Commercial notes No. 26

No. 26
8 May 2008

Current issues in technology procurement

Procurement of technology is an increasingly important
activity for government agencies. This issue of Commercial
notes focuses on a range of current legal issues in
information and communications technology (ICT) procurement.


Tony Beal

Tony Beal Special Counsel, Commercial
T 02 6253 7231
F 02 6253 7306

Stuart Hilton

Stuart Hilton Senior Lawyer
T 03 9242 1431
F 03 9242 1481

ICT liability policy

Finance Circular 2006/03: Limited Liability in Information
and Communications Technology Contracts was released
by the then Department of Finance and Administration,
now the Department of Finance and Deregulation, 18
months ago. This circular changed the default position
for liability capping for the procurement of information
and communications technology (ICT) supplies1 for
agencies subject to the Financial Management and
Accountability Act 1997 (FMA Act), requiring that,
in most cases, liability of suppliers be capped at
appropriate levels.

Finance Circular 2006/03 provides that liability of ICT
suppliers contracting with Commonwealth agencies should,
in most cases, be capped at appropriate levels and the
only instance where it is justifiable to have unlimited
liability is where there is a 'compelling reason' to
require unlimited liability. The circular indicates that
a 'compelling reason' would be where unlimited
liability represents an 'accurate reflection of the
potential risks' of a particular procurement.

Potential for contingent liabilities to be created

Liability caps can create contingent liabilities. Contingent
liabilities not only need to be considered from a Commonwealth
policy and risk management perspective; they are also important
for compliance with the FMA Act and the Financial Management
and Accountability Regulations 1997 (FMA Regulations) (in
particular, FMA Regulation 10).

Since Finance Circular 2006/03 was issued, agencies have
been asked to consider stating a liability cap when they
issue requests for tender for ICT supplies except where
an unlimited liability regime is proposed.2 While
setting the amount of the cap is important, providing for
appropriate exclusions is equally important. This is typically
done in the draft contract.

Failure to appropriately draft the exclusions from the
liability cap can give rise to contingent liabilities.
The circular identifies some specific exclusions that should
be provided for in any liability cap.

Whether a particular spending proposal gives rise to a
contingent liability is often difficult for agencies to
assess, particularly following protracted negotiations
with a supplier.

Liability caps present particularly difficult legal issues
and advice should be sought by agencies where they have
any doubt whether a contingent liability may be created
by a particular transaction.

Any liability cap that covers a situation that might involve
third party claims against the Commonwealth where contractor
fault may be part of the cause is likely to involve a contingent
liability. In particular, any exclusion or limitation of
consequential loss of any kind is likely to create a contingent
liability, as this has the potential to prevent the Commonwealth
from recovering the cost of claims from the contractor
that might otherwise have been possible at common law.

Contingent liabilities arising from intellectual property

Liability for breach of intellectual property (IP) rights
is often the subject of negotiations when procuring technology.
Some contractors seek to have their liability to the Commonwealth
in relation to breach of third party intellectual property
(IP) rights restricted to the Commonwealth's rights
provided under an indemnity in the contract (i.e. the indemnity
is expressed as a 'sole remedy'). Where this
is the case, a contingent liability is likely to arise
despite the fact that the indemnity itself is not subject
to an explicit cap.

The contingent liability in such cases arises because
the wording of the indemnity, the sole remedy, limits the
rights that would otherwise be available at law to recover
loss or damage from the supplier for IP infringement problems
with their product or service. The gap is often narrow
(for example, there may be no remedy if the problem is
not reported quickly ), but suppliers are constantly revising
indemnities in ways that make the gap (and hence the contingent
liability) wider–particularly in areas such as patent
infringement. It is often very difficult to spot potential
gaps and other shortcomings in indemnities, so it is wise
to seek legal advice on them every time but in particular
where a 'sole remedy' provision is involved
or a supplier refuses to agree to IP liability being a
specific exclusion from the liability cap.

