, our annual Projects and Procurement Practice Group seminar will focus on the role of specifications at various stages of the procurement process and how to ensure that it becomes a robust part of your contractual suite.

Our August seminar 'Metamorphosis: The evolution of the specification' has already booked out, however we will be live tweeting. You can follow us @VicGovSolicitor and join the conversation using #vgsolive.

For legal assistance regarding procurement please contact:

Assistant Victorian Government Solicitor
9947 1404

Managing Principal Solicitor

9947 1401

Thursday, 30 April 2015

Identity crisis: The importance of identifying the correct party to a contract

The importance of identifying the correct party when entering into a contractual arrangement is paramount.

When working as a government lawyer, you can often find yourself in unusual situations, like buying chaff for horses, bullet proof vests for dogs and canned soup for prisoners.  In the context of purchasing goods from local suppliers, knowing who is responsible when the goods are faulty is essential.  Getting this wrong can create significant issues when it comes to disputes and when seeking to enforce terms of the contract.

It is easy to make mistakes and errors can arise in a number of ways:
  • referring to a non-existent company;
  • not referring to the correct individual or correct company; or
  • referring to a business name, rather than the holder of that business name.

Sometimes it is difficult to identify the correct party - there are multiple ways to set up and manage a business and just navigating company searches can be  a challenge. Companies can trade under numerous business or trading names, but it is the holder of that business or trading name that is the legal entity for contracting purposes.

Although courts will strive to ascertain the correct contracting party by applying a test of what a reasonable person would think, it is important to know how to undertake this process correctly from the outset.  Fortunately, post-contractual communications may be of aid to a court that is asked to determine the correct contracting entity.  However, it is preferable not to have to rely on, for example, email chains with a supplier, to overcome an incorrect party name in the contract.

To avoid the risks associated with contracting with the wrong entity, it is important to:
  • have a written contract or written confirmation of an oral contract , not an oral one;
  • confirm the contracting entity by:
    • asking the other party to provide their business details (i.e. ABN/ACN); and
    • undertaking company searches on ASIC (via ASIC Connect) to verify those business details are for the correct entity, 
  • if the entity uses a business name, confirm that the holder of the business name (via ASIC Connect) is the entity listed in the contract; and
  • ensure that signature blocks clearly set out the capacity in which a person signs on behalf of their company, partnership or as a sole trader.

If you are unsure who you are contracting with, please seek legal advice.

Carolyn Doyle
Managing Principal Solicitor
9947 1403

Sanishya Fernando
Solicitor
9947 1439

Tuesday, 3 February 2015

Operation Fitzroy - learnings for integrity in procurement practices

Between September 2013 and October 2014, IBAC conducted an extensive investigation into alleged serious corrupt conduct by employees of a government department and statutory authority.

The investigation, dubbed 'Operation Fitzroy', involved 15 current and former public officials and government contractors being called to evidence during a series of public examinations conducted in the County Court of Victoria in mid-2014. These were the first such examinations conducted by IBAC since its establishment in 2012.

The IBAC report identifies a need for the Victorian public sector to learn from the findings of Operation Fitzroy and to strengthen measures to ensure integrity in public procurement.

As another year begins, it is timely for government agencies and departments to reflect on the findings of the IBAC report and consider whether their own existing procurement practices are adequate to safeguard against corruption.

Lessons from Operation Fitzroy


Public sector organisations are entrusted with a significant responsibility for public expenditure. With this comes an obligation to have robust measures in place to ensure integrity in procurement practices.

Solid organisational processes, and a good organisational culture, are cornerstones of good procurement practice.

The IBAC report identified a number of factors as contributing to corruption risks. Ensuring that departments and agencies have robust practices in the following areas will help protect against corrupt conduct and ensure integrity in procurement practices.


