This article is an excerpt from The Art of Tendering: A Global Due Diligence Guide, which is available for purchase.
In its July 2020 report on Procurement of Strategic Water Entitlements, Australia’s National Audit Office (ANAO) called on the government to improve the tendering procedures used for the acquisition of water entitlements by creating clearer rules for limited tendering and increasing the use of open tendering. As the ANAO stated, the government “did not consistently apply approved policy, planning and guidance to the assessment of all limited tender procurements” and “did not develop a framework designed to maximise value for money” for the $190 million worth of expenditures made under the program.
After noting that the water entitlements acquisition program was critical to the government’s conservation efforts in the Murray-Darling Basin, the report found that the “arrangements in place to support these procurements were not fully effective.” As the ANAO stated, competition “is a key element of the Australian Government’s procurement framework” to support “the achievement of value for money” and that “limited tender is less competitive than open tender as it does not provide an opportunity for all potential suppliers to compete for the provision of goods and services.” The ANAO found that the government needed to establish clearer rules around its use of “exceptionally advantageous circumstances” as a justification for bypassing open tendering and using invitational tendering:
The department developed a draft framework for strategic surface water procurements, including through limited tenders, which aligned with high level policy objectives. This draft framework was not finalised or endorsed. For limited tender procurements conducted in 2016 to 2017, the department used the additional rules for the conditions for limited tenders for exceptionally advantageous circumstances. The department did not develop a definition for exceptionally advantageous.
The department developed internal policy and guidance materials to assist officials’ review of limited tender procurement offers. These materials align with the principles of the draft framework and outlined the process to be followed when assessing limited tenders. The department did not consistently apply the guidelines it developed to all limited tender procurements. Four offers were assessed and provided to the Minister for approval prior to the guidelines being fully developed and approved.
Briefings to the Minister did not provide a clear indication of how the procurements would obtain a triple bottom line outcome as in the original commitment. The department did not consistently provide complete information to enable departmental decision-makers to make informed decisions.
As this report illustrates, to better ensure value-for-money, government institutions should establish clear procedures that rely on open tendering as their default rule, while limiting their invitational tendering and direct awards to carefully regulated exceptional circumstances.