Is an FMA Regulation 10 authorisation required for liability

In some cases, FMA Regulation 10 authorisation will be
required for liability caps. Finance has recently issued
Finance Circular 2007/01: FMA Regulation 10, which
provides guidance on the application of FMA Regulation
10. This circular explains the changes to the delegation
of the Finance Minister's powers under Regulation
10 in the Financial Management and Accountability (Finance
Minister to Chief Executives) Delegation 2007 (the Delegation).

Finance Circular 2007/01 provides information about how
to determine whether an FMA Regulation 10 authorisation
is required, and, if so, whether authorisation can be given
under the Delegation.

According to Finance Circular 2007/01, spending proposals
containing certain types of liability cap will be regarded
as contingent liabilities and will generally, depending
on the limits of the relevant appropriation, require FMA
Regulation 10 authorisation. They are:

  • liability caps limiting a contractor's liability
    to a third party so that the Commonwealth is liable to
    the third party for any excess
  • liability caps limiting a contractor's exposure
    for damage the contractor has itself suffered so that
    the Commonwealth is liable to the contractor for any
  • liability caps limiting a contractor's liability
    to meet costs that the Commonwealth may seek to recover
    from the contractor, where a third party has sued the
    Commonwealth for damage resulting from the contractor's
    action or inaction.

However, if a liability cap only limits a contractor's
liability to the Commonwealth for damage that the contractor
directly causes the Commonwealth, the Commonwealth's
policy in Finance Circular 2007/01 is that the liability
cap will not, of itself, result in a need to obtain FMA
Regulation 10 authorisation.

Can the delegation be used to provide FMA Regulation
10 authorisation?

If the spending proposal does include a contingent liability,
there is a limited delegation. The test for working out
whether the spending proposal is within the limits of the
delegation is threefold:

  1. The duration of the spending proposal does not extend
    beyond specified time limits (for departmental items
    this is 16 years and for administered items this is 10
  2. The most probable expenditure, if the contingency
    were to occur, would not be material.
  3. The chance of the contingency occurring is remote.3

In relation to point 1, Finance Circular 2007/01 provides
that, when calculating the duration of a spending proposal
that involves a contingent liability, agencies should use
the period during which events may occur that lead to a
contingent liability crystallising. Agencies are not required
to include any subsequent period during which a person
might make a claim in this calculation.

For point 2, officials are required to assess the 'most
probable' expenditure and then they need to assess
whether this is 'material'.

Each of these issues must be determined on the basis of
a risk assessment.

AGS often assists agencies with legal risk assessments
for indemnities, liability caps and, more generally,
for Regulation 10 purposes.

Tony Beal is Special Counsel Commercial and is co-leader
of our Technology and Intellectual Property network.
Tony has provided strategic advice to many leading commercial
and government business enterprises. He is an expert
in legal and commercial frameworks for major initiatives,
particularly in ICT, e-commerce, financial systems, privately-funded
infrastructure, security, and alliances and joint ventures.

Stuart Hilton specialises in advising Commonwealth
Government departments and agencies on major ICT transactions
and the impact of the Commonwealth Procurement Guidelines on
their purchasing activities.


  1. It does not matter whether or not the contractor in
    question is an ICT supplier.
  2. Whenever an agency is considering capping a supplier's
    liability for an insurable risk, the agency should contact
    Comcover to determine whether its own insurance cover
    is affected.
  3. The Delegation gives a general guide that an event
    has a 'remote' chance of occurring if the
    probability of the event occurring is less than 5%.


Katrina Leach

Katrina Leach Lawyer
T 02 6253 7519
F 02 6253 7305

Simon Thornton

Simon Thornton Lawyer
T 02 6253 7287
F 02 6253 7383

Panels involving a number of suppliers can provide
agencies with a convenient, flexible, and efficient process
for obtaining goods or services covered by the panel
arrangement. Once the panel has been established by a
formal procurement process, contracts for individual
jobs can be let without the delays, costs and elaborate
processes involved in a formal request for tender process.
Although panel processes are less formal, they still
need to ensure that a value for money outcome is achieved.