  1. Contract management. Good contract management practices are essential to managing corruption risks. It is good practice, for example, to continue to monitor projects once a tender process is finished and a contract awarded. Adequate performance monitoring, which continues beyond a tender process, may assist in detecting corrupt practices. Controls over sub-contracting arrangements are also important.
  2. Supplier due diligence. Due diligence must be conducted on suppliers who are awarded contracts. This enables departments to investigate any connections between individuals within the department, and companies that are being awarded contracts. There should be controls to ensure that suppliers have the necessary skills, qualifications, financial viability and experience to deliver the required goods and services. This will help ensure that value for money is achieved in government procurement practices.
  3. Training and expertise. Government employees with procurement responsibilities must have appropriate training, experience and adequate technical knowledge about the goods or services being procured. There should be ongoing processes for employees and contractors to raise concerns about procurement misconduct and corruption. There should also be ongoing education and training for all relevant employees regarding procurement policies and procedures, as well as associated corruption risks, and mechanisms to engage with suppliers regarding procurement policies and procedures, probity obligations, standards and requirements.
  4. Management of conflicts of interest. Departments must ensure that there are appropriate processes in place to manage conflicts of interest. This could include, for example, a register of interests in which department employees regularly record any relevant interests, training for identifying when conflicts of interests occur, and processes for referring contentious or difficult conflict of interest issues to management.
  5. Management of procurement staff. Managers of procurement officers must be appropriately trained in managing conflicts of interest and other corruption risks, and have appropriate managerial expertise. This will ensure that procurement staff are adequately supervised, and that staff activities are monitored and checked. It will also mean that red flags, which may indicate that improper or corrupt practices are occurring, are identified and acted upon sooner, rather than later. There must also be accountability of those at management level.
  6. Recruitment of management staff. There should be processes for screening prospective employees in potentially high-risk positions relating to finance and procurement, and re-screening regularly for appointed employees.
  7. Timeframes for delivery of projects. Tight timeframes and a culture of expediency may create corruption risks related to procurement planning, compliance and scrutiny of decisions. Regarding procurement policies as subservient to delivering significant programs of work as quickly as possible may lead to non-compliant or improper behaviour. The tension between meeting project delivery requirements and complying with procurement policies and processes must be monitored and managed appropriately.

The VGSO has a long-standing practice in public sector integrity, government procurement and public sector governance. We can assist you to ensure that your department or agency is protected against corruption risks, and conducts its procurement activities appropriately. With extensive expertise in public sector integrity processes, we can also provide advice and assistance with respect to department and agency responses to inquiries by bodies such as IBAC.

 For queries relating to any of the issues identified in this blog, please contact:

Julie Freeman
Assistant Victorian Government Solicitor
9947 1404
julie.freeman@vgso.vic.gov.au

Alison O'Brien
Assistant Victorian Government Solicitor
8684 0416
alison.o'brien@vgso.vic.gov.au

Sophia Angelis
Solicitor
sophia.angelis@vgso.vic.gov.au

Handy resources for procurement

Friday, 16 May 2014

eServices Contract released!

Victorian government purchasers are required to engage suppliers of information and communication technology (ICT) products and services using a cloud based procurement platform called the eServices Register. The eServices Register provides a streamlined process for engaging suppliers of eServices.  It is mandatory to use for inner budget agencies and administrative offices as defined in the Public Administration Act 2004.

The eServices Contract was released on 8 April 2014,  it replaces an interim eServices Contract that was previously in place.  The contract was finalised after extensive consultation with various government and industry stakeholders.  The release of the contract means that government purchasers are able to approach suppliers for each procurement using a known set of terms. 

The contract is mandatory for use with all engagements under the eServices Register for  new procurements.  The interim contract can still be used for projects that were 'in flight'  at the date of the release of the final contract. 

What types of eServices are covered by the contract?

