and the New NSW Procurement Framework Presented by Scott Alden 27 - - PowerPoint PPT Presentation

Presented by Scott Alden

27 March 2013

1

Legal Risks In Procurement and the New NSW Procurement Framework

Overview

• 1. Background to the procurement framework: the process

contract

• 2. What does the procurement framework look like?
• 3. The ICAC framework - ensuring fairness and probity
• 4. What are the reforms and what are their implications?

2

1. Background to the procurement framework: the process contract

• A. Legal Risks

i. The Process Contract One Contract (before Hughes Aircraft) (i) Invitation to Tender (Invitation to Treat) (ii) Tender (Offer) – Validity Period (iii) Letter of Acceptance (Acceptance)

3

1. Background to the procurement framework: the process contract

Two Contracts (after Hughes Aircraft)

(A) The Queen in Right of Ontario et al v Ron Engineering & Construction Eastern Ltd (1981) Canada (B) Hughes Aircraft Systems International and Airservices Australia (1997) 146 ALR 1 (C) Ipex ITG Pty Ltd (in liq) v State of Victoria [2010] VSC 480 (D) Ipex ITG Pty Ltd (in liq) (recs apptd) v State of Victoria [2012] VSCA 201

4

1. Background to the procurement framework: the process contract

Can You Exclude the Process Contract?

There is no intention to create legal relations by this RFP. The request may result in negotiations for the award of a contract, but of itself is not an offer that applicant / Proposers accept by submitting a proposal. To avoid doubt, no process contract will arise by the issue of this RFP.

• Cubic Transportation Systems Inc & Anor v State of New South

Wales & 2 Ors (2002)

5

1. Background to the procurement framework: the process contract

Should You Exclude the Process Contract? Ron Engineering & Construction Eastern Ltd [1981] 1 SCR 111 Canada

• City Polytechnic of Hong Kong v Blue Cross (Asia Pacific) Insurance

[1994] HK CFI 355

6

1. Background to the procurement framework: the process contract

Excluding Liability under a Process Contract

• Tercon Contractors Ltd v British Columbia (Transportation and

Highways) 2010 SCC4 RFP exclusion of liability clause: “Except as expressly and specifically permitted in these Instructions to Proponents, no Proponent shall have any claim for compensation of any kind whatsoever, as a result of participating in this RFP, and by submitting a Proposal each Proponent shall be deemed to have agreed that it has no claim.”

7

1. Background to the procurement framework: the process contract

Consequences of Breach of the Process Contract

• Damages for a breach of the Process Contract
• Loss of Profit
• Loss of Chance
• J&A Developments v Edina Manufacturer Ltd, Amoura Ltd Ors [2006]

NIQB 208

8

1. Background to the procurement framework: the process contract

Disclosure & Preliminary Discovery

• Griffin Energy Pty Ltd v Western Power Corporation [2006]FCA 1242
• Telstra Corporation Limited v Minister for Communications,

Information Technology and the Arts (No.3)[2007] FCA 1567

9

ii. Avoid Risks

• Careful drafting of the RFT
• Comply with the Process Contract
• Adequate Planning
• Internal Training
• Proper Processes
• Compliance Program
• Contracting out of the Process Contract?

1. Background to the procurement framework: the process contract

10

• iii. General
• Misleading and Deceptive Conduct
• Section 18, Schedule 2 Competition and Consumer Act

2010

• Fabcot Pty Ltd v Port Macquarie-Hastings Council [2010]

NSWSC 726

• Equitable Estoppel
• LMI Australasia Pty Ltd v Baulderstone Hornibrook Pty Ltd

(unreported 10 April 2003)

1. Background to the procurement framework: the process contract

11

A. What do I have to comply with?

• Local Government
• State Government (Departments, Statutory Authorities,

State owned corporations, Government Trusts)

• Commonwealth Government

2. What does the procurement framework look like?

12

NSW Procurement Framework

• NSW Government is overhauling its procurement systems
• For Goods and Services procurement, an Interim Procurement

Policy Framework currently applies to government agencies.

