Application of the directions and instructions (Construction Guidance 1.3a)

Effective date: 1 July 2018

Objective: To help agencies work out when the directions and instructions apply to a procurement.

Summary

The directions only apply to Public Construction Procurement.

The directions only apply to certain agencies.

This guidance helps agencies to work out when the directions apply to a procurement. The key points to consider are:

• Does the procurement activity constitute Public Construction Procurement?
• Does the Agency have to comply with the Directions?
• Is the procurement being undertaken by or on behalf of an Agency that must comply with the Directions?

Does the procurement activity constitute Public Construction Procurement?

When the directions apply

The directions apply when undertaking Public Construction Procurement.

Public Construction Procurement is defined as:

• processes and requirements that apply to engaging suppliers to perform Works or Construction Services
• the terms of engagement and contracts used to engage suppliers performing works or construction services, and
• management of engagements for works or construction services and reporting on how suppliers perform when engaged to deliver works or construction services

Consider 3 elements when applying this definition:

1. Engagement of a supplier. The directions apply when an agency engages the market to provide works or construction services.

2. What is being procured. The directions apply when an agency engages the market to obtain either, or both, of:

• Works which means construction, maintenance, rehabilitation, alteration, extension or demolition of any improvements on land.
• Construction services which means services directly related to delivering works, including architectural and design services. Construction services do not include services indirectly related to delivering works, such as legal advisory services and commercial advisory services.

3. The activity undertaken. The directions apply when an Agency is performing any of the following activities:

• engaging tender participants from the market through processes such as expressions of interest, tenders and quotations. This includes preparing any documents needed for these processes, and the process of assessing the offers received
• determining the terms of engagement and contracts used to engage tender participants;
• managing the engagements, including administering contracts
• reporting on the performance of suppliers, and
• publishing the details of the procurement undertaken

When the directions do not apply

The directions do not apply to:

• grants
• investments
• loans
• sale by tender, such as land sales
• hiring of employees
• transactions where the asset being procured is not a fixed asset acquired by the agency
• acquisition of works or construction services from another public body or government owned entity, except where the public body or government owned entity is a participant in a competitive tender process

When it is not clear if the directions apply

Sometimes it may not be clear and agencies may have to decide on the most appropriate way to categorise what is being procured and whether it meets the definition of Public Construction Procurement.

Defining Public Construction (Construction Guidance 1.3b) provides more information about the scope of activities that are included or excluded from Public Construction Procurement.

Be sure to document any decisions that categorise whether or not the procurement is Public Construction Procurement and the reasons for that decision.

If the directions for Public Construction Procurement do not apply to a procurement:

• For agencies that are Victorian Government Purchasing Board in-scope entities apply the Victorian Government Purchasing Board Procurement Policies for goods and services procurement.
• For other agencies apply the goods and services procurement policies of the agency.

Once a decision is made, follow the relevant procurement rules consistently throughout the procurement process.

Does the agency have to comply with the directions?

There are 2 classes of agencies for the purposes of the directions:

• agencies that must comply with the directions directly, and
• excluded entities that are not required to comply with the directions

Agencies that must comply with the directions

The directions apply to all agencies other than those identified as excluded entities.

Agencies that must comply with the directions are the same as those in scope for the Standing Directions 2018 made under the Financial Management Act. The factsheet Is your agency subject to the Standing Directions under the Financial Management Act - Updated July 2019 lists covered agencies.

Excluded entities that are not required to comply with the directions

The following agencies are excluded entities:

• any school council constituted under part 2.3 of the Education and Training Reform Act 2006 (Vic)
• any incorporated committee of management, unless the committee is listed in the instructions
• any class B cemetery trust constituted under section 6 of the Cemeteries and Crematoria Act 2003 (Vic)
• any 'registered unit' as defined in the Victoria State Emergency Service Act 2005 (Vic), and
• any 'volunteer brigade' as defined in the Country Fire Authority Act 1958 (Vic)

Note that excluded entities must follow any requirements of:

• their Portfolio Department (for school councils, incorporated committees of management and Class B cemetery trusts), or
• the Victorian State Emergency Service, or the Country Fire Authority (for their registered units and volunteer brigades respectively)

Is the procurement by or on behalf of an agency that must comply with the directions?

The directions apply when:

• an agency is undertaking Public Construction Procurement, or
• a third party is undertaking Public Construction Procurement on its behalf

The directions do not apply to allocating resources within or between government agencies. Government agencies in this context includes another public body, government owned entity, local government or the equivalent from the Commonwealth or any other state or territory.

The directions apply if a government entity is a participant in a competitive procurement process.

Example: An agency may determine that the most effective, efficient and economical way to develop engineering drawings (construction services) is to use its in-house engineering staff to develop them. The directions do not apply because there is no Public Construction Procurement.

Procurement undertaken under the following procurement models/methods is covered by the directions:

• construction related services
• construct only
• design and construct
• construction management, and
• direct managed

Procurement undertaken under the following collaborative procurement models is covered by the directions, to the extent that the directions are not inconsistent with the Victorian Alliancing Policy:

• early contractor involvement
• managing contractor, and
• alliance

Procurement undertaken under the Partnerships Victoria Requirements is covered by the directions, to the extent that the directions are not inconsistent with the Partnerships Victoria Requirements.

Procurement undertaken under the following procurement models is not covered by the directions (apply the construction procurement principles as much as possible):

• work undertaken under rail franchise arrangements, unless the arrangement requires the directions to be applied
• work undertaken by developers for water companies (including any other work undertaken in addition to statutory requirements while the ground is open), and
• works or construction services undertaken under a Growth Areas Infrastructure Contribution Work-in-Kind agreement, as defined by the Planning and Environment Act 1987 (Vic)

Example: In the case of works-in-kind undertaken under the Growth Areas Infrastructure Contribution, the value of these works should be benchmarked against equivalent works to ensure value for money and documented to ensure transparency and defensibility. The works must comply with relevant standards and the Accountable Officer needs to be satisfied with the arrangement.

Where procurement is undertaken under the Victorian Alliancing Policy or the Partnerships Victoria Requirements, the components of the directions and instructions noted in the following table apply.

Useful resources

Defining Public Construction

Helps practitioners work out if a procurement is Public Construction Procurement. Includes examples of matters noting whether they are subject to the directions.

Find Defining Public Construction (Construction Guidance 1.3b)

Victorian Alliancing Policy

Sets out policy and approvals requirements that apply to alliance contracts.

Find the Victorian Alliancing Policy

Partnerships Victoria requirements

Sets out policy and approvals requirements that apply to public-private partnership contracts.

Find Partnerships Victoria requirements

Tools and support

The Construction Toolkit includes key documents, guidance and information about the Ministerial directions and instructions for public construction.

For further information about the Ministerial directions and instructions for public construction procurement, contact the Construction Policy Team.