There are various categories of eServices that are covered by the eServices Contract.  These include:

  • Professional Services - that is, ICT consultancy services;
  • Cloud Services -  including Software as a Service (SaaS) or Infrastructure as a Service (IaaS) and related services;
  • Implementation Services - the implementation of new software applications.  It does not cover the implementation of commercial off-the-shelf software;
  • Development Services - the development of new software applications.  This does not include customising commercial off-the-shelf software;
  • Hosting Services - the hosting of an agency's software application or website on a supplier's server;
  • Managed Services - the management by a supplier of an agency's software application or function;
  • Maintenance and Support Services - maintenance and support services in relation to software; and
  • Hardware Services - maintenance and support services in relation to ICT hardware.  

The eServices Contract should not be used to purchase software licences (where there will be no associated eServices) or hardware.

Structure of Contract

The eServices Contract consists of the following documents (in descending order of priority):

  •  the eServices Terms;
  • the Contract Variables;
  • the Purchaser's Request; and
  • the Supplier's Response.

Each of these documents is explained below:

The eServices Terms

The eServices Terms are the standard terms and conditions for the eServices Contract.  The parties will not be able to negotiate or amend these terms.

The eServices Terms states that the Contract Variables, the Purchaser's Request and the Supplier's Response all form part of the contract.

The Contract Variables

The Contract Variables is the only document that can be negotiated by the parties.  It has been structured to enable the parties to specify:

  • the particular categories of sServices that apply under the contract; and
  • the specific arrangements that apply under the contract.

If the Contract Variables specify that specific categories of eServices apply, corresponding clauses in the eServices terms are adopted.

The Purchaser's Request

The Purchaser's Request is the document that invites suppliers to submit a bid for the services.  It is made available to suppliers via the eServices Register. 

It should specify, amongst other things, the scope of the services to be provided and the criteria that will be used to evaluate bids by the supplier. 

Common examples of a Purchaser's Request include:

  • Request for Tender (RFT);
  • Request for Quotation (RFQ); and
  • Request for Proposal (RFP). 

The Supplier's Response

The Supplier's Response is the document that comprises the bid that has been submitted by the preferred supplier on the eServices Register in response to the Purchaser's Request.  This document would normally provide a description of the approach that has been proposed by the supplier in delivering the project.


Further Information

If you would like to access the eServices Contract, it can be found on the eServices Register Gateway.

To discuss the eServices Contract or the eServices Register generally, please contact:

9947 1405

9947 1407

9947 1426

9947 1402

Wednesday, 29 January 2014

How to draft an enforceable dispute resolution clause

When will a dispute resolution clause be enforceable? The Supreme Court recently grappled with this question in WTE Co-Generation v RCR Energy. The decision is a helpful guide on how to create a dispute resolution clause that achieves its aim. It also highlights the danger of commercial dispute resolution clauses that are effectively 'agreements to agree', which may be unenforceable due to a lack of precision.

Background


This case related to a contract for the supply of a co-generation facility, intended to be fired by paper mill residues, for a price of in excess of $20m. While the facility was constructed, the superintendent did not certify practical completion as being reached, ultimately resulting in the plaintiff issuing a notice to the defendant purporting to terminate the contract.
 
An application was made by the defendants that the proceeding be stayed until the parties had complied with a contractual resolution clause.
 
That clause provided that:
In the event that the parties have not resolved the dispute then within a further 7 days a senior executive representing each of the parties must meet to attempt to resolve the dispute or to agree on methods of doing so.
The defendants argued that there had been no compliance with clause 42, while the plaintiffs position was that the clause was uncertain and unenforceable.
 

The Decision


Justice Vickery found that the clause effectively amounted to an agreement to agree and was therefore not enforceable due to its inherent uncertainty.
 
Justice Vickery cited with approval the statement in the New South Wales Court of Appeal decision in Coal Cliff Collieries v Sijehama Pty Ltd that '…in some circumstances a promise to negotiate in good faith will be enforceable, depending on its precise terms…'.
 
