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ASDEFCON(Services)

HANDBOOKIncorporating Guidance On

Covering LetterConditions Of TenderDraft Conditions Of Contract

ASDEFCON (Services) Handbook

Amendment Certificate (V1.1) i

AMENDMENT CERTIFICATE – ASDEFCON (SERVICES) HANDBOOK

Amendment Effected

No. Date Latest Version Signature Date


Foreword i

FOREWORD The ASDEFCON (Services) Handbook Version 1.1 is a companion to the ASDEFCON (Services) template Version 1.1 and provides guidance to Defence drafters on the use of the ASDEFCON (Services) template. The Handbook is intended to assist drafters in preparing Requests For Tender (RFTs) based on ASDEFCON (Services) and in the process, facilitate a more efficient tender and contract process that reduces costs to both Defence and to Industry. Drafters should note that the Handbook is to be used in conjunction with specialist advice from Defence contracts officers. Drafters of RFTs should also familiarise themselves with any policy documents referenced in the Handbook and seek specialist advice to gain a full appreciation of the subject matter. The information contained in the Handbook is of a general and summary nature only. Users of this Handbook should note the disclaimer that follows this Foreword. The Handbook will be updated as changes are made to ASDEFCON (Services). I am pleased to release the ASDEFCON (Services) Handbook Version 1.1 in support of your contracting needs. Gillian Marks General Counsel - DMO March 2005

ASDEFCON (Strategic Materiel) Handbook

Foreword ii

DISCLAIMER: The ASDEFCON (Services) Handbook has been prepared for the guidance of ASDEFCON (Services) RFT drafters only. Nothing in this Handbook should be construed as a representation: a. as to the future conduct of the Commonwealth in particular tender processes or

contract negotiations; or b. as to the circumstances in which the Commonwealth will or will not exercise rights

under a contract based on the ASDEFCON (Services) template. The Handbook should not be relied upon as a substitute for legal, contracting policy or technical advice.


General Information (V1.1) i

GENERAL INFORMATION ON HOW TO USE THIS HANDBOOKPURPOSE OF THE ASDEFCON (SERVICES) HANDBOOK1. ASDEFCON (Services) Handbook is a guide for drafting the ASDEFCON (Services)

template. ASDEFCON (Services) is a proforma Request For Tender (RFT) for use inengaging professional service providers, consultants and other contractors to provideservices to Defence. By using a standard template for all acquisitions of services, theDepartment of Defence aims to minimise the cost of tendering and the duration ofnegotiations.

2. The Handbook provides drafters with information to assist in understanding the clauses inthe template and an explanation of their practical implications.

3. When considering use of ASDEFCON (Services) and its accompanying Handbook, draftersshould ensure that the template is appropriate for the acquisition type. For guidance onwhen to use ASDEFCON (Services) see ‘Provision of Services’ category as defined by theDefence Procurement Policy Manual (DPPM), and the Handbook Overview.

4. ASDEFCON (Services) is designed to be used for procurements that are both covered andnon-covered for the purposes of the Commonwealth Procurement Guidelines - January2005. For information on whether a procurement is covered see the Defence ProcurementPolicy Manual (DPPM), Version 5.0, Update 5.5, Section 1, Chapter 1.2.

STRUCTURE OF THE ASDEFCON (SERVICES) HANDBOOK5. The ASDEFCON (Services) Handbook is structured as follows:

� Preliminary pages – including the Cover Page, Amendment Certificate and anOverview of the ASDEFCON (Services) template;

� Guidance on the Covering Letter;

� Part 1: Guidance on the Conditions of Tender – including Annexes; and

� Part 2: Guidance on the Draft conditions of contract – including Attachments.

6. Parts 1 and 2 provide guidance on the clauses contained in ASDEFCON (Services). Thesections contained within these parts map exactly the structure and sequence of the clausesin ASDEFCON (Services).

DISSEMINATION OF THE ASDEFCON (SERVICES) HANDBOOK7. The ASDEFCON (Services) template and handbook are not available in hardcopy. The

ASDEFCON (Services) Handbook can be downloaded from the DEFWEB via the‘Contracting’ link on the Defence Materiel Organisation (DMO) homepage at the followingaddress:

http://intranet.defence.gov.au/dmoweb/sites/cpo/

8. The ASDEFCON (Services) Handbook is not available on the internet.

THE CONTRACTING HELP DESK9. Drafters will have access to a General Counsel Division help desk facility that has been

established to provide advice on contracting matters, including issues relating to theASDEFCON suite of tendering and contracting templates.

10. Drafters requiring specific operational contracting advice should in the first instanceapproach the contracting desk officer in their operating division. In the absence of acontracting desk officer, drafters may contact the Contracting Help Desk to obtain anappropriate contact for their operational area. If appropriate, General Counsel Division staffmay assist in arranging legal advice from a member of the Defence legal services panel.

11. Contact details for the Contracting Help Desk are:

Ph: 1800 100 605

Fx: +61 2 6266 7644

e-mail:[email protected]


General Information (V1.1) ii

CONFIGURATION MANAGEMENT OF THE ASDEFCON (SERVICES) HANDBOOK12. ASDEFCON (Services) Handbook is a dynamic document that will be amended on an “as

required” basis. A Document Change Proposal (DCP) proforma has been provided to assistin the standardisation of all proposals to amend ASDEFCON (Services) Handbook. A copyof the proforma is available via the “Contracting Link” at:

http://www.defence.gov.au/dmo

13. ASDEFCON (Services) Handbook is managed in accordance with the ASDEFCONConfiguration Management Plan.

RELEASE OF AMENDMENTS TO THE ASDEFCON (SERVICES) HANDBOOK14. Amendments to the ASDEFCON (Services) Handbook will be released through the issue of

a new version of the handbook. All new versions will be issued on the DEFWEB at the siteslisted in paragraph 7.


Overview of ASDEFCON (Services) (V1.1) i

OVERVIEW OF ASDEFCON (SERVICES)

Introduction to ASDEFCON (Services)

ASDEFCON (Services) is designed to replace DEFPUR 301: Proforma Request for Tender (RFT)(including Draft Short Form and conditions of contract) for the Provision of Consultancy/ProfessionalServices 1999. This Handbook provides guidance to individuals setting up a Request For Tender(RFT) using ASDEFCON (Services).

Three of the significant changes to DEFPUR 301 to bring it in line with the ASDEFCON suite oftendering and contracting templates are:

a. a change in terminology evident from the title of the template itself;

b. updated clauses to align with current Commonwealth procurement best practice;and

c. removing the need to distinguish, within the Contract itself, between a consultant, aprofessional service provider and a contractor. As such the Commonwealth nowcontracts for the ‘provision of services’, whether they are a consultancy,professional services or services performed by a contractor. The distinction is stillnecessary for ROMAN reporting purposes, and will be addressed later.

Use and Tailoring of ASDEFCON (Services)

ASDEFCON (Services) is designed to be used to engage consultants, professional service providersand other contractors to provide services to Defence. The template aims to reduce time and efforttaken by both Defence personnel and potential tenderers when tendering and contracting withDefence. Use of the template, as is, should be confined to situations where the services to beprocured are:

a. straightforward;

b. low risk;

c. low value (less than $5 000 000 (five million dollars)); and

d. of short to medium duration.

Format of ASDEFCON (Services)

ASDEFCON (Services) consists of four main parts:

a. Preliminary Pages;

b. Covering Letter;

c. Conditions of Tender with Annexes; and

d. Draft conditions of contract with Attachments, including the Statement of Work atAttachment A.

The clauses, Annexes and Attachments constituting ASDEFCON (Services) have been divided in totwo categories ‘Core’ and ‘Optional’. Any condition within ASDEFCON (Services) described as:

a. ‘Core’ is generally to be included in all RFTs and Contracts; and

b. ‘Optional’ is to be included in an RFT where the optional clauses meet theparticular project requirement.

Drafters may tailor the standard ‘Core’ and ‘Optional’ clauses, but this should be kept to a minium andmay only occur after the drafter has received specialist advice.

There are instances in the Conditions of Tender and draft Conditions of Contract where additionaldetails are required prior to the release of the RFT to industry. These are marked in the document asfollows:

[...BRIEF INDICATION OF INFORMATION REQUIRED TO BE INSERTED...].


Overview of ASDEFCON (Services) (V1.1) ii

There are other instances where relevant input will not be able to be ascertained until after selection ofthe preferred tenderer. These are marked in the document as follows:

(…INSERT AMOUNT…) i.e. curved rather than square brackets.

This Handbook will give advice on the choices that need to be made, however for more specificadvice, and for advice on those changes which need to be made for Services contracts likely to bevalued at greater than five million dollars, or of high risk or long duration, drafters should contact theContracting Help Desk.

ASDEFCON (Services) is designed to be used as a base document and drafters should be aware thatits use ‘as is’ may not always be appropriate. In such instances ASDEFCON (Services) should beused as a starting point for drafting and tailored specifically for the provision of those particularservices. Tailoring should be minimised and done in conjunction with expert advice from contractingspecialists such as staff in General Counsel Division.

Procurement Policy, the Defence Procurement Policy Manual and the ASDEFCON (Services)Handbook

The Defence Procurement Policy Manual (DPPM) is the primary reference point for all procurementundertaken within Defence. Section 4, Chapter 4.10 of the DPPM outlines the policy for contractingfor the provision of services within Defence. The purpose of this Overview is to summarise the keyissues involved in the procurement of services. In the event of any conflict between this Handbook andthe DPPM, the DPPM will take precedence.

Those wishing to contract for the provision of services should, in the first instance, consider whetherappropriately skilled Defence employees from another area within Defence are available to provide theservice. It may be possible to arrange for secondment of the officer(s) either for a specific period or tocomplete a specialist task. Further, all other cost effective avenues such as standing offers andendorsed supplier arrangements must be explored and considered. Drafters should note that if, afterexhausting the in-house resources and options for other procurement methods, a contractor still needsto be engaged, written justification for the decision should be provided and recorded for auditpurposes.

In this ASDEFCON (Services) Handbook V1.1 any reference to the Defence Procurement PolicyManual (DPPM) is a reference to the DPPM Version 5.0, Update 5.5.

General Considerations

The following issues should be considered prior to commencing a services procurement:

a. Standing Offer for Advertising Services - Advertising must be arranged through theexisting Defence standing offer for advertising services;

b. Film Australia - If films or audiovisual equipment goods or services are to bepurchased, Film Australia is a Commonwealth owned agency and has expertise inthis area of procurement;

c. Engaging ‘natural persons’ - Defence prefers not to contract with ‘natural persons’(see Section 4, Chapter 4.10 of the DPPM for further information);

d. Engaging Other Government Employees or Academics - When engagingCommonwealth or State Government employees, or persons already in anemployer/employee relationship (eg academics), the engagement must bearranged through the employer. Commonwealth or State Government employedofficers may not be eligible for a fee, but may be reimbursed for expenses;

e. Engaging a former Defence Employee - Where a service contract may be awardedto a former employee (or a Contractor employing that individual), considerationshould be given to that person’s previous Defence employment. Any appearanceof favouritism or unfair advantage is reduced if that person has not been employedby Defence in the last two years; and/or has not been employed by Defence in arole or capacity directly related to the task for which bids are sought. In mattersrelating to Defence procurement, the use by a contractor of any inside informationwhich has been gained by virtue of an employee’s former position with the


Overview of ASDEFCON (Services) (V1.1) iii

Commonwealth, can be perceived as giving them an unfair competitive advantageover others tendering for the work; and

f. Engaging a Retired Public Servant - Retired public servants can be engaged toprovide services, however the need to ensure that the person is sufficiently fit toundertake the task is essential. ComSuper should be advised when a person whoretired on invalidity grounds is being considered. In the case of officers who haveaccepted voluntary retrenchment, engagement as a service provider should not beconsidered within a short period of the retrenchment if the Department’s action inengaging the person would, under public scrutiny, appear to involve favouritism orprovide an unfair advantage to that person over other potential service providers.

Where a former employee has been identified as a potential contractor, the question arises as to whya current employee cannot do the task. If the answer to this question relates entirely to resourceavailability, then the use of a contractor would contravene Commonwealth policy of efficient andeffective use of Commonwealth resources (refer to the DPPM). Where the task requires expertise notavailable within Defence a contract is subject to the usual value for money considerations.

Providing Purchasing Authority and Financial Delegations to Contractors

In limited circumstances contractors may be provided with purchasing authority and/or financialdelegations with the power to exercise Proposal, Procurement and Liability approvals as an agent ofthe Commonwealth. Granting purchasing authority to Contractors should occur only in limitedcircumstances as the Commonwealth retains very little control over the procurement while remainingfully accountable for the expenditure of the public money involved.

DPPI 9/2002 Providing Purchasing Authority and Financial Delegations to Contractors, sets outthe policy and provides clauses in Annex A for drafters to include in contracts wherepurchasing authority is provided to contractors.

The clauses in Annex A state that the Contractor must exercise financial authority in accordance withCommonwealth legislation and relevant Defence policy. A Contractor is deemed to be an ‘official’when they perform financial tasks and spend public money. Such a person is subject to the FinancialManagement and Accountability Act 1997 (FMA Act) and must have regard to both it and the FinancialManagement and Accountability Regulations 1997 (FMA Regulations). Contractors exercisingproposal, procurement and liability approvals in any procurements (Simple, Complex or Strategic)must hold appropriate competencies or ensure that a person holding those competencies has beeninvolved in a material way during the development of the proposal and/or has provided advice duringthe procurement process.

Gazettal and Other Reporting Requirements

The DPPM identities the range of reporting requirements that must be considered when purchasinggoods and services. Agencies are required to provide information on:

a. all open business opportunities and contracts entered into that are valued at $10000 or more on the AusTender website (see DPPM, Section 5, Chapter 5.8); and

b. procurement activities of $100 000 or more on the Buy Australia website (see theDPPM Section 3, Chapter 3.12 of) and in accordance with the requirements of theInterim Defence Contracts Register (see DPPM Section 3, Chapter 3.11 andSection 5, Chapter 5.8).


Overview of ASDEFCON (Services) (V1.1) iv

Of particular relevance is the requirement that Defence report on the use of consultants andprofessional service providers to Parliament as part of the Defence Annual Report (see DPPM Section5, Chapter 5.8).

Distinguishing Between a Professional Service Provider, a Consultant and a Contractor

To comply with Commonwealth reporting requirements, all procurement areas must use the correctaccount code for ROMAN in order to distinguish between consultancy services, professional serviceproviders (PSP) and those services provided by a contractor. The person responsible for reporting inROMAN will need to independently determine what the nature of the services is, as this is notnecessarily identifiable by the particular profession/industry/trade involved, nor by representations orperceptions held by the party who will perform the contract.

For information on the reporting requirements for service providers to Defence, see the DPPMSection 5 Chapter 5.8.