Establishing and operating a panel can involve difficult
and complex issues. However, many of these issues can be
dealt with by using a Commonwealth Procurement Guidelines compliant
panel membership application process.

What is a panel?

The Commonwealth Procurement Guidelines (CPGs) define
a panel in the following way:

A panel may be established by an agency by entering
into contracts or deeds of standing offer (panel arrangements)
for the provision of identified property or services.
A panel is defined as an arrangement under which a number
of suppliers, usually selected through a single procurement
process, may each supply property or services to an agency
as specified in the panel arrangements. The respective
panel arrangements must contain minimum requirements,
including an indicative or set price or rate as appropriate
for the property or services to be procured in the period
of the panel arrangement.

Essentially, a panel is an arrangement established as
a result of a procurement process conducted in accordance
with the CPGs. Each panel member enters into a deed of
standing offer ('standing offer') with the
agency. These standing offers set out the terms and conditions
that will apply when goods or services are purchased by
the agency. The benefits of a panel are maximised where
it is being used to cover goods or services that are purchased
regularly. Usually, a separate contract is formed under
a standing offer each time an agency purchases goods or
services under the panel arrangement.

Once set up, a panel can provide a convenient and efficient
process for purchasing goods or services while still achieving
value for money.

Panel arrangement challenges

Panels often require more initial effort to create and
manage than other types of procurement arrangements. Entering
into an agreement with potential panel members may involve
negotiating a separate standing offer with each successful
tenderer rather than a single negotiation with a preferred
tenderer. This can result in agreements with panel members
that contain different terms and conditions. These contractual
differences can later complicate the evaluation of quotes
for goods or services to be provided under the panel arrangement.

However, attempting to negotiate a level playing field
with the same terms and conditions for all panel members
may also create problems. In any situation where there
is a 'must have' participant who is in a strong
position to dictate the terms of the arrangement, applying
the same terms to all panellists might result in the other
panel members achieving more favourable terms than they
may otherwise have obtained. This could undermine the achievement
of value for money outcomes from the panel.

There are two main implications that follow from these

  1. There is a much greater need to think carefully about
    the terms and conditions at the start of the procurement
    process to ensure that the standing offer is likely to
    be acceptable to a sufficient range of suppliers to make
    up an effective panel.
  2. It is important to remember that negotiations when
    establishing a panel are very different from negotiations
    with a single preferred tenderer. In the panel context,
    an agency needs to determine what changes, if any, it
    is prepared to accept (and whether these should be on
    a global basis). Generally, these changes would be put
    back to the preferred panel members on a take it or leave
    it basis. Any form of iterative discussion or negotiation
    will be more difficult than with a single tenderer.

Despite these complexities, once established, a panel
can provide an agency with a simpler process for purchasing
goods or services through that panel. At the same time,
a successful panel arrangement provides competitive pressures
to assist in ensuring procurements continue to represent
value for money.

The panel membership application process: a streamlined

In order to take advantage of the convenience and efficiency
of a panel while at the same time minimising the difficulties
associated with establishing a panel arrangement, AGS has
been assisting some agencies to develop a new, streamlined
approach to the panel creation process.

The streamlined approach uses a CPG compliant panel membership
application process as opposed to a traditional request
for tender process.

Benefits of the application process

Commercial leverage for agencies when determining terms
and conditions

One of the main advantages of an application process is
that it provides an agency with maximum leverage when determining
terms and conditions. All potential panel members are invited
to apply for panel membership on the same terms and each
supplier has to decide whether or not to join the panel
on the offered terms by submitting an application. The
result is that each supplier will be aware that their competitors
may join the panel on the offered terms and that failing
to sign up may result in missed opportunities.

High degree of compliance with terms and conditions amongst
panel members

The use of this commercial leverage in the application
process results in a high degree of compliance with the
terms and conditions proposed. The resulting consistency
of terms and conditions has the follow-on benefit of simplifying
the evaluation of subsequent quotes. At the same time,
the application process can help to avoid the situation
where negotiations with a single prospective panel member
result in more favourable terms and conditions for all

Improvements in management and administration

Agencies that have taken advantage of this innovative
application approach have reported considerable reductions
in the time and cost of establishing panels and significantly
enhanced flexibility in the ongoing management and administration
of the panel arrangements.

