RESTRICTED  
  
GPA/ACC/AUS/38  
 
8 March 2018  
(18-1438) Page: 1/6 
Committee on Government Procurement  Original: English  
 
ACCESSION OF AUSTRAL IA TO THE AGREEMENT ON GOVERNMENT PROCUR EMENT  
COMMUNICATION FROM AUSTRALIA  
The following communication, dated 7 March 2018 , is being circulated at the request of the 
Delegation of Australia . 
 
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AUSTRALIA'S REPLIES TO COMMENTS FROM THE EU ROPEAN UNION (GPA/ACC/AUS/35) 
ON ITS SECOND REVISED OFFER  (GPA/ACC/AUS/29)  
Australia thanks the European Union for both its comments and encouragement that Australia 
work towards the submission of a final offer rapidly. Australia 's offe r is of very high quality and 
compares favourably with the coverage provided by other GPA members:  
 
 our negative list for services means we are providing one of the best levels of services 
coverage among GPA members;  
 we include all construction services, i ncluding public -private partnerships; and  
 we have a very high level of coverage of entities at both central and sub -central levels.  
General  
 
1.  The EU notes that a number of changes have been introduced and that the offer has 
been improved in certain respect.  
2.  The EU welcomes the inclusion of two additional central governments entities 
(Australian Transport Safety Bureau in Annex 1 and Old Parliament House in Annex 3).  
3.  The EU notes that the lower sub -central levels such as cities and public entities 
operating i n the utilities sector, which the EU has requested, have still not been included 
in the offer.  
Australia's market access offer provides comprehensive coverage of government entities at the 
sub-central level.  
 
Cities  
 
Australia has never made commitments a t the local government level, given the small size and 
nature of local councils in Australia. Local councils only account for approximately 10% of 
government procurement expenditure in Australia.  
 
Utilities  
 
Australia has gone through 30 years of divestment and/or privatisation of public assets, including 
most utility assets. Generally, utilities have been privatised (or on long -term leases to the private 
sector) or are government corporations operating on a c ommercial basis. This means that state 
and territory governments do not directly control the procurement decisions of such utilities, with GPA/ACC/AUS/38  
 
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  their procurement decisions undertaken in accordance with commercial considerations, and outside 
government procureme nt frameworks.  
4.  The EU positively notes the removal of the reciprocity requirements for access to sub-
central entities (Annex 2).  
5.  The EU welcomes a phased withdrawal (as of 1 January 2019) of the exception for 
motor vehicles for central government entities (Annex 1) and other entities (Annex 3), 
as reflected in the notes in Annex es 1 and 3. The EU notes however, that the phased 
withdrawal of the exemption for motor vehicles does not concern the sub -central 
government entities (Annex 2). The reservation for t he motor vehicles is still contained 
in the note for Australian Capital Territory, New South Wales, Queensland, South 
Australia and Victoria. It appears that in the remaining three territories there is no 
motor vehicle production. The EU understands that p hasing out of the exception does 
not lead to any substantial improvement in respect to the sub -central government 
entities (Annex  2). The EU would therefore welcome Australia to give further 
explanations on the exception.  
Australia has been able to offer t he phased withdrawal of the exception for motor vehicles for 
central government entities (Annex 1) and other entities (Annex 3). Australia has never done this 
in a trade agreement before. The maintenance of the exception by some sub -central governments 
reflects the ongoing sensitivity. Australia has removed the note from Annex 7, which improves 
market access for GPA members to the procurement of motor vehicles in the three states and 
territories without the note.  
 
6.  The EU observes that the reservation relati ng to the preferences to SMEs has not 
been eliminated. The EU reiterates its request to remove this reservation from the 
General Notes under Annex 7.  
The inclusion of the SME note is essential for all Australian governments and covers schemes 
designed to ensure that Australian SMEs have an equal opportunity to participate in government 
procurement processes.  
 
