Changes to the Commonwealth Government’s Procurement Rules come into effect 1 July
The Commonwealth Procurement Rules (CRPs) will be changing from 1 July 2024.
Commencing from 13 June 2023, the CRPs set out the Australian Government’s policies and expectations for procuring officials. Essentially they dictate the way the Australian Government makes available opportunities to small and medium enterprises (SMEs). But, in reality, the CRPs go beyond merely setting out how Government procurement officials source suppliers, they also set out how suppliers to the Commonwealth Government are required to behave if they wish to source work from the Government’s circa A$70BN annual purchasing spend.
Not surprising then that any update to the CRPs will be keenly and closely watched by many - if not all - SMEs suppliers in Australia (and their Tender Managers!).
What changes are being made?
Effective Monday 1 July 2024 a number of changes to the CRPs will come into force. You can view the full list here, but essentially four (4) main changes are coming into effect:
An update to what constitutes ‘value for money’ to Government;
A new mandated Supplier Code of Conduct will come into force;
The threshold for permitted ‘direct engagement’ will change; and
The definition of ‘what constitutes an SME’ will change.
The change in the definition of an SME
Looking at the last one first, the definition of SME will be redefined slightly so that an SME:
“must be an independent entity, rather than a small or medium sized entity supported by the resources of a larger entity.”
It’s worth noting here that the revised definition looks at both “independent entity” and “resources” (as in resourcing requirements/ability), which, to us, makes the change more profound as, in theory, it would make white-labelling of larger firm resources through a small - qualified SME entity - more difficult (if not impossible).
As a result, future multiple party tenders -either via white-labelling or subcontracting - should be looked at more closely to ensure they meet the requirements of the RFT and the definition of SME.
Updating what constitutes ‘Value for Money’ to Government
From 1 July 2024 there will be a reduction in the threshold for procurements that require an economic benefit assessment from A$4M to A$1M (contract value).
The net result of this change is that a lot more tenders to the Australian Government are going to require a “benefit to the Australian economy” section in their submission - so if you need help drafting a pro forma here, get in touch!
Change to the threshold for permitted direct engagement changing
Almost as a counter-balance to the change in what constitutes ‘value for money’ to Government is a change in the threshold amount permitted for direct engagements - which will increase from A$200K to A$500K post 1 July 2024.
For bid professionals like us, this will result in a fall off in some tender work - but for business it should be good; subject to some stress testing around giving work to your mates!
New Mandated Supplier Code of Conduct
Leaving the best to last, a new mandated supplier Code of Conduct comes into force 1 July.
This is a 30+ page document [a ‘must’ read if you are a supplier to Commonwealth Government] that incorporates elements of all of the above and ties them together around a central issue.
At its core though is that supplier to the Commonwealth Government must ‘emulate’ Australian public sector values.
As to what constitutes “Australian public sector values” - we will leave that to you to decide!
What else is happening?
Two other updates/changes to note:
The target for sourcing work from small businesses (SMEs) for contracts with a value under A$1BN increases from 20% to 25%; and
The small business target for deals below A$20M will increase from 35% to 40%.
How friendly is this to SMEs in Australia?
Hard to tell until post 1 July implementation of the changes, but there should be a lot for SME businesses in Australia to celebrate about with these amendments.
As always though, the proof will be in the pudding - will there be additional compliance costs!?!
As always, get in touch if you want to chat about any of this.
