Commercial Notes No. 5

No. 5
30 August 2002

Legal and Probity Issues in Tendering

Cubic Transportation Systems v New South Wales
26 July 2002, [2002] NSWSC 656

Background

This case is a timely reminder of the complex legal and probity
issues that can arise in relation to tender processes and the
need to take legal/probity advice both in drafting the conditions
of tender and in dealing with process issues as they arise.

The case involved a tender dispute under a 'Call for Revised
Offers' document which was issued to 2 pre-selected proponents.
The tender process related to the proposed acquisition of an
Integrated Ticketing System (ITS) for Sydney's public transport
system. The proposed arrangements for delivery of the ITS involved
the preferred proponent contracting with 'the Principal', proposed
to be a special purpose company having as its shareholders
the participating operators and the relevant NSW Department.

Call for Revised Offers

The key provisions of the Call were:

  • clause 3.1.1: 'Each Proponent agrees and acknowledges that
    notwithstanding anything contained in this Call (except in
    relation to the irrevocable offer described in Clause 3.1.17),
    no contractual relationship exists between the Principal,
    and Operator or its employees, agents, representatives or
    advisers, on the one hand and any Proponent, its agents,
    employees, representatives or advisers on the other hand
    in relation to the evaluation of revised Proposals, or otherwise
    in dealing with a Proponent in relation to the ITS.'
  • clause 3.1.17: 'Each Proposal submitted in response to
    this Call will comprise an irrevocable offer by the Proponent
    to perform the undertakings and observe the representations
    and warranties set out in the Proposal. The irrevocable offer
    shall be given in consideration for the Principal agreeing
    to consider the Proposal (but it shall not be a term that
    the Principal must do so) in accordance with this Call. …'

The decision

The unsuccessful tenderer alleged that the selection process
did not follow the procedures set out in the Call, was not
a fair process and did not afford an equal opportunity to both
tenderers. The concerns related to the evaluation of particular
technical issues as well as allegations of bias or the perception
of bias in the decision making process, including as a result
of various conflicts of interest of some of the advisers. The
Court dealt with each of the allegations in turn and found
that in each case the decision making process was fair, there
was no actual bias and no conflicts of interest existed.

Process contracts

After reviewing case law on process contracts (including Hughes
Aircraft Systems International v Air Services Australia (1997)
76 FCR 151, and Transit New Zealand v Pratt Contractors [2002]
2 NZLR 313, but interestingly not MBA Land Holdings v
Gungahlin Development Authority [2000] ACTSC 89), the
Court found 'not without misgivings', that 'a contract of
some kind was intended' based on the language of contract
in clauses 3.1.1 and 3.1.17 of the Call. However, given the
language of clause 3.1.1, the basis of the contractual obligations
were as follows:

  • There was no contractual relationship in relation to the evaluation of
    Proposals.
  • The exception in the parentheses in clause 3.1.1 'relates
    entirely to a contractual obligation on the Principal to
    comply with the Call and, in particular, to consider the
    bids in light of the assessment of the Evaluation Committee,
    which it is to assist in the ways specified in section 3.2,
    appoint a Probity Auditor and consider any advice given by
    the Auditor as to probity concerns.'
  • The words in clause 3.1.17 'do not require the Principal to
    assess or evaluate the bids in any particular way, except...in
    light of the assessment of the Evaluation Committee.'
  • '...[T]he nature of the contractual obligations of the
    parties in the context of this tender, requires the implication
    of a term of reasonableness and good faith, especially because
    (so far as the Principal is concerned) of the broad powers
    the Call reserves to it to vary the Call and the processes
    under it.' This term was implied as a matter of law.
  • The term meant that the specific reservations and unqualified
    powers in the Call, although not being read down, could not
    be exercised unreasonably or capriciously or dishonestly.
  • The content of the implied term was that the Principal
    and the Government were obliged to act honestly, reasonably
    and fairly. However, this does not mean that the Principal
    is not entitled to have regard only to its own legitimate
    interests but it must not do so for a purpose extraneous
    to the contract.
  • The process contract was between each of the members of
    the consortium and the Principal or the Department or both
    (the court considered that it did not need to finally determine
    this issue).