7.  The EU positively notes that Australia re moved the security note (under G eneral 
Notes in Annex 7), on the understanding that the intention of this Note is already 
covered by Article II.3(e) and Article III (Security and General Exceptions) of the 
Agreem ent of Government Procurement.  
8.  The EU recalls its request that the legislation in States and territories providing for 
"Buy Local " requirements and var ious preferential treatment programmes should be 
fully aligned and made compatible with GPA provisions.  
State and territory "buy local" schemes are in line with GPA provisions and the commitments 
Australia has offered as part of our accession. These scheme s do not stop foreign companies from 
winning contracts in Australia, but seek to ensure that Australian SMEs have an equal opportunity 
to participate in government procurement processes.  
 
9.  The EU also requests Australia to provide detailed explanations on t he compatibility 
of the proposed new Commonwealth Procurement Rules (CPRs) with the GPA. Australia 
is also invited to inform the EU of the administrative stage of the legislative process. The 
EU refers to the more detailed submission made on behalf of the EU on 24 March 2017 in 
response to the "Inquiry into the Commonwealth Procurement Framework". In 
particular, Australia is invited to clarify how the provisions on standards and on the 
examination of economic benefit to the Australian economy comply with th e GPA 
provisions. First of all, could Australia explain how the requirement for compliance with 
an Australian standard, and only in the absence of such a standard with international 
one (CPR Art. 10.10), is compatible with the GPA req uirements as set out i n 
Article  X:2(b) of GPA. Could Australia also provide clarification how 'reasonable 
enquiries' are done in this context? Secondly, could Australia also provide detailed 
clarification on the way how the "economic be nefit to the Australian economy"  test (Art 
10.30) would be applied in a non -discriminatory manner towards foreign suppliers, 
taking into account Article IV(1) of GPA ?  GPA/ACC/AUS/38  
 
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  When implementing the changes to the Commonwealth Proc urement Rules (CPRs) on 
1 March  2017, the Commonwealth Government was mindfu l of its existing and future trade 
obligations.  As a result, Australia is of the view that the changes to the CPRs fully comply with the 
agreement on government procurement.  
 
Standards  
 
Australia would like to clarify that the CPRs, in particular CPR 10.10 , do not require compliance 
with an international standard only in the absence of an Australian Standard. CPR 10.9(c) clearly 
requires that specifications be based on international standards, when they exist and apply to the 
relevant procurement. CPR 10.10  is subsequent to CPR 10.9(c), and only applies where an 
Australian Standard was applicable, in accordance with CPR 10.9(c). Hence, the CPRs are 
compatible with Article X:2(b) of the GPA which states: procuring entities shall, where appropriate, 
… (b) base  the technical specification on international standards, which such exist; otherwise, on 
national technical regulations, recognized national standards or building codes.   
 
Further, to support the changes around standards in the CPRs, a definition of standa rds was added 
to the CPRs in Appendix B: "standards means a document approved by a recognised body such as 
Standards Australia, the International Organization for Standardization, the International 
Electrotechnical Commission or the International Telecommu nication Union… " 
 
Standards Australia adopts international standards wherever possible as Australia 's national 
standards. This is in line with Australia's obligations under the WTO's C ode of Good Practice for the 
Preparation, Adoption and Application of Standards  (Annex 3 of the Agreement to Technical 
Barriers to Trade), which requires the elimination of technical standards as barriers to international 
trade. This means Australian stand ards meet international standards wherever possible. Hence, 
the CPRs are compatible with Article X:2(b) of the GPA.  
 
The changes relating to compliance with standards and regulatory frameworks build on existing 
provisions in the CPRs and provide clarity to  procurement officers. These changes are consistent 
with Australia 's trade obligations as all tendering firms – domestic and foreign – are required 
equally to demonstrate their capacity to meet standards and comply with regulatory frameworks. 
Procurement o fficers are required to treat all tenders – domestic and foreign – equally in making 
their assessments and must apply the new rules in accordance with rule 10.9(c) of the CPRs which 
reflects Article X:2(b) of the GPA.  
 
