Competition and contestability (Direction 3.2)
Effective date: 1 July 2018
Principles
Value for money, scalability and probity are procurement principles that are specifically relevant to tender preparation and processes.
Of particular relevance to this Direction are the following construction procurement principles:
- appropriately planning and managing Public Construction Procurement to deliver procurement objectives
- employing the appropriate Procurement Models and processes taking account of the complexity and value of the project and supplier market capability
- reducing unnecessary burden of Public Construction Procurement for all parties
- encouraging appropriate innovation and responsiveness in the supplier market
- ensuring appropriate competition and contestability when undertaking Public Construction Procurement
- conducting Public Construction Procurement processes in an efficient and timely manner
- treating all tender participants fairly and equally
- undertaking Public Construction Procurement in accordance with the relevant legislation, policy, guidance and any mandatory requirements in these Directions
3.2 Competition and contestability
To promote competition and contestability, when engaging a supplier to perform Works or Construction Services, Agencies must use:
(a) an open tender
(b) a Selective Tender open to:
(i) all suppliers in the relevant category of a Register
(ii) at least three suppliers in the relevant category of a Register
(c) a Limited Tender conducted in accordance with the Instructions
Competition and contestability (Instruction 3.2)
Effective date: 1 July 2020
Objective: To help Agencies to promote efficiency and reducing the burden of the tender process
3.2.1 Limited Tender processes
(a) Agencies may use a Limited Tender if:
(i) the value of the engagement is expected to be less than $75,000 (inclusive of GST), in which case the Agency may invite a single potential tender participant to participate in the Limited Tender
(ii) the value of the engagement is expected to be
1. in the case of Works, more than $75,000 (inclusive of GST) but less than $750,000 (inclusive of GST)
2. in the case of Construction Services, more than $75,000 (inclusive of GST) but less than $300,000 (inclusive of GST) in which case the Agency must invite at least three potential tender participants to participate in the Limited Tender
(iii) the Special Circumstances set out in Instruction 3.2.2 apply, in which case the Agency must comply with the requirements in paragraph (b)
(iv) procuring under a Supplier Panel established in accordance with the Directions, as the rules of that panel allow
(b) Where a Limited Tender is conducted in accordance with paragraph (a)(iii), the Agency must:
(i) determine the most appropriate way to conduct the Limited Tender taking into account the nature of the Special Circumstances and, to the extent practicable, identify ways to conduct the Limited Tender in a manner that is consistent with the principles set out in Guiding principles (Construction Direction 1.2), and otherwise in accordance with the requirements of the Directions
(ii) document the nature of the Special Circumstances and proposed approach to conducting the Limited Tender
(iii) ensure the Accountable Officer or Responsible Minister of the Agency approves the use of a Limited Tender and the proposed approach to conducting the Limited Tender
To avoid doubt, paragraph (b) does not apply to Limited Tenders conducted in accordance with paragraphs (i) and (ii) of paragraph (a).
(c) The thresholds set out in paragraph (i) and (ii) of this Instruction 3.2.1(a) are to be reviewed, taking account of the advice of the Public Construction Procurement Committee, at least every five years and may also be reviewed at such other times as the Committee may recommend.
(d) An Agency may procure Works or Construction Services from a group purchasing scheme only if the procurement and contracting processes used by the group purchasing comply with these Ministerial Directions and Instructions.