The Court also held that the provisions of the tender evaluation
plans, being confidential internal documents, did not comprise
a term of the process contract and accordingly the Proponents
could not rely on any processes or requirements set out in
the evaluation plans.

Procedural fairness

In addition to arguing that a process contract applied in
relation to the tender process, the unsuccessful tenderer also
argued that documentation governing the tender process gave
rise to a legitimate expectation about the process to be followed
in dealing with Proponents' bids.

The Court found that the particular imputations raised by
the unsuccessful tenderer, which depended on alleged perceptions of
bias, did not attract the judicial rule relating to natural
justice and procedural fairness. However, the Court assumed
that the rules of procedural fairness did circumscribe the
procedures of Government, although their content must be related
to the nature of the exercise being undertaken, which in the
present case, was primarily a commercial one.

The allegations of unfairness

The re-evaluation issue

A key aspect of the tender evaluation involved consideration
of the merit of the tenderers' technical systems. The system
proposed by one of the tenderers (MASS/ITSL) was considered
to be significantly more mature than the other (called Smartpost – effectively
the unsuccessful tenderer). ITSL was recommended by the Evaluation
Committee as the preferred tenderer largely because of this
technical advantage.

However, before a decision was made, information came to light
which suggested that the ITSL system may not have been as mature
as previously thought. Accordingly, a decision was made to
review the technical findings. Additional information was considered
at this point. That review resulted in some adjustment to the
technical score for the ITSL system but the ultimate recommendation
to select ITSL as the preferred tenderer was not changed.

After considering the factual background to the technical
evaluation, including the circumstances surrounding the provision
of the additional information which did not correspond fully
with the Call, the Court found that the process was nevertheless
fair and reasonable and equal opportunity was afforded to both
proponents.

Bias and the evaluation team members

Two of the participants on the Technical Sub-Committee of
the Evaluation Committee had had previous involvements with
various participants in the unsuccessful tenderer's consortium
which had ended in circumstances that might have suggested
that they held ill-feeling towards the unsuccessful tenderer.
The probity auditor examined the situation of each of these
persons. Following Hughes, the Court held that the crucial
question was whether there was any actual unfairness
or actual bias, rather than an apprehension of bias
or the possibility of the reasonable apprehension of bias.
There was not a duty to ensure that a reasonable person would
not apprehend the possibility of bias. The Court found that
there was no actual bias.

Conflict of interest

Both the legal adviser (who was also a member of one of the
Evaluation Sub-Committees) and the probity auditor were alleged
to have had conflicts of interest in that other partners in
their firms had instructions to act for ITSL related parties
in relation to various matters unconnected with the tender
process. In particular, the Melbourne office of the legal adviser
was handling some litigation for One Link which was related
to ITSL, while the probity auditor provided tax advice for
another company associated with ITSL. The Court made the following
comments:

  • The probity auditor examined the arrangements put in place
    by the legal adviser to establish Chinese walls and considered
    that they were acceptable. The Court considered that there
    was in fact as well as in law no conflict of interest.
  • The only issue was whether there was a real risk of breach
    of confidence - the Court noted that the legal adviser had
    no fiduciary obligation of confidence to the unsuccessful
    tenderer or any duty, breach of which could provide a basis
    for it to prevent the Government from entering into a contract
    with ITSL.
  • Similarly, the probity auditor was found not to have a
    conflict of interest as it was not required to make any financial
    assessment of the ITSL bid and there was no suggestion that
    the individuals acting as probity auditors in relation to
    the ITSL tender had any knowledge of information on the tax
    matters in any case.

Role of the probity auditor

The Court found that as far as the government was concerned,
having appointed the probity auditor, it was entitled to rely
on that person's resolution of probity issues, whatever the
deficiencies in the investigation process adopted by the probity
auditor may have been, unless the Government had failed to
provide necessary information to the probity auditor.