Economic Benefit  
 
The requirement to assess economic benefit is not a test, it is one of many evaluation criteria that 
are considered as part of the value for money assessment an official undertakes when conducting 
a procurement.  
 
All suppliers – Australian and foreign – are given an equal op portunity to demonstrate the 
economic benefit to Australia and are given sufficient flexibility to demonstrate economic benefits. 
For example, foreign suppliers can demonstrate economic benefit through providing value for 
money and better use of government  resources.  
  
The CPRs set out very clearly that suppliers cannot be discriminated against due to their 
ownership, location or the origin of their goods and services (CPR 5.3). The CPRs are also very 
clear that the new rules must not be interpreted or appl ied in a manner that diminishes or negates 
non-discrimination (CPR10.1).  
 
Annex 1  – Central Government Entities  
 
Entities  
 
10.  The EU welcomes the addition of Australian Transport Safety  Bureau. There are 
currently 64  entities.  GPA/ACC/AUS/38  
 
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  11.  The EU recalls its request indicated in the observations on the initial offer aiming at 
full coverag e of entities at central level.  
Australia's initial and subsequent offers have been very comprehensive, reflecting our open, non -
discriminatory, and transparent government procurement  framework. Our second revised offer 
now covers all entities in FTAs we have with US, Japan, Korea, Singapore as well as agreed in the 
Trans -Pacific Partnership.  
 
Notes  
 
12.  A note on procurement of motor vehicles is maintained but only until 1 January 
2019. T he EU welcomes this improvement.  
13.  The scope of the N ote 4 .a. has been widened by including "Engines, Turbines and 
Components" in the table containing the list of goods, where the Agreement does not 
cover the Department of Defence procurement. The EU recall s that this provision had 
been eliminated previously (see comparison between initial and revised offer) and 
would request Australia to provide clarifications why it had been re -introduced.  
Due to a Secretariat formatting error, the line "Engines, Turbines  and Components FSC 28 " was 
omitted in the table in Note 4 of Australia 's revised offer of 30 September 2016. A corrigendum 
was issued on 14 October 2016 (GPA/ACC/AUS/17/Corr.1) correcting this omission.  
 
14.  The EU notes that exceptions should be kept limite d as they reduce the scope of 
application of the GPA.  
15.  Therefore, the EU recalls its requests concerning Notes 3 ., 4.a., 4.b., 4.d. (in its 
current numbering) on the initial offer from 10 February 2016.  
Note 3. (Note 2. in the offer of June 2017) relates to  the Australian Government Solicitor, which 
was absorbed by the Attorney -General's Department on 1 July 2015. The functions of the 
Australian Government Solicitor are not subject to the obligations of Australia's procurement 
framework and cannot be part of  a government procurement offer in an Australian trade 
agreement.  
 
Notes 4.a., 4.b., 4.d. in the offer of 2 June 2017 relate to the Department of Defence and are 
required by the Australian Government and are included in all of Australia's trade agreements with 
government procurement obligations.  
 
Annex 2 – Sub-Central Government Entities  
 
16.  The EU reminds that its comments to Australia's revised offer, in particular in 
respect to Annex 2, circulated by the EU on 22 December 2016 are still pertinent.  
Entities  and corresponding notes  
 
17.  The EU refers to its observations on the initial offer with respect to the coverage of 
sub-central government entities. The EU notes that the Australian second revised offer 
has not been changed in this respect and therefore does not meet the EU's request.   
Australia notes the EU's previous request that Australia expands its coverage of local procuring 
entities and the utilities sector in Annex 2.  
 
Australia cannot offer local procuring entities. Approximately 90% of procurement in  Australia is 
undertaken at the central (i.e. Australian Government) and State and Territory levels. This 
compares very well to GPA members.  
 