A PSP is an external specialist engaged to exercise professional and/or technical skills in the deliveryof a service. The contract:

a. does not generally require a significant contribution to management decisionmaking processes; and

b. requires the PSP to perform a prescribed task as a result of managementdecisions.

A Contractor is an individual or organisation contracted to deliver goods and/or services. A Contractoris not under the control of Defence and is legally liable for the provision of goods or services under theContract. Costs for a Contractor should be recorded against the relevant activity e.g. training.

A Consultant is a particular type of Contractor, and is defined for reporting in the Annual Report. AConsultant conducts independent investigations, reviews or evaluations of policies, proposals oractivities. The Consultant will either:

a. provide information and advice on the development and/or refinement of theinvestigations, evaluation or review process to assist Defence management indecision making, or

b. assist Defence management in decision making. A Consultant does not implementchange.

Consequences of the Employer/Employee Relationship

Drafters should be aware of the potential consequences if an employer/employee relationship iscreated between the Commonwealth and a service provider or contractor. The employer/employeerelationship is a contractual arrangement. Where a contract creates the relationship ofemployer/employee between the Commonwealth and a service provider or contractor (whetherinadvertently, deliberately or by operation of law), it imposes special obligations on theCommonwealth. These may include:

a. payment of superannuation contributions into an approved/regulated fund for thebenefit of an employee;

b. liability for the actions of the individual;

c. withholding of PAYG tax (where applicable) from the worker’s salary or wages; and

d. provision of worker’s compensation coverage.

These responsibilities are set out in legislation and Defence’s failure to meet them may result in legalconsequences such as the payment of fines, and cause considerable embarrassment to theCommonwealth.

The DPPM (at Annex 3D) provides a comprehensive flow chart to assist drafters in determiningwhether or not a person is entitled to superannuation benefits from the Commonwealth. It alsosets out the tests to determine whether a person is entitled to superannuation cover under theSuperannuation (Productivity Benefit) Act 1988.


Overview of ASDEFCON (Services) (V1.1) v

In deciding whether a person (‘the worker’) is an employee or a contractor, the courts have developeda test based on a number of factors, often referred to as the ‘indicia of employment’. Where someindicia support an employment relationship and others do not, the courts will balance the factors tocome to a conclusion. The factors identified as being of most importance include the following:

a. the extent to which one party is subject to the direction and control of the otherparty in the manner in which they do their work. If the worker works under thedirection and control of Defence in their day-to-day work, this suggests the workeris an employee;

b. the mode of remuneration of the worker. If, for example, the worker is paid byresults, this suggests the worker is an independent contractor, whereas anemployee is normally paid on an hourly basis;

c. who provides and maintains necessary equipment. If it is the worker, this suggestshe or she is an independent contractor;

d. the obligation to work. If the worker has the right to dictate his or her hours of workand may refuse tasks, this suggests the worker is an independent contractor. Anemployee would normally undertake work as directed by a supervisor and work anagreed number of hours per week;

e. the provision of leave and other entitlements. These entitlements are consistentwith an employment relationship;

f. the place of work. If the work is undertaken at the worker’s own premises or office,this suggests the worker is an independent contractor. An employee is more likelyto work from the employer’s premises, although there is a degree of flexibility in themodern workforce with some employers permitting employees to work from home;

g. the ability of the worker to delegate the work. A right to delegate work to otherssuggests the person is an independent contractor. If the employer has a right toinsist that the worker perform the work, this suggests the worker is an employee;

h. whether income tax is deducted by the employer. However, this factor hasreduced in significance over time as the tax laws have changed;

i. whether the employer has a right to the exclusive services of the worker. If so thissuggests the worker is an employee; and

j. the degree to which the worker is integrated into, and is treated as part of theemployer’s enterprise, the more likely they are an employee.

It is apparent that the courts do not feel bound to accept that the status of the parties is as specified inthe contract, if this does not reflect the reality of the relationship between the parties. So, for example,including a clause providing that the contractor is not an employee of Defence will not prevent a courtfinding that the person was an employee, if other factors in the relationship between the parties pointclearly to this conclusion.

Nevertheless, the terms of the contract are an important factor in establishing the intention of theparties. Only where this intention is not supported by the subsequent conduct of the parties will thecourts look behind it.

As this is a steadily evolving area of law, where drafters are in any doubt as the potential statusof a proposed contractor, specialist advice should be sought from General Counsel Division.


Guidance on Covering Letter (V1.1) i

COVERING LETTER

Overview

The purpose of the covering letter is to:

a. invite the company to submit a tender in response to a RFT;

b. provide background information on the tender; and

c. give details of the tender process.

All requests for documentation should be recorded accurately so that the Commonwealth cancontact potential tenderers if an amendment is issued.

Prior to sending the letter, drafters should insert the following details when prompted in the templateletter:

a. address and contact details of the tenderer;

b. the area within Defence responsible for releasing the RFT;

c. the RFT number;

d. a brief description of the Services required; and

e. background information on the project, including project phase information.

The description of the Services required may be a reduced version of the scope of the servicesoutlined in the draft Statement of Work (Attachment A).

The covering letter also advises tenderers of:

a. the Australian Defence Contracting (ASDEFCON) template used for preparation ofthe RFT;

b. the tender closing details; and

c. details of the Commonwealth Contact Officer should they have any questions inrelation to the RFT.

The Commonwealth Contact Officer must keep records of conversations with tenderers andtake care to avoid any language that may be relied on or misconstrued as either a promise, anoffer, or a verbal contract. The Commonwealth Contact Officer must also ensure that theyprovide the same information to each potential tenderer so that there is no appearance of biasor unfair advantage regarding the conduct of the tender process.

Option for when classified material forms part of the RFT

For any RFT that contains classified material, drafters must include the optional paragraph and inserta list of any classified documents and its classification level.

The Commonwealth prefers not to transfer classified material to tenderers, and similarly prefers thattenderers do not transfer classified material as part of their response to the RFT. Where the transfer ofclassified material is unavoidable, a separate provision for the receipt of and access to the materialmust be included in the RFT. Drafters should consult the Defence Security Manual if unsure of thebasic requirements for the transmission of classified material.

Advice on the manner in which a document is assigned a security grading may be obtainedfrom the Defence Security Authority.

Reliance On Information Included in the Covering Letter

The covering letter does not form part of the RFT and as such (in accordance with clause 2.4.2b of theconditions of tender) a tenderer should not rely on the information provided in it. Even so, draftersshould ensure that the information included in the covering letter is accurate and not misleading, asthis could lead to a claim (based upon estoppel or misrepresentation) against the Commonwealth.

To circumvent potential claims by tenderers against the Commonwealth, the covering letter containsan express statement that the proposed schedule included in the letter is subject to change at any


Guidance on Covering Letter (V1.1) ii

time and should not be relied upon. This statement is not to be removed from the covering letterunless the drafter has obtained specialist legal advice.

Commonwealth Signatory

Arrangements for putting a contract in place must comply with the Financial Management andAccountability Act 1997 (FMA Act) and its subordinate legislation including: Financial Managementand Accountability Regulations 1997 (FMA Regulations); Financial Management and AccountabilityOrders 1997 as well as the Commonwealth Procurement Guidelines - January 2005; and the DefenceChief Executive Instructions.

In particular Proposal approval, Procurement approval, Contract approval and a Contract Signatoryare required.

It is recommended that the delegate signing the covering letter of the RFT be the Procurementapproval delegate. A person delegated as Procurement approver is to give approval onlywhere satisfied that the procurement method chosen is an efficient and effective means ofachieving value for money.

For further information concerning procurement delegations please refer to the DPPM, Section1, Chapter 1.4.


Table of Contents (V1.1) 1

TABLE OF CONTENTS

PagePART 1 – CONDITIONS OF TENDER

1. GENERAL INFORMATION AND TENDER LODGMENT………………………….… 1-11.1 Interpretation of Terms (Core)…………………………………………………………… 1-11.2 Inconsistency (Core)………………………………………………………………………. 1-1

1.3 Amendment of RFT (Core)………………………………………………………..……… 1-1

1.4 Contact Officer for RFT Inquiries (Core)………………………………………………... 1-21.5 Industry Briefing (Optional)……………………………………………………………….. 1-3

1.6 Part, Joint and Alternative Tenders (Core)……………………………………………... 1-3

1.7 Alterations, Erasures or Illegibility (Core)……………………………………………….. 1-31.8 Unintentional Errors of Form (Core)…………………………………………………….. 1-3

1.8 Copies of Tenders (Core)………………………………………………………………… 1-3

1.9 Lodgment of Tenders (Core)……………………………………………………………... 1-31.10 Preparation and Transmission of Classified Tenders (Optional)…………………….. 1-3

1.11 Defence Security Clearance Requirements (Core)……………………………………. 1-3

1.12 Australian Government Requirements (Core)………………………………………….. 1-4

2. MATTERS CONCERNING TENDER RESPONSE……………………………………. 2-12.1 Period of Tender (Core)…………………………………………………………………... 2-12.2 Language of Tenders (Core)……………………………………………………………... 2-1

2.3 Tender Preparation (Core)……………………………………………………………….. 2-1

2.4 Tenderers to Inform Themselves………………………………………………………… 2-12.5 Use of Tender Documents (Core)……………………………………………………….. 2-2

3. EVALUATION OF TENDERS…………………………………………………………… 3-13.1 Cost Investigation of Sole Source Tenders (Optional)………………………………… 3-1

3.2 Tender Evaluation (Core)………………………………………………………………… 3-1

3.3 Minimum Content and Format Requirements (Optional)……………………………… 3-13.4 Conditions of Participation (Optional)…………………………………………………… 3-1

3.5 Essential Requirements (Optional)……………………………………………………… 3-2

3.6 Evaluation Criteria and Process (Core)…………………………………………………. 3-23.3 Use of Former Defence Personnel in Tender Preparation (Optional)……………….. 3-4

3.4 Negotiation (Core)…………………………………………………………………………. 3-5

3.5 Debriefing of Tenderers (Core)…………………………………………………………... 3-5

AnnexesA. Declaration by Tenderer (Core)………………………………………………………….. A-1



B. Statement of Non-Compliance (Core)…………………………………………………... B-1C. Information to be Provided by Tenderers (Core)………………………………………. C-1

D. Employer Sponsored Superannuation Cover (Core)………………………………….. D-1

PART 2 – CONDITIONS OF CONTRACT

1. CONTRACT FRAMEWORK……………………………………………………………... 1-11.1 Definitions (Core)………………………………………………………………………….. 1-1

1.2 Interpretation (Core)………………………………………………………………………. 1-11.3 Commencement of Operation (Core)…………………………………………………… 1-2

1.4 Entire Agreement (Core)………………………………………………………………….. 1-2

1.5 Precedence of Documents……………………………………………………………….. 1-21.6 Contracted Requirement (Core)…………………………………………………………. 1-2

2. ROLES AND RESPONSIBILITIES……………………………………………………… 2-12.1 Commonwealth Representative (Core)…………………………………………………. 2-1

2.2 Notices (Core)……………………………………………………………………………… 2-1

3. PROVISION OF THE SERVICES……………………………………………………….. 3-13.1 Language and Measurement (Core)…………………………………………………….. 3-1

3.2 Government Furnished Material (Optional)…………………………………………….. 3-1

4. INTELLECTUAL PROPERTY…………………………………………………………… 4-14.1 Ownership of Intellectual Property (Core)………………………………………………. 4-14.2 Intellectual Property Licence (Core)…………………………………………………….. 4-2

4.3 Provision of Technical Data (Core)……………………………………………………… 4-2

4.4 IP Schedule (Core)………………………………………………………………………... 4-24.5 Release to Third Parties (Core)………………………………………………………….. 4-2

4.6 Moral Rights (Core)……………………………………………………………………….. 4-2

5. PRICE AND PAYMENT………………………………………………………………….. 5-15.1 Price and Price Basis (Core)……………………………………………………………... 5-1

5.2 Payment (Core)……………………………………………………………………………. 5-15.3 Ownership and Control of Services (Core)……………………………………………... 5-1

5.4 Taxes and Duties (Core)………………………………………………………………….. 5-1

5.5 Investigation of Costs and Prices (Optional)…………………………………………… 5-1

6. INSURANCE AND LIABILITY…………………………………………………………… 6-16.1 Indemnity (Core)…………………………………………………………………………… 6-16.2 Insurance (Core)…………………………………………………………………………... 6-1



7. WARRANTIES…………………………………………………………………………….. 7-17.1 Fitness for Purpose (Core)……………………………………………………………….. 7-1

7.2 Warranties and Representations (Core)………………………………………………… 7-17.3 Conflict of Interest (Core)…………………………………………………………………. 7-1

8. CONTRACT MANAGEMENT……………………………………………………………. 8-18.1 Change to the Contract (Core)…………………………………………………………… 8-1

8.2 Waiver (Core)……………………………………………………………………………… 8-1

8.3 Commercial-in-Confidence Information (Core)………………………………………… 8-18.4 Assignment and Novation (Core)...……………………………………………………… 8-1

8.5 Negation of Employment and Agency (Core)…………………………………………... 8-1

8.6 Commonwealth Access (Core)…………………………………………………………... 8-28.7 Contractor Access (Core)………………………………………………………………… 8-2

8.8 Subcontracts (Core)………………………………………………………………………. 8-2

8.9 Defence Security (Core)………………………………………………………………….. 8-28.10 Specified Personnel (Core)..…………………………………………………………….. 8-3

8.11 Post Defence Separation Employment (Optional)……………………………………... 8-3

9. POLICY AND LAW……………………………………………………………………….. 9-19.1 Applicable Law (Core)…………………………………………………………………….. 9-1

9.2 Australian Content (Optional)..…………………………………………………………… 9-19.3 Policy Requirements (Core)……………………………………………………………… 9-1

9.4 Occupational Health and Safety (Core)…………………………………………………. 9-1

9.5 Severability (Core)………………………………………………………………………… 9-19.6 Privacy (Core)……………………………………………………………………………… 9-1

10 DISPUTES AND TERMINATION………………………………………………..……… 10-110.1 Resolution of Disputes (Core)…………………………………………………………… 10-1

10.2 Contractor Default (Core)………………………………………………………………… 10-1

10.3 Right of Commonwealth to Recover Money (Core)…………………………………… 10-110.4 Survivorship (Core)……………………………………………………………………….. 10-2

EXECUTION PAGE………………………………………………………………………..………. EX-1

AttachmentsA. Statement of Work (Core)………………………………………………………………… A-1



B. Payment (Core)……………………………………………………………………………. B-1C Intellectual Property Schedule (Core)…………………………………………………… C-1

D. Commercial-in-Confidence Information (Core).………………………………………... D-1

ASDEFCON (Services) Handbook PART 1

Guidance on Conditions of Tender (V1.1) 1 - 1

1. GENERAL INFORMATION AND TENDER LODGEMENT

This section explains the administrative procedures for the tender and the basis on which theCommonwealth will be accepting and evaluating the tender response(s).