Comments about the Call document

While the Court ultimately found in favour of the Government,
it made a number of comments about the Call document that are
worthy of consideration:

  • The Court severely criticised the drafting of the Call
    document, noting 'the obscurities and confusion of even the
    most important provisions' and the fact that the document
    appeared to be a patchwork.
  • The Court noted that the threat of litigation may distort
    and encumber the process which highlights the need for ensuring
    the document is clear about actual undertakings and legal
    obligations - '[a]spirational statements may provide a warm
    inner glow but they are no substitute for unambiguous language
    targeted at actual risks with clearly stated consequences.'
  • The Call included a clause requiring that Proponents pay
    their own costs and in particular excluding liability for
    any losses and expenses in developing or pursuing a proposal.
    This case related to injunctive relief to prevent a contract
    being signed. The Court noted that this clause did not protect
    the Principal from an action directed to the failure to make
    a valid recommendation owing to flaws in the process.

Improper conduct of the unsuccessful tenderer

It is important to note that the Court found that the unsuccessful
tenderer had not come to the matter 'with clean hands' and
that it had shown 'lack of good faith and positive dishonesty'.
The Court held that, had it been necessary for it to do so,
it would have given judgment to the defendants on this ground
alone. The matters in question included the receipt by the
unsuccessful tenderer of confidential information about the
tender evaluation process and a plan by the unsuccessful tenderer
to effectively stop the tender process if they were not to
be the preferred tenderer. Accordingly, it seems that the conduct
of an aggrieved tenderer could ultimately lead a Court to refuse
a remedy even where the tenderer could show that a particular
tender process was flawed.

Contacts for further information:

Harry Dunstall
Senior Executive Lawyer

Tel: (02) 6253 7066
Fax: (02) 6253 7333
E-Mail: harry.dunstall@ags.gov.au

Cathy Reid
Senior Executive Lawyer

Tel: (03) 9242 1203
Fax: (03) 9242 1481
E-Mail: cathy.reid@ags.gov.au

Employee or Contractor?

Difficulties often arise in determining whether a person performing
duties for a government entity is an employee or an independent
contractor. The worker's status can have important implications
for the entity - for example, it can affect whether the entity
will be vicariously liable for the worker's actions, or whether
the worker can seek a remedy for unfair dismissal if their
services are terminated.

When considering whether an employment relationship exists
between two parties, a court will initially examine the terms
of any contract between the worker and the purported employer.
However, in order to avoid an employment relationship being
found, it may not be enough to simply state in the contract
that the worker is not an employee. The court will not accept
the label put on the relationship by the parties if this label
contradicts the effect of the agreement as a whole, or if subsequent
conduct by the parties has varied the terms of this agreement.

It may be that the contract is unclear as to the nature of
the relationship; or there may be no contract between the two
parties at all. For example, where a worker has been supplied
to a government entity by a labour hire firm, the entity may
well have a contract with the labour hire firm, but not with
the worker directly. There is usually no legal relationship
between the Commonwealth and the worker in these circumstances.
However, where there is a legal relationship, the court will
look at a variety of matters to determine whether this is an
employment relationship, using the multi-factor test outlined
by the High Court in Stevens v Brodribb Sawmilling Co Pty
Ltd (1986) 160 CLR 16. The factors to be taken into account
include whether the purported employer has the right to exercise
control over the worker ('the control test'); the mode of remuneration
- such as whether the worker is paid wages, or a set fee per
hour; whether the worker or the employer provides the required
equipment for the work; the hours of work and provision for
holidays; the deduction of income tax; and whether the worker
must perform the work personally, or may delegate or sub-contract
it to others.

The High Court case of Hollis v Vabu Pty Ltd [2001]
HCA 44 reinforced the importance of the control test in determining
whether a worker is an employee or an independent contractor.
However the High Court also confirmed that it is the totality
of the relationship between the parties which must be considered.
In Hollis v Vabu, the High Court had to consider whether
bicycle couriers were employees of the courier company for
whom they delivered goods, or independent contractors. In finding
that the couriers were employees, the High Court took into
account such factors as:

  • the couriers were not providing skilled labour or labour
    which required special qualifications
  • the couriers had little control over the manner of performing
    their work - they were assigned work rosters, could not refuse
    work, and were to deliver goods as directed by the courier
    company
  • the couriers were presented to the public as representatives
    of the courier company - for example, by having to wear uniforms
  • the courier company superintended the couriers' finances
    - for example, there was no scope for the couriers to bargain
    for their remuneration rate.

