Fears of govt supplier collapse during Covid prompts procurement guideline release
The Department of Finance has released new procurement guidelines advising federal agencies to collaborate with suppliers to ensure supply chains are maintained through the Covid-19 crisis.
Fears have grown that suppliers to Commonwealth entities, under mounting financial pressures from sustained social distancing shutdowns, may struggle to fulfil their contractual obligations, the Department said in its recently released Covid-19 procurement guidance statement.
“The outbreak of Covid-19 is unprecedented,” it said, noting that global shutdowns have adversely affected companies big and small.
The Department acknowledged the pandemic's impact on suppliers’ financial viability, their ability to retain staff, and increased exposure to risk across their supply chains.
“The Covid-19 disruption [has] had an adverse effect on the supply of equipment, materials, and services required to carry out normal business processes for the Government and the economy more broadly,” said Federal Minister for Finance, Mathias Cormann in an official statement.
Despite the disruption, Cormann said the Australian Government would remain a reliable purchaser of goods and services from suppliers.
He added that the Department of Finance had now set firm expectations of engagement between Government entities and suppliers.
“New guidance has been published asking Commonwealth departments and agencies to work collaboratively with suppliers to ensure business continuity and to take action, where appropriate, to ensure that supply chains can be maintained.”
As part of the guidelines, federal agencies could look to relax or waive some contractual obligations, avoiding, perhaps, exercising termination rights or liquidated damages and the revision of payment arrangements during, and even some time beyond, the Covid shutdowns.
Further, to boost suppliers' solvency, Cormann said the Government will instruct agencies to pay contracts “quicker than the maximum 20-day payment terms”.
Electronic invoices could be paid within five days, he added, where suppliers and agencies have adopted e-invoicing consistent with the international standard.
He said small invoices under $10,000 should be paid immediately by card payment systems, supporting businesses with cash flow and jobs retention.
Approaches to market
Tenders, or approaches to the market, could also be progressed on a case-by-case basis, the Department advised.
These approaches may seek to factor in the impact of Covid-19 on prospective suppliers and their ability to deliver on an entity’s requirements when presenting tenders.
Future approaches could indicate – and be assessed upon – how Covid-19 would impact plans in the immediate future, the appropriate schedules for delivery, and the time needed for suppliers to prepare tender submissions. Practicalities involving deliverables also bore scrutiny.
Outreach through AusTender
To minimise procurement risk, entities are invited to first engage with the market through the Government’s online Request for Information service through AusTender, the Department said.
“This approach will help entities better understand the capability before formally approaching the market.”
Entities were also advised to maintain detailed records that adjust for the scale, scope, and risk of procurement.
Additionally, though restrictions are being eased across the country, suppliers were tacitly warned to prepare for future lockdowns should a potential second-wave outbreak of Covid-19 occur.
“We expect entities to support suppliers at risk where possible so they are better able to cope with the current crises and be in a position to resume normal service delivery and fulfil their contractual obligations when the outbreak is over.”