New rules for Victorian Government Construction Procurement

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In July, the Victorian Government introduced new Ministerial Directions that govern how public sector agencies approach public construction procurement.

The launch of new Ministerial Directions for public construction procurement has implications for all businesses operating in the public construction sector. Although they are instructions and guidelines primarily targeted at public sector agencies and bodies, these Ministerial Directions provide insight to savvy businesses about the public construction procurement environment. Insights that can provide competitive advantage…

Ministerial Directions for public construction procurement

First, be aware the Ministerial Directions for public construction procurement govern one of two procurement regimes run by the Victorian Government:

  1. The procurement of goods and services governed by the Victorian Government Purchasing Board under the Financial Management Act 1994, and
  2. The procurement of building, construction and related consultancies governed by Ministerial Directions under the Project Development and Construction Management Act 1994.

Why two regimes exist is an interesting question. In part, it’s a result of the separate pieces of legislation that govern each broad procurement category and the accountabilities identified in those Acts that are associated with each procurement category.

And, while there are Victorian Government procurement policies that apply equally to general procurement and construction procurement (for example: probity, value-for-money, contract disclosure and local content), there are some notable differences, particularly around the rules and methods for approaching the market.

Public construction is generally defined as any matter relating to the construction, maintenance, rehabilitation, alteration, extension or demolition of any improvements on land by, or on behalf of, departments and public bodies. This includes the removal, destruction or lopping of trees, the removal of vegetation or topsoil, and land reclamation and decontamination.

This definition is used by Government when determining whether a procurement relates to public construction or general goods and services. Businesses working with Government should therefore use this definition to understand which procurement regime applies to their business – and become familiar with the governing policies of that regime.

The Ministerial Directions for public construction procurement (and how they are used)

The Ministerial Directions for public construction procurement prescribe the principles and procedures that Victorian government departments and public bodies must follow when they procure public construction works and services (as defined above). Their purpose is to establish a fair and open playing field within which businesses are to compete for government work.

Importantly, the Ministerial Directions also include a requirement for each government department and agency to manage a complaints process designed to ensure free and open avenues for tenderers to make a complaint (where, for example, a department or agency has not operated in the spirit of these principles and procedures), without jeopardising the assessment of their tender.

Any business operating in the public construction market should download and become familiar with these Ministerial Directions to make the most of public construction opportunities. The Ministerial Directions for public construction procurement encompass:

  1. Tendering provisions and requirements for public construction that Victorian Government Departments and Agencies, along with all public bodies, must comply with when seeking quotations and tenders.
  2. Managing probity requirements
  3. Ensuring transparency in public construction procurement
  4. The use of Registers and Supplier Panels (such as the Construction Supplier Register and VicRoads Prequalification Register)
  5. Contracting requirements
  6. Improving performance and continuous improvement, which includes management of a tenderer complaints process
  7. Accountability, and
  8. Authorising provisions.

New Ministerial Directions for public construction procurement

On 1 July 2018 a new set of Ministerial Directions came into play for the public construction sector, with new principles and procedures replacing the old rules.

This review and update of the Ministerial Directions was driven by the implementation of the Government’s endorsed reforms to improve the efficiency of public construction procurement. The review also presented an opportunity to modernise the Ministerial Directions to ensure better alignment with contemporary procurement practice and governance arrangements in Victoria.

Below, I’ve outlined what I see as the major changes to the public construction procurement environment; for more detail I encourage you to read a very informative blog by Pauline Bernard, Probity Consultant and Public Sector Procurement Specialist at CourtHeath.

  • The Guides to the previous Ministerial Directions have been replaced by mandatory Instructions, issued by the Secretary of the Department of Treasury and Finance, and non-mandatory Guidance, issued by the Department of Treasury and Finance. The Guidance for Public Construction is a new feature to enhance support for the framework by assisting agencies to consistently understand and interpret the requirements of the Ministerial Directions and Instructions.
  • The new Ministerial Directions clearly identify the agencies (approximately 300) that must comply, addressing the ambiguity in the previous Ministerial Directions, which refer only to departments and public bodies.
  • Additional requirements have been included in the tendering principles to improve the efficiency of tender processes. This includes providing clear notice of upcoming procurements and using appropriate tender open times and documentation requirements.
  • Notices must be published on a common website, currently the Victorian Government tenders system, TendersVIC. This is to enable suppliers to access a single point for information about all government procurement opportunities.
  • Advanced notice for all open and selective tenders must be published an appropriate period prior to launch.
  • Requirements such as the mandatory evaluation criteria for occupational health and safety and industrial relations are retained.

In addition, higher tendering thresholds that dictate how Government may approach the market have been introduced.

  • According to the new requirements for Limited Tendering (Direction 3.2):
    • For works and services below $50k (was $25k) Government must seek at least one tender.
    • For works between $50k and $500k (was $25k-$200k) or services between $50k and $200k (was $25k-$150k), Government must seek three to six tenders.

NOTE: Though prequalified suppliers may be invited to participate in a Limited Tender there is no requirement for tenderers to be prequalified for these low-value projects.

  • When engaging a supplier to perform works or construction services greater than the above respective ranges, to promote competition and contestability Government Agencies must use:
    • Open tender, or
    • A selective tender open to
      (i) all suppliers in the relevant category of a prequalification register, or
      (ii) at least three suppliers in the relevant category of a prequalification register.
  • For complex or design-led tenders, Government agencies are recommended to invite up to four suppliers to tender.
  • For costly, major tenders (e.g. PPP or alliance), it may be sufficient to invite two suppliers to tender.

What are the implications of the new Ministerial Directions for industry?

Whether your business operates in public construction or is involved in the delivery of goods and services, you must understand the procurement environment you are supplying within. While government procurement policies can seem cumbersome, they do serve an important purpose… and that is to achieve the best value-for-money outcome to Government.

And guess what? Government cannot achieve value-for-money if it doesn’t maximise opportunities for businesses to compete. In this way, many procurement policies actually protect businesses, giving you every opportunity to compete in a fair and open environment. However, if you aren’t familiar with these policies, you won’t know what levers exist for you to pull when a procurement is not being run in a fair manner.

So, if nothing else, review the Ministerial Directions relating to tender provisions, notifications of tenders and contracts, and complaints management processes. Then create a profile on www.tenders.vic.gov.au and monitor that site for notices of upcoming tenders as well as current tenders.

At the same time, review www.contracts.vic.gov.au to see what government is currently buying, how much it is paying and who your competitors are. And, if you haven’t already done so, start your application for a relevant register in the public construction space.

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