1.1 Interpretation of Terms (Core)

Clause 1.1 of the conditions of tender provides that terms used in the RFT have the same meaning asthose in the definitions section of the draft conditions of contract. Defined terms or those terms thathave specific meaning in the Contract, are capitalised in both documents, for example‘Commonwealth Representative’. Some common terms are also defined for the purposes of theContract but are not capitalised, for example ‘month’.

1.2 Inconsistency (Core)

In the event that there is inconsistency between different parts of the RFT, clause 1.2 specifies thatthe provision in the higher ranked document will take precedence. The parts of the RFT have beenlisted in clause 1.2 in order of precedence as follows:

a. the conditions of tender detail the tendering process and have the highestprecedence. In the event of any inconsistency the documents referred to inclauses 1.2.1a. and 1.2.1b. will take precedence over any element of the draftcontract;

b. annexes to the conditions of tender contain the information required fromtenderers and have the second highest precedence;

c. the draft conditions of contract identify the legal rights and obligations of thesuccessful tenderer in performing the work and are third in the order ofprecedence;

d. the draft Statement of Work (Attachment A to the draft conditions of contract) takesfourth priority; and

e. any Attachments to the draft conditions of contract are lowest in the order ofprecedence.

Clause 1.2 does not apply where there is inconsistency between provisions contained within thesame document, or within a group of documents with the same level of precedence. This type ofconflict can only be resolved by interpretation of the RFT as a whole, so drafters must make everyeffort to ensure that there is no conflict or discrepancy either internally within the provisions of thesame document, or within different documents in the RFT.

1.3 Amendment of RFT (Core)

Clause 1.3.1 of the conditions of tender gives the Commonwealth the right to amend the RFTprovided the tenderer has been given timely written notice. What constitutes ‘timely’ notice issomething that can only be determined on a case by case basis. Generally speaking if theamendment impacts on a tender response, or changes an interpretation of the tender documentation,a minimum of one week from receipt of the change notification for tender responses would normallybe considered appropriate.

For guidance on determining whether a procurement is ‘covered’ or ‘non-covered’ for thepurposes of the Commonwealth Procurement Guidelines – January 2005, see the DPPM –Section 1, Chapter 1.2.

Clause 1.3.3 (Option A) provides the Commonwealth with a right to terminate the tender process atany time. This option must be included where the procurement is a ‘covered’ procurement for thepurpose of the Commonwealth Procurement Guidelines – January 2005. The right contained withinthis option does not give rise to an absolute discretion in the Commonwealth to terminate the tenderprocess for any reason. In accordance with paragraph 8.41 of the revised CommonwealthProcurement Guidelines, the Commonwealth should exercise this right to terminate in relation to‘covered procurements’ only in circumstances where it determines that it is not in the public interest toaward a contract. See DPPM Section 5, Chapter 5.7 for further guidance.



The Guidance on the Mandatory Procurement Procedures provides some examples of situations inwhich it may not be in the public interest to award a contract. These are only examples and it may beappropriate to terminate a tender process on other grounds. Prior to terminating a tender process,guidance must be sought from a contracting specialist or the Contracting Help Desk.

Clause 1.3.4 (Option B) confirms the Commonwealth’s absolute discretion to terminate the tenderprocess at any time. This option must be included where the procurement is a “non-covered”procurement for the purpose of the Commonwealth Procurement Guidelines – January 2005. Wherea non-covered procurement the Commonwealth prefers to retain a greater discretion to terminate thetender process at any time. It is important to note, however, that advice should always be obtainedfrom General Counsel Division prior to any action being taken to terminate a tender process. Tenderprocesses should be terminated only in exceptional circumstances. Where the Commonwealthterminates a tender process in accordance with this clause and has otherwise dealt with tenderers inaccordance with principles of fairness and the conditions of tender it is unlikely that theCommonwealth will be under an obligation to compensate any tenderer (see DPPM, Section 2Chapter 2.1). If a compensation claim is received from a tenderer, advice should be sought fromGeneral Counsel Division before any payment is considered.

The Commonwealth Procurement Guidelines provide that the Commonwealth must publish all openapproaches to the market on the AusTender website (www.tender.gov.au) in accordance with therequirements set out in the Guidance on Procurement Publishing Obligations. Publications may alsooccur elsewhere, but the content of any notice must be identical to the AusTender notice.

Request documentation must be made available, to the extent practicable:

a. for download from AusTender where an open tender process has been adopted;and

b. electronically to suppliers where a selected tender process has been adopted.

Documentation will be considered to be electronically available where it is:

a. provided on AusTender;

b. sent to a supplier by e-mail, facsimile or otherwise transmitted to the recipient byanother electronic means; or

c. made available on the Defence internet website.

Circumstances in which it may not be practicable to include request documentation on AusTender orprovide documentation electronically to a supplier include where the request documentation:

a. contains sensitive information including Commercial-in-Confidence Information,Technical Data or national security classified information; or

b. is large in volume such that it cannot be easily included in AusTender ordistributed by e-mail or facsimile.

Where it is not practicable to include request documentation on AusTender or provide it electonicallyto a supplier, the request documentation must be promptly provided through alternative means. Anyamendment or variation to a RFT must be given the same publication as any original notice. Hence,where a RFT has been published on AusTender any amendment or variation to a RFT must also bepublished on AusTender. The user registration facility of the AusTender website can also be used tosend out notices to all potential tenderers who have downloaded the original RFT from that website.For further guidance on the use of the AusTender website see the DPPM Section 4, Chapter 4.6.

1.4 Contact Officer for RFT Inquiries (Core)

Drafters must insert the contact details of the Contact Officer in clause 1.4. This officer should be bothavailable and knowledgable enough to answer questions on the tender throughout the tenderpreparation time, and should be the only one to do so. This ensures questions are answeredconsistently throughout the period of the tender. Frequently the contracts officer or project managerwill be used as the contact officer, however this is not required. Clause 1.4 makes it clear thatquestions posed to the contact officer must be in writing. Any response should also be in writing, anda record kept and filed. This enables the Commonwealth to keep track of responses and ensures theprobity of the process. In order to give fair and equitable treatment, the Commonwealth may circulate



the question asked by a tenderer (and the response given) to all other tenderers, but this must bedone in a way that does not disclose the identity of the potential tenderer or any Commercial-In-Confidence Information.

1.5 Industry Briefing (Optional)

If Defence elects to conduct an Industry Briefing, optional clause 1.5 must contain all the relevantdetails. Attendance at an Industry Briefing is not a prerequisite for tendering and under nocircumstances should a tenderer be excluded from consideration because of non attendance at anIndustry Briefing.

If a classified briefing is required drafters must include clause 1.5.2 in the RFT, as this clause requiresthe tenderers to provide details about the security clearance of any of their representatives who wishto attend the Industry Briefing. All representatives of prospective tenderers attending the briefing mustpossess a personal security clearance at the required level which has been confirmed with theDefence Security Authority for currency. Sufficient time should be allowed between the nominationclosing date and the date of the briefing to enable the Defence Security Authority to confirm eachsecurity clearance.

Clause 1.5.3 contains a disclaimer about any information provided at an Industry Briefing andprovides the Commonwealth with some protection in the event that statements made at the IndustryBriefing are not supported by the RFT. In any event, officers should ensure that the information, (bothoral and written) released at the Industry Briefing is accurate, truthful and consistent with the RFT.

1.6 Part, Joint and Alternative Tenders (Core)

A joint tender is one in which two or more companies tender as one, and combine their response tothe RFT. A part tender is one which addresses only a part of the requirements of the RFT. TheCommonwealth prefers to enter into a contract with a single entity for the entire requirement as thisensures that one entity is legally responsible for the successful delivery of the requirement. Reflectingthis preference, clauses 1.6.1 and 1.6.2 notify tenderers that the Commonwealth will not considereither part or joint tenders.

An alternative tender is one which does not fully address the requirements of the draft Statement ofWork but purports to meet the functional objectives. When the Commonwealth decides it will consideralternative tenders, drafters should determine how these will be evaluated in order to ensure that theyare treated fairly and consistently with other tenders.

If alternative tenders are to be considered, drafters should ensure that clauses 1.6.4 and 1.6.5are inserted. If alternative tenders are not to be considered, drafters should ensure that clause1.6.3 is inserted.

1.7 Alterations, Erasures or Illegibility (Core)

Where a tender contains uninitialled alterations or erasures or where prices or other information arenot clearly and legibly stated, the Commonwealth may not be able to rely upon the informationprovided. Although an uncertainty as to what has been tendered may be resolved by seekingclarification from the tenderer, it is important to ensure that no incentive exists for tenderers to submitinformation in a way that allows them to influence the interpretation of the information after tendershave closed, as at this time tenderers may have more market information about other tenders.

Since the tender forms the basis of the resultant contract, it must be clear, unambiguous and capableof only one interpretation. Thus, the Commonwealth is entitled to exclude a tender from furtherconsideration if on receipt, any alteration or erasure is not clearly initialled by the tenderer, or thepricing or other information is not clear and legible.

1.8 Unintentional Errors of Form (Core)

Clause 1.8 provides the Commonwealth with a discretion to allow tenderers an opportunity to correctunintended errors of form in their tender documentation. If this discretion is exercised, then the sameopportunity must be extended to all tenderers.

An unintentional error of form is an error that the Commonwealth is satisfied:

a. represents incomplete information not consistent with the tenderer’s intention orcapabilities at the time the tender was lodged; and



b. does not materially affect the competitiveness of the supplier’s bid.

Errors of form are to be distinguished from conditions for participation, which are the basicrequirements with which a supplier must be able to demonstrate compliance in order to participate ina procurement. Tenders submitted in relation to a ‘covered procurement’ that fails to meet allconditions for participation must be excluded from evaluation. The Commonwealth has no discretionto allow a tenderer to correct failures to meet the conditions of participation.

1.9 Copies of Tenders (Core)

In clause 1.9, drafters must insert the required number of copies of the tender. In deciding how manycopies will be required, consideration should be given to the costs to tenderers of providing numerouscopies, the costs to Defence of printing additional copies and the burden that hard copies place on thetender lodgement and opening procedures.

It may be advisable for drafters to request electronic copies of the tender documentation as thisenables tenderers to provide one hard copy and one electronic copy of the tender documentation. Ifelectronic copies will be permitted, then drafters must insert the format in which the electronic copiesare required in optional clause 1.9.2. Where there is a discrepancy between a copy and the original,the original will take precedence.

1.10 Lodgment of Tenders (Core)

Current Defence procurement policy is that RFTs and other ‘request’ documents must specify boththe exact time and date of the tender closing time. Any tender submitted after this time will be markedas a late tender and accepted for evaluation only at the discretion of the Commonwealth. For moreinformation refer to the DPPM Section 5, Chapter 5.5.

Currently, Defence has not endorsed any Electronic Tender Box process. Accordingly,Electronic Tender Box solutions are not to be employed for Defence tendering. For moreinformation refer to the DPPM, Section 5, Chapter 5.5.

If tender documents are directed to a tender closing box, drafters must contact the tenderclosing officer prior to release of the RFT to discuss dates. There are a number of lodgmentsites for tenders for Defence around Australia. Drafters should refer to the DPPM Annex G forspecific tender box information.

RFTs must specify the exact closing time and date for the submission of tenders. A tender closingtime of 12:00 noon is specified in the draft RFT. This time has been selected as it enablesCommonwealth personnel sufficient time, following the close of tenders, to record and processtenders prior to the close of business. A tender closing time of 12:00 noon also ensures that theCommonwealth will be aware of any late tenders that are received.

If a different tender closing time is selected, drafters should:

a. liaise with local tender closing officers regarding local arrangements, for example,an establishment may mandate that all public invitation tenders close 12:00 noon,irrespective of closing day;

b. avoid the use of the term ‘Close of Business’ as this phrasing may causeconfusion in different time zones;

c. consider using a tender closing period earlier than 5pm on a Friday so that tenderdocuments can be opened at a convenient time;

d. give due consideration to the impact that the tender closing time will have onCommonwealth personnel involved with the receipt and opening of tenders; and

e. consider the ability of the Commonwealth to determine whether tenders receivedwere submitted prior to the tender closing time.

.



1.11 Preparation and Transmission of Classified Tenders (Optional)

If the tender will be classified, then clause 1.11 will be necessary. If classified content is unavoidable,Australian tenderers are required to prepare and transmit tenders containing classified content inaccordance with the appropriate guidance. Overseas tenderers must prepare and transmit tenderscontaining classified content in accordance with the industrial security regulations issued in theircountry and use the diplomatic bag arrangements of their own country where transmission is bydiplomatic bag.

Where only part of a tender response contains classified content, tenderers may segregate theclassified part from the remainder of the tender and transmit the parts separately. However both partsof the tender must be lodged by the Tender Closing Time.

1.12 Defence Security Clearance Requirements (Core)

This clause does not impose a requirement for every tenderer to undergo the security clearanceprocess. If the successful tenderer is required to perform work at facilities and sites with restrictedaccess, then the Commonwealth requires that the tenderer undergo the appropriate securityclearance process. If a tenderer indicates an unwillingness to undergo the security clearanceprocess, the Defence Security Authority should be consulted in relation to the current security statusof the tenderer and their personnel. The Defence Security Manual provides guidance on minimumCommonwealth and Defence security requirements where purchasing and contracting activities havea security component. This can be accessed on the Defence Intranet at http://intranet.defencegov.au/dsm/.

1.13 Australian Government Requirements (Core)

The purpose of clause 1.13 is to notify tenderers that they should familiarise themselves with theCommonwealth policy that applies to the RFT. This requirement is also referenced in clause 9 of thedraft conditions of contract.

Clause 1.13 also ensures contractors acknowledge that:

a. as a result of Defence’s reporting responsibilities to Parliament, any resultantcontract shall be subject to Commonwealth legislative, administrative andaccountability requirements; and

b. certain information relating to the successful tender will be published on theCommonwealth Purchasing and Disposals Gazette.

Further guidance on these requirements can be found in the DPPM Section 3, Chapter 3.10.



2. MATTERS CONCERNING TENDER RESPONSE

Clause 2 outlines the terms of the response to the RFT. It gives reference to the Annexes, explainsthe language to be used, states how long the tender should remain open, and identifies the rulesunder which the Commonwealth will accept tenders.

2.1 Period of Tender (Core)

In clause 2.1 drafters must insert the period during which the tender is to remain open for acceptance.During this period the tender, including tender prices, may not be varied by the tenderer. This is toallow the Commonwealth enough time to evaluate the tenders and negotiate with the successfultenderer. If this period expires, tenderers may have an opportunity to ‘revalidate’ their offer. If theperiod of the tender expires, assistance should be obtained from General Counsel Division.

Drafters should be certain that the offer period is long enough to enable the Commonwealth toenter into an agreement with the Contractor.

The Commonwealth may seek an extension of the tender validity period prior to expiry of the originalperiod under clause 2.1.2. A tenderer is under no obligation to extend and may allow their tender tolapse.