Further, his Honour set out a number of principles to determine whether a stay should be granted where a contractual dispute resolution process is expressed to be a pre-condition of litigation, including:
  1. That such clauses should be determined robustly to give them commercial effect by avoiding a 'narrow or pedantic approach in favour of a commercially sensible construction'.
  2. Where express words are at issue that are broad and general, but nevertheless have sensible and ascribable meaning, the court should give effect to such provisions.
  3. Public policy in promoting efficient dispute resolution, especially commercial dispute resolution, requires enforceable content be given to contractual dispute resolution clauses where possible.
Justice Vickery found the dispute resolution clause not to amount to a valid agreement to negotiate however, as it essentially amounted to an agreement to agree for the following reasons:
  1. Once the operation of the clause was triggered, it required the parties to either meet together to resolve the dispute, or to agree on methods for doing so. These requirements fell short of prescribing a process to determine which option is to be pursued.
  2. No method of resolving the dispute is prescribed by the clause. Rather, the clause expressly contemplates that the method for resolving the dispute is to depend on the parties' further agreement as to the methods to be employed.
His Honour outlined that, whilst a valid dispute resolution clause does not require a set of rules to be set out:
…as a minimum, what is necessary for a valid and enforceable dispute resolution clause, is to set out the process or model to be employed, and in a manner which does not leave this to further agreement. It is not for the court to substitute its own mechanism where the parties have failed to agree upon it in their contract. To do so would involve the court in contractual drafting, which is a distinctly different exercise from contractual construction of imprecise terms.
 
If you are in the Victorian Government and wish to discuss the implications of this case further, please contact:
 
Managing Principal Solicitor
t 8684 0418
 
General Counsel
t 8684 0458

Friday, 17 January 2014

9 things you should know about the draft VPS Intellectual Property Guidelines

The Intellectual Property Guidelines for the Victorian Public Sector have been published as a working draft.

The Guidelines will support the Whole of Victorian Government Intellectual Property Policy Intent and Principles (IP Policy), created in August 2012. The IP Policy sets out broad principles on the State's ownership and management of its intellectual property and its use of third party intellectual property. The Guidelines, provide guidance on the specific steps government agencies should take to comply with the IP Policy.

The IP Policy and the Guidelines apply to all departments and public bodies of the State. ‘Public body’ includes State business corporations and statutory authorities.

The draft Guidelines are a 'must read' for departments and agencies, who will need to implement the processes outlined. They also provide links to useful resources and an indication of when specific legal advice may be required.

