Australian Government
Department of Finance and Administration
Finance Circular
No. 2006/02
To all departments, agencies and relevant CAC Act bodies subject to the
Commonwealth Procurement Guidelines
Commonwealth Procurement Guidelines Clarification
Purpose
The purpose of this Circular is to clarify certain elements of the Commonwealth Procurement
Guidelines (CPGs). This clarification of the CPGs may assist agencies to simplify some of
their internal procurement processes.
Terms in this Circular which are defined in the CPGs are in bold text on their first use.
Target Audience
This Circular applies to all departments and agencies subject to the Financial Management
and Accountability Act 1997 (FMA Act) and to relevant CAC Act bodies1.
Background
1.
2.
The current CPGs came into operation from 1 January 2005 with the following key
objectives:

to strengthen the provisions on encouraging competition;

to strengthen the accountability and transparency framework; and

to introduce the Mandatory Procurement Procedures (MPPs) that give effect to
obligations entered into by the Government under the Australia – United States
Free Trade Agreement (AUSFTA) and other free trade agreements.
The CPGs have been reviewed to take into account the experience, including feedback
from agencies, of the first year of operation of the MPPs.
Key Points
3.
This Circular should be read in conjunction with the CPGs. It addresses elements of the
text of the CPGs which are considered to require clarification. It does not represent any
change to the Australian Government’s procurement policy framework.
1
Relevant CAC Act bodies are those bodies listed in Schedule 1 of the Commonwealth Authorities and Companies
Regulations 1997.
Page 1 of 6
Finance Circular 2006/02
Department of Finance and Administration
Issues
Scope of Procurement
Reference CPGs paragraphs 2.2 – 2.5 (refer also to Finance Circular 2005/14 Procurement Policy
Framework – Contracts for Labour Hire.)
Exclusions from the Procurement Policy Framework
4.
The scope of the CPGs has been raised by a number of agencies. For clarity, the CPGs
address only circumstances where there is a proposal to spend public money on the
acquisition of property or services. Procurement2 therefore does not include such
matters as:

investment (or divestment) - any mode of application of money or financial assets
for the purpose of gaining a return, whether by way of income, capital gain or any
other form of return;

sales by tender - for example, the sale of sponsorship rights or the sale of an asset
such as land; or

any property right not acquired through the expenditure of public money - for
example, a right to pursue a legal claim for negligence.
Disposal of Public Property
5.
Regulation 7 of the Financial Management and Accountability Regulations 1997
(Regulations) allows the Minister for Finance and Administration to issue CPGs which
may include guidelines on ‘the disposal of public property’. However, there are no
requirements in the CPGs on the disposal of property.
6.
Chief Executives of FMA Act agencies are required by section 44 of that Act to manage
Commonwealth resources in an efficient, effective and ethical manner. The
management of disposals falls within those responsibilities.
7.
Chief Executive’s Instructions, issued under the authority of the FMA Act in
accordance with FMA regulation 6, are designed to enable a Chief Executive to address
any other elements of the framework if an agency considers there is a need for
additional guidance. Chief Executive’s Instructions may be issued on the disposal of
public property.
8.
It is appropriate to consider the potential future costs (or benefits) of disposing of goods
when undertaking a whole-of-life costing as part of a value for money assessment.
2
The term procurement encompasses the whole process of acquiring property or services. It begins when an agency has
identified a need and decided on its procurement requirement. Procurement continues through the processes of risk
assessment, seeking and evaluating alternative solutions, contract award, delivery of and payment for the property or
services and, where relevant, the ongoing management of a contract and consideration of options related to the contract.
Page 2 of 6
Finance Circular 2006/02
Department of Finance and Administration
Measures to Protect Security Health and National Treasures
Reference CPGs paragraph 8.2
9.
Paragraph 8.2 of Division 2 of the CPGs allows Chief Executives discretion in the
application of the MPPs. It provides that ‘Nothing in this Division of the CPGs prevents
an agency from applying measures determined by their Chief Executive to be necessary
to the maintenance or restoration of international peace and security or to protect
human health or the protection of essential security interests or to protect national
treasures of artistic, historic or archaeological value’.
10.
Paragraph 8.2 is to be treated as having application in respect of Division 1 as well as
Division 2 of the CPGs. Paragraph 8.2 should be read that ‘Nothing in any part of the
CPGs prevents an agency from applying measures…’.
11.
The operation of paragraph 8.2 in no way diminishes the responsibility of Chief
Executives under section 44 of the FMA Act to promote the efficient, effective and
ethical use of resources.
Value for Money
Reference CPGs paragraphs 4.1 - 4.5
Written Contracts
12.
A recent ANAO Audit Report3 found some cases where formal contracts had not been
entered into for the supply of property and services. Use of a written contract where
appropriate supports the obligation of agencies to properly manage risk and achieve
value for money.
13.
A written contract is a robust and objective means of managing procurement risk
particularly to specify requirements such as price, performance, duration, termination,
confidentiality, risk management and intellectual property. Agencies may wish to
consider including guidance in Chief Executive’s Instructions to better inform their
officers about when a written contract is required. For example, a well constructed
purchase order which includes standard terms and conditions may be an appropriate
form of written contract for minor low risk purchases. A comprehensive written contract
with terms and conditions negotiated and agreed by the contracting parties would be
appropriate for most, if not all, procurements conducted by tender.
Contract End Dates and Termination Provisions
14.
There appear to be circumstances where some agencies administer contracts that have
evolved to a stage where legally they could be continued in perpetuity. Such
arrangements are difficult to reconcile with obligations to achieve value for money and
are likely to act to limit competition. Agencies should approach the market in respect of
property or services provided under any such existing contracts as soon as practicable.
15.
All contracts should regularly and objectively be reviewed to test that they continue to
represent value for money. In practice this generally occurs when an agency approaches
the market. In addition it is good practice to include a clear end-date and/or termination
provision in any contract. For example, this could be a stated date beyond which any
contract extension options can no longer be exercised.
3
ANAO Audit Report No. 57 2004-05 Purchasing Procedures and Practices.
Page 3 of 6
Finance Circular 2006/02
Department of Finance and Administration
16.
Some elements of a contract will survive a contract end date or termination of a
contract. For example, obligations to maintain confidentiality do not cease on
termination or completion of a contract.
Management of Confidential Information (FMA Act Agencies only)
Reference CPGs paragraphs 7.15 - 7.33 and Guidance on Confidentiality of Contractors' Commercial
Information4.
17.
Agencies need to ensure that officials actively consider the matter of confidentiality of
contract clauses during procurement planning, contract drafting and contract negotiation
processes.
18.
Appropriate transparency in Australian Government procurement requires that
assessments of whether or not material is confidential should be made on a case-by-case
basis. In the absence of a reason to act otherwise contracts should generally only
include provisions to protect the confidentiality of material where:

