Finance department releases procurement advice for agencies during COVID-19

By Shannon Jenkins

Monday May 11, 2020

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The Department of Finance has published new procurement guidance calling on federal government entities to collaborate with suppliers so they can maintain supply chains during the coronavirus pandemic.

Many suppliers will struggle to meet their contractual obligations with agencies due to the pandemic, according to the procurement policy note.

This could “put their financial viability, ability to retain staff and their supply chains at risk”, it says.

The guidance suggests departments and agencies relax or waive some contractual rights, avoid exercising termination rights or liquidated damages, or revise payment arrangements — if necessary.

Finance expects entities to support struggling suppliers where possible so they are “better able to cope” during COVID-19 and be in a position to fulfil their contractual obligations when the pandemic is over.

Approaches to the market should be progressed on a case-by-case basis, the guidance states. Agencies preparing to approach the market should consider:

  • how COVID-19 may impact plans in the immediate future,
  • appropriate timelines depending on the nature of the market,
  • the amount of time potential suppliers require to put in submissions,
  • the potential to structure procurements into practical achievable deliverables,
  • bringing forward procurements that are less reliant on substantial material supply.

Entities can engage with the market through a Request for Information on AusTender to better understand capability before formally approaching the market. They should also ensure appropriate records are kept in line with the scale, scope, and risk of the procurement.

The Commonwealth Procurement Rules present a number of mechanisms that could be useful during the pandemic. Two of these, highlighted by the new guidance, are as follows:

  1. Accountable authorities can apply any measures that they deem appropriate for a range of circumstances, including to protect human health. They could decide, for example, that it’s necessary to undertake a streamlined process for particular goods or services to protect the health of individuals.
  2. Entities can also use a streamlined process when, “for reasons of extreme urgency brought about by events unforeseen by the relevant entity, the goods and services could not be obtained in time under open tender”.

The policy note states entities must ensure value for money is being achieved regardless of the procurement process, and appropriate records must be maintained.

Contract managers are also expected to maintain their relationships with suppliers and to handle any issues related to COVID-19 “in a collaborative and sensible manner”.

When considering possible options with suppliers, agencies must ensure public resources are used in an efficient, effective, economical and ethical manner, as required under the Public Governance, Performance and Accountability Act 2013.

In line with the PGPA Act, agencies are able to provide relief to suppliers if necessary, to ensure business continuity is maintained, the guidance notes.

They could, for example, make minor changes to contract requirements, frequency and timing of delivery, and targets and performance indicators.

However, changes to contract terms should be limited to the specific circumstances of the situation, and be considered on a case-by-case basis. Agencies must record all contractual changes and the reasons behind them.

Finance has called on agencies to pay suppliers and verify receipt of goods and services — including resolving disputed invoices — as soon as possible.

Under the government’s payment policy, entities must use payment cards as a preferred option for payments to suppliers valued below $10,000 (this means payments are made immediately).

The policy also requires maximum payment terms of 20 calendar days for contracts valued up to $1 million, or five calendar days when the supplier and agency have e-Invoicing capability. Interest is payable where payment isn’t made to a supplier by these timeframes.

Entities are expected to exceed these maximum payment terms, where practicable, the guidance notes.

Other payment arrangements which agencies could consider include payments against revised or extended milestones, interim payments, payments on order, and payment in advance or prepayment. The policy note states agencies must satisfy their requirements under the PGPA Act in when looking at these options.

The Finance and Defence departments have also established a Procurement Hub to assist agencies with COVID-19 related procurement activities.

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