Flexibility for agency on panel membership

The application approach is suitable for setting up a 'closed' panel
where all members for the term of the panel are included
in the initial establishment. However, it can also be used
to establish 'open' panels where new members
can be added in subsequent application rounds, provided
they agree to the same terms and conditions as the existing
panel members and the process for further application and
admission to the panel is on the same basis as the process
that set up the original panel.

Suitability of application process and management of
potential issues

As with all types of procurement processes, the application
process for establishing a panel is not suitable in all
situations and it is important to be aware of the potential
limitations on its use. These limitations generally relate
to all panel arrangements, not just those established using
the application process, and usually relate to the market
that the panel covers.

For example, if the particular market that the panel covers
is a seller's market then it may be that an agency
is less likely to get suppliers to sign up to the terms
and conditions it proposes. As discussed above, another
potential difficulty arises in markets where there are
one or two dominant suppliers that must be included to
establish an effective panel. Suppliers in this position
may be less likely to apply to join the panel on a take
it or leave it basis.

Of course, these issues can be partially addressed by
ensuring that the terms and conditions of the standing
offer balance the interests of the agency and suppliers.
Indeed, determining the nature of the terms and conditions
that an agency approaches the market with is a significant
determinant in the success of all procurements.

Where a particular term is considered potentially contentious,
the standing offer entered into as a result of the application
can provide enough flexibility to vary certain terms when
proposals or quotations are sought from panel members for
specific jobs. The standing offer can also provide for
additional terms to be included in specific requests for
proposal or quotations. This flexibility can be used to
limit the possibility that suppliers will consider the
terms of a particular panel to be unbalanced with respect
to specific purchases. It also ensures that, where it is
necessary to further tailor the terms to a specific purchase
from the panel, this can be achieved.


Once they are established, panels provide agencies with
a convenient and efficient process for purchasing goods
and services without the requirement to conduct further
formal tender processes.

However, panels can be complex to create. They potentially
require negotiation with a number of suppliers, each of
which may have its own concerns regarding the terms of
the standing offer. In order to take advantage of the benefits
of panel arrangements while minimising the effort required
to create and manage a panel, a streamlined approach to
panel establishment can be advantageous.

An application process for establishing a panel provides
a number of advantages over more traditional approaches
to creating a panel. These include maximising commercial
leverage for an agency and ensuring the consistency of
terms and conditions of the standing offer with each panel
member. At the same time, the approach is flexible enough
to allow terms to be tailored to a specific quote where

If you would like to know more about the streamlined
approach to establishing panel arrangements, please contact
one of the authors of this article, or Simon Anderson
or Deborah Browitt (see here for
contact details).

Katrina Leach has advised on and drafted commercial
documents for large procurement processes, including
panel arrangements, and been involved in a range of probity,
leasing and funding matters. She has provided general
commercial advice including on the establishment, operation
and management of ICT and other service panels.

Simon Thornton has advised on a range of ICT issues
including software licensing arrangements and all stages
of procurement processes, from the release of an RFT
through to legal evaluation and the final negotiation
of a contract. This work has included advising on, and
drafting commercial documents for, the establishment
and management of a number of ICT related panels.


Adrian Snooks

Adrian Snooks Senior
Executive Lawyer
T 02 6253 7192
F 02 6253 7306

Simon Anderson

Simon Anderson Senior
T 03 9242 1260
F 03 9242 1481

Cooperative agency procurement provides agencies with
an opportunity to share procurement costs and gain the
benefit of economies of scale and process.

