Australia: Leveraging the benefits of early private sector engagement in Commonwealth government procurement

The pressure to achieve great outcomes from procurement processes—and to reach the outcomes faster—means the Commonwealth must look at innovative paths to success. Early industry engagement is one way of achieving sound procurement outcomes, faster time to contract and innovative solutions. If properly managed, early industry engagement can occur without compromising procurement integrity and compliance with key procurement policies such as the Commonwealth Procurement Rules. However, with government procurement becoming subject to increasing public and judicial scrutiny, it is important to understand the principles and how to effectively manage such engagements.

The Commonwealth Government spends billions of dollars on goods and services procured from (and maintained by) private sector organisations every year. Decisions about the Commonwealth's requirements for goods and services—as reflected in Approaches to Market (ATMs)—are often made independently of, and in isolation from, expertise that the private sector delivering such goods or services can bring. However, this approach undervalues the role the private sector can play in assisting the Commonwealth to develop and "sanity test" its requirements during the procurement planning/pre-ATM phase.

There are benefits to the Commonwealth in engaging with the private sector during the early phases of Commonwealth procurement activities—particularly for more complex procurements or procurements that heavily leverage private sector expertise. This includes enabling the Commonwealth to:

  • identify and consider the available options to meet its requirements and whether those requirements are capable of being met within reasonable timeframes and budgets
  • explore alternative solutions and assess whether they will fulfil the need
  • generate interest and competition around particular procurement activities, encouraging better value for money
  • test the relative merits and suitability of available solutions against the Commonwealth's requirements
  • understand what the potential supplier market looks like (including any standard practices, supplier relationships and benchmarks), whether there is adequate competition and capacity to deliver on the Commonwealth's requirements, and
  • understand innovation and the development paths that private industry is pursuing, before assessing whether associated benefits can be harvested.

Probity problems

Probity constraints are the most common justification for the Commonwealth's reluctance to engage with the private sector in the procurement planning/pre-ATM phase. Probity issues can seriously damage relationships between the Commonwealth and private industry, adversely impact on procurement processes and outcomes, and undermine confidence in the Commonwealth's decision-making processes. Accordingly, it is critical that appropriate probity controls are maintained throughout procurement planning and delivery. Understanding the probity risks around industry engagements, as well as how to manage them, will support productive and effective relationships with the private sector which, in turn, will contribute to better procurement outcomes.

Some of the key probity issues that arise in connection with early private sector engagement include:

  • actual or perceived inequality of supplier treatment (including through access to information and opportunity to contribute to the Commonwealth's requirements), and
  • actual or perceived ability to introduce bias into technical or other process requirements, or to influence the Commonwealth toward a particular supplier or solution.

These concerns can be effectively managed by taking the below steps, allowing the Commonwealth to leverage the benefits of early private sector engagement.

Equal opportunity to engage

Consider who your potential private sector market might include and try to ensure all potential ATM participants are given the opportunity to engage with the Commonwealth. This might involve an open invitation to the market to respond to market sounding or to meet with Commonwealth representatives to discuss the requirements. Seeking engagements with a broad range of private sector organisations can also assist the Commonwealth obtain the best, broadest and most reliable set of information available, which can help minimise the risk of solution bias (as multiple sources of information have been considered).

Keep it simple

Keeping pre-ATM private sector engagements as simple as possible will ensure the time and cost investment for all involved is minimised. Keeping the investment burden to a minimum reflects sound procurement practice and is important in generating maximum private sector interest in pre-ATM engagements. Structuring your engagement as simply as possible, while allowing it to elicit meaningful information, will also make it easier to implement and manage.

Information access

Being even-handed also requires that the private sector is given equal access to information. Consider what value you want to get from your engagements and what information would be required by the private sector to meaningfully respond to you. Ensure all participants in your engagement have the same opportunity to access information. Also ensure the information you provide is accurate, consistent and current. Along with supporting sound probity, this will ensure you get the most value out of your early industry engagements.

Consider input impartially

Ultimately, the Commonwealth needs to determine what its requirements (as articulated in an ATM) are. Information gleaned from private sector engagements should be carefully and impartially considered. Whether or not you take on the feedback received, you must have a defensible reason for doing so. The purpose of engagements is to inform the Commonwealth so that it can approach any procurement activity in the "smartest" possible way. This doesn't mean accepting everything presented as being fact, rather obtaining all readily available information and critically assessing it to arrive at the best possible outcome.

Consider confidentiality and intellectual property (IP) limitations

When engaging with the private sector you must be cognisant of confidentiality and IP limitations that may be relevant to their willingness to engage with you. If you are prepared to obtain feedback on a confidential basis, you may get more valuable information from the private sector. However, you will need to ensure confidentiality is maintained and that you do not further distribute information subject to IP or confidentiality limitations without appropriate approvals being obtained (including in your ATM).

Manage engagements

Early industry engagement does not mean providing potential suppliers with an open door and an open ear on all matters relevant to a procurement activity. Engagements with the private sector need to be properly managed so that they are transparent, fair and targeted at supporting the Commonwealth to achieve best value for money. Ensure your engagements are structured in a way that supports fairness between potential ATM participants. This might involve holding structured (and minuted) meetings, requesting submissions from potential suppliers, or holding open forums in which suppliers can participate.

Be open and transparent

Open and transparent dealings assist the Commonwealth to maintain equal treatment of private sector businesses and ensure that bias and favouritism are avoided. In the interests of full transparency and accountability, comprehensive records of all engagements should be maintained, along with a record of whether, how and why feedback from those engagements has been adopted or ignored. Not only will this help inform the content of your ATM, it will also help ensure the Commonwealth's actions can withstand public scrutiny while maintaining public confidence.

Perception management

Perceptions are an important consideration in any Commonwealth procurement activity. If pre-ATM private sector engagements occur, it is important to ensure they do not create any perception of unfairness, bias or impropriety. It is prudent to ensure sound probity principles are applied by personnel involved in pre-ATM engagements, including principles relating to conflicts, hospitality and confidentiality. Consider establishing probity protocols for your pre-ATM activities that enable flexibility and ensure any adverse perceptions are avoided.

Proper probity controls are important in early private sector engagements, but probity concerns should not be a reason not to effectively engage with the private sector to support you to get the best procurement outcomes. Properly structured and managed, probity controls can be effective to ensure your early industry engagements are defensible, while also being flexible enough to allow you to get the outcome you need.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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