2.2 Language of Tenders (Core)

Clause 2.2.1 provides that the tender and all supporting documentation must be in English. Thetenderer has responsibility for the accuracy of the translated tender which removes theCommonwealth’s responsibility for any errors or ambiguities that may occur during the translation oftendered information.

The National Measurement Act 1960 states that, with the exception of imported or exported supplies,a contract entered into in Australia for a measured volume, weight or other physical quantities ofgoods must be expressed in ‘Australian legal units of measurement’ otherwise the contract is void. Soclause 2.2.2 allows for units other than Australian legal units to be used where this is specified in theRFT, for example where the goods are imported.

2.3 Tender Preparation (Core)

Tenderers respond to the RFT by completing the Annexes. As a result, drafters must ensure that theAnnexes:

a. contain all of the information necessary to evaluate tenders against the tenderevaluation criteria;

b. clearly state the nature and extent of the required information; and

c. do not ask for information in excess of that necessary to properly evaluate tenders.

2.4 Tenderers to Inform Themselves (Core)

Clause 2.4.1 outlines the assumptions upon which each tenderer should base its tender and notifiestenderers of the types of investigations that the Commonwealth assumes each tenderer has madebefore lodging a tender. These provisions provide some protection to the Commonwealth by limitinga tenderer’s ability to argue that it was unaware of any particular fact that was expressly referred to inthe RFT or was discoverable through reasonable inquiries. It also allows drafters to refer to allapplicable Defence policy and legislation without including the documents in the RFT.

Drafters should note that ‘reasonable inquiries’ is a matter of judgment and, if the material willhave a significant impact on the tenderer, especially in relation to pricing, it should beexpressly referred to, or included, in the RFT.

Clause 2.4 does not provide absolute protection for the Commonwealth. If a representation orstatement is made by the Commonwealth then the legal doctrines of estoppel and misrepresentationmay still apply to require the Commonwealth to act in accordance with the representation. If a changeis required to be made to the RFT, then the RFT should be formally amended through the process inclause 1.3 and the amendment distributed to all recipients of the RFT.



2.5 Use of Tender Documents (Core)

Commonwealth procurement policy requires that all tenders be treated in confidence and onetenderer’s information must not be conveyed to other tenderers. This obligation does not override thepublic accountability requirements, including disclosure to Parliament and its committees, with whichDefence must comply.

The obligation of confidentiality must be provided to all tenderers and to all tender material. Thisobligation of confidentiality must be respected during and after the RFT process. An exception existsin respect to tenderer questions. The Commonwealth retains the right to forward this material to allother tenderers participating in the tender process. However, the material must only be madeavailable on a non-attributed basis and without disclosing any Commercial-in-Confidence Information.

Tenderers are still required to identify material that they consider as Commercial-in-Confidence sothat this material may be appropriately dealt with when complying with the Commonwealth’s generaldisclosure obligations such as those requiring disclosure of contract details once a contract has beenawarded to a successful tenderer. Nevertheless some elements of the successful tender maycontinue to be protected, for example, the tenderer’s pricing basis and profit margins. Identification ofCommercial-in-Confidence Information may also be an important consideration in any requireddisclosure under the Freedom of Information Act 1982 or Parliamentary Committee Processes.

Under clause 2.5.2, tender documentation may only be supplied to third parties for the purposes ofassisting the Commonwealth in tender evaluation and the preparation of any resultant contract. Thisis particularly relevant where the Commonwealth hires a Professional Service Provider to assist in theevaluation of tenders. The Commonwealth is required to obtain deeds of confidentiality from any thirdparty the Commonwealth wishes to disclose tender information to for the purpose of evaluation.Where the Commonwealth needs to disclose tender information to third parties for reasons other thanthose set out in clause 2.5.2, the Commonwealth must obtain the written consent of the tenderer priorto any disclosure being made.

Notwithstanding the Commonwealth’s rights, the tenderer retains ownership of all Intellectual Propertyembodied in their tender. Drafters should ensure that the tenderer’s ownership of Intellectual Propertyin the tender is appropriately reflected in any deed of confidentiality entered into between theCommonwealth and a third party.

General Counsel Division can assist with advice on deeds of confidentiality.



3. EVALUATION OF TENDERS

3.1 Cost Investigation of Sole Source Tenders (Optional)

Clause 3.1 should only be inserted into Sole Source RFTs. This clause allows cost investigation ofthe tenderer’s pricing to ensure the Commonwealth is achieving value for money.

Drafters should seek advice from General Counsel Division staff when considering the releaseof a Sole Source RFT.

3.2 Tender Evaluation (Core)

Drafters should note that the evaluation criteria must be relevant to an assessment of value formoney.

3.3 Minimum Content and Format Requirements (Optional)

This clause must be included where a procurement is a ‘covered’ procurement for thepurposes of the Commonwealth Procurement Guidelines – January 2005. For guidance ondetermining whether a procurement is ‘covered’ or ‘non-covered’ for the purposes of theCommonwealth Procurement Guidelines – January 2005, see the DPPM – Section 1, Chapter1.2.

Clause 3.3 sets out the minimum content and format requirements which tender responses arerequired to meet in order to be further evaluated by the Commonwealth. If a tender response for a‘covered procurement’ does not meet these requirements, the Commonwealth must automaticallyexclude the tender from further consideration in the evaluation process. The Commonwealth retainsthe discretion to allow suppliers to correct errors of form only.

Defence policy specifies that the following minimum content and format requirements be included inall RFTs for ‘covered procurements’:

a. that any tender be submitted in English; and

b. the supplier must sign the required Declaration by Tenderer.

Procurement staff should seek advice from their relevant contracting specialist or the Contracting HelpDesk prior to including additional minimum content and format requirements in an RFT.

3.4 Conditions of Participation (Optional)

This clause must be included where a procurement is a ‘covered’ procurement for thepurposes of the Commonwealth Procurement Guidelines – January 2005. For guidance ondetermining whether a procurement is ‘covered’ or ‘non-covered’ for the purposes of theCommonwealth Procurement Guidelines – January 2005, see the DPPM – Section 1, Chapter1.2.

Conditions for participation are the basic requirements with which a tenderer must be able todemonstrate compliance in order to participate in a tender process. Tenders for a ‘coveredprocurement’ that fail to meet conditions for participation must be excluded from the evaluationprocess. The Commonwealth must not enter into a contract with a tenderer who has not met theconditions for participation.

Conditions for participation must be limited to those that will ensure that a tenderer has theprerequisite or minimum legal, commercial, technical and financial capabilities to fulfil theprocurement. They ensure that only tenderers who are appropriately qualified participate in thetender process. In this regard, conditions of participation are equivalent to screening criteria used todetermine whether a tender has met the necessary requirements to proceed to the detailed evaluationstage. Further guidance on conditions for participation is included in the DPPM Section 5, Chapter5.4.

Defence policy requires as a condition for participation in a tender process for a ‘coveredprocurement’ that:

a. tenderers must be willing to undergo the security clearance process; and

b. where required, classified tender content must be prepared and transmitted:



(i) in Australia, in accordance with the Defence Industry Security Manualand the Defence Information System Security Manual; and

(ii) overseas, in accordance with the applicable industrial securityinformation system regulations issued by the appropriate authority in thatcountry.

Procurement staff should seek advice from their relevant contracting specialist or the Contracting HelpDesk prior to including additional conditions for participation in a RFT.

3.5 Essential Requirements (Optional)

This clause may be included where:

a. a procurement is a ‘covered’ procurement for the purposes of the CommonwealthProcurement Guidelines – January 2005; and

b. where drafters specify essential requirements in the draft Statement of Work.

For guidance on determining whether a procurement is ‘covered’ or ‘non-covered’ for thepurposes of the Commonwealth Procurement Guidelines – January 2005, see the DPPM –Section 1, Chapter 1.2.

Essential requirements are similar to conditions for participation in that they are mandatoryrequirements. The main distinction is that essential requirements are those elements of theStatement of Work (SOW) that are considered to be ‘essential’ qualities of the supplies or services (asopposed to important or desirable). These clauses are optional and should only be used when thereare requirements in the draft SOW that are identified as essential.

Drafters should take care to ensure that requirements set out in the draft SOW are not unnecessarilydescribed as ‘essential’ as a failure to meet essential requirements will result in a tender for a‘covered procurement’ being excluded from further consideration.

Where it is not certain whether a requirement should be described as essential, a better approachmay be to use descriptions such as ‘highly desirable’ or ‘important’ as a failure to meet requirementsdescribed in this manner would not lead to automatic exclusion from the tender process.

For further guidance on the consideration of essential requirements, procurement staff should consulttheir relevant contracting specialist or the Contracting Help Desk.

3.6 Evaluation Criteria and Process (Core)

Inclusion of Evaluation Criteria in an RFT.Commonwealth procurement policy requires that RFT documentation include all informationnecessary to permit potential tenderers to prepare and lodge their tender responses. As part of thisapproach, the conditions of tender for a ‘covered procurement’ must set out all evaluation criteria tobe considered in assessing tender responses. For a ‘non-covered’ procurement, clause 3.6.6 statesthat the list of criteria in clause 3.6.1 is not exhaustive. Notwithstanding clause 3.6.6, it is goodprocurement practice, and drafters are urged to set out all evaluation criteria, which will be used toassess tenders, in clause 3.6.1.

While it is mandatory to include all evaluation criteria in the RFT where the procurement is a ‘covered’procurement, where a pertinant evaluation criterion was overlooked prior to tender release, draftersmay rely on clause 3.6.4 to include additional evaluation criteria post RFT release. Clause 3.6.4provides that the Commonwealth must notify tenderers where additional evaluation criteria not listedin the conditions of tender will be applied by the Commonwealth during tender evaluation. Where theCommonwealth has provided notice of its tender process on the AusTender website, tenderers whohave registered for AusTender are deemed to be informed when the Commonwealth publishes theadditional evaluation criteria on the website.

Tenderers must also be given a reasonable time to respond to any additional evaluation criterianotified by the Commonwealth. This opportunity includes, where necessary, the ability to amend theirtender responses to address the additional criteria. While a set time period for revised tenderresponses is not prescribed, it is important that the Commonwealth sets a time period that isreasonable having regard to the likely impact the additional evaluation criteria may have on thetenderers’ original responses.



As the use of additional evaluation criteria not set out in the RFT may have a significant impact on thetime and cost to tenderers of preparing their responses, as well as adding to the time theCommonwealth will need to evaluate any revised offers, procurement staff should carefully considerwhether such action is necessary.

For further guidance on the consideration of additional evaluation criteria procurement staff shouldconsult their relevant contracting specialist or the Contracting Help Desk.

The evaluation criteria set out in clause 3.6.1 can be modified to suit an individual tender, however toensure fairness, all relevant evaluation criteria should be included in clause 3.6.1.

In order to allow the Commonwealth a degree of flexibility and protection from criticism of evaluationdecisions:

a. drafters must notify tenderers of any issue that may lead to the exclusion of theirtender from further consideration;

b. evaluation criteria must not be ranked;

c. the Tender Evaluation Plan must always be consistent with the evaluation criteriaset out in the RFT and must be completed prior to release of the RFT; and

d. under no circumstances should new or revised evaluation criteria be introducedinto the tender evaluation process after the Tender Closing Time. Preferably, newor revised evaluation criteria should not be introduced at any time after release ofthe RFT however, where a change is essential for the project, appropriate noticeshould be given to all tenderers in accordance with clause 1.3. Tenderers shouldthen be provided with a reasonable time (including, where necessary an extensionto the Tender Closing Time) to respond to the amended RFT.

Excluding tenders from consideration – Minimum Content and Format Requirements,Conditions of Participation and Essential RequirementsWhere a procurement is ‘non-covered’ for the purposes of the Commonwealth ProcurementGuidelines – January 2005, clause 3.6.5 states that the Commonwealth retains the discretion toexclude from consideration any incomplete, non-compliant with essential requirements or non-competitive tenders.

Where a procurement is ‘covered’ for the purposes of the Commonwealth Procurement Guidelines –January 2005, clauses 3.3 and 3.4 require that the Commonwealth exclude from consideration anytenders that do not comply with the Minimum Content and Format Requirements and the Conditionsof Participation. In addition, if optional clause 3.5 is included in the RFT, the Commonwealth mustexclude from further consideration tenders that do not comply with essential requirements in the draftStatement of Work.

The Commonwealth retains no discretion when using clauses 3.3 to 3.5. The Commonwealthmust exclude from consideration all tenders that do not comply with the requirements inclauses 3.3 to 3.5. Clauses 3.3 and 3.4 are mandatory requirements for all ‘covered’procurements.

As the Commonwealth must exclude from consideration all tenders that are non-compliantwith clauses 3.3 to 3.5, drafters must be careful when including any additional requirements inclauses 3.3 and 3.4 and must also be careful when including Essential Requirements in theStatement of Work. Onerous requirements in clauses 3.3 to 3.5 may exclude quite a number oftenders from consideration.

Advice should be sought from General Counsel Division prior to excluding any tender (whether theprocurement is a ‘non-covered’ or ‘covered’ for the purposes of the Commonwealth ProcurementGuidelines – January 2005) from consideration. Drafters should note that there is no obligation on theCommonwealth to exclude a tender for any of the circumstances identified in clause 3.6.3 or 3.6.5 asapplicable, however, exercise of the discretion should be consistent across all tenders beingconsidered. The reasons for excluding a tender from consideration must be well documented.

Improper assistanceClause 3.6.9 emphasises the declaration in Annex A that tenderers must not obtain the improperassistance of any Commonwealth employees. An example of this would be:



a. hiring the Commercial manager of a project area that has just put out a tender, forthe purposes of replying to the tender;

b. bribery; or

c. fraud.

Process contractsDefence does not intend to create process contracts in relation to its tendering processes and clause3.6.10 informs tenderers of this. Since a court will look to substance rather than form in determiningwhether a process contract exists, a mere statement that it is not the intention of the parties to enterinto contractual obligations will not necessarily be sufficient to protect the Commonwealth from such aclaim.

For more information on process contracts and the legal implications for the Commonwealth,drafters should consult the DPPM Section 2, Chapter 2.1.Tender clarificationClause 3.6.11 reserves the right of the Commonwealth to seek clarification from tenderers during theevaluation phase. This enables the Commonwealth to conduct a complete evaluation and thus makea decision based on value for money. If the Commonwealth does seek clarification from tenderers, itis essential that records of the Commonwealth’s question and the tenderer’s answer be kept toensure a clear audit trail.

Drafters must be careful not to request additional information during the clarification processas this may either affect the pricing regime, or allow a tenderer to gain an advantage bysupplementing their original tender information.

3.7 Use of Former Defence Personnel in Tender Preparation (Optional)

This optional clause 3.7.1 is required where the Services are commercially sensitive or the Contract isvalued at more than $5 000 000. Clause 3.7.1 requires tenderers to notify the CommonwealthRepresentative and seek permission before allowing a former Defence employee, who meets certaincriteria, to be involved in the preparation of the tender response. Where a contract may be awarded toa former employee (or a contractor employing that individual), consideration should be given to thatperson’s previous Defence employment.