it is required by law (such as the Privacy Act 1998);

it is required in order to protect the Commonwealth’s interests, such as where the
disclosure of information would have a detrimental effect on the Commonwealth;
or

a potential supplier has made a request for confidentiality which satisfies the
following tests:
a. the information to be protected must be identified in specific rather than global
terms;
b. the information must have the necessary quality of confidentiality;
c. disclosure would cause detriment to the parties concerned; and
d. the information was provided under an understanding that it would remain
confidential.
19.
Draft contracts issued with request documentation should generally not include
confidentiality provisions which seek to protect a contractor’s confidential information
beyond the scope of the model contract clauses at part 7.3 of Guidance on
Confidentiality of Contractors’ Commercial Information.
4
Guidance on Confidentiality of Contractors' Commercial Information is available from www.finance.gov.au
(Government Finances menu) and provides detailed guidance on the treatment of contractors’ commercial information.
Page 4 of 6
Finance Circular 2006/02
Department of Finance and Administration
Time Limits
CPGs paragraphs 8.31 - 8.33
20.
Paragraph 8.31 of the CPGs states that agencies ‘need to provide sufficient time for
potential suppliers to prepare and lodge a submission in response to an approach to
the market’. Agencies should note that the time limits referred to in CPGs
paragraphs 8.32 and 8.33 represent a minimum period, and should not be treated as a
default time limit for potential suppliers to lodge a submission.
21.
The time limit stated in CPGs paragraph 8.32 applies to each approach to the market.
As described in CPGs paragraph 8.32, a single approach to the market must comply
with the time limits; or, in the case of a multi-stage procurement process, each approach
to the market must comply with the time limits. For example, when a call for
expressions of interest is followed by a select tender, the time limit for each approach to
the market of the procurement may be reduced to a minimum of 10 days where that
approach to the market meets the conditions specified in CPGs subparagraphs 8.32(a)-(d).
22.
Notwithstanding the minimum time limits and the ability to reduce time limits provided
in the CPGs, an agency is responsible for ensuring that procurement processes are
transparent and that any time frame does not detract from the open competition aspect
of the procurement process or the outcome. Whether a process is sound and its decisions
are defensible and able to be substantiated in accordance with government policy is a
matter of judgement that must be made by the procuring agency. In this context, any
time limit applied to a procurement process must be reasonable, equitable and compliant
with the CPGs.
Conditions for Direct Sourcing
Reference CPGs paragraph 8.65
23.
Paragraph 8.65 sets out the circumstances in which an agency may conduct a covered
procurement through a direct sourcing process.
24.
A condition under which direct sourcing is allowable under subparagraph 8.65(a)(i) of
the CPGs is ‘where, in response to an open approach to the market: (i) no submissions
were received’. This condition is intended to include circumstances where no
submissions were received which represented ‘value for money’ and should be applied
accordingly.
AusTender
25.
Agencies are required to use AusTender for the publication of request documentation.
The CPGs require, to the extent practicable, that all request documentation be available
for download from AusTender. Paragraph 7.21 of the CPGs provides that: ‘The
mandatory procurement procedures set out in Division 2 require open approaches to
the market, including requests for tender, requests for expressions of interest and
requests for inclusion on a multi-use list, to be published on AusTender. Furthermore,
any documentation providing information on the request (request documentation) must
be available, to the extent practicable, for download from AusTender.’
Page 5 of 6
Finance Circular 2006/02
Department of Finance and Administration
26.
A further reference to this requirement is made at paragraph 8.21: ‘Where practicable,
request documentation for an open or select tender process must be distributed
electronically. Where electronic distribution is not practicable, the agency must
promptly provide the request documentation, on request from any potential supplier.’
27.
The requirement of paragraph 7.21 is that request documentation must be available for
download from AusTender, to the extent practicable. This requirement is not
diminished in any way by the operation of paragraph 8.21. This is consistent with the
definition of electronic in the CPGs, which includes AusTender.
Further Information and Contacts
28.
Questions on procurement should be directed in the first instance to the agency’s Chief
Financial Officer or procurement unit.
29.
Further questions on the procurement policy framework may be directed through the
agency’s Chief Financial Officer or procurement unit to the Procurement Agency
Advice Branch at procurementagencyadvice@finance.gov.au. In addition to the CPGs,
a list of reference information published by Finance is available from our website at
www.finance.gov.au (under Government Finances).
John Grant
Division Manager
Procurement Division
Asset Management Group
3 August 2006
Page 6 of 6
Finance Circular 2006/02
Department of Finance and Administration