The Finance Minister has recently announced a review of
the Australian Government's management of information
and communication technology (ICT), including ICT procurement,
as part of the broader reform agenda to improve the efficiency
of government spending and deliver better value for money.
Cooperative agency procurement is one way agencies can
increase the efficiency of their ICT procurements. The
latest Good Procurement Practice guide–Cooperative
Agency Procurement–issued by the Department of
Finance and Deregulation (Finance), provides some practical
assistance to agencies interested in such arrangements.

The attraction of cooperative agency procurement

Agencies bound by the Financial Management and Accountability
Act 1997 (Cth) (FMA agencies) must comply with the Commonwealth
Procurement Guidelines of January 2005 (CPGs) and
other Australian Government policies in relation to procurement.
FMA agencies also have in place internal procedures to
be followed in procurement.

A cooperative procurement can allow for costs associated
with procurement to be shared between agencies, thus reducing
the overall cost to the Commonwealth. This is particularly
so for new and small agencies, which could expect to gain
administrative support and other savings by accessing the
procurement experience and contracts of larger agencies.
The cost of the goods and/or services procured may also
be reduced as the increased supply requirement may result
in a better price being achieved.

It is important to note that cooperative agency procurement
may also reduce the costs to tenderers. By allowing tenderers
to submit one tender for the provision of goods or services
to a number of agencies rather than re-tendering for each
agency requirement, tender costs can be reduced, and this
may also lead to a saving for the procuring agencies.

This paper describes two types of cooperative agency procurement–clustering
and piggybacking–and discusses the challenges associated
with each of them while providing practical advice about
how those challenges can be met.

When can agencies take advantage of cooperative agency

Agencies will need to consider their obligations under
the CPGs when deciding whether to undertake cooperative
procurements. Value for money remains the paramount consideration.
This means that a reduction in procurement costs is a relevant
consideration but will not justify cooperative agency procurement
unless the procurement will ultimately deliver value for
money to the agency.

Agencies should also consider whether conducting a cooperative
agency procurement will have a negative impact on small
and medium enterprises (SMEs). The CPGs require agencies
to ensure that procurement methods do not unfairly discriminate
against SMEs by, for example, requiring excessive quantities
of services. SMEs may struggle to meet the supply required
by a cooperative procurement and therefore may not bid,
which may lead to a reduction in competition in the market
and ultimately to higher prices for agencies.

It may also be worthwhile, prior to undertaking a cooperative
agency procurement, to test the market to ensure that tenderers
can meet what may be high volume requirements. Not doing
so may result in a lack of suitable tenders and a failure
of the tender process.


Clustering occurs where agencies conduct a procurement
process together. In order to achieve the best value for
money outcome, all agencies involved in a clustering arrangement
should participate in the development of request documentation
and the evaluation of submissions. Note however that, if
an agency compromises on its initial requirements in order
to participate in a clustering arrangement, there is a
real risk that the agency will have to return to the market
to obtain further goods and/or services.

Agencies will need to consider whether one agency should
lead the procurement. The role of the lead agency can vary
but, practically, it is likely to be more efficient if
one agency conducts the management of the tender process
and carries out the related administrative tasks (for example,
notifying the market, communicating with tenderers and
receiving submissions).

In a clustering arrangement, agencies should determine:

  • what kinds of advisers may be required to assist, who
    will engage them, and how costs for advisers will be
    shared between the agencies
  • whether a lead agency should conduct the evaluation
    (having regard to the need for each agency to be satisfied
    that there has been a value for money outcome)
  • whether a representative committee should conduct
    the evaluation, chaired by a lead agency
  • how each agency intends to contract with the successful
    tenderer; that is, whether each participating agency
    should contract directly with the supplier/s or be listed
    on a schedule of the lead agency's contract.

Where there are a number of agencies participating in
the evaluation, probity considerations will be particularly
relevant: when many agencies are involved, there is an
increased risk that information will be inadvertently disclosed
or that conflicts will arise.

In some circumstances, notwithstanding its involvement
in the procurement process, an agency may determine that
submissions do not represent value for money for that agency.
To address this situation, request documentation should
allow participating agencies to pursue other procurement

Agencies should note that the term 'clustering' does
not refer to circumstances where an agency becomes party
to a contract after it is executed or standing offer arrangement
after a panel is established: this is called 'piggybacking'.