• All relevant requirements of the NSW Government Tendering

Guidelines (issued December 2011) have been captured by the Interim Procurement Policy Framework (sections 2-5).

• The NSW Government Procurement Policy & Guidelines Paper

issued in 2004 (TPP04.01) applies where it is not inconsistent with the interim framework

• For Construction procurement, a different set of guidelines and

schemes apply (see next page)

2. What does the procurement framework look like?

13

NSW Procurement Framework

2. What does the procurement framework look like?

14

Goods and Services Procurement Construction Procurement An Interim Procurement Policy Framework is in place for purchasing Goods and Services (available at www.procurepoint.nsw.gov.au) from 1 January 2013 Construction procurement guidelines apply for procurements valued below the $1 million threshold for the Agency Accreditation Scheme for Construction (see next page) From 1 July 2013, a revised version of this framework will be in place An Agency Accreditation Scheme for Construction applies for the planning and/or delivery phases of construction projects valued at $1 million or above The NSW Government Procurement Policy & Guidelines Paper (TPP04.01) applies where it is not inconsistent with/overridden by these newer policies NSW Treasury appraisal/monitoring requirements apply for major projects with a cost of over $50 million

NSW Procurement Framework - construction Approved quote/tender requirements from 1 July 2013:

2. What does the procurement framework look like?

15

Value Construction Construction Related Consultancy (where Pre- qualification Scheme exists) Other Consultancy Goods and Services (no existing State Contract) ** Up to $30,000 1 1 1 1 $30,000 - 50,000 3 1 3* 3 $50,000 - 150,000 3 3 3* 3 $150,000 - 250,000 3* 3 Open Tender* 3 Over $250,000 Open Tenders

*

3 Open Tender* Open Tender

• * Where a pre-qualification scheme is used, adopt the number specified by the
• scheme. If not specified in the prequalification scheme, a minimum of 3 is

recommended.

• ** This is in accordance with the State Contracts Control Board general purchasing

delegation for non-construction work.

Public Sector Employment and Management Act 2002 (NSW) Section 149 Obligations of government agencies

(1) A government agency is to exercise its functions in relation to the procurement of goods and services in accordance with: (a) any policies and directions of the Board that apply to the agency, and (b) the terms of its accreditation (if any) by the Board, and (c) the principles of probity and fairness. (2) A government agency is also to ensure it obtains value for money in the exercise of its functions in relation to the procurement of goods and services. (3) A government agency is, at the request of the Board, to provide information to the Board about its activities in relation to the procurement of goods and services.

(Emphasis added)

2. What does the procurement framework look like?

16

The Gateway Review System

The Gateway Review System was intended by the NSW Government to "help agencies improve their procurement discipline and achieve better service results from their activity"

(Procurement NSW website)

A Gateway Review is mandatory if a project meets strategic review or business case criteria (see next page) under Treasury Circular 10/13. 1. Submission of a project proposal for a Gateway Review requires agencies to complete an online Risk Assessment Tool. 2. A small team of experienced procurement practitioners conduct the reviews based on service delivery, affordability, value for money, sustainability, governance, risk management and stakeholder management and change management. 3. Review results are summarised in a report which may include recommendations.

2. What does the procurement framework look like?

17

The Gateway Review System

2. What does the procurement framework look like?

18

Strategic Review Business Case Review Estimated total cost over $10 million; AND All projects with an estimated total cost over $10 million and commencing in the upcoming budget year, OR Commencing in years 2-4 of the upcoming forward estimates period OR Estimated total cost over $1 million (if requested by Treasury) Proposed for State Infrastructure Strategy publication or other public statement

"Several ICAC investigations have exposed corrupt conduct and identified common corruption risks in procurement processes."

• ICAC Website under 'Preventing Corruption'

3. The ICAC Framework and Ensuring Fairness and Probity

19

Dragan Marijan v Rail Corporation NSW T/A RailCorp [2012] FWA 5639

• Employee's engagement of a particular service provider which was not a member
• f RailCorp's approved panel of suppliers, and which later charged RailCorp an

inflated price for services it had subcontracted.

