Federal suppliers vying for $80 billion in annual contracts will need to demonstrably manage conflicts of interest, protect workers and the environment, and pay tax under a new ethics code triggered by a string of scandals.
The requirements — which also apply to subcontractors — and several other integrity and ethical demands are in a new draft Commonwealth Supplier Code of Conduct, with a final version to be in force from April with the sign off from Finance minister Katy Gallagher.
Failure to adhere will be grounds for terminating deals and the government will be able to investigate adherence to the new code.
The Commonwealth Supplier Code of Conduct sets the minimum expectation for suppliers, their personnel and their subcontractors while under contract with the Commonwealth.
A draft version outlines specific requirements like having robust processes for upholding business integrity, protecting sensitive information and managing conflicts of interest.
“Where actual, potential or perceived conflicts of interest and duty are identified, they must be declared, managed appropriately and immediately reported to the contracting entity.”
Last year, the government was rocked by revelations PwC consultants had used privileged government information to devise and market workarounds for new multinational tax laws in what became known as the ‘tax leaks scandal’.
The revelations triggered a criminal investigation as PwC’s federal work dried up and it eventually sold off its government business.
The Albanese government did not ban PwC because it had legal advice that there was there was a distinction between the incident and government procurement.
Instead, it reformed procurement policies to include “notification of significant event clauses” requiring suppliers to disclose adverse findings and creating new grounds for terminating contracts.
In response to the tax leaks scandal, Treasury has also since begun reforms to information sharing and promoter penalty laws and the tax practitioners regulator.
Other procurement scandals, including large technology buys, have also shown a concerning lack of ethics.
An inadvertent leak of suppliers pricing information last year has also raised ethical concerns, with some suppliers now having a potential competitive advantage.
The Finance department made the recipients of the pricing information sign confidentiality deeds and will perform spot checks on their contract bids to monitor for breaches.
Government buyers are already supposed to consider suppliers’ unethical behaviour when conducting value for money assessments, and the upcoming code of conduct will add an explicit new commitment and mechanism for scrutinising it.
Suppliers who sign contracts that include the code will need to be able to demonstrate they have the policies and frameworks in place to comply with the expectations as requested by the Commonwealth.
The application of the new code and inquiries into adherence will be based on the scale, scope and risk of contracts.
The code is expected to apply to new contracts from April onwards through new clauses, but may also be applied to existing arrangements when panels are refreshed or extension options are exercised.
“Ethics is considered to encompass, at a minimum: honesty, integrity, probity, diligence and fairness,” the draft code states.
“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 draft code also includes requirements for professional standards and behaviour, risk management, meeting tax obligations, paying their own suppliers on time, and managing safe and inclusive workplaces.
Suppliers will also be asked to maintain environmentally responsible policies and practices, including but not limited to reducing emissions, circular economy activities and transitioning to renewable energy.
Consultation on the draft Commonwealth Supplier Code of Conduct is open until March 1.
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