Piggybacking occurs where an agency accesses an established
contract or standing offer arrangement of another agency.
It is important to note that in most cases an agency can
piggyback on the contractual arrangements of another agency
only if this was contemplated in the original procurement
process and in the contract. If the procuring agency anticipates
that other agencies may wish to piggyback in the future,
it will need to ensure that the relevant procurement documentation
and contract allow for this. Agencies should also note
that piggybacking agencies may need access to evaluation
materials, so they should ensure that confidentiality provisions
in the request documentation and contract do not restrict
other agencies from accessing the relevant material.

When considering including a piggybacking arrangement,
agencies should consider what effect piggybacking will
have on the supplier:

  • Does the request documentation need to specify potential
    usage, to avoid overburdening the supplier (and potentially
    causing supply problems) and to allow the tender to offer
    pricing options (such as volume discounts) that may present
    better value for money?
  • Do potential piggybacking agencies need to be identified
    in the arrangement (for example, if the procurement is
    conducted by an agency with a number of portfolio agencies,
    should all potential agencies within the portfolio be
    identified), or will this unnecessarily limit the potential
    for piggybacking?
  • Will additional agreements (such as a deed of undertaking
    from the supplier to the piggybacking agency) be required
    for the piggybacking to be effective and, if so, does
    this need to be included in the request documentation?

When piggybacking, participating agencies should consider
formalising the arrangements between themselves and consider
whether the contract or standing offer should be amended
to reflect the arrangement. This may be necessary to avoid
unintentional amendments to an agency's pre-existing
contract or standing offer if the piggybacking arrangement
is not entered correctly.

Finally, an agency that is considering piggybacking should
consider when the original procurement took place and whether
the market has since changed, as a new or innovative procurement
option that represents better value for money may exist.

Managing cooperative agency procurement

In addition to the specific issues relevant to each of
clustering and piggybacking, some general principles should
be kept in mind when managing any cooperative agency procurement.

Close cooperation between agencies is required

Each participating agency needs to ensure that its goals,
objectives, policy requirements and supply requirements
are agreed and well documented before the market is approached.
It is important that agencies have a common understanding
of the agreed arrangements. Where a clustering arrangement
is being considered, agencies will need to agree (possibly
through an MOU or exchange of letters) how the procurement
process will be managed (for example, the role of each
agency, how the procurement costs will be met and how the
evaluation will be conducted), whereas, for a piggybacking
arrangement, the focus is more likely to be on managing
the process of establishing the piggyback contract.

Agencies should be aware that, as with any other procurement,
poor management of a cooperative agency procurement can
result in agencies procuring goods and/or services that
do not completely meet their requirements.

Where there are more than two parties to a contract, issues
of contract management and the related responsibilities
may arise. Cooperative agency procurements need to be carefully
managed to avoid disconnects between multiple parties,
which could result in goods or services not being supplied
as required, unintentional breaches of contract by the
contractor or an agency, or unintended contract variations.
Carefully drafted notice and change control processes will
aid in managing this, but they are not a substitute for
close contract management.


Cooperative agency procurement presents agencies with
an opportunity to achieve the best possible value for money
outcome for the Commonwealth by reducing the administrative
costs of procurement. Cooperative agency procurement does
have its pitfalls, but these can be managed through well-developed
and consultative procurement processes.

If your agency wants to join a cooperative agency procurement,
contact the procurement office in your agency, or check
the Annual Procurement Plans on AusTender for information
on potential clustering opportunities.

Adrian Snooks has considerable experience in ICT procurement
and commercial drafting and negotiation. He has advised
on some of the largest acquisitions of technology by
the Australian Government.

Simon Anderson specialises in intellectual property
agreements and negotiations and also advises more generally
on ICT procurement, competitive tendering and contracting,
and general commercial matters.