Significantly, the High Court's finding that an employment
relationship existed allowed the Court to go on to find that
the courier company, as an employer, was vicariously liable
for the actions of one of its couriers, who had injured a pedestrian.
This outcome highlights the importance for government entities
of having a clear understanding of whether their workers are
employees or independent contractors.

New Commonwealth National Lease

AGS has recently produced a new version of the Commonwealth
National Lease. The earliest version of the Commonwealth National
Lease commenced its life at the National Tenant's Lease in
the early 1990s and through its various versions has been the
benchmark for the acquisition by lease of commercial office
accommodation for Commonwealth agencies.

The lease reflects a balanced allocation of risk between the
landlord and the tenant as opposed to the more common forms
of commercial lease which tend to place most risk with the
tenant.

The lease is appropriate for use in any method of acquisition
(including inviting expressions of interest, calling tenders
or simply negotiation by private treaty) and is compatible
with all forms of project delivery ranging from design, construction
and lease to the lease of existing commercial office accommodation.

General features

An emphasis on plain-English drafting makes the lease easier
to read and understand. The revised form and structure, together
with headings which summarise paragraph content, make for a
more 'user-friendly' document.

Amendments have resulted from testing the lease provisions
against current market and tenancy issues. For example:

  • provisions which deal with performance standards for the
    operation and maintenance of building services adopt Australian
    Standards as a benchmark
  • fixed time frames have been adopted for dispute resolution,
    and
  • if the tenant removes its fittings it must effect that
    removal prior to the expiry or termination of the Lease.

Changes in law and practice have been addressed. For example:

  • the GST provision has been simplified and covers supplies
    made by each party, and
  • requirements which attach to the consent of a party are
    common for each consent.

Special features

Treatment of rent

The Lease adopts a gross rent (exclusive of GST) which includes
all outgoings except for tenancy cleaning, electricity, water
and gas. We believe a gross rent benefits both parties and
is preferable to a net rent (tenant pays a base rent plus outgoings)
for the following reasons:

  • an acceptable definition which exhaustively defines the
    nature and extent of outgoings is elusive
  • the costs incurred by each party in the management and
    administration of outgoings for the term of the lease is
    high, and
  • disputes concerning whether an item of expenditure falls
    within the definition of outgoings or whether the quantum
    of expenditure is both reasonable and necessary are avoided.

If rent is not fixed for the duration of the Lease, the term
is divided into rent periods commencing on the Commencement
Date of the Lease and on each review date for rent. Rent for
the first rent period is specified. Provided a rent review
notice is given by one party to the other, rent for each subsequent
rent period is fixed by agreement or failing agreement is equivalent
to the open market rental value of the premises determined
by a valuer acting as an expert. The provision provides certainty,
since if both parties fail to give a review notice, rent remains
unchanged.

Maintenance and repair

The tenant must keep and maintain the premises, including
its fittings and alterations, in good repair and condition
subject to fair wear and tear and risks which are specified.
In return, the landlord must keep and maintain the premises
and the building subject to the obligations of the tenant.
The tenant has no responsibility for the maintenance and repair
of the building services or the building structure except where
that damage is caused by its act or omission.

The landlord has important obligations to operate and maintain
the building services which must satisfy:

  • standards specified in the Lease, and
  • Australian Standards and Industry Standards effective at
    the commencement of the Lease.

The landlord must effect maintenance contracts with respect
to the building services in accordance with the relevant Australian
Standards and provide the tenant with certain information and
certificates of compliance at regular intervals.

The tenant has the following remedies for the malfunction
of a building service which is not rectified within two working
days after notice to the landlord:

  • abatement of rent
  • termination, if in the written opinion of an expert the
    malfunction is unlikely to be rectified within three months
    from the date of that opinion, or
  • the tenant may rectify the failure at the landlord's cost
    if the malfunction remains uncorrected for a period of five
    further working days.

The tenant is permitted to make alterations subject to a number
of conditions. Property in the tenant's fittings and its obligations
vest in the tenant who must maintain and repair those items.

The tenant has the right, but not the obligation, to remove
its fittings and alterations on or before the expiry or termination
of the Lease. Subject to the tenant making good damage caused
by the removal of its fittings and alterations, the tenant
is not obliged to make good or otherwise restore the premises
on the expiry or termination of the Lease.