Australia is also not in a position to offer utilities for states and territories. As set out above, 
Australia has  gone through 30 years of divestment and/or privatisation of public assets including 
most utility assets. Generally, utilities have been privatised (or on long -term leases to the private 
sector) or are government corporations operating on a commercial basi s. This means that state GPA/ACC/AUS/38  
 
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  and territory governments do not directly control the procurement decisions of such utilities, with 
their procurement decisions undertaken in accordance with commercial considerations, and outside 
government procurement frameworks.  
 
Australian Capital Territory  
 
18.  The EU notes that the wording regarding services, in particular the utility services, 
is not precise enough. The EU requests Australia to consider using Provisional Central 
Product Classification (CPC Prov.), which can be fo und at:  
http://unstats.un.org/unsd/cr/registry/regcst.as p?Cl=9&Lg=1 . 
Australia, through a negative list approach, has offered ambitious and comprehensive coverage of 
services. We c an confirm that this note is required unchanged for the ACT to be able to provide 
this high level of coverage.  
 
Notes to Annex 2  
 
19.  The EU welcomes the removal by Australia of the reciprocity requirement for access 
to sub -central entities.  
Annex 3  – Other E ntities  
 
20.  The EU welcomes the addition of the Old Parliament House.  
21.  A note on procurement of motor vehicles by any entity listed in this Annex is 
maintained but only until 1 January 2019. The EU welcomes this change.  
22.  The EU refers to its request to expand  Annex 3 by covering GBEs at central level, in 
particular those operating in the utilities sectors.  
As set out above, Australia has gone through 30 years of divestment and/or privatisation of public 
assets including most utility assets. GBEs  are not covered under Australia's procurement 
framework. GBEs operate essentially as a company, being required to earn at least a commercial 
rate of return to justify the retention of assets in the business, and to pay commercial dividends 
from those retu rns. Australia's limited number of GBEs operate independently of other government 
entities, but may be subject to strategic control from relevant government ministers. The directors 
of a GBE develop business strategies and handle day -to-day management poli cies, including 
procurement. The Australian Government does not directly control the procurement decisions of 
GBEs, and accordingly, they are not able to be covered.  
 
Annex 5 - Services  
 
23.  The EU notes that Australia defines under 2 . the services that are not covered by the 
Agreement in a broad way. The EU requests Australia to consider using Provisional 
Central Product Classification (CPC Prov.), which can be found at:  
http://unstats.un.org/unsd/c r/registry/regcst.asp?Cl=9&Lg=1 . 
Australia, through a negative list approach, has offered ambitious and comprehensive coverage of 
services. We can confirm that the small number of services listed under 2. are required  unchanged 
for Australia to be able to provide this high level of coverage.  
 
Annex 7  – General Notes  
 
24.  The EU welcomes the rem oval of the security note (ex 2. c.). 
25.  The EU notes that the exclusion of any form of preference to benefit small and 
medium sized en terprises remains as broad as in the initial offer.  
26.  The EU refers to its request concerning the note on procurement funded by grants 
and sponsorship payments.  GPA/ACC/AUS/38  
 
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  This Note is necessary and is similar to the chapter text of Australia's existing trade agreement s 
with government procurement provisions. This Note relates to government purchasing funded by 
grants and sponsorship from the private and non -government sector. For example, in the 2013 
2014 financial year the Australian War Memorial received a A$1,000,00 0 sponsorship from BHP to 
fund the establishment of a World War One gallery. In the 2013 -2014 financial year, the National 
Museum of Australia received A$302,000 from the Australian Council for Arts to support travelling 
exhibitions.  
 
27.  With the first revise d offer from 30 September 2016 the note concerning unsolicited 
innovative proposals had been changed by providing a reference to Article XIII:1 of the 
GPA. The EU concerns about the reference to Article XIII:1 being very broad have not 
been addressed.  
Australia linked the note to Article XIII:1 of the GPA in response to EU concerns. The Note clarifies 
that limited tendering may be used for procurements in response to unsolicited innovative 
proposals. The Note is not for the purpose of avoiding competition, and does not prevent suppliers 
from the EU and other GPA members from making unsolicited innovative proposals.  
 
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