Peter Kidd

Peter Kidd Senior Executive
T 02 6253 7210
F 02 6253 7301

Kate Brophy

Kate Brophy Senior
T 02 9581 7678
F 02 9581 7445

Probity and process issues are integral considerations
for agencies in ensuring the defensibility and overall
success of government procurement processes.

In the context of a government tender or procurement process, 'probity' is
often used in a general sense to mean a defensible process
which is able to withstand internal and external scrutiny:
one which achieves both accountability and transparency
and provides tenderers with fair and equitable treatment.

Public awareness and scrutiny of government's management
of probity and process-related issues are significant and
increasing. There are a number of reasons for this, including:

  • increased concern with ethics and accountability in
    public life
  • greater media scrutiny
  • more time and resources now required from bidders
    in formulating and submitting bids, leading to demands
    for increased accountability and transparency in procurement

Failing to conduct a procurement process with due regard
to probity and fair dealing may potentially leave it open
to challenge. Defending challenges is time consuming and
costly, and can undermine public confidence, affect reputations
and act as a distraction from government's core functions.

Outcomes of any challenge (whether or not it is ultimately
successful) are negative and involve consequences for government,
senior management and, potentially, staff and advisers

Common issues in procurement processes

Disconnect between request for tenders and evaluation

The decision in Hughes Aircraft Systems International
v Airservices Australia (1997) 76 FCR 151 established
that a process contract may arise from procurement processes
and that, when the procuring entity is a government agency,
it may be appropriate to imply in the process contract
a duty to act fairly. In most cases, one aspect of this
duty will involve the requirement to evaluate bids according
to the priorities and methodology specified in the request
for tenders (RFT). In this context, it is now common
practice for government agencies to prepare and obtain
internal sign-off on a formal evaluation plan before
bids are opened. Properly drafted and implemented evaluation
plans enable agencies to demonstrate that they have objectively
evaluated bids in accordance with the RFT and without
conscious or subconscious bias towards an initially preferred

The Commonwealth Procurement Guidelines stress
the need for 'logical, clearly articulated, comprehensive
and relevant conditions for participation and evaluation
criteria' to enable an accurate and fair assessment
of all potential bidders.

However, in practice there is often a lack of consistency
between evaluation plans and the requirements specified
in the applicable RFTs. To avoid this problem, the RFT
and the evaluation plan should be drafted together. This
will enable a 'side-by-side' review to be done
to ensure that the evaluation methodology proposed in the
plan is consistent with the draft RFT. For example, if
the plan proposes threshold or mandatory requirements,
these should be clearly brought to the attention of bidders
in the RFT. In addition, all steps in the evaluation process
described in the RFT should be mirrored in the evaluation

Disconnect between evaluation criteria and information
requested from bidders

In order to ensure a fair evaluation process, bidders
must be considered on the basis of the bids submitted.
This process is enhanced in circumstances where agencies
give careful consideration to ensure that enough information
is sought from bidders to enable full evaluation against
each evaluation criterion, and to ensure that additional
information is not inadvertently sought to the cost of
bidders. This issue is best remedied by ensuring that the
RFT requires bidders to provide information by direct reference
to the evaluation criteria.

In addition, prior to requesting information from bidders,
agencies should consider the relevance to the evaluation
of each piece of information requested. Finally, agencies
should ensure that the evaluation methodology is sufficiently
broad to permit all relevant information submitted by the
bidder to be taken into account.

Management of communication with bidders

It is important for agencies to ensure that identical
information is available to all potential bidders during
the procurement process. In order for this to occur, procedures
need to be established to govern communication with bidders.

Such procedures should stipulate that only authorised
personnel are to provide information to potential bidders.
In particular, agency employees should not express any
personal opinions on the procurement process publicly,
privately or on the email system, particularly in relation
to preferred potential bidders or prices, unless specifically
authorised to do so. They should also refrain from making
any comments or giving information to the media regarding
the procurement process.

If potential bidder briefings are conducted, all material
information provided at the briefing and during the procurement
process should be documented and will usually need to be
made available to all interested parties. 'Interested
parties' can be taken to include all people who have
collected, been sent or downloaded from the agency's
website, copies of the documentation relating to the relevant
request for submissions. One way of making the information
available is to place it on AusTender.

