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

Commonwealth Government introduces Government Procurement (Judicial Review) Bill 2017

Procurement practitioners may have noticed that on 25 May 2017, the Commonwealth Government introduced the Government Procurement (Judicial Review) Bill 2017 designed to give the Commonwealth procurement rules some extra teeth.

What does the Bill propose?

The Bill would enable the Federal Court to grant an injunction or order for compensation for a contravention of relevant Commonwealth Procurement Rules by a Commonwealth entity.

A supplier whose interests are affected by the relevant conduct (which includes a potential supplier ie bidder) may make an application to the court for compensation or an injunction, which may halt the procurement process or preserve the supplier's rights in the process.  

The Bill also provides for complaints to be made to the accountable authority of a relevant Commonwealth entity about a contravention of the relevant Rules, which must then be investigated.

Does this impact Victoria?

The bill does not affect state procurements.  In Victoria, an unsuccessful bidder has to bring proceedings (including an injunction) against an agency under contract law, for breach of the contract that may have been formed through the procurement process. 

If you'd like any more information about government procurement, please contact:

Julie Freeman

Assistant Victorian Government Solicitor

9947 1404

Rebecca Radford

Managing Principal Solicitor

9947 1403

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

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:

Julie Freeman

Assistant Victorian Government Solicitor

9947 1404

Sarah Daniell

Managing Principal Solicitor

9947 1401

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

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

• Current Victorian Government Purchasing Board procurement policy framework 
• Victorian Public Sector Commission Good Practice Checklist -Supporting Integrity in Procurement