Government suppliers to face sweeping new ethical rules
Suppliers and their subcontractors will have to meet sweeping new ethical rules to bid for the annual $80 billion of federal government contracts, according to a new draft code of conduct for all new tenderers.
The new draft supplier code imposes the government’s minimum expectations for its suppliers as well as their personnel and subcontractors.
It notes that suppliers often interact with the public and requires them to “emulate” Australian Public Service values, which include recently strengthened bullying and gender abuse obligations.
The Finance Department is seeking feedback on the new code before it comes into force, which could happen in April following endorsement by Finance Minister Katy Gallagher.
The new code is expected to have the biggest impact on the technology, military, real estate and care sectors, where external firms provide the bulk of work and support.
It places a duty on suppliers to take “proactive action to prevent and discourage breaches”. This includes regularly monitoring and assessing whether a firm’s employees, agents and subcontractors are complying with the code.
Suppliers will have to be able to demonstrate compliance with “ethics, governance and accountability” expectations set out in the code.
They already have to comply with federal laws, but previously the procurement rules have focused on the ethical behaviour of the contracting agencies.
The new code follows a Senate committee review of consulting practices, after revelations about PwC’s breaches of confidentiality concerning new multinational tax laws. The committee heard claims of conflicts between the consulting and auditing arms of the bigger firms.
A separate clause enabling agencies to consider a bidding party’s previous ethical behaviour was rushed out mid-year, effectively neutering PwC’s federal work program. Shortly afterwards, PwC spun out its government business to a private equity start-up called Scyne.
Many government programs are delivered by private entities, especially in the care sector. The establishment of the National Anti-Corruption Commission has also led to a renewed focus on ensuring supply chain integrity. This includes serious abuse under modern slavery rules.
Suppliers to the federal government will have to ensure they are free from unmanaged conflicts of interest. Where conflicts are identified, they must disclose these to the contracting agency and show what actions are being taken to manage them.
Suppliers must uphold business integrity, including not seeking to obtain an advantage for themselves or cause detriment to the government or any other person. Confidential information must be protected and not used for private benefit.
Termination for breaches
More broadly, suppliers must conduct themselves in a manner that is fair and professional and will not bring the government into disrepute.
The new code will be incorporated as a standard clause in all procurement contracts, giving them legal force to enable termination for breaches. A record of termination will be held by the Finance Department, meaning firms that have breached ethical requirements could be banned from future work.
“The Commonwealth expects its suppliers to conduct themselves with high standards of ethics such that they consistently act with integrity and accountability,” the proposed code says.
“Ethics is considered to encompass, at a minimum: honesty, integrity, probity, diligence and fairness. Ethical behaviour also extends to not making improper use of an individual’s position or benefiting from practices which may be dishonest, unethical or unsafe.”
The code requires this to be demonstrated through suppliers’ behaviour and actions, and supported by appropriate governance arrangements.
It will apply only to new contracts. However, federal government entities may negotiate the inclusion of code clauses into existing arrangements, such as for a contract extension or the refreshing of a panel.
Data protection
The ethics rules will mean agencies and their contractors have to maintain continuous engagement to ensure disclosures are made and are in compliance.
The push to extend obligations to subcontractors echoes a similar broadening of cyber rules to strengthen data protection across supply chains for critical infrastructure players.
A separate Senate review last year called for the modernisation of federal procurement rules and approaches. The review noted submissions that procurement was regarded as a purchasing function rather than strategic supply management.
A huge effort is put into complying with the arduous tendering process, but less time goes into improving the management of procurement and supplier markets, as is common practice in bigger private firms such as Bunnings and Woolworths.
A new entity, known as Australian Government Consulting, will offer in-house consulting services. This followed the government’s ban on the use of consultants for core public service policy and cabinet proposals.
AGC is also looking to make the federal government a better consumer of advisory services. It is developing tighter terms and conditions for consulting contracts to optimise the value of a consultant’s advice.
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Tom Burton has held senior editorial and publishing roles with The Mandarin, The Sydney Morning Herald and as Canberra bureau chief for The Australian Financial Review. He has won three Walkley awards. Connect with Tom on Twitter. Email Tom at tom.burton@afr.com