• FWA found that the employee had accepted that he had breached RailCorp's

procurement policy, that "he was well aware of the need to comply with RailCorp's policy" and breached the policy repeatedly – and therefore lawfully dismissed.

• In particular, where panels are used for procurement, departure from using service

providers on those panels can undermine the system.

• Future and existing service providers may form the view that the agency may not

follow procurement processes and be discouraged from applying.

3. The ICAC Framework and Ensuring Fairness and Probity

20

What is Probity

i. Uprightness, Honesty, Ethical, Behaviour and Good Process ii. Tenets of Probity

• Best value for money (ICAC)
• Impartiality (ICAC)
• Conflicts of Interest (ICAC)
• Accountability and Transparency (ICAC)
• Confidentiality (ICAC)
• Use of an appropriately competitive process (ANAO)
• Fairness and Impartiality (ANAO)
• Consistency and Transparency of Process (ANAO)
• Appropriate Security and Confidentiality Arrangements (ANAO)

3. The ICAC Framework and Ensuring Fairness and Probity

21

What is Probity

ii. Tenets of Probity (cont)

• Value for Money (NSW Procurement Reform – Strategic

Directions Statement 2012) (SDS)

• Encouraging Competition and No Discrimination (SDS)
• Effectiveness and Efficient Use of Resources (SDS)
• Accountability and Transparency (SDS)
• Confidentiality (ICAC)
• Proper Risk Management (SDS)
• Proportionality (Process vs Scale and Scope of Procurement

3. The ICAC Framework and Ensuring Fairness and Probity

22

4. What are the reforms and what are their implications?

(A) The Strategic Directions Statement

• Published by the NSW Procurement Board in November 2012
• Ultimate objective to develop a system where "doing business

with the NSW Government is simpler, easier and more attractive"

23

4. What are the reforms and what are their implications?

(B) Overarching Goals & The Six Strategic Directions

24

Alignment with Business Needs Value for Money Delivery of Quality Government Services

Strategic and agile procurement Simplification and Red Tape Reduction Effective category management across government Supporting agencies in a devolved environment Industry engagement Innovation

4. What are the reforms and what are their implications?

(B) Overarching Goals & The Six Strategic Directions

25

Strategic and agile procurement Simplification and Red Tape Reduction Effective category management across government Supporting agencies in a devolved environment Industry engagement Innovation

• The need to move away from a 'one

size fits all' approach to procurement and adopt a more responsive procurement model.

• Introduction of an accreditation

system for government agencies which will enable agencies to procure goods and services within the scope of their accreditation.

• Priority actions (by end 2013)

include reviewing the current maximum five year contract term, and developing a simple, performance based rating scheme for prequalification schemes utilising the NSWBuy Platform.

4. What are the reforms and what are their implications?

(B) Overarching Goals & The Six Strategic Directions

26

Strategic and agile procurement Simplification and Red Tape Reduction Effective category management across government Supporting agencies in a devolved environment Industry engagement Innovation

• The new Procurement Policy

Framework is intended to provide a 'one stop shop' for agencies concerning procurement processes.

• Further steps include:
• abolishing management fees

under contracts

• introducing 30 day payment

terms for small business suppliers

• simplifying the process for

pre-qualification of suppliers

• n the Government's existing

Performance and Management Services prequalification scheme.

• identification of obsolete and

duplicative policies for repeal,

4. What are the reforms and what are their implications?

(B) Overarching Goals & The Six Strategic Directions

27

Strategic and agile procurement Simplification and Red Tape Reduction Effective category management across government Supporting agencies in a devolved environment Industry engagement Innovation

• A category management model for

procurement involves approaching the procurement of goods and services on a category wide, rather than contract-by-contract basis.

• This requires effective coordination

across government with estimated costs savings in excess of $13 billion per annum.

• Priority categories to be identified,

Category Management Working Groups established for each category, and approval of category management planning guidelines between 2013 and 2014.