Where ex-Defence staff are employed by existing or potential contractors, issues arise regarding‘inside’ knowledge. The Crimes Act 1914 and Public Service Act 1999 constrain formerCommonwealth employees from passing on information that they obtained in the course of theiremployment, and which at the time of ceasing Commonwealth employment, it was their duty not todisclose. In matters relating to Defence procurement, the use by a tenderer of any information whichhas been gained by virtue of an employee’s former position with the Commonwealth, can beperceived as giving them an unfair competitive advantage over others tendering for the work.

In determining whether knowledge can be protected from use by tenderers, a distinction is drawnbetween knowledge that is obtained by the nature and environment of the tasks, and knowledge thatrelates directly to the trade or profession of the employee. Whilst the former knowledge is the‘property’ of the Commonwealth, and can therefore be protected, the latter is a matter of professionalskill which cannot be constrained. Unfortunately, these two classifications of knowledge are notalways easy to delineate.

If there is evidence that a tender was developed with the inappropriate and unauthorised helpof a former employee and it is believed that the tender should be excluded, the matter shouldbe referred to the chair of the tender evaluation committee, with an accompanying explanation,including details of the evidence, references to any applicable procedural clauses in the RFTand a recommended course of action. Advice should also be sought from General CounselDivision.

3.8 Negotiation (Core)

Clause 3.8.1 allows the Commonwealth to conduct negotiations with one or more tenderers.Generally Defence undertakes negotiations with a single preferred tenderer. Parallel negotiationsshould only be undertaken where two or more tenderers meet the requirements of the proposed



contract, and on the basis that no other tenders could be assessed as representing better value formoney. It should be noted that parallel negotiations are extremely demanding and can be resourceintensive, especially for the Commonwealth. There are also significant probity considerations inrelation to the fairness of the parallel negotiation process. Advice should be sought from GeneralCounsel Division prior to commencing parallel negotiations.

In the event that negotiations with the preferred tenderer are unable to be concluded satisfactorilythen clauses 3.8 affords the Commonwealth the opportunity to negotiate with the next most-preferredtenderer.

In all negotiations, it is important that the Commonwealth informs tenderers that anycommunications or representations are made subject to contract.

3.9 Debriefing of Tenderers (Core)

This clause informs both unsuccessful tenderers and the successful tenderer of their right to request awritten or oral debriefing after the Contract has been awarded. The extent of information that theCommonwealth will disclose to tenderers in regard to their own tender will be limited to informationrelating to the evaluation criteria in 3.6.1, and any additional or alternative criteria that may have beenused.

No Commercial-in-Confidence Information concerning the successful tenderer should bedisclosed, including the successful tenderer’s pricing structure.


Guidance on Annexes to Conditions of Tender (V1.1) A - 1

ANNEX A - DECLARATION BY TENDERER (CORE)

1. DECLARATION BY TENDERER (CORE)1.1 The Declaration by Tenderers is completed by the tenderer and submitted with the tender.

Within it tenderers are required to declare that they have prepared the tender:

a. in accordance with the terms set out;

b. without improper assistance; and

c. subject to the statement of non-compliance and in accordance with the provisionsof the draft Contract.

The acceptance period should be the same as the tender validity period outlined in clause 2.1 of theconditions of tender. Tenderers are required to sign a declaration on these terms and return it with ahard copy of their tender response.

Improper AssistanceThe Declaration warns the tenderer that the Commonwealth may not consider their tender if inpreparing their response, the tenderer:

� solicits the improper assistance of any current or former Commonwealth employee;

� uses unlawfully obtained material; or

� uses information obtained in breach of an obligation of confidentiality to the Commonwealth.

What constitutes improper assistance will depend on the circumstances of each case. However,assistance given which involves disclosure of information in breach of a person’s duties under theCrimes Act 1914 or Public Service Act 1999 would be improper. It should also be noted that oftenconsultants and professional service providers to the Commonwealth enter into confidentialityagreements.

The use of improperly obtained information will render the tenderer’s response non-compliant againstthis section of the Declaration and the Commonwealth will be entitled to exercise its discretion not tofurther consider the tender.

One of the reasons for the inclusion of improper assistance and conflict of interest clauses isthat contravention of these clauses may allow one tenderer to gain a potential advantage overanother. To ignore such activities may leave the Commonwealth open to both publicembarrassment and potential legal action as well as in breach of its legislative obligationsregarding the efficient and effective use of public money.


Guidance on Annexes to Conditions of Tender (V1.1) B - 1

ANNEX B - STATEMENT OF NON-COMPLIANCE (CORE)

1. STATEMENT OF NON-COMPLIANCE (CORE)The Statement of Non-Compliance lists those areas within the conditions of tender and the draftconditions of contract with which tenderers do NOT comply. This summary both assists theCommonwealth in evaluations and also enables tenderers to highlight their areas of concern with thedraft conditions of contract.


Guidance on Annexes to Conditions of Tender (V1.1) C - 1

ANNEX C - INFORMATION TO BE PROVIDED BY THE TENDERERS (CORE)

1. TENDER DETAILS (CORE)The Commonwealth expects tenderers to detail how they intend to approach the tasks as outlined inthe Statement of Work (SOW) at Attachment A to the draft conditions of contract. Drafters mustaccurately describe the Services required by the Commonwealth in sufficient detail in the SOW toenable a tenderer to respond with all the appropriate information.

2. TENDER PRICES AND PRICE BASIS (CORE)This clause provides explicit instructions requiring tenderers to respond with a detailed pricing regimeand provides information on what is to be included in the pricing, for example all prices must be inAustralian dollars and be GST inclusive.

This pricing information will be used to complete Attachment B.

3. INSURANCE (CORE)Defence’s preference is that the tenderer, as the party who is expected to manage the majority of thecontractual risk, advises the Commonwealth of what insurance is required, rather than having theCommonwealth mandate specific types of insurance. Accordingly, in this clause the Commonwealthdoes not require tenderers to take out specific insurances, however tenderers must indicate whetherthey are covered to the extent required by clause 6 of the draft conditions of contract. The detailsrequested will enable the Commonwealth to determine whether the tenderer will need to update theirinsurance or if additional insurance is required.

4. SUBCONTRACTORS (CORE)Under clause 4.1 of Annex C, tenderers must provide details of any subcontractors they propose touse in providing the Services under any resultant contract where the value of the subcontracted workis expected to exceed the amount set by the drafter prior to the release of the RFT. This gives theCommonwealth advance notice of any subcontractor (and allows the Commonwealth to furtherinvestigate any subcontractor) the tenderer plans to use in performing the contract.

It is in the best interest of the Commonwealth to investigate the viability of a Subcontractorwhose services are critical to the success of the contract.

If a drafter knows which services are likely to be subcontracted, and those services are critical to thesuccess of the contract, then it is appropriate to keep the amount to be inserted into 4.1 low so that thetenderer will be obliged to provide the subcontractor’s details. If the Services to be subcontracted arenot critical to the success of the contract, the amount inserted in 4.1 by a drafter may be relativelyhigh. This way the Commonwealth is only informed when a subcontractor will be doing work critical tothe success of the contract.

If a drafter does not know which services are likely to be contracted, then it is appropriate to keep theamount to be inserted into 4.1 low so that the tenderer will be obliged to provide details of all thesubcontractors the tenderer proposes to use under the contract.

5. GOVERNMENT FURNISHED MATERIAL (OPTIONAL)If a tenderer considers the use of Government Furnished Material (GFM) as necessary or expedientfor the performance of the contract, clause 5.1 allows tenderers to provide details of any GFM theyrequire. Tenderers should also detail any impact on the Services if the use of the GFM is not granted,as well as the affect this may have on the tendered price.

The term GFM is fairly widely defined under the draft conditions of contract, and includes material thatmay be anything from a desk and chair to Intellectual Property or Technical Data. The drafter shouldbe aware of the wider implications of granting the use of Government Furnished Material. Forexample, if the Commonwealth enters into a contract stating that it will provide a certain amount ofoffice space, storage space or workshop space etc, it will be obligated to provide that space to thecontractor for the duration of the contract.


Guidance on Annexes to Conditions of Tender (V1.1) C - 2

A particular issue which should be considered is whether the Commonwealth will receive a discountfor the provision of GFM. Many companies will price their services based on whether or not GFM willbe provided, and a discount is usually offered if GFM is provided.

Drafters must ensure that the appropriate permission has been granted from theCommonwealth before committing GFM for use under a contract.

6. AUSTRALIAN INDUSTRY INVOLVEMENT (AII) (OPTIONAL)This clause must be used where the tendered price is expected to be more than $A5 million. If thetendered price is expected to be more than $5 000 000, drafters are to seek advice fromStandardisation Branch and General Counsel Division to determine the tender and Contractrequirements for AII.

7. INTELLECTUAL PROPERTY (CORE)Tenderers are notified that the Commonwealth requires a list of the Background, Foreground andThird Party IP that will be brought to any contract. This ensures that the Commonwealth will have theappropriate ownership or licensing rights to Intellectual Property that it requires.

8. COMMERCIAL-IN-CONFIDENCE INFORMATION (CORE)This clause has been developed to meet the requirements of the Senate Order on Departmental andAgency Contracts (No 192).

This order requires Government agencies to place lists of contracts with a consideration of $100,000or more on the agency’s Intenet home page. To comply with this order, Government agencies arealso required to identify the provisions in contracts that are considered by the parties to beCommercial-in-Confidence Information and detail the reason for any provision so identified.

Therefore, this clause requires tenderers to identify in their tenders any provision of the proposedContract that they believe should be classified as Commercial-in-Confidence. It is Defence andCommonwealth policy to consider on a case-by-case basis what might constitute Commercial-in-Confidence rather than characterising the entire Contract as Commercial-in-Confidence. Furtherinformation on commercial-in-confidence information can be found in Section 3, Chapter 3.11 of theDefence Procurement Policy Manual.

9. CONFLICT OF INTEREST (CORE)This clause requires the tenderer to advise the Commonwealth of any conflict of interest existing orarising during the tender evaluation or negotiation stage so that such conflict can, if possible, bemanaged appropriately. The Commonwealth may terminate the evaluation of a tender or negotiationswith a tenderer if the tenderer fails to notify the Commonwealth of a conflict of interest, or is unwillingor unable to resolve the conflict.

10. COST INVESTIGATION OF SOLE SOURCE TENDERS (OPTIONAL)This requirement is to be included where the RFT is sole sourced. It requires the sole source tendererto facilitate a cost investigation of its tender by providing relevant information as part of its RFTresponse.

Defence policy strongly recommends that all sole source tenders are cost investigated. Forfurther information see the DPPM section 4, chapter 4.7.

Since there is a lack of competition in a sole source tender, conducting a cost investigation of thetender is an effective way to determine whether the tendered price is reasonable and offers value formoney in accordance with Commonwealth procurement policy. In an open tender process theCommonwealth will have alternative mechanisms to satisfy itself that the tender constitutes value formoney, such as comparison of tenders and tender pricing.


Guidance on Annexes to Conditions of Tender (V1.1) D - 1

ANNEX D - EMPLOYER SPONSORED SUPERANNUATION COVER (CORE)The purpose of the questionnaire in Annex D is to assess the Commonwealth’s liability for thetenderer’s superannuation, under the Superannuation Guarantee (Administration) Act 1992. Underthis Act employees or contractors not covered by employer sponsored superannuation, are entitled toreceive an appropriate level of contribution from the Commonwealth. This cost if any, should befactored into the total tendered price as required at Annex C.

As ‘natural persons’ are usually not covered by employer sponsored superannuation, contracting with‘natural persons’ rather than companies or partnerships is strongly discouraged, as these added costsand responsibilities fall on the Commonwealth. If the contract is with a ‘natural person’ theCommonwealth Representative becomes responsible for ensuring that the contractor is paid therelevant superannuation entitlements.

For further information drafters should refer to the DPPM, Section 3, Chapter 3.14, and seekassistance from the Contracting Help Desk.


Guidance on draft Conditions of Contract (V1.1) 1 - 1

1. CONTRACT FRAMEWORK

INTRODUCTIONThe section contains information on issues relating to:

a. the draft conditions of contract within the RFT; and

b. contract management.

General information regarding contract law and contract management can be found in theDPPM Section 2, Chapter 2.1 and Section 5, Chapter 5.9 respectively or by contacting theContracting Help Desk.

The draft conditions of contract are designed to be adapted, tailored and negotiated during the RFTand contract negotiation stage. They will become the conditions of contract after signature by bothparties.

The Recitals PageThe first page of the draft conditions of contract identifies and records company details of both partiesto the contract. Identifying details such as A.C.N./A.R.B.N. and A.B.N are to be inserted on the firstpage.

Drafters must ensure that these details are inserted only after a preferred service supplier is knownand accepted by the delegate.

The recitals contain a brief description of the background to the contract, and the intention of theparties as to what the Contract will cover. The recitals are not a legally binding part of the contract, butit is important that the recitals are accurate, as in the event there is a dispute concerning the terms ofthe Contract, the recitals may be used for the purpose of interpreting the intention of the parties.

In the recitals at A, drafters must state the Commonwealth requirements in a clear and succinct way.The statements in B and C are worded to show that the elements of proper contract formation havebeen satisfied, in that the recitals provide that the Contractor has offered to provide the Services andthat the Commonwealth has accepted the Contractor’s offer on the terms set out in the contract.

The Department of Defence is not a legal entity and does not have the legal capacity to enter into acontract. For this reason, the entity signing the Contract is the Commonwealth of Australiarepresented by the Department of Defence. Drafters must also ensure that all deeds and associatedagreements subsequent to the Contract are executed in the same manner.

1.1 Definitions (Core)

The definitions contained in clause 1.1 are designed to operate in conjunction with the clauses set outin the conditions of contract and the attachments. Where drafters have added terms to the conditionsof contract that need to be defined, the definition should be capitalised and inserted into this clause inalphabetical order.

Drafters should note that the definition of ‘Deliverables’ (as previously included in DEFPUR301) has been rolled into the definition of ‘Services’ for the purposes of this contract.Additionally, ‘Services’ under the contract includes not only the Services that are to beperformed, but also any goods that may be provided under the contract and goods producedas a consequence of the Services being performed.

1.2 Interpretation (Core)

Key points for drafters to note regarding the operation of clause 1.2 are:

a. clause 1.2.1a states that headings do not form part of the Contract and areincluded for reference purposes only. Drafters must therefore ensure that anywords intended to have legal effect are included in the terms of the Contract andnot in the headings;

b. clause 1.2.1f states that a reference in the Contract to any legislation is to beinterpreted as a reference to an Act of the Commonwealth, State or Territory ofAustralia, including subordinate legislation, as amended from time to time;



c. in contrast, clause 1.2.1i states that a reference to any specification, publication,Commonwealth policy or other document is to be interpreted as a reference to theversion of that specification, publication or document that is current on theEffective Date; and

d. clause 1.2.1 includes other usual interpretative provisions, including that areference to the singular includes the plural, a reference to a person includes abody corporate, and a reference to a clause includes a reference to subclauses ofthat clause.