Landlord's warranties

The landlord warrants that premises and the building are:

  • free of materials containing asbestos or any other hazardous
    substance
  • fit for use in accordance with the permitted use, and
  • comply with the specified performance standards, the relevant
    Australian Standards and the industry standards effective
    at the Commencement Date.

Subject to the provisions of the Lease which deal with damage
and destruction, the landlord's warranty is expressed to apply
at all times during the term of the Lease.

The landlord provides warranties in relation to its insurance
and in particular, that the Lease does not affect its rights
to be indemnified under those insurances.

Obligations to comply with laws

The tenant must comply with all laws relating to the use of
the premises, except those requiring structural alterations
or additions. The landlord must comply with all laws which
are not the responsibility of the tenant.

Tenant's right to assign and sub-lease

The tenant may assign and sub-lease with the consent of the
landlord. The Lease identifies the information which must be
provided by the tenant and the conditions which the tenant
must satisfy to secure the consent. For example, the landlord's
consent to an assignment is conditional on a Deed or Agreement
in which the assignee agrees to perform, in favour of the landlord,
the obligations of the tenant under the lease and the provision
by the assignee of a security reasonably required by the landlord.

Landlord's insurance obligations

The landlord must effect joint (composite) insurance or alternatively,
ensure that the tenant's interests are noted in each of the
insurances. In the case of joint insurances, the tenant may
elect to have its fittings and alterations included in the
policy for the building for full reinstatement or replacement
value given that the tenant must keep and maintain its fittings
and alterations. If the tenant makes the election, it must
reimburse the landlord for all additional premiums as a result
of the inclusion. The election permits an integrated reinstatement
of the building and the tenant's fitout, without additional
cost to the tenant.

In the event of damage or destruction, the landlord must reinstate
the premises if the tenant requires and apply the proceeds
of the insurance to that reinstatement.

Insurance is important to the tenant as it is required to
perform an obligation under the Lease only to the extent that
the landlord is not entitled to receive indemnity under a policy
of insurance required by the Lease.

Premises unfit for occupation and use

If the premises or the building become wholly or partially
unfit or are otherwise inaccessible, the rent or a proportion
of the rent having regard to the nature of the damage or inaccessibility,
is suspended until reinstatement has been completed. The tenant
has limited rights to terminate the Lease if the premises or
the building are rendered unfit for occupation and use or are
inaccessible.

The landlord must restore the premises and the building in
the event of partial unfitness and subject to the tenant's
limited right to require reinstatement, the landlord may terminate
the Lease if the premises or the building are rendered wholly
unfit for occupation and use.

Default and termination

The Lease defines default by each party and specifies the
remedies. The tenant's default includes rent being unpaid for
not less than thirty days after it becomes due or a failure
to commence repairs within thirty days after the landlord's
notice and to proceed diligently to complete those repairs.
Default by the landlord includes a failure to commence repairs
or maintenance within thirty days after the tenant's notice
and to proceed diligently to complete those repairs.

Resolution of disputes

Each party is permitted to refer a dispute for determination
by an expert if the dispute is not resolved within a fixed
time after giving notice of that dispute to the other party.
Each party may make submissions to the expert within a fixed
time. If the expert fails to make a determination within a
fixed time, either party may require the appointment of a further
expert to determine the dispute. The expert must provide a
written statement of reasons for the determination which is
expressed to be conclusive and binding on the parties.

How to use the lease

The extent to which the terms of the Lease are applied will
depend on the early development of a lease acquisition strategy
which allows the tenant to examine and test the market prior
to the commencement of the term. This will involve:

  • the preparation of a tenancy brief which identifies all
    user and technical requirements, and
  • choosing the method of project delivery and the manner
    in which the requirement will be put to the market.

The preparation of the tenancy brief and the matters which
must be considered in selecting the method of project delivery
justify the procurement of project management, property, valuation
and legal advice. AGS is able to provide advice in relation
to:

  • the structure and inter-relationship of the consultancies
  • the alternative forms of project delivery
  • the documentation for use in conjunction with the Lease
    to facilitate the chosen form of project delivery
  • evaluation of proposals and the negotiation of an agreement
    and lease, and
  • the management of the agreement and lease.