4. What are the reforms and what are their implications?

(B) Overarching Goals & The Six Strategic Directions

28

Strategic and agile procurement Simplification and Red Tape Reduction Effective category management across government Supporting agencies in a devolved environment Industry engagement Innovation

• According to the Strategic

Directions Statement, "where appropriate, procurement should be undertaken by those closest to the 'business' need, those with the best understanding of opportunities to make savings and by those where the incentives to drive value is strongest."

• Clusters must obtain appropriate

accreditation before 1 July 2013 as

• ne way of meeting this principle.

4. What are the reforms and what are their implications?

(B) Overarching Goals & The Six Strategic Directions

29

Strategic and agile procurement Simplification and Red Tape Reduction Effective category management across government Supporting agencies in a devolved environment Industry engagement Innovation

• An Industry Advisory Group is being

established to advise on a range of matters including procurement trends and opportunities.

• Proposed actions for 2013 include:
• the trial of a series of

suppliers forums across the State;

• the development of a detailed

industry engagement strategy; and

• training by the Department of

Finance and Services to Government procurement staff on effective engagement.

4. What are the reforms and what are their implications?

(B) Overarching Goals & The Six Strategic Directions

30

Strategic and agile procurement Simplification and Red Tape Reduction Effective category management across government Supporting agencies in a devolved environment Industry engagement Innovation

• Stimulating innovation within

procurement assists with unlocking the potential for delivering value.

• The NSW Procurement Board will

trial early industry engagement in the development of two of the priority category management working plans.

• By Q2 2013, the Procurement

Leadership Group is also to host a forum on the use of "outcome based" procurements to share the lessons learnt by agencies.

4. What are the reforms and what are their implications?

(C) Commercial Approaches In Contracts

• Term : 5 years to 18mths – 2 years
• Types and Levels of Insurance ($10m Public and Product)
• Indemnities
• Liability Cap Multiple of Contract Price
• Indemnity To Complement Insurance
• Government Not To Give Indemnities
• Agencies to Limit Liability to 1 x Contract Price
• ADR – Mediation not Expert Determination
• IP – Consider Contractor to Retain and Agency to Licence
• Guarantees – Only Where Justified eg Sole Supplier
• Termination for Convenience – Yes Where Compensated

31

4. What are the reforms and what are their implications?

(D) Timeframes

• A transitional period is currently in place until the new system

for the procurement of Goods and Services becomes fully functional from 1 July 2013.

• During this transitional period, there is an interim NSW

Procurement Board Policy Framework that applies to all procurement processes for the NSW Government.

• From July 2013 it was anticipated that a revised version of the

Policy Framework will apply. The likelihood is that the Policy Framework will remain substantially intact, with changes made based on feedback from the Procurement Board, agencies and based on other changes in government policies or laws.

32

4. What are the reforms and what are their implications?

(E) Accreditation

• Accreditation involves the assessment of a NSW agency's

procurement capabilities and the accreditation of that agency to conduct procurements in accordance with the level of its capability.

• Once accredited an agency may:
• procure goods and services in accordance with its accreditation;
• use any procurement method considered appropriate to procure

goods and services within the limits of its accreditation;

• If an agency wishes to procure beyond the limits of its

accreditation, it must refer the procurement to the Department

• f Finance and Services.

33

4. What are the reforms and what are their implications?

(E) Accreditation (Goods and Services)

• The interim Procurement Framework requires that by 1 July

2013, all agencies must be accredited for Goods and Services Procurement.

• Until 1 July 2013, agencies that are not accredited may procure

under their existing procurement arrangements subject to complying with the conditions of those arrangements

• Where no existing procurement arrangement is in place, procure

in accordance with Board Direction 2012-04 (see next page)

• After 1 July 2013, agencies that are not accredited will need to

comply with Board directions which will be issued in the first half

• f 2013.

34

4. What are the reforms and what are their implications?

(E) Accreditation (Goods and Services)

• Board Direction 2012-04 for unaccredited agencies:
• procurements over $3,000 and up to $30,000 require at least one

written quotation;

• procurements over $30,000 and up to $250,000 require at least three

written quotations;

• procurements over $250,000 and up to $1,000,000 require a tender

to be conducted; and

• procurements over $1,000,000 require an open competitive

procurement process that is appropriate to the nature of the goods and services, and full details and specifications of the proposed procurement must first be submitted to the Department of Finance and Services for concurrence.

