Govt: Suppliers will struggle to fulfill contracts

The Federal Government has warned that many of its third party contractors will not be able to fulfill contract obligations due to the impact of the coronavirus pandemic.

“Many suppliers may not be able to fulfil their contracts due to action taken elsewhere in the public sector and restrictions that are now in place, or that may be in place in the future,” the Government said in a note published on the Department of Finance website.

“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.”

In response, the Government has issued new guidance on procurement policy going forward. The policy is designed to have a more compassionate approach to suppliers impacted by the COVID-19 pandemic.

“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,” Finance Minister Mathias Cormann said in a statement.

“To ensure they are making appropriate arrangements with suppliers impacted by the Coronavirus health crisis, the Department of Finance have set the expectations for engagement by Government agencies.”

The Minister added that Government departments agencies had been asked to work collaboratively with suppliers “to ensure business continuity and to take action, where appropriate, to ensure that supply chains are able to be maintained”.

The specific measures include relaxing or waiving some contractual rights, avoiding exercise of termination rights and revision of payment arrangements.

“The Government also expects agencies to pay suppliers quicker than the maximum 20 day payment terms, and is making payments of electronic invoices within five days where suppliers and agencies have adopted e-invoicing consistent with the international standard,” the Minister added.

“Small invoices under $10,000 should be paid immediately by card payment systems. This will assist businesses with their cash flow and support jobs.”

The departments of Finance and Defence have come together to establish a procurement hub specific to COVID-19 resources.

“The Procurement Hub is providing assistance to agencies through advice, technical solutions and resources where required,” the Minister added.