1.3 Commencement of Operation (Core)

The Effective Date is a defined term and means the date on which the contract is signed by theparties, or if signed on different days, the date of the last signature.

1.4 Entire Agreement (Core)

Clause 1.4 provides that the contract between the Contractor and the Commonwealth will be limitedto that which is expressly included in the Contract. It aims to protect both parties from any perceivedagreements made prior to or after signature of the Contract and means that the terms and conditionsof the Contract supersede any other agreements or statements that were made prior to execution ofthe Contract.

1.5 Precedence of Documents (Core)

Clause 1.5 establishes the order of importance of clauses in the event that there is any inconsistencybetween the various documents that collectively make up the Contract. Where any conflict ordiscrepancy occurs between any two parts of the Contract, for example between a clause in theconditions of contract and a clause in the Statement of Work, the clause in the higher rankeddocument will take precedence. For this reason the conditions of contract take precedence over allother parts of the Contract.

Clause 1.5 does not apply where there is inconsistency within a document or group of documents thathave the same level of precedence. A conflict of this nature will be resolved through interpretation ofthe Contract as a whole.

Drafters must be careful to check that there are no conflicting clauses or discrepancies withina document, or within the Contract as a whole.

1.6 Contracted Requirement (Core)

In order for a contract to be formed in law certain essential elements of contract must exist. Toestablish that the essential element of consideration has been met, this clause describes theconsideration payable by the Commonwealth in return for performance of work under the Contract bythe Contractor.

For further information see the DPPM Section 2, Chapter 2.1.

ASDEFCON ((Services) Handbook PART 2

Guidance on draft conditions of Contract (V1.1) 2 - 1

2. ROLES AND RESPONSIBILITIES

2.1 Commonwealth Representative (core)

The Contract is made between the Commonwealth represented by the Department of Defence andthe Contractor. The Commonwealth Representative has the responsibility to manage the Contract onbehalf of the Commonwealth. Generally, the Commonwealth Representative has the authority to bindthe Commonwealth and does so by directing the Contractor to deliver the services under the Contract.Clause 2.1 prescribes that the Commonwealth Representative’s mandate is limited in certaincircumstances.

2.2 Notices (Core)

Clause 2.2.1 requires, that for a notice or communication to be effective, it must be in writing andsigned by the party sending the notice. This means that a notice sent by e-mail is not an effectivenotice recognised under the Contract. E-mail is not addressed in this clause due to the complextechnical issues associated with electronic signatures.

Clause 2.2 prescribes how any notices or communications are to be passed between theCommonwealth and the Contractor. In the event of a dispute arising, clause 2.2.2 sets out therequirements for when a notice or communication can be deemed to have been delivered to the otherparty.

It is important that drafters insert the relevant contact details of both the CommonwealthRepresentative and the Contractor Representative accurately, prior to signing the Contract.

Advice on electronic signatures and signature authentication should be sought from theDirectorate of Electronic Business Strategies and General Counsel Division prior to includingany provision allowing for communication by e-mail in the Contract.



3. PROVISION OF THE SERVICES

3.1 Language and Measurement (Core)

Clause 3.1.1 places an obligation on the Contractor to provide information delivered as part of theSupplies in English and to ensure that any translation of information into English is free fromambiguity. Reflecting the National Measurement Act 1960, this clause also requires thatmeasurements of physical quantity are to be in Australian legal units as prescribed under the NationalMeasurement Act 1960 or if Supplies are imported, units of measurement as agreed by theCommonwealth Representative.

3.2 Government Furnished Material (Optional)

Optional clause 3.2 deals with Government Furnished Material (GFM) provided by the Commonwealthto the Contractor for use in the Contract. This clause provides that:

a. the GFM always remains owned by the Commonwealth;

b. the Commonwealth grants, or will arrange, a licence to the Contractor to use, copyand adapt the GFM for the purpose of the Contract; and

c. the GFM must be returned to the Commonwealth at the expiration of the Contract.

The preferred Defence position is to minimise the provision of GFM to the Contractor. However, insome circumstances the Contractor will not be able to perform the Services required under theContract without GFM.

The category of Government Furnished Facilities (GFF) is not considered appropriate for ASDEFCON(Services) as this template is only used for the provision of services which are straightforward, lowrisk, low value and of short to medium duration.

If drafters consider that provision of GFF may be necessary for their project they should firstlyrefer to DI(G) 35-1 ‘Procedures for the Use of Defence Estate Assets by Non-DefenceOrganisations or Individuals including Commercial Contractors’ and secondly seek advicefrom the Contracting Help Desk on whether ASDEFCON (Services) is the appropriate templateto use.



4. INTELLECTUAL PROPERTY

4.1 Ownership of Intellectual Property (Core)

IntroductionIntellectual Property (IP) is perhaps one of the most controversial, and least understood aspects ofcontracting. The following guidance is intended for use in relatively straightforward contracts.

Where issues of Intellectual Property are complex, or clauses within the template requiremodification, General Counsel Division should be contacted.Intellectual Property, and particularly the ownership and licensing of Intellectual Property rights, areimportant aspects of Commonwealth Services contracting. Without adequate Intellectual Propertyrights the Commonwealth may not be able to fully utilise the Services purchased. Failure to obtain theappropriate Intellectual Property rights at an early stage of the procurement of say, a study, review orreport, could have direct effects on value for money for the Commonwealth in later relatedprocurement activities.

The term ‘Intellectual Property’ can be a difficult term to understand. Developing and SustainingDefence Capability: Defence Intellectual Property Policy 2003 defines Intellectual Property as a groupof statutory and common law rights which afford protection to the product of intellectual and creativeefforts. In this Policy and in the Contract, it is further defined to include copyright, moral rights, patentand trade mark rights, designs, confidential information and circuit layouts, and ‘any other rightsresulting from intellectual activity in the industrial, scientific, literary and artistic fields recognised indomestic law anywhere in the world’. This can include everything from the ‘know-how’ on an item, totrademarks of a mark used by Defence, to a source code.

Moral Rights are not, however, included in the definition of ‘Intellectual Property’ in the template. Thisis because the Moral Rights to intellectual endeavour must be treated differently to other IP rights.For further information on Moral Rights see the guidance on clause 4.6 of the conditions of contract.

Almost all service contracts in Defence will have some form of associated Intellectual Property,whether they are contained in a written report, or complex layouts or diagrams. It is important that theCommonwealth obtains appropriate rights for usage of this information both in the present and in thefuture.

Defence categorises Intellectual Property into 3 main types: Background IP, Third Party IP, andForeground IP.Defence has adopted the terms Background IP, Third Party IP and Foreground IP and Moral Rights todescribe the different types of intellectual property covered by Defence contracts. Moral Rights arediscussed in the guidance on clause 4.6 of the conditions of contract.

Background IP is the Intellectual Property either already in existence before entering into the Contractor, is brought into existence other than in performance of the Contract AND:

a. is embodied in the Services;

b. attaches to the Services;

c. is otherwise necessarily related to the operation of the Services.

Clause 4.1.1 protects the ownership rights of all Background IP and Third Party IP by providing thatnothing in the Contract alters the ownership of Background IP or Third Party IP. Both theCommonwealth and the Contractor may bring Background IP to the Contract. Under clause 4.1.1,ownership of all Background IP remains with the party who brought the IP to the Contract. BecauseBackground and Third Party IP may be necessary to allow the Commonwealth to properly use theServices, it is important to obtain appropriate licences and rights to the Contractor’s Background IPand to Third Party IP. Any limitations, exclusions or qualifications from the standard licence termsincluded in the template in relation to Background IP needs to be carefully examined to determinetheir impact on the Commonwealth’s ability to use the Services provided.

It should be noted that this template does not contain any provisions that will allow theCommonwealth to licence any Commonwealth owned Background IP to the Contractor.



Third Party IP belongs to a party other than the Commonwealth or the Contractor. If the Contractorplans to use Third Party IP they must obtain a licence from that third party to use the IP. They alsomust obtain (on the best available commercial terms) a licence for the Commonwealth to use theThird Party IP for the purposes of the Contract.

Foreground IP:

a. is the Intellectual Property created under or in connection with the Contract;

b. can be developed under the contract; and

c. can comprise improvements or additions to Background IP.

Even if the Foreground IP comprises only alterations to Background IP, it is still important that theCommonwealth has an appropriate licence so that the full functionality of the addition or alteration canbe effectively used. Appropriate ownership and licensing of Foreground IP is a vital part of a Contractfor Services and has important consequences on the future use of the Services provided under theContract. This is reflected in clause 4.1.2 which provides that ownership of Foreground IP is attributedto the Commonwealth as a default position, and the Commonwealth has the exclusive right to registerthat IP in all countries of the world.

Not obtaining appropriate IP rights at the concept development stage can impact on the futureuse of the Services and also on the value for money received under the contract. It isimportant that IP issues are considered at the earliest stage of procurement.

4.2 Intellectual Property Licence (Core)

Ownership of IP allows the owner to exploit the IP and make use of it in a number of different ways.Under clause 4.2, the Contractor grants to the Commonwealth the right, or a ‘licence’ to use theIntellectual Property for Defence purposes, including the right to sub-licence the IP to a third party forDefence purposes.

If the Commonwealth plans to provide its Background IP to a Contractor, the drafter shouldcontact their General Counsel Division Desk Officer to obtain appropriate clauses for insertioninto the Contract.

4.3 Provision of Technical Data (Core)

If the Commonwealth requires access to the Technical Data in order to be able to exercise its IPrights, then clause 4.3 becomes relevant. Clause 4.3 requires the Contractor to provide to theCommonwealth any technical data that the Commonwealth needs to exercise its IP rights. IP is oftenembodied in, and attaches to, Technical Data. Technical Data is all technical know-how andinformation that is reduced to material form and can be produced or acquired. It is otherwise known asthe written form or even the product of IP and it is required to enable a person to perform acts inrelation to the IP, or the rights themselves are useless. As a result failure to obtain access to suchTechnical Data can obstruct the full use of the Services provided under the contract.

4.4 IP Schedule (Core)

Clause 4.4.1 instructs the Contractor to keep the IP Schedule current. The IP Schedule is a list of allIP involved in the Contract and can be found at Attachment C. It is important that the schedule doesnot conflict with the rights required under clause 4.2.

4.5 Release To Third Parties (Core)

This clause imposes an obligation on the Commonwealth to obtain a deed of confidentiality prior torelease of any contractor owned Background IP to a third party. This is a precautionary measure toprotect the Contractor’s IP from unauthorised disclosure, and gives the Contractor confidence thattheir Background IP will only be used for Defence purposes.

4.6 Moral Rights (Core)

Intellectual Property consists of both economic and non-economic rights. Moral rights are non-economic and relate to a creator’s reputation in connection to his or her work. These rights vest inindividuals, are personal to the creator and cannot be bought, sold, assigned or licensed. As a result,they cannot be used for direct financial gain. Moral rights are applicable to much the same material asconventional IP, the only difference being that conventional IP is economic and can be licensed or



assigned in whole or part. This means that even though the Commonwealth may be the owner of, orhold a licence to use the IP, the Moral Rights in the Services will be retained by the individualauthor(s) who created that material.

The Moral Rights of an author are the following rights:

a. the right of attribution of authorship;

b. the right of integrity of authorship; and

c. the right not to have authorship falsely attributed.

Clause 4.6.1 ensures the Commonwealth obtains consent from the Contractor (where the Contractoris an individual and the author of the Services) to use the Services for Defence Purposes as outlinedin clause 4.2.

Where the Contractor is not an individual and author of the Services clause 4.6.2 obligates theContractor to obtain the written consent of the author of the Services to use the Services for DefencePurposes as outlined in clause 4.2.

Despite the consent obtained in clauses 4.6.1 and 4.6.2, clause 4.6 does not excuse the falseattribution of the Contractor’s or author’s work. For this reason it is important that any IP provided bythe Contractor as Background or Foreground IP is properly identified, so that it is not attributed toanyone other than the author.


Guidance on draft Conditions of Contract (V1.1) 5 – 1

5. PRICE AND PAYMENT

5.1 Price and Price Basis (Core)

The majority of procurements undertaken using ASDEFCON (Services) are expected to be arranged ona firm price basis. Within this framework, Attachment B contains a range of options with respect to howthe Contract Price will be calculated.

This clause provides that payment of any claim may be deferred or withheld if the CommonwealthRepresentative determines that the Contractor has failed to perform the Services satisfactorily.

Payment for the Services occurs only after the Commonwealth Representative agrees that the servicesare satisfactory and in accordance with the contract.

The DPPM Section 2, Chapter 2.2 contains information on different approaches to contractpricing.

5.2 Payment (Core)

The payment and acceptance processes have been combined into a two step process to simplify andstreamline the process in ASDEFCON (Services). Step 1, defined in clause 5.2.2, involves verifying thatthe Services for which the Contractor is seeking payment have been completed to the satisfaction of theCommonwealth. Fourteen days from the receipt of a claim for payment have been allowed for thatreview process.

If the Commonwealth Representative considers that the Services are satisfactory and in compliancewith the requirements of the Contract, the Contractor’s invoice should be verified promptly so thatpayment can be made within 30 days of the Commonwealth having approved the claim. This is step twoand is set out in Clause 5.2.3.

Should the Commonwealth Representative reject the Services, the process set out in clause 5.2.4 mustbe followed. Notice in writing stating reasons for rejecting the Services must be given to the Contractorwithin 14 days of rejecting the claim. The SOW should be consulted by the CommonwealthRepresentative in order to determine if the Services received comply with the Services required underthe Contract, and before any decision is made to reject the Services. If the Services described in theSOW do not adequately describe what the Commonwealth requires, the Commonwealth may beobliged to accept the Services as described.

The Commonwealth prefers that payments be made directly into the Contractor’s bank account.

5.3 Ownership and Control of Services (Core)

Once the Commonwealth has paid a claim for Services, the Commonwealth becomes the owner of theServices that are the subject of the claim. Notwithstanding this, the IP clauses will determine ownershipof IP. Risk of loss or damage to the Services passes to the Commonwealth on delivery of the Services.

5.4 Taxes and Duties (Core)

It is the Contractor’s responsibility to pay all taxes and duties that are relevant to the Contract within theContract Price, including GST and any customs duty payable where Services do not originate inAustralia.

Drafters should refer to the DPPM Section 3, Chapter 3.7 for more information.

5.5 Investigation of Costs and Prices (Optional)

The Commonwealth must be able to access the Contractors records to verify the claim for payment andit is important to capture all necessary access requirements in this clause. Financial investigation staffwithin General Counsel Division can provide expert assistance in this area.