35

4. What are the reforms and what are their implications?

(E) Accreditation Scheme Scoring Guide

• The NSW Procurement Board decides to issue agencies with an

accredited status in accordance with a score on a range of requirements.

• These requirements relate to Strategy; Governance, Control and

Policy; the Procurement Process; Procurement Tools and Systems; Information Management and Reporting, and Organisation and Capability.

• To achieve a score – 1 being the lowest and 4 being the highest

– agencies must meet all considerations (see handout) and provide sufficient evidence of policies being applied in practice.

• The requirements outlined on the next slides are in accordance

with the Accreditation Scheme Scoring Guide v2012.4

36

4. What are the reforms and what are their implications?

(E) Accreditation Scheme Scoring Guide: Strategy

• Requirements:
• Approved procurement function strategy
• Procurement Management Plan submitted to NSW Procurement
• Board and conformance to standard template
• Annual Procurement Management Plan & Report developed at an

entity level

37

4. What are the reforms and what are their implications?

(E) Accreditation Scheme Scoring Guide: Governance, Control and Policy

• Requirements:
• Procurement governance function in place
• Documented process for identifying, managing and mitigating

procurement risk

• Procurement participates in entity's annual internal audit planning
• Documented Procurement Manual which complies to NSW

Government policy and is approved by the CPO or equivalent

• A procurement delegation manual exists that identifies delegation

levels and approval authorities

38

4. What are the reforms and what are their implications?

(E) Accreditation Scheme Scoring Guide: Procurement Process

• Requirements:
• Business Case is developed prior to commencing procurement projects as

required by NSW Government procurement policy.

• The entity can demonstrate that spend analysis has been undertaken to

support opportunity assessments and drive category strategies.

• Entity demonstrates consideration of demand drivers and methods to manage

demand.

• Minimum specifications are identified and specified.
• Procurement procedures require supplier market analysis.

39

4. What are the reforms and what are their implications?

(E) Accreditation Scheme Scoring Guide: Procurement Process

• Requirements:
• Contract management plans are developed & performance management

process exists

• Meetings are conducted with suitable suppliers to assess the success of the

relationship, identify areas for improvement and engage in planning at appropriate levels .

• Benefits are reported and tracked.
• Sourcing strategy is developed and documented.
• Policies and procedures include guidelines exist for tendering and evaluation.
• Guidelines exist for procedures around Negotiation & contract award.

40

4. What are the reforms and what are their implications?

(E) Accreditation Scheme Scoring Guide: Procurement Tools and Systems

• Requirements:
• Use of Procurement Tools and/ systems to support stages of the

procurement process.

• Evidence that systems and tools are being used and that training

programmes are in place.

41

4. What are the reforms and what are their implications?

(E) Accreditation Scheme Scoring Guide: Information Management and Reporting

• Requirements:
• Policies and procedures for information reporting.
• Entity has completed capability assessment matrix and nominated

category managers.

42

4. What are the reforms and what are their implications?

(E) Accreditation Scheme Scoring Guide: Organisation and Capability

• Requirements:
• The capability of procurement personnel and category managers is

appropriate for delivering its procurement strategy and maintaining its procurement manual and supporting tools and systems.

• Procurement training and development plans exist, including

example individual training and development plans.

• Documented resource planning process exists which considers

resourcing against the dimensions of size of spend and complexity.

• Procurement organisational structure, position description and

articulation of rationale for organisational structure.

