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Greater appetite needed to challenge government procurement decisions
Government procurement is big business, and with so many contracts up for grabs, there is more scrutiny over the procurement process than ever before, writes Emily Murphy.
Emily Murphy
In Australia alone 78,150 government contracts were entered into for the 2018/19 financial year, worth a total of $64.5 billion. With so much at stake, what happens if the procurement process appears not to have been conducted as expected? Can an unsuccessful tenderer challenge a government procurement decision?
However, despite this significant change to the legislation, and almost one year on from the act coming into force, there have been no test cases put forward by any suppliers. So, why are companies seemingly reluctant to make use of this new legislation?
The GPJR Act allows suppliers to develop a written complaint to seek that a formal investigation be undertaken, and a report prepared, if they believe there is a breach of the Commonwealth Procurement Rules (CPR).
The CPR is a set of rules that govern the way in which entities operate when procuring certain goods and services. If successful, companies can be reimbursed the reasonable costs incurred in preparing a tender and/or in seeking to resolve their complaint.
However, while the act looks good on paper, it is questionable whether the systems in the GPJR Act will be attractive enough for companies to develop an appetite to challenge tender decisions.
Originally, the underlying purpose behind the GPJR Act was to fill a gap in the law that prevented Australia from aligning with the World Trade Organisation Government Procurement Agreement. Following a lengthy four-year ascension process, Australia was able to “tick the box” for its international trade obligations, made only possible after it was able to demonstrate an express right to review government procurement decisions.
While the GPJR Act does not have a retrospective effect, the legislation applies to covered procurements from 19 April 2019. The fact that no businesses appear to have taken up the opportunity to challenge government procurement decisions to date, may be because there are some significant issues and limitations for businesses, including:
- The GPJR Act is a federal legislation so it is only applicable to suppliers who are dealing with the Commonwealth procurement process;
- Not all tenderers meet the threshold requirements to be considered for a “covered procurement” even when the CPRs apply; and
- The GPJR Act does not apply to the state government procurement process.
More practically, with many businesses relying on successful tendering to keep themselves afloat, the likelihood of those businesses voluntarily challenging a failed submission is slim. Most businesses have long-term relationships in mind and continue to tender for similar projects, even if they may not previously have been successful.
Although addressing a breach will be unlikely to affect any future tender prospects, businesses may not want to risk the unconscious reputational harm that comes from formally challenging a tender outcome in the court.
The legislation relies on a business’ appetite to challenge a tender decision and utilise the new review mechanism now available. With currently no known test cases, it remains to be seen how businesses will react and be affected.
Overall, it is a positive development on paper that allows Australia to “tick the box” for its international obligations. However, the commercial realities of business mean that there are some challenges to overcome in how this new review mechanism will work in practice to have a positive and practical impact on businesses.
Emily Murphy is a senior associate at Moulis Legal.