6. INSURANCE AND LIABILITY

6.1 Indemnity (Core)

Clause 6.1 requires the Contractor to indemnify the Commonwealth against any liability for loss ordamage as a consequence of the acts or omissions of the Contractor, its staff or Subcontractors. Ineffect, the clause protects the Commonwealth from loss that flows from a breach of the Contract, oran unlawful or negligent act or omission by the Contractor. If such an incident occurs, it is theContractor who is best able to manage the risk and thus should bear any loss. This indemnity shouldnot be limited or amended without specialist advice as a different indemnity regime may bring with itcertain reporting and liability approval obligations in accordance with Commonwealth policy onguarantees and indemnities.

Drafters should refer to the DPPM Section 3, Chapter 3.15 for guidance on indemnities.

6.2 Insurance (Core)

ASDEFCON templates have been drafted on the basis that, with the exception of insurance pertainingto workers compensation (which is dealt with in clause 6.2.1a.), the issue of what insurance isrequired is determined on a case by case basis. The recommended approach is to allow tenderers topropose what insurance they believe is necessary, to assess those proposals from a riskmanagement perspective and draft the Contract accordingly. As such, clause 6.2.1b is optional. Ifmore than one insurance policy is to be specified, then additional clauses should be added for eachpolicy required.

The issue of insurance is closely linked to the issue of liability but the two are not directly related. Forexample, the fact that the Commonwealth does not require a Contractor to take out insurance doesnot mean the Contractor is not liable for a loss that would have been covered by insurance. Liability isdetermined by the Contract and the liability clauses. The purpose of requiring the Contractor to obtaininsurance coverage is to ensure that the Contractor will have the financial resources available to meetany claim arising from performance of the Contract.

General Counsel Division and the Defence Insurance Office can assist purchasing officers indetermining what insurance coverage may be required by service providers.

If the Commonwealth requires insurance then it must be satisfied that the Contractor has theapplicable insurance policies, and that they are current. A Certificate of Currency from theContractor’s insurance company can validate the currency of a policy, however it isrecommended that the Commonwealth views the actual documents containing the policy.Drafters should refer to ‘Risk Management in Procurement’ in the DPPM Section 3, Chapter3.2.For information on types of insurance and examples, drafters should refer to the DPPMSection 3, Chapter 3.15.



7. WARRANTIES

7.1 Fitness for Purpose (Core)

In clause 7.1 Contractors are required to warrant that the Services provided under the Contract are fitfor the purpose or purposes for which ‘Services of that kind would be reasonably expected to beapplied by the Commonwealth’.

This general warranty is designed to cover a situation in which the Services are used for purposesthat are ‘reasonably expected’ but are not expressly contracted for in the SOW.

Drafters must accurately define, in detail, the Services required under the Contract in the SOW.

7.2 Warranties and Representations (Core)

This clause contains three distinct warranties. In clause 7.2.1a the Contractor warrants that it has theexpertise and experience to perform the Services. Drafters must detail the Services required by theCommonwealth accurately and precisely in the SOW so as to avoid any ambiguity about the standardor expertise required for delivery of the Services.

In clause 7.2.1b the Contractor warrants that it will correct any defects or errors in the Services, whilein 7.2.1c the Contractor warrants that it will meet the requirements of the Contract. These warrantiesare important as they provide the Commonwealth with protection from sub-standard performance.However, these warranties only operate effectively if the SOW accurately details what is required inthe provision of the Services.

Under clause 7.2.4 the Contractor agrees to remedy defects in the Services notified to it by theCommonwealth Representative during the warranty period. The drafter must specify the warrantyperiod in the draft Contract, but the length of the warranty period will often be an issue arising duringnegotiations with the preferred tenderer.

Drafters must assess the risk of discovering a defect in the Services in order to estimate theoptimal length of time that the warranty should be in place. For help in assessing how longthe warranty period should be, drafters should contact the Contracting Help Desk.

7.3 Conflict of Interest (Core)

In clause 7.3, the Contractor gives the Commonwealth an assurance that to the best of its knowledge,and after making diligent inquiries, no conflict of interest exists at the time the Contract is signed. If aconflict of interest arises after the Contract is signed, the Contractor undertakes to notify theCommonwealth of the conflict immediately. The Commonwealth may terminate the Contract if theContractor fails to notify of a conflict of interest, or is unwilling or unable to resolve the conflict.



8. CONTRACT MANAGEMENT

8.1 Change to the Contract (Core)

Clause 8.1 provides that only changes to the Contract which are documented, recorded and agreed toby both parties to the Contract become obligations each party is bound to fulfil. This assists theCommonwealth Representative to keep track of all Contract changes. If either of the parties requires achange to be made to the Contract, under clause 8.1 they are required to provide written notice to theother party. It is good practice for the copies of the Contract to be physically amended as soon aspracticable after the change is agreed. It is the Commonwealth Representative’s responsibility toissue any Contract amendments.

8.2 Waiver (Core)

Drafters should note that Clause 8.2 does not provide absolute protection for a party who fails toenforce a provision. Where it is reasonable for a party to rely on a representation of another party thatthey need not comply with a provision of the Contract, the legal doctrine of estoppel may apply toprevent the party making the representation from later requiring compliance with the contractprovision.

8.3 Commercial-in-Confidence Information (Core)

Strict duties are placed on both the Commonwealth and the Contractor in regard to Commercial-In-Confidence Information in clause 8.3. This clause sets out the situations where a party to the Contractcan disclose Commercial-In-Confidence Information. It is important to note that the onus is on bothparties to safeguard Commercial-In-Confidence Information, and the responsibilities attached to thatinformation.

Clause 8.3 also expresses the contractual framework now mandatory as a result of Senate Order 192.Further information on Senate Order 192 can be found in the DPPM Section 3, Chapter 3.11.

The Commonwealth and the Contractor will need to discuss and agree, prior to Contract signature,what parts of the Contract will be classified Commercial-In-Confidence Information, and Attachment Dwill need to be drafted accordingly. If no obligation of confidentiality is imposed by either party, theinformation will not be considered as Commercial-In-Confidence.

8.4 Assignment and Novation (Core)

An assignment is the transfer by a party to the Contract of their contractual rights to another party. Itshould be noted that a party cannot assign its obligations under a Contract, as obligations must be‘novated’. Therefore, a deed of novation is used where a party wishes to transfer all of its contractualrights and obligations to a third party.

Before agreeing to the Contractor's request for any assignment, the Commonwealth Representativeshould assess the impact of the assignment on both the Contractor's performance of the Contract,and on the Commonwealth. While the Commonwealth is not obliged to consent to any assignment ofrights under the Contract, a request for assignment should not be unreasonably refused.

In deciding whether or not to consent to an assignment, the Commonwealth Representative shouldconsider the:

a. financial stability of the party to be substituted for the Contractor;

b. ability of the substituted party to perform the Contract and deliver the Services;

c. Contractor's current performance under the Contract; and

d. Commonwealth's previous relationship with the proposed party.

8.5 Negation of Employment and Agency (Core)

Clause 8.5 aims to prevent the Contractor from representing itself as an agent or employee of theCommonwealth. If the Contractor was an employee or an agent of the Commonwealth then theCommonwealth may be liable for the actions of the Contractor.

Notwithstanding clause 8.5, a court will still look at the substance of the relationship between theCommonwealth and the Contractor to determine whether an employer/employee relationship exists.



In the first instance, drafters should consult the guidance provided in the Overview section ofthis Handbook for further information on employer/employee relationships.

This clause also creates a positive obligation on the Contractor and on its employees agents andSubcontractors to identify themselves as contractors of the Commonwealth when they perform theServices. By doing so, the Contractor ensures that there is no confusion on the part of third parties asto the relationship between the Contractor and the Commonwealth.

8.6 Commonwealth Access (Core)

Clause 8.6 places an obligation on the Contractor to allow the Commonwealth Representative accessto its premises and access to records and accounts for the purposes the Contract. This enables theCommonwealth Representative to manage the Contract effectively by ensuring that:

a. the Commonwealth Representative has visibility of work done under the Contract;

b. the Commonwealth can comply with its legislative obligations and can give theANAO access to Contractor records relating to the Contract; and

c. if applicable, the Commonwealth has access to any Government FurnishedMaterial during the performance of the Contract to enable asset checks and stocktakes to take place.

8.7 Contractor Access (Core)

Where access to Commonwealth premises will be allowed under the Contract, contractual provisionsshould be included that detail the scope of the access rights and any obligations that are placed onthe Commonwealth or the Contractor in relation to that access. This clause 8.7 defines these rightsand obligations, and is closely related to the clause on Defence Security (clause 8.9).

Guidance on security issues associated with the provision of access is contained in Section 3,Chapter 3.9 of the DPPM.

8.8 Subcontracts (Core)

This clause informs the Contractor of the Commonwealth's requirements when Subcontractors areinvolved in the provision of the Services. The Contractor retains full responsibility for the workperformed under the Contract regardless of whether it Subcontracts out that work. In accordance withCommonwealth policy, this clause prohibits the Contractor from entering into a Subcontract with aSubcontractor who does not comply with the Equal Opportunity for Women in the Workplace Act1999.

8.9 Defence Security (Core)

This clause details the security requirements of the Contract and the security classification of work tobe performed under the Contract. It places an obligation on the Contractor to ensure that theobligations in this clause are applied to all Subcontractors requiring access to security classifiedinformation in order to provide the Services under the Contract.

The clause consists of two distinct elements. Clauses 8.9.1, 8.9.2, 8.9.13, 8.9.14 and 8.9.15 are coreand are general in nature. The remaining clauses are optional and used when the Contractor will berequired to obtain specific security clearances to undertake the work under the Contract.

In Australia, facility security clearances and personnel facility clearances only apply where classifiedwork will be at the CONFIDENTIAL level or higher. Prior to Contract signature, drafters should selectfrom the clause options A, B, C or D and insert appropriate information into the relevant clauses.Where communications security material is likely to be dealt with in the Contract then optional clauses8.9.10 and 8.9.12 should be inserted.

Unless drafters are certain that all tenderers will be either overseas Contractors or AustralianContractors, a choice between A, B, C and D for this clause can not be made before therelease of the RFT. In these circumstances, all options should be retained.

A facility clearance must be obtained where a company or individual is required to store and handlesecurity classified information at a specific location. A personnel facility clearance is required whereone or more employees of a company or organisation are required to access security classifiedinformation or materials at locations other than their own company premises.



Further guidance on a facility or personnel facility clearance can be found in Part I of theDefence Security Manual.

8.10 Specified Personnel (Core)

In the Statement of Work at Attachment A, drafters should insert the names of any specifiedpersonnel that the Commonwealth requires to perform the Services. Under clause 8.10 the Contractoris obliged to use the specified personnel in the provision of the Services, and to notify theCommonwealth if these people will not be providing Services under the Contract.

8.11 Post Defence Separation Employment (Optional)

Defence has policies that deal with the acceptance of employment in Defence related industries byformer Defence employees.

Where ex-Defence staff are employed by existing or potential Contractors, issues arise regarding‘inside’ knowledge. The Crimes Act 1914 and Public Service Act 1999 constrain formerCommonwealth employees from passing on information that they obtained in the course of theiremployment, which at the time of ceasing Commonwealth employment, it was their duty not todisclose.

Both civilian and military employees are required by Defence to discuss any proposed post separationemployment with the potential for a conflict of interest with the Department and may, depending uponthe outcome of the discussions, be required to lodge a formal request to take up such employment. Indeciding whether to grant approval, the Commonwealth Representative, in conjunction with theappropriate DRB 19 or DI(G) PERS 25-4 delegate, must consider the factors listed in this clause.Failure to consider these factors could result in Defence being in breach of Contract and liable to theContractor for damages or Defence being subject to claims from individuals in relation to detriment totheir post separation employment prospects. In granting approval, restrictions of up to 24 months maybe placed on the use of former Defence employees on specific contracts.

Any questions arising in connection with the application of this clause should be referred tothe Contracting Help Desk.


Guidance on draft Conditions of contract (V1.1) 9 - 1

9. POLICY AND LAW

9.1 Applicable Law (Core)

Where drafters are asked in clause 9.1 to “INSERT STATE/TERRITORY”, they should write ajurisdiction of Australian law. Drafters who are in Canberra should use the laws of the AustralianCapital Territory. If drafters are in other States, and that State is where most of the Services are beingprovided, then drafters may use the law of that Australian State or Territory.

If a Contractor asks for the laws of a foreign jurisdiction to govern the Contract, draftersshould seek advice from General Counsel Division, as a foreign jurisdiction may interpret theContract differently.

9.2 Australian Content (Optional)

This clause should be included only when the procurement is non-covered and is thereforenot subject to the Mandatory Procurement Procedures in the Commonwealth ProcurementGuidelines – January 2005.

Clause 9.2 obliges Contractors to use their best endeavours to maximise local content in sourcingServices. When using ASDEFCON (Services) the value of the Contract will normally be less than $5000 000. If so, an Australian Industry Involvement (AII) clause is not required, this clause will besufficient. However, if a contract value is either initially over $5 000 000 or through changes to thecontract the total exceeds $5 000 000, then the drafter or Commonwealth Representative shouldcontact General Counsel Division for the appropriate AII clauses to insert.

9.3 Policy Requirements (Core)

This clause imposes on the Contractor the contractual obligation to comply with the Commonwealthpolicies listed. These policies are not to be attached to the Contract.

9.4 Occupational Health and Safety (OHS)(Core)

Clause 9.3.1 imposes a contractual obligation on the Contractor to assist the Commonwealth incomplying with its OH&S obligations. The Occupational Health and Safety (CommonwealthEmployment) Act 1991 imposes a statutory duty on the Commonwealth as an employer to take allreasonably practicable steps to protect the health and safety of its employees, Contractors and theirstaff and other persons at or near Defence workplaces.

9.5 Severability (Core)

Clause 9.4 relates to the legality and validity of the Contract. A court may be called upon to look at aterm in the Contract and may form the view that it is invalid or unenforceable. This clause contains theagreement of the parties that any term or condition which becomes invalid or unenforceable should besevered from the Contract, with the rest of the Contract to remain in force.

9.6 Privacy (Core)

Clause 9.5 outlines the Contractor’s obligations under the Privacy Act 1988. The new privacyobligations under section 95B of the Act require Defence to include appropriate provisions in certaintypes of contracts that ensure that Contractors and Subcontractors do not perform an act, or engagein a practice, that would breach an Information Privacy Principle if that act was performed or thepractice engaged in by Defence. Section 95B also applies where a Contractor is providing Services toa third party, rather than directly to Defence, and provision of the Services is in connection with theperformance of the functions of Defence.

It is not sufficient to include a general clause in the Contract stating that the Contractor must notbreach their privacy obligations in relation to the Act. Agencies are required to include detailed orpractical provisions such as those included in ASDEFCON (Services) for each requirement in order tomake a Contractor fully aware of their responsibilities under the Contract.