3.2.2 Special Circumstances
The Special Circumstances when Agencies may conduct a Limited Tender are:
(a) due to reasons of extreme urgency brought about by events unforeseeable by the Agency, or because the Works or Construction Services could not be obtained in time by means of an open tender or Selective Tender. Such reasons may include:
(i) life threatening situations
(ii) occupational health and safety
(iii) security
(iv) loss of essential services
(v) avoiding significant loss or damage to assets, or significant service delivery disruption
(vi) weather protection
(vii) any comparable events beyond the control of the Agency but not where the urgency arises because performance of the Works or provision of the Construction Services is simply running over time
(b) to protect essential security interests
(c) where, in response to an open tender or Selective Tender:
(i) no tenders were submitted;
(ii) no tender that represented a value-for-money outcome was received
(iii) no tenders were submitted that conform to the essential requirements in the Tender Documentation
(iv) no tender participants satisfied the conditions for participation provided that, in the Tender Documentation for the Limited Tender, the Agency does not substantially modify the essential requirements set out in the original Tender Documentation
(d) only single or a limited number of potential tender participants could perform the Works or provide the Construction Services for any of the following reasons:
(i) the requirement is for a work of art
(ii) to protect patents, copyrights or other exclusive rights or proprietary information
(iii) due to an absence of competition for technical reasons
(e) to perform additional Works or provide additional Construction Services by the original supplier not included in the initial procurement where changing supplier for such additional Works or Construction Services:
(i) cannot be made for technical reasons such as requirements of interchangeability or interoperability with the existing equipment, software, services or installations procured under the initial procurement and
(ii) would cause significant inconvenience or substantial duplication of costs for the Agency
(f) to perform additional Works or provide additional Construction Services that are an extension of Works or Construction Services not included in an existing contract, but that are within the objectives of the original Tender Documentation
(g) the Works are to be carried out in, or Construction Services are related to, leased premises or a third-party property where:
(i) the supplier must be approved by the lessor, or another third party
(ii) the costs of the approved Works or Construction Services are to be reimbursed to the lessor in accordance with the leasing arrangements, or another third party in accordance with the arrangements for the third-party property
(h) the supplier of the Works or Construction Services is selected as a result of a design competition
(i) where the procurement is conducted in accordance with the Market-Led Proposals Guideline
(j) exceptional circumstances as certified by the Responsible Minister or Accountable Officer
(k) the Works comprise a utility asset being installed by a third party and the Agency requests increased scope or changes to the specification for the utility asset
When the provisions of International Agreements apply to a Limited Tender, Special Circumstances 3.2.2(f), 3.2.2 (g) and 3.2.2 (j) are not allowed.
3.2.3 Multi-stage procurement processes
(a) Agencies may use multi-stage procurement processes when conducting open or Selective Tenders.
(b) When conducting a multi-stage procurement process for a Selective Tender, the initial invitation stage may be either open or selective.
(c) For clarity, the requirement to use a forward notice set out in Forward notices (Construction Instruction 5.1) applies to multi-stage tender processes. The forward notice must be used in advance of the first notice that starts the multi-stage tender process.
Revision history
First release - 1/07/2018
Revision 1 - 30/12/2018
Paragraph 3.2.1: New sub-paragraph (d) inserted to describe the conditions when a procurement may be made through a group purchasing scheme.
Paragraph 3.2.2: New sub-paragraph (k) inserted to provide an additional special circumstance that may justify use of a Limited Tender - the Works comprise a utility asset being installed by a third party and the Agency requests increased scope or changes to the specification for the utility asset.
Paragraph 3.2.3: New paragraph 3.2.3 added to describe use of multi-stage procurement processes.
Revision 2 - 1/07/2020
Paragraph 3.2.2(e): Special Circumstance 3.2.2(e) revised. Sub clause (i) replaces part of the circumstance to clarify that it applies to technical reasons such as requirements of interchangeability or interoperability with the existing equipment, software, services or installations procured under the initial procurement. Sub-clause (ii) inserted.
Paragraph 3.2.2(f): Special Circumstance 3.2.2(f) added to the list of circumstances that are not allowed when the provisions of International Agreements apply to a Limited Tender.
Revision 3 - 1/09/2024
Increase in dollar value thresholds following review.
Tools and support
The Construction Toolkit includes key documents, guidance and information relating to the Ministerial Directions and Instructions.
For further information about the Ministerial Directions and Instruction for public construction procurement, please contact the Construction Policy Team.
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