43

4. What are the reforms and what are their implications?

(E) Accreditation scheme (construction) from 1 July 2013

44

Agency Accreditation Status - Planning and/or Delivery Phases Project Risk Accredited:- Projects of all values Non-Accredited:- Projects valued >$50M Non-Accredited:- Projects valued <$50M Partial Accredited:- Projects valued <$50M H Can undertake without external support using own procurement system Require external

• support. Must use

the government procurement system Require external

• support. Must use

the government procurement system N/A - Require external support and must use the government procurement system for delivery phase M Can undertake without external support using own procurement system Require external

• support. Must use

the government procurement system Require external

• support. Must use

the government procurement system Can undertake without external support but must use the government procurement system L Can undertake without external support using own procurement system Require external

• support. Must use

the government procurement system Can undertake planning without external support. Delivery requires external support and use of the government procurement delivery system Can undertake without external support but must use the government procurement system for delivery phase (partial accreditation not required for planning phase)

4. What are the reforms and what are their implications?

(E) Partial accreditation for construction

45

• A non-accredited agency may apply to the Department of Financial

Services (DFS) for accreditation for only the planning phase or delivery phase of a particular construction project.

• Partial accreditation may be sought for:

 the planning phase of medium risk profile projects less than $50 million in value; and  the delivery phase of medium and low risk profile projects of value less than $50 million.  N.B. accreditation is not required for procurements below $1 million

• r planning of low risk projects less than $50 million
• Partial accreditation should be sought if the agency believes it has in-

house staff with suitable competencies for the project.

4. What are the reforms and what are their implications?

(F) Unsolicited Proposals Policy

• Proposals offered by private individuals, companies, not-for-

profit entities and non NSW Government owned Local Authorities such as councils are classified as 'unsolicited proposals'.

• These unsolicited proposals are administered under a Guide for

Submission and Assessment of Unsolicited Proposals and involves a pre-submission concept review stage; Stage 1(a) and Stage 1(b), Stage 2 and Stage 3.

• Though the unsolicited proposals review process is not a

substitute for routine competitive procurement, it is acknowledged that unsolicited proposals may offer opportunities

• f real value for Government.

46

4. What are the reforms and what are their implications?

(F) Unsolicited Proposals Policy

• Pre-submission concept review stage:
• An optional initial, pre-lodgement meeting between the proponent

and the Department of Premier and Cabinet to discuss the key attributes, benefits, requirements and assumptions underlying the potential proposal.

• This is not a compulsory stage, but proponents planning to formally

submit an unsolicited proposal are strongly advised to arrange such a meeting with DPC, prior to committing substantial resources to the development of the proposal.

• A key part of this meeting will be the demonstration of the unique

attributes of both the proposal and the proponent in order to progress through the process.

• The Government may provide feedback at this stage as to whether it

considers that the proposal, as presented, is consistent with the

• Guide. Notwithstanding this feedback, it is the proponent's decision

as to whether is proceeds with making a formal Stage 1 submission.

47

4. What are the reforms and what are their implications?

(F) Unsolicited Proposals Policy

• Stage 1:
• (a) Initial Submission and Preliminary Assessment - DPC will

undertake a Preliminary Assessment of the proposal in conjunction with the relevant agencies to determine if the submission constitutes an unsolicited porposal and if it contains sufficient potential grounds to justify direct dealing and therefore undertake a Stage 1

• Assessment. The Unsolicited Proposals Steering Committee

approves progression, or otherwise, to Stage 1(b).

• (b) Strategic Assessment of Initial Submission – Includes a

comprehensive initial assessment of the proposal to identify the potential benefit to Government of further consideration and development with the Proponent. The outcome is advice to the Proponent of progression to Stage 2, or that the Government does not wish to proceed.

48

4. What are the reforms and what are their implications?

(F) Unsolicited Proposals Policy

• Stage 2: Detailed Proposal
• Requires the Proponent and Government to work cooperatively in the

development and assessment of a Detailed Proposal. The outcome is advice to the Proponent of progression to Stage 3, or that the Government does not wish to proceed.

• Stage 3: Negotiation of Final Binding Offer
• Involves the finalisation of all outstanding issues with a view to

entering into a binding agreement, should the Government accept the final offer.

49

SCOTT ALDEN

Sydney Location Head Finance & Projects DLA Piper Australia Phone: 02 9286 8128 Email: scott.alden@dlapiper.com

50