Here are 9 things you should know about the Guidelines:
  1. Many requirements of the Guidelines will only apply to 'significant' IP - for example, where the IP is particularly valuable or important to the operations of the agency.
  2. The Guidelines will require agencies to manage their own IP and be responsible for implementing the IP Policy. (This is different to the previous position where requests to make use of State owned copyright material required the Attorney General’s approval.) Agencies will also need to actively foster compliance and awareness of the IP Policy and Guidelines.
  3. The Guidelines acknowledge that agencies may have specific IP provisions in their establishing legislation. For example, the Transport Integration Act 2010 (Vic) empowers the Secretary of the Department of Transport to acquire, hold, licence, exploit or dispose of IP. Agencies need to consider the interaction between the IP Policy and these provisions.
  4. The Guidelines set out specific recording and reporting requirements
    1. Maintaining an intellectual property register recording information about any significant IP of the agency, including the creator, its identifying details, any IP registrations, the start and end date of the IP protection, relevant contracts and any important ownership and licensing details.
    2. Reporting IP infringements to DTF, as the responsible agency. (The Guidelines contain materials on circumstances where it will be appropriate for an agency to enforce State IP rights, and a substantial section highlighting law relevant to use by the State of third party IP).
  5. The Guidelines set out how to address IP in government contracts. Not sure where to start? For IP under procurement contracts, Chapter 5 of the Guidelines provides for a default position whereby:
    1. each party retains ownership of its background IP;
    2. the contractor grants the agency a licence over its background IP and third party IP to the extent needed for the agency to enjoy the full benefit of the agreement; and
    3. the contractor owns the project IP developed but grants the agency a licence over the project IP to the extent necessary to achieve the procurement purposes.
  6. The Guidelines encourage agencies to develop template procurement contracts to reflect the IP Policy. DTF is currently working with the Victorian Government Purchasing Board to ensure consistency between the IP Policy and the VGPB requirements. (Chapter 6 deals with these issues for IP under funding and grant agreements.)
  7. There is a substantial section on licensing and public release of materials where the State owns the relevant IP. The preferred form of licence for State copyright material is a Creative Commons licence (Australian version). Specific guidance is provided on the selection and use of the various types of Creative Commons licences for new and existing materials..
  8. The Guidelines address the commercial dimensions of IP where there has been little guidance in the past, including:
    1. the factors to consider to value IP;
    2. when a State agency can commercialise its IP through licence or sale (the IP Policy has imposed significant restrictions on commercialisation, including requirements for authorisations, and the application of the Cost Recovery Guidelines);
    3. when a State agency should reassign or dispose of its IP and how to do this in an open, accountable and competitive manner.
  9. There is a full chapter on moral rights, and practical guidance as to when the State should seek moral rights consents from its employees and contractors, together with a template consent form.
For more information about the IP Policy or the draft Guidelines, please contact:
Isabel Parsons
Special Counsel
t 9947 1405
isabel.parsons@vgso.vic.gov.au

Tuesday, 27 August 2013

The ICT market in the cloud

If your Department is in the market for some information technology and communications (ICT) products and services, you’ll need to master the new eServices Register.

The Register replaces the eServices Panel and eServices Online.  It has been in place since 1 July 2013.  All Departments and agencies must use the new Register for any new ICT procurement.

Unlike the Panel, the Register is open to all companies that agree to the Government's terms and conditions. There is no limit to the number of suppliers on the Register, improving opportunities for small to medium ICT businesses. 

The Register is an online cloud-based portal that allows Government purchasers to provide feedback on service delivery.  Rather than using a formal system of rating for suppliers (which was thought to be too subjective and unfair), the Register allows Government purchasers to see what engagements a supplier has had with other Government project officers. This allows Government users to check with their colleagues about suppliers’ performance.

Purchasers must still define their requirements and issue a Statement of Work (specification) for suppliers to quote on. However, the entire procurement will be conducted within the Register portal.

Former Panel suppliers are already eligible to join the Register.  Joining the Register also enables suppliers to identify possible partners, particularly small and medium companies who may not be able to respond to a request on their own.

Departments have greater flexibility with procurements under the Register.  Use of the Register will be in accordance with departmental procurement plans.  Where department procurement plans are not yet in place, interim approach to market arrangements apply.  These have been determined by the VGPB.

The old online system is accessible only for the completion of existing Panel engagements, including completing end project reporting.

So which contract applies?
  • All contracts commenced before 1 July 2013 will continue to be managed and completed under the existing eServices Panel contract.
  • Between 1 July 2013 and 31 August 2013, an interim contract is available for use, which will be the same as the existing contract, subject to some small changes to reflect the new arrangements. These include removing references to lead agency oversight and the distinction in service categories. Further, the rates under the Panel arrangements no longer apply. This will be replaced by a new eServices contract. The interim contract and new eServices contract will not be mandatory to use.
  • RFPs/RFTs issued by Government agencies before 1 July will continue to operate using the existing contract. Similarly, all existing purchase order contracts will continue to operate for the term of those contracts.
  • The new eServices contract is being circulated for consideration. DSDBI has suggested that the new contract should be ready by 1 September 2013. 

For more information about ICT procurement, please contact

Sam Funnell
Managing Principal Solicitor
t 9947 1407
sam.funnell@vgso.vic.gov.au