The Queensland Government spends close to $25billion per year on procurement. In today's cost-conscious environment, the processes of procurement and managing ongoing supplier contracts are being subjected to closer scrutiny than ever.
This process can prove daunting not only for public sector employees, but also for government lawyers advising at various stages, from the front end, to litigation. Government lawyers are increasingly involved not just in drafting contracts, but in future-proofing them.
Below, we offer insights and guidance on the Queensland Government modern procurement processes.
Queensland Procurement Policy 2023
The Queensland Procurement Policy 2023 (QPP) offers guidance, along with the 'Queensland Procurement Strategy 2023 – Jobs, Economy, Legacy, Confidence', the 'Buy Queensland' approach and the relatively new Ethical Supplier Mandate (Mandate) which outlines how the Government will manage instances where suppliers fail to meet their contractual, policy, or legal obligations. The Mandate ensures that businesses supplying to the government uphold their social, economic, and environmental commitments. The Mandate aims to promote ethical and responsible business practices and to remove unethical behaviour from the supply chain. QPP also refers to the Ethical Supplier Threshold, which outlines wage standards expected of suppliers.
Good faith and fair dealing
Engaging in a 'good faith' approach may be an implied term of a contract involving a public sector agency. Queensland courts have shown a growing willingness to read good faith obligations into public contracts (Aurizon Network Pty Ltd v Glencore Coal Queensland Pty Ltd & Ors [2019] QSC 163), especially where there is a significant power imbalance. Be careful though – there is no binding decision of the High Court to the effect that a term obliging good faith is to be implied into all contracts or all commercial contracts. Instead, cases such as QNI Resources Pty Ltd & Anor v North Queensland Pipeline No 1 Pty Ltd & Anor [2022] QCA 169 suggest that such terms might arise as a factual circumstance of the contract.
The public sector, in setting the gold standard as the model litigant, should be very clear as to what 'good faith' entails in your contract terms, if you choose to make them explicit (e.g., timely communication, timely issue of invoices, genuine effort to resolve disputes).
Ambiguous 'good faith' clauses can create exposure if an agency is seen to act arbitrarily, for example by terminating or varying a contract.
Flexible contracts for uncertain environments
COVID-19, climate-related and tariff-based disruptions have shown that rigid contracts are high risk. Public sector agencies are encouraged to:
- review mechanisms that allow scheduled contract evaluations and amendments without re-tendering. Given the elapse of time and organisational 'churn' that can sometimes occur in government procurement, this is a necessary step
- use variation clauses that allow scope, timelines, or deliverables to shift in accordance with any probity requirements
- 'Force majeure' clauses that are specific and reflect real risks (2 examples are supply chain delays and cyberattacks).
Output-based contracts
More contracts are moving toward measuring outputs or outcomes rather than just service inputs (e.g. number of hours spent). This requires clear KPIs and dispute escalation processes that start with internal resolution before going to mediation, arbitration or litigation.
As a significant party to large scale contracts, governments should build in remedy regimes. e.g., 'step-in rights' that grant a third party the right to take control of a contractor's operations or obligations if the contractor defaults or faces insolvency. This allows the public sector entity to maintain the flow of goods or services, especially in situations where the project's financial health or completion is at risk.
Preparation in the event 'things go wrong'
An issue repeatedly seen in practice is that government must retain clear termination for convenience clauses, especially in technology and infrastructure contracts. Exit obligations (e.g., data handover) should be clearly stated to avoid holdover risks or vendor lock-in.
Technology and digital procurement challenges
The public sector's increasing reliance on digital services and automation has created a distinct set of legal risks that lawyers and public sector employees must navigate during procurement.
Data privacy and sovereignty
Government contracts should clearly consider:
- data localisation requirements - whether data must stay onshore in Australia or Queensland
- clear expression of data ownership and data disposal obligations keeping in mind the governing legislation of the Public Records Act 2002
- compliance with the Information Privacy Act 2009 and related confidentiality protections in agency-specific Acts such as the Hospital and Health Boards Act 2011.
AI and emerging technology procurement
AI procurement will necessarily create new risks for the public sector. Bias and possible discrimination must be considered during vendor selection, and even in design of algorithms. Lawyers should build in:
- ethical use clauses or references to existing government ethical use policy such Use of generative AI for government and Artificial intelligence governance policy
- right to audit the algorithms (given the sensitive proprietary nature of algorithms, this may be difficult). Another difficulty in determining the responsible party for AI contracts is the evolution of AI algorithms, especially where the solution relies on a third-party algorithm, and that algorithm is improved or modified
- termination rights for unintended harm. The nature of an AI product may make it difficult to identify an adequate remedy – can you repair or replace an AI system with another? Who is responsible and liable for the breach?
- use of the new ISO/IEC 23894:2023 Information technology – Artificial intelligence–Guidance on risk management Standard
Public sector agencies, as part of the procurement process, should also check that tenderers clearly identify whether AI is part of the proposed contracted solution (no matter what that solution is), and if so, how are the risks to be managed?
Software as a Service (SaaS) Contracts
There is a burgeoning interest in acquiring open-source platforms and SaaS models for use in public sector processes. The Queensland public sector is a treasure trove of data which can be used for incredible public benefit.
With this, there is a need to:
- clarify the ownership of intellectual property and the scope of any licence/s
- address future risks of vendor insolvency, ensuring continuity of service for vital public sector services
- clarify exit strategies from the agreement, including data extraction formats and a process for data migration, so the public sector can easily port to a different software solution. This would help eliminate the glut of legacy systems which exist, posing their own data security and cyber attack vulnerabilities.
Key takeaways for decision makers and legal advisers in the public sector
Procurement and contract management need not be thought of as 'Defence against the Dark Arts'. Transparency always triumphs. Sensible and proactive relationship and agreement management with suppliers means everybody wins – from the public sector to the supplier, to the service recipient and taxpayer.
We suggest the following:
- develop a checklist – this is necessary for good practice and record-keeping
- get the basics right – including knowing who is properly delegated to enter and vary agreements
- undertake continuing education and upskilling on contemporary procurement
- act with integrity (especially to avoid/declare/manage conflicts of interest)
- refer to the QPP, especially the Ethical Supplier Mandate and Ethical Supplier Threshold
- where the issues seem unclear, seek advice both from trusted experts in your organisation and externally where available.
- exercise constant vigilance, especially in this era of ballooning costs
- manage and monitor supplier performance – often it can be hard to remedy contractual problems to your favour (even with the best lawyers!)
- most contracts will have appropriate review and grievance mechanism processes. Utilise those where necessary.
This publication does not deal with every important topic or change in law and is not intended to be relied upon as a substitute for legal or other advice that may be relevant to the reader's specific circumstances. If you have found this publication of interest and would like to know more or wish to obtain legal advice relevant to your circumstances please contact one of the named individuals listed.