Bid repair versus bid clarification

A bidder may be requested to clarify its bid where there
is a conflicting statement or an ambiguity in that bid.
However, it is important to consider all requests for clarification,
and the answers provided to these requests, carefully.
In some cases, the answer given by a bidder may change
its bid and therefore amount to bid repair rather than
bid clarification. In addition, before asking for further
information from bidders, agencies should carefully consider
whether their proposed questions are in fact seeking clarification
of bid ambiguities.

Management of conflicts of interest

The Commonwealth Procurement Guidelines emphasise
that procurement processes must be conducted in an ethical
manner which avoids conflicts of interest and the misuse
of power. Conflicts of interest will arise where a member
of a procurement team or an adviser to a procurement team
has an affiliation or interest which prejudices–or
might be seen to prejudice–their impartiality.

Typically, all members of the procurement team, and their
advisers, will be required to declare all conflicts of
interest before the beginning of the bidding process and
to keep their declarations up to date. Having 'conflicts
of interest' as the first agenda item at meetings
of relevant teams, committees and panels can help to ensure
that conflict issues do not go unnoticed.

The response to conflicts and potential conflicts of interest
will vary depending on the nature of those conflicts. Where
a serious conflict or potential conflict of interest is
identified, the officer or adviser concerned may need to
be removed from the procurement process. Where this is
not practical, other mitigation measures may need to be
put in place. If a less serious conflict or potential conflict
of interest is identified, some ring fencing or quarantining
of the individual or of sensitive information may be sufficient
to deal with the problem.

If you are considering engaging a probity adviser, AGS
has a Probity Fact Sheet available on our website:

Peter Kidd is a Senior Executive Lawyer in our Commercial
team. Peter has extensive experience and involvement
in procurement for major national and international projects.
He is a specialist in the creation and documentation
of procurement and probity processes and procedures.

Kate Brophy is a Senior Lawyer in our Commercial team.
Kate specialises in advising on tendering and contracting
in the Commonwealth environment. She is experienced in
advising Commonwealth agencies at all stages in the procurement
process, including on ICT procurements.

AGS contacts

John Scala

John Scala Chief Counsel,
T 03 9242 1321
F 03 9242 1481

Linda Richardson

Linda Richardson National
Practice Leader, Commercial
T 02 6253 7207
F 02 6253 7301

Tony Beal

Tony Beal Special
Counsel, Commercial
T 02 6253 7231
F 02 6253 7306

AGS has a national team of lawyers specialising in advising
agencies on a wide range of information and communications
technology (ICT) matters. For assistance with any ICT matters,
please contact John Scala, Linda Richardson, Tony Beal
or any of our specialist ICT lawyers listed below:


Philip Crisp
Henry Addison
Rachel Chua
Peter Kidd
Adrian Snooks
Leah West
Deborah Browitt
Irene Ghobreal
Kathryn Grimes
Alexandra Hall
Zoe Loughton
Swee-Kim Tan
Katrina Leach
Simon Thornton

02 6253 7159
02 6253 7264
02 6253 7086
02 6253 7210
02 6253 7192
02 6253 7006
02 6253 7586
02 6253 7345
02 6253 7513
02 6253 7122
02 6253 7441
02 6212 0371
02 6253 7519
02 6253 7287


John Berg
Kate Brophy

02 9581 7624
02 9581 7678


Kenneth Eagle
Stuart Hilton
Simon Anderson

03 9242 1290
03 9242 1431
03 9242 1260


Peter Blennerhassett

07 3360 5767


Lee-Sai Choo
Scott Slater

08 9268 1137
08 9268 1789


Andrew Schatz
Peter Whatson

08 8205 4201
08 8205 4287


Peter Bowen

03 6210 2104


James Docherty

08 8943 1405

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

The material in these notes is provided to AGS clients
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. © AGS
All rights reserved