Contact for further information:

Robert Claybourn
Senior Executive Lawyer

Tel: (07) 3360 5767
Fax: (07) 3360 5798
E-Mail: robert.claybourn@ags.gov.au

Commonwealth Privacy Legislation: Implications for Commonwealth
Agencies

Extension of privacy regulation to the private sector

On 21 December 2001, the Privacy Amendment (Private Sector)
Act 2000 (the Private Sector Act) came into effect. The
Private Sector Act amends the Privacy Act 1988 (Cth)
(the Act) by extending the regulation of privacy to private
sector organisations.1 Specifically, the Private
Sector Act establishes a co-regulatory regime which obliges
organisations when dealing with 'personal information'2 to
comply with the National Privacy Principles (NPPs) or an
Approved Privacy Code (APC).3

Application of the Private Sector Act to agencies – section
95B

The Private Sector Act imposes certain requirements upon Commonwealth
agencies 4 in dealing with private sector organisations.
Section 95B requires an agency entering into a Commonwealth
contract 5 to take contractual measures to ensure
that a 'contracted service provider' 6 for the contract
does not do an act, or engage in a practice, that would breach
an Information Privacy Principle (IPP) if that act were done
or the practice engaged in by the agency. The agency must also
ensure that the Commonwealth contract contains provisions to
ensure that such an act or practice is not authorised by a
subcontract 7 relating to the provision of the services.

Commencement of obligations under section 95B

The obligation upon agencies to take contractual measures
to comply with section 95B of the Act is prospective and therefore
applies to all Commonwealth contracts entered into on or after
21 December 2001. However, even before the commencement of
section 95B, it was arguable that IPP4(b) required agencies
to include provisions in their contracts preventing the unauthorised
use or disclosure of personal information contained in a record.

Application of the NPPs or an APC

By virtue of section 6D(4)(e) of the Act, a contracted service
provider for a Commonwealth contract is not a 'small business
operator'. Accordingly, at least for the purposes of its activities
under a Commonwealth contract, a contracted service provider
(regardless of size) is deemed to be an 'organisation' under
the Act and therefore subject to the NPPs or an APC in relation
to those activities. However, a contracted service provider
may be defined as a small business operator (and therefore
not an 'organisation') in relation to its activities outside the
Commonwealth contract and in that capacity, would not be subject
to the NPPs or an APC.

Significantly, if a contracted service provider does an act
or engages in a practice for the purposes of meeting (directly
or indirectly) an obligation under the Commonwealth contract
(whether entered into before or after 21 December 2001) and
the act or practice is authorised by a provision of the contract
that is inconsistent with the NPPs or an APC respectively,
then that act or practice will not contravene the NPPs or the
APC. 8

Comparison of the NPPs and the IPPs

As a contracted service provider will be obliged to comply
with the IPPs under provisions in a Commonwealth contract,
the effect of that obligation is that the IPPs will prevail
to the extent that they are inconsistent with the NPPs (or
an APC). In general terms, compliance with the IPPs by a contracted
service provider will in any event satisfy the requirements
of all but four of the NPPs for which there are no equivalent
IPPs. These four are NPPs 7 (Identifiers), 8 (Anonymity), 9
(Transborder data flows) and 10 (Sensitive Information).

In view of the above, it is probably good practice to refer
in a Commonwealth contract to a contracted service provider's
obligations to comply with NPPs 7–10 in order to assist
the contracted service provider to identify its obligations
under the Privacy Act.9 This is particularly the
case as the Privacy Commissioner has the discretion to substitute
an agency for a contracted service provider as respondent to
a complaint under section 50A. In this context, the inclusion
of an obligation in a Commonwealth contract that the contracted
service provider must comply with the NPPs could arguably support
an agency's submissions that it should not be substituted as
respondent to the complaint.

Direct marketing – section 16F

Agencies should also be aware that section 16F of the Act
provides that a contracted service provider must not use or
disclose personal information for direct marketing unless the
use or disclosure is necessary to meet (directly or indirectly)
an obligation under the contract. Again, in order to assist
a contracted service provider to become aware of its obligations
under the Act, it will if relevant, be necessary to include
provisions in a Commonwealth contract which expressly state
the extent to which disclosure of personal information is required
to meet an obligation under that contract for the purposes
of the section.

