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Trust me, I'm with the government

Posted by James Neilson on 30 April 2020
Trust me, I'm with the government

Piggy backing off a current State Government contractual arrangement may be very convenient, but Councils need to check the fine print first.

Background

Councils are obliged to comply with the default contracting procedures, that is:-

  • for a medium sized contractual arrangement, Council must first invite written quotes; or
  • for a large sized contractual arrangement, Council must first invite written tenders.

There are a limited number of exceptions, including, under the Local Government Regulation 2012, section 235(f), a contract "made with, or under an arrangement with, a government agency". 

Issue

When is a contract "made with, or under an arrangement with, a government agency"?

Consideration

An entity is a government agency if the entity is:-

  • a local government, a State government, or the Commonwealth government; or
  • an entity which is controlled by the State government.

To take a simple example, Council X may make a contract "with" a government agency without first inviting written quotes or tenders.  Also, Council X may enter into a contract "under an arrangement with" a government agency. 

Anecdotal evidence is that this latter exception is of most interest to Councils.  Relevant questions include:-

  • is there an "arrangement" with a government agency?;
  • is the contract made "under" the arrangement with the government agency?

The expression "arrangement" is not relevantly defined in the Regulation.  It should be given its ordinary meaning having regard to the context in which it is used.  The Concise Oxford Dictionary, 10th Edition defines "arrangement" to mean an action, process or result of arranging, or a plan for a future event.

Relevantly, a Council must satisfy itself about the following (each a "prerequisite"):-

  • that the government agency and a relevant supplier have agreed on standard terms and conditions which will enable future contracts to be made on the basis of individual negotiation only of the particular terms and conditions (primarily description of goods or services and price to be paid) which are unique to the particular transaction; and
  • that it is within the contemplation of the arrangement entered into between the government agency and the relevant supplier that 1 or more or all councils may avail themselves of the arrangement.

The intent of the provision, and its predecessors, is to reflect the legislative policy decision of the State that, to put matters simply and colloquially, if a particular purchasing arrangement is "good enough for the State government" in terms of transparency, value for money and public accountability requirements, then it is also "good enough for local governments", thus permitting Councils to simply follow, or piggy back on, the State process without regard to requirements which would otherwise apply under the default contracting procedures. 

State government purchasing arrangements are regulated by the Queensland Procurement Policy, the content of which is revised from time to time.  A Council which is proposing to avail itself of a State government purchasing arrangement should satisfy itself:-

  • about each of the "prerequisites" identified above; and
  • that the arrangement was put in place in compliance with the State Procurement Policy which applied at the time when the arrangement was put in place. 

Importantly, a contract will not be made "under" an arrangement with a government agency unless the terms and conditions of the contract are, in all significant and substantive respects, controlled by the terms and conditions of the contractual arrangement which was previously put in place between the government agency and the relevant supplier.

The exception will not apply if the contract entered into between the Council and the relevant supplier is:-

  • in substance, a product of direct dealing and negotiation between the Council and the supplier; or
  • not legally controlled in any substantive way by the terms and conditions of the contractual arrangement which was previously entered into between the government agency and the relevant supplier.

Implications

If there is concern about the application of the exception, that is, whether a contract that a Council is proposing to enter into is a contract "made with, or under an arrangement with, a government agency", please contact James Neilson of this office, or call (07) 3243 0000.

James NeilsonAuthor: James Neilson
About: James is a partner in the firm's Commercial & Advisory Group.
Tags: Local Government Council Liability Planning & Environment

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