Ethical Supplier Mandate: Tougher guidelines for government suppliersAug 2019 | Commercial Property Construction & Engineering Corporate Energy & Resources Planning & Environment
The Queensland Government has introduced the Ethical Supplier Mandate (Mandate) and Ethical Supplier Threshold (Threshold) via changes to its Queensland Procurement Policy (QPP) to impose tougher standards on government suppliers; the idea being that taxpayer dollars should only be spent on companies doing the right thing by workers through commitment to training, safety and fair wages.
The changes are a direct response to a parliamentary report regarding wage theft (which has coincidentally occurred in the midst of some high profile hospitality wage disputes) and are intended to strengthen the existing Buy Queensland approach which emphasises the government’s responsibility to maximise the social, economic and environmental benefits to the public in relation to procurement.
Ethical Supplier Threshold
Pursuant to c 2.3 of the QPP, the Queensland Government will expect suppliers to comply with the Ethical Supplier Threshold which means the supplier has not:
- contravened a civil remedy provision of ch 2 or ch 3 of the Fair Work Act 2009 (Cth) (Fair Work Act), or committed an offence against the Fair Work Act.
- contravened a civil remedy provision of ch 2, 3, 4, 5, or 7 of the Industrial Relations Act 2016 (Qld) (IRA), or committed an offence against the IRA or failed to pay employment related levies, or other payments, established under Queensland Legislation.
- failed to make superannuation contributions on behalf of employees.
- purported to treat employees as independent contractors, when they are not.
- required persons who would otherwise be employees to provide an Australian Business Number so that they could be treated as independent contractors.
- engaged persons on unpaid work or as unpaid interns, when they should be treated as employees.
- entered into an arrangement for the provision of labour hire services with a person who is not licensed under the Labour Hire Licensing Act 2017 (Qld) (Labour Hire Act), or a supplier who is an unlicensed supplier under the Labour Hire Act.
- paid employees wages below those provided for in an applicable modern award.
Invitation to tender documents will be required to specify that compliance with the Threshold is mandatory. Suppliers will have to include information in tender responses detailing whether they comply, including the history of compliance for the last five years (commencing from 1 August 2019 – the Threshold will not apply retrospectively).
Ethical Supplier Mandate
The Mandate sets the parameters for managing instances where a supplier fails to meet a QPP requirement or other policy requirement (refer to the definition of policy requirement in the Mandate), including the Threshold. A supplier will breach the Mandate if the supplier knew, or ought to have known, that their conduct is a breach. Honest mistakes, oversights or accidents will not be a breach.
The Mandate introduces a supplier demerit point scheme. The extent of non-compliance will determine how many demerit points are incurred – minor (2 points), moderate (5 points) and major (10 points). A supplier will incur 20 demerit points if they breach the Threshold.
Suppliers may be penalised for non-compliance by their subcontractors except where the supplier can demonstrate reasonable action was taken by the supplier to prevent non-compliance by their subcontractors.
Non-compliances can be matters such as:
- achieving less than the required number of apprentice or trainee hours on a project.
- Workplace Health and Safety sanctions.
- failing to have an industrial relations management plan (where this is a condition of contract).
If a contract is already on foot and the supplier breaches the Threshold, the breach will be dealt with using contract management processes.
If a supplier accumulates 20 demerit points, they will be sanctioned as determined by the Procurement Penalties and Sanctions Committee (Committee), which can include making a supplier ineligible for a contract award for a defined period or suspending them from the relevant panel or contracting framework.
Demerit points will not be automatically issued. First, the supplier will have an opportunity to respond to allegations of a breach (unless the breach is referred to an appropriate regulator or law enforcement agency). They will also be contacted prior to any demerit points being issued and allowed 10 business days to provide to the Committee any information about potential extenuating circumstances. Similar processes exist around imposing sanctions.
If a supplier ceases trading, this does not necessarily mean that they can escape demerit points. The Committee may decide to issue the demerit points to a company that continues the business or a related body corporate of the supplier.
Both demerit points and sanctions can be appealed by a supplier.
The application of the Mandate will commence:
- for the Building Construction and Maintenance Category on 1 August 2019; and
- for the Transport and Infrastructure Services Category on 1 October 2019.
Importantly however, the Threshold will apply from 1 August 2019 onwards. This means that all suppliers intending to (or currently) contracting with the Queensland Government will need to ensure they can comply with the Threshold immediately, irrespective of when the Mandate commences.1 Suppliers who are likely to be affected should start preparing now for ongoing compliance with the Threshold.
Further, those suppliers will need to ensure there is compliance with the Threshold across the whole of the business – not just in respect of any particular government contract. This will be a critical and somewhat onerous process for suppliers who are reliant on government business and require a sound understanding of the Threshold so compliance with each item (set out at paragraph 3 above) can be adequately demonstrated in tenders.
Businesses which experience frequent union entries on work health and safety grounds will need to exercise particular vigilance in responding to any improvement notices issued by WHSQ, noting that in order to avoid demerit points:
- improvement notices should be acted upon promptly; or
- alternatively, it may be in the best interests of the business to challenge improvement notices where they have been issued in questionable circumstances.
The Department of Housing and Public Works has published guidelines to assist suppliers with the new Mandate and Threshold, including how that information should be addressed in tenders.
1 The commencement date for the Mandate for other spend categories and agencies including statutory bodies, government owned corporations and special purpose vehicles will be sometime in 2020.
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