Interference with privacy

Under section 13A of the Privacy Act, an act or practice of
an organisation constitutes an 'interference with privacy'
of an individual if:

  • the act or practice breaches an NPP or an APC to which
    the organisation is bound; or
  • the act or practice breaches a provision of a Commonwealth
    contract relating to privacy of the individual; or
  • the organisation is in breach of section 16F.

It should be emphasised that the definition of 'contracted
service provider' in the Act has the effect of extending any
privacy obligations imposed on a contracted service provider
in relation to a Commonwealth contract beyond the duration
of the Commonwealth contract.

For a similar reason, a breach of any privacy obligations
imposed under a Commonwealth contract entered into prior to
21 December 2001 will also constitute an interference with
privacy for the purposes of section 13A of the Privacy Act.

Privacy clause

The following model clause was drafted by AGS in consultation
with the Attorney-General's Department and the Office of Federal
Privacy Commissioner. It takes account of the principles outlined
in this note. We emphasise that this is the initial version
of the AGS model clause which AGS may if necessary modify in
the light of experience with its use. In addition, agencies
using this model clause will need to consider whether it should
be amended to suit their own particular circumstances.

MODEL CLAUSE: PROTECTION OF PERSONAL INFORMATION1

The following model clause is provided to assist Commonwealth
agencies in discharging their responsibilities under section
95B of the Privacy Act. Agencies are reminded that changes
to these clauses may be necessary to reflect particular situations.
If any difficulties are expressed with implementation of
the clause please contact AGS.

X.1 This clause applies only where the Consultant deals with
personal information when, and for the purpose of, providing
[services] under this Contract.

X.2 The Consultant acknowledges that it is a 'contracted service
provider' within the meaning of section 6 of the Privacy Act
1988 (the Privacy Act), and agrees in respect of the provision
of [services] under this Contract:

(a) to use personal information obtained during the course
of providing [services] under this Contract, only for the
purposes of this Contact;

(b) not to do any act or engage in any practice that would
breach an Information Privacy Principle (IPP) contained in
section 14 of the Privacy Act, which if done or engaged in
by an agency, would be a breach of that IPP;

(c) to carry out and discharge the obligations contained
in the IPPs as if it were an agency under that Act;

(d) to notify individuals whose personal information the
Consultant holds, that complaints about acts or practices
of the Consultant may be investigated by the Privacy Commissioner
who has power to award compensation against the Consultant
in appropriate circumstances;

(e) not to use or disclose personal information or engage
in an act or practice that would breach section 16F (direct
marketing), an NPP (particularly NPPs 7 to10) or an APC,
where that section, NPP or APC is applicable to the Consultant,
unless:

(i) in the case of section 16F - the use or disclosure
is necessary, directly or indirectly, to discharge an obligation
under [clause ?] of this Contract; or

(ii) in the case of an NPP or an APC - where the activity
or practice is engaged in for the purpose of discharging,
directly or indirectly, an obligation under [clause ?]
of this Contract, and the activity or practice which is
authorised by [clause ?]of this Contract is inconsistent
with the NPP or APC; 2

(f) to disclose in writing to any person who asks, the content
of the provisions of this Contract (if any) that are inconsistent
with an NPP or an APC binding a party to this Contract; 3

(g) to immediately notify the agency if the Consultant becomes
aware of a breach or possible breach of any of the obligations
contained in, or referred to in, this clause X, whether by
the Consultant or any subcontractor;

(h) to comply with any directions, guidelines, determinations
or recommendations referred to in, or relating to the matters,
set out in Schedule X, 4 to the extent that they
are not inconsistent with the requirements of this clause;
and

(i) to ensure that any employee of the Consultant who is
required to deal with personal information for the purposes
of this Contract is made aware of the obligations of the
Consultant set out in this clause X.

X.3 The Consultant agrees to ensure that any subcontract entered
into for the purpose of fulfilling its obligations under this
Contract contains provisions to ensure that the subcontractor
has the same awareness and obligations as the Consultant has
under this clause, including the requirement in relation to
subcontracts.

