David Drabkin, speaking at a series of roundtable sessions and seminars on the opportunities opened up by the FTA in February, discussed how one of the world’s largest economies purchases services from the private sector, while focusing on government procurement practices and the impact of the recently negotiated FTA.

According to Minter Ellison Canberra-based partner Michael Brennan, “improving procurement practices in the light of Australia/US FTA has received greater focus from governments at both Federal and State levels”.

Drabkin’s visit was timely, said Brennan, as government agencies at all levels tighten and strengthen their procurement processes as a result of the new FTA arrangements. “There is an increased possibility of unsuccessful tenderers commencing legal challenges because of the tighter new rules with which agencies must comply,” he said.

As part of the deal with the US, Brennan told Lawyers Weekly, the Australian government agreed to adopt a more prescriptive procurement process.

This means that as of January 1 this year, any procurement of goods and services above $80,000 by an Australian government agency generally requires an open tender process. “The government agency will need to put out a request for tender or expression of interest, and advertise through the AusTender website,” said Brennan. There are some limited exceptions, including strategic defence purchases. The threshold for construction purchases is higher, at $6 million.

“Up until January 1, when the government wanted to buy goods and services, the rules were not as prescriptive, but now they just can’t buy without going through some sort of open tender process,” said Brennan.

This means that when government agencies buy things they need to sharpen up their tendering processes because the new rules are mandatory, with very limited exceptions, said Brennan. There are now prescribed periods in which tenders need to be in the market to give tenderers sufficient time to respond.

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It also means that if a government agency discovers a contract is about to expire and it does not have an option clause in the contract to renew, it cannot simply roll it over without going out to a full tender process.

The US procurement system is much more prescriptive, according to Brennan, so while they have very detailed and complex federal acquisition rules which are law, the new Commonwealth rules we have are relatively light. We have moved closer to the US system, but ours is still “nowhere near as prescriptive”, he said.

Minter Ellison’s national government group has noticed a marked increase in the number and complexity of issues being raised by government, said Brennan. “Strategic advising on tender processes that comply with the new requirements will be particularly important in protecting government agencies from unwarranted challenges.”

Minter Ellison has seen an uplift in the amount of work it is doing, said Brennan, which includes updating tendering documents, advising on internal tendering procedures, as well as general advising for agencies on complying with the new Commonwealth procurement guidelines. There has been an overall increase of work in the area as agencies have had to bolster their procurement processes and resources, he said.

The intended upside of all this, according to Brennan, is the further opening of opportunities for suppliers to do government work and greater competition. “Although there may be increased cost and resources for agencies, the government expects better value for money outcomes,” he said. “The non-discriminatory requirements of the new rules generally means that anyone in the market can take part, no matter where in the world they are located.”