X.4 The Consultant agrees to indemnify the Commonwealth in
respect of any loss, liability or expense suffered or incurred
by the Commonwealth which arises directly or indirectly from
a breach of any of the obligations of the Consultant under
this clause X, or a subcontractor under the subcontract provisions
referred to in subclause X.3.

X.5 In this clause X, the terms 'agency', 'approved privacy
code' (APC), 'Information Privacy Principles' (IPPs), and 'National
Privacy Principles' (NPPs) have the same meaning as they have
in section 6 of the Privacy Act, and 'personal information',
which also has the meaning it has in section 6 of the Privacy
Act, means:
'information or an opinion (including information or an opinion forming part
of a database), whether true or not and whether recorded in a material form
or not, about an individual whose identity is apparent, or can reasonably be
ascertained, from the information or opinion'.

X.6 The IPPs and the NPPs are set out in Attachment A and
B, respectively. [optional]

X.7 The provisions of this clause X survive termination or
expiration of this Contract.

Notes to Model Clause

1 See 'Guidelines for Commonwealth Contracts' Information
Sheet No. 14 issued by the Federal Privacy Commissioner and
available at www.privacy.gov.au.

2 Note that section 6A requires that the Consultant
be 'obliged' to carry out the activity. Where possible the
relevant clause numbers should be noted here.

3 Section 95C Privacy Act.

4 This Schedule should include any specific matters,
for example, agency and Privacy Commissioner's guidelines which
the agency wishes the CSP to comply with.

Notes

1 'Organisation' is defined in the Private Sector
Act to mean an individual, body corporate, partnership or any
other unincorporated association or trust that is not a small
business operator, registered political party, agency, State
or Territory authority or prescribed instrumentality of a State
or Territory.

'Small business operator' does not include an individual,
body corporate, partnership, unincorporated association or
trusts if he, she or it: (i) carries on a business having an
annual turnover of more than $3 million for financial year;
(ii) provides a health service to another individual and holds
any health information except in an employee record; (iii)
discloses personal information about another individual to
anyone else for a benefit, service or advantage; (iv) provides
a benefit, service or advantage to collect personal information
about another individual from anyone else; or (v) is a contracted
service provider for a Commonwealth contract (whether or not
a party to the contract).

2 'Personal Information' means information or an
opinion (including information or an opinion forming part of
a database), whether true or not, and whether recorded in a
material form or not, about an individual whose identity is
apparent, or can be reasonably ascertained from the information
or opinion.

3 An APC is a privacy code developed by the relevant
industry and approved by the Privacy Commissioner which contains
privacy requirements of an equivalent standard to the NPPs.

4 'Agency' includes Commonwealth Departments and
statutory authorities.

5 'Commonwealth contract' means a contract to which
the Commonwealth or a Commonwealth Agency is or was a party,
under which services are to be or were to be provided by a
Commonwealth agency. Section 6(9) clarifies that services provided
to an agency include the provision of services to other persons
in connection with the performance of the functions of the
agency.

6 'Contracted service provider' means: (i) an organisation
that is or was a party to the government contract and that
is or was responsible for the provision of services to an agency
or a State or Territory authority under the government contract;
or (ii) a subcontractor for a government contract.

7 'Subcontract' includes all subcontracts beyond
the initial subcontract.

8 See sections 6A(2) and 6B(2) of the Act.

9 See 'Privacy Obligations for Commonwealth Contracts',
Office of the Federal Privacy Commissioner, Information Sheet
14 - 2001.

Contacts for further information:

Rachel Chua
Senior Lawyer

Tel: (02) 6253 7086
Fax: (02) 6253 7306
E-Mail: rachel.chua@ags.gov.au

Madeline Campbell
Senior Executive Lawyer

Tel: (02) 6253 7408
Fax: (02) 6253 7381
E-Mail: madeline.campbell@ags.gov.au

ISSN 1443-9549 (Print)
ISSN 2204-6550 (Online)

The material in these notes is provided for general information only and
should not be relied upon for the purpose of a particular matter. Please contact
AGS before any action or decision is taken on the basis of any of the material
in these notes.

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