For more information on the Privacy Act 1988 drafters may refer to the DPPM Section 3,Chapter 3.14.



10. DISPUTES AND TERMINATION

10.1 Resolution of Disputes (Core)

Drafters are required to insert an appropriate period in days, whereby the parties will try tosettle the matter between themselves, before using an alternative process.

Clause 10.1 prescribes what processes may be used to resolve disputes between the Commonwealthand the Contractor. If these processes fail however, the parties to the Contract are able to use otherprocesses to resolve the dispute.

If issues arise between the Commonwealth and a Contractor, General Counsel Division shouldbe contacted immediately to resolve issues before they affect the performance of the Contract.

A dispute between the Contractor and the Commonwealth does not mean that either is released fromits obligations under the Contract. Until a definitive result is agreed upon or stated by the court, bothparties must continue fulfilling their obligations under the Contract.

10.2 Contractor Default (Core)

Where a Contractor defaults under the Contract it does not automatically give the Commonwealth theright to terminate. If the service provided is late or not consistent with what was agreed in the SOWthe Commonwealth Representative is encouraged to use contract management techniques to try toresolve any disputes. This should be done well before the option to terminate is discussed, and theoption of termination should never be discussed with the Contractor until General Counsel Divisionhas been consulted.

Even if there is a discrepancy between the Services required and those prescribed in the SOW, theSOW is still the definitive statement of what Services will be performed under the Contract. Thismeans that if there is an error in the SOW, and the Contractor has provided the Services inaccordance with the SOW, the Contractor has fulfilled its obligations under the Contract.

If the Services provided do not accord with the SOW, or the Contractor does not provide the Services,there may be grounds for the Commonwealth to terminate the Contract. General Counsel Divisionmust be contacted before any action is taken to terminate the Contract.

Drafters must ensure that ALL of the Services required are accurately and comprehensivelyprescribed in the SOW in a way which will prevent or minimise any misunderstanding that maylead to a dispute.Termination for ConvenienceThe Termination for Convenience clause has been omitted from the Services template because of thelow risk profile of a Services contract which is designed for the provision of services that arestraightforward, low value and of short to medium duration.

Terminating the Contract should not be taken lightly. General Counsel Division should becontacted immediately, if the Contract becomes unworkable.

10.3 Right of Commonwealth to Recover Money (Core)

It is possible that money is owed to the Commonwealth for some reason during the Contract. Clause10.3 stipulates the Commonwealth’s rights of recovery under the Contract, including details on thepayment of interest and the right of the Commonwealth to deduct the amount of the debt from thepayment of any claim.

The waiving of a debt owed to the Commonwealth by the Contractor, is only permitted if aspecial delegation has been given by the Minister for Finance. See Chief Executive Instruction6.3 ‘Waiver of Debts to the Commonwealth’.

For further information refer to DEFGRAM NO 19/2003 – Accounts Receivable and the DebtManagement Procedures Manual.



10.4 Survivorship (Core)

This clause provides that after the Services have been completed and the Contractor has receivedpayment, the obligations, warranties and securities given under the Contract survive the expiry ortermination of the Contract.


Guidance on draft Conditions of Contract (V1.1) EX - 1

EXECUTION PAGE

Deeds and Contracts are signed by a Contract Signatory. The Contract Signatory delegate isresponsible for entering into a contract, agreement or arrangement under which public money willbecome payable. The Contract Signatory delegation is detailed in DRB 47 – Manual of FinancialDelegations Schedule F2-5. The schedule includes a list of Contract Signatory delegates and therelevant directions. Proposal, Procurement and Contract Approval needs to be obtained beforethe Contract Signatory exercises its delegation.

For more information on Financial Delegations and general responsibilities andprocedures for exercising delegations, refer to the DPPM, Section 1, Chapter 1.4.

There are a number of ways in which a company may execute a contract. Unless the contract isvalidly executed, the Contractor may not be legally bound. Drafters should note that the followingprovides an overview of the common ways in which companies execute contracts. It is not anexhaustive summary of the law relating to the execution of contracts and in particular does notdeal with the law of agency which may operate to bind either the Commonwealth or theContractor in circumstances where a person is held out by a party as having authority to executethe Contract on behalf of that party.

Effective Methods for Executing the Contract

The guidance below generally relates to execution of the Contract by a company incorporatedunder the Corporations Act 2001.

Contracting advice should be obtained as to the correct execution clause to be used for anoverseas Contractor.

A Contract may be executed by an Australian company in one of the following ways:

a. by affixing its company seal in accordance with its constitution or in presenceof certain company officers;

b. by certain company officers signing the Contract; or

c. by an individual or individuals acting with the company’s express or impliedauthority signing on behalf of the company.

Assumptions Concerning Proper Execution

Affixing the company seal or having the specified company officers sign the Deed, in the mannerdescribed below, are preferred over other ways of executing a contract. The reason for this isthat using either of these methods will, in certain circumstances, allow the Commonwealth toassume that the Contract has been duly executed.

A person is not entitled to assume valid execution if, at the time of the dealings, they knew orsuspected that the assumption was incorrect.

Execution by Affixing the Company Seal

An Australian company may sign a Contract by affixing its company seal in accordance with theCorporations Act 2001 or the company’s constitution. The seal is a stamp that includes the nameof the company and its Australian Company Number (A.C.N.).

The company’s constitution may set out the way in which the company seal must be affixed. Forexample, the constitution may require that the company’s Board of Directors pass a resolutionauthorising the affixing of the seal to a contract. In these circumstances, it is best practice toobtain a copy of the company’s constitution and evidence that any requirements for a validexecution by the company has been fulfilled (for example a copy of the relevant resolution of theBoard).

Under the Corporations Act 2001 a person may assume that a Contract has been duly executedby a company where it is stated to have been executed as a Contract and the seal has beenaffixed in the presence of: two directors; or a director and the secretary of the company; or thesole director/sole secretary of the company. However, the preferable means of execution is viatwo directors or director/secretary. These company officers indicate their presence by signing theContract next to the seal and inserting their name and position within the Company.



A person may also assume that anyone who signs the Contract and states next to their signaturethat they are the sole director and sole company secretary of the company actually occupies bothoffices, where they are making that assumption for the purpose of assuming the Contract hasbeen properly executed. As a matter of practice, Commonwealth officers should check AustralianSecurities and Investments Commission (ASIC) public records to verify that the person claimingto be a director or secretary are listed as such.

However, it should be noted that Australian companies have not been required to have acompany seal since amendments to the corporations law in 1998. Some companies, therefore,will not execute the Contract in this way.

Execution by a Person Under Authority

Under the Corporations Act 2001 a person dealing with an Australian company may assume thatanyone who is held out by the company to be an officer or agent of the company has been dulyappointed and has authority to exercise the powers and perform the duties customarily exercisedor performed by that kind of officer or agent of a similar company.

In some circumstances, this assumption would extend to enable a person to assume that adocument (including a contract) has been validly executed by a person held out as an officer oragent of the company. However, it is important to note that the extent of the authority of theperson being held out by the company should be carefully considered to ensure that either:

a. the authority expressly extends to executing the particular Contract; or

b. that executing the Contract would be within the powers customarily exercisedor performed by that kind of officer or agent.

Execution by a Person with a Power of Attorney

An example of express authority would include the authority granted under a power of attorneyexpressly authorising a person to bind the company to the Contract in question. Where a personis seeking to execute a Contract under power of attorney, drafters should ask to see a copy of thepower of attorney in order to check that it is current, is validly executed and legally enforceableand that it confers on the attorney the power to execute the Contract in question.

Signature of the Contract by the Commonwealth

For information on Financial Delegations, particularly the Contract Signatory delegation,refer to the DPPM, Section 1, Chapter 1.4

The Commonwealth must also sign the Contract through a Commonwealth officer withappropriate authority to bind the Commonwealth. An officer with the authority to exercise theContract Signatory delegation should sign for, and on behalf of, the Commonwealth. The officer’sdelegation will usually be limited according to the level of the officer by reference to an amount ofmoney. The Minister with portfolio responsibility for the funds in question may also authorise anofficer to sign the Contract. Such an authorisation will usually be limited to a particular contract.

A company dealing with the Commonwealth is entitled to rely on a document as binding theCommonwealth if it is signed on behalf of the Commonwealth by an officer of the Commonwealthwho the Commonwealth has held out as having authority to bind the Commonwealth. ACommonwealth officer who purports to bind the Commonwealth by signing a ContractDevelopment Agreement in the absence of a delegation or other authority may be subject todisciplinary action but their action will not affect the validity of the contract signed.

In some cases a company may request evidence from the Commonwealth of the authority of theofficer signing the Contract to bind the Commonwealth.

Contracting advice should be sought when a request is received for evidence of theauthority of the officer signing the Contract. Usually a letter is then drafted setting out thebasis for the officer’s authority.

Final Review of the Contract Prior to Signature

Drafters should ensure that prior to Contract signature the Contract documents are checked foraccuracy and completeness. Sufficient time should be allowed between completion ofnegotiations and Contract signature to enable the parties to check the final Contract. It isimportant not to rush this final checking process.



Initialling of Individual Pages

In order to ensure that the parties are able to clearly identify the ‘as signed’ version of theContract it is recommended that an authorised representative from each party initial each page ofthe Contract (including all Attachments).

Promulgation and Storage of Executed Contracts

Generally at least two copies of the Contract will need to be executed, one for each party. TheCommonwealth Representative should retain the Commonwealth’s original copy.

Prior to Contract signature, drafters must insert the correct execution clauses for eachparty. As the Department of Defence is not a legal entity, it is necessary for the Contract tobe signed by ‘the Department of Defence on behalf of the Commonwealth of Australia’.


Guidance on Attachments to Contract (V1.1) A - 1

ATTACHMENT A - STATEMENT OF WORK (CORE)1. INTRODUCTIONThe Statement of Work is issued as part of the Request for Tender (RFT) or other requestdocumentation. It defines what the Commonwealth wishes to buy and what tenderers need to addressin their tender responses. The development of a comprehensive draft Statement of Work will ensurethat the identified requirement will be satisfied with minimum recourse to amendment during the life ofthe Contract. This will represent better value for money.

2. STATEMENT OF WORK (CORE)Usually drafters will produce a SOW aimed at either a particular output, or the performance of ongoingtasks. If the Service is a physical output such as a report or presentation, clauses drafted in terms ofphases are an effective way of measuring progress. For services that are ongoing, clauses drafted interms of tasks to be completed may be more appropriate.

Drafters should compare the draft Statement of Work against the conditions of contract toensure that there is no conflict between the parts of the Contract. If there is a conflict, clause1.5 of the conditions of contract provides that the conditions of contract shall prevail.Option AClause 2.1 of Option A requires a drafter to outline the phases of Services to be completed under theContract. Drafters should break down the services into distinct stages. For example, if theCommonwealth contracted for the provision of a report on contract training within Defence, it may beappropriate for the Contractor to research, interview people, prepare a draft report for approval,prepare a penultimate report, present the report to a committee and incorporate final comments beforefinal approval can be given. In this case clause 2.1.1 may look something like:

2.1.1 The Contractor shall undertake the work in the following phases:

a. Phase 1: Research;

b. Phase 2: Draft Report;

c. Phase 3: Pre-Final Report;

d. Phase 4: Presentation; and

e. Phase 5: Final Report.

The clause should be complete but need not be detailed, as the detail of the work will be outlined infurther clauses. Correctly detailed phases will allow the Commonwealth Representative to ascertainwhether or not a Contractor is performing under the Contract and if not, inform the Contractor exactlywhere they are failing and what needs to be rectified.

A properly drafted Statement of Work is essential for successful contract management.

It is not necessary to specify HOW the Commonwealth wants the work done, as this may lead to sub-optimal results, however it is necessary to identify exactly WHAT the Commonwealth expects toreceive in the provision of the Services under the Contract.

Drafters must state exactly WHAT it is the Commonwealth wants, and to what standard.As there is the need to create obligations on a Contractor in the SOW, the use of mandatory language(or language stating that something will be done) such as ‘shall’, ‘will’ or ‘must’ is required.

A good rule of thumb for drafters to ensure that the SOW meets the Commonwealth’s needs is to:

� know exactly what the Commonwealth wants out of the Contract;

� make sure you create OBLIGATIONS on the Contractor;

� detail those OBLIGATIONS; and

� seek assistance from contracting specialists to ensure that you have done the above in amanner which will give the Commonwealth best value for money.



Option BIf a Contractor is expected to perform various tasks or duties, as compared to providing a specificoutput, drafters should use the SOW clauses at Option B. If it is not clear from delivery of a specificoutcome, drafters must ensure that the Contract contains an end date. Contracts that do not have anend date, or delivery date for a final phase of work, may not be sufficiently certain. Uncertainty mustbe avoided where ever possible as it may lead to:

a. difficulty in holding the Contractor to the required level of service; and

b. difficulty in ensuring the Commonwealth receives value for money as theContractor may build contingency for uncertainty into the cost of performing theServices.

The tasks in Option B are usually described as ‘the level of service provided’ and ‘the location fordelivery of the Services’. Drafters should expand on these clauses later in the document in as muchdetail as possible. For example if the Commonwealth wishes to hire a Contractor to provide IntegratedLogistics Support (ILS) advice on a project, this advice may include drafting documentation such asILS Plans and Transition Plans. If the Transition Plan needs to cover ‘spare entitlement from theacquisition phase to the support phase of the life of a contract’, then the SOW must say that in order tocreate an obligation on the Contractor. Drafters should provide as many details as they can on whatexactly the Commonwealth requires.

3. DELIVERABLESA Deliverable is the actual measurable item or service that the Commonwealth expects theContractor to achieve by close of each phase of the Contract.

Deliverables can either be :

a. the object or outcome of the Contract;

b. the Services themselves; or

c. a combination of an expected outcome (e.g. a report) and the services (e.g. ILSManagement).

If the Commonwealth requires two types of Deliverables from the Contract, drafters should divide theSOW into work or task packages, and include the physical Deliverables and Services in a deliverytable similar to that shown in clause 3.1 Option A.

Option AOption A is for Contracts where Contractors are performing a specific task such as producing a report.Since the work to be completed in the SOW has already been divided into phases completing thetable at clause 3.1 will be relatively simple. Some phases may not have an assigned Deliverable, butmost will. If more than one Deliverable is assigned to a phase, each Deliverable should be listed as aseparate line number.

The ‘Location’ is the physical location to which the Deliverable will be sent. Drafters should include theaddress, even if delivery is to the Commonwealth Representative.

The heading ‘SOW Ref’ refers to the clause number in the SOW that outlines the exact requirement.This further emphasises the need to ensure that the SOW is as succinct and detailed as possible.

The ‘Delivery Date’ column must state a final and firm delivery date.

Option BIf a Contractor is expected to perform various tasks, as compared to providing a specific output, andno specific deliverable other than those tasks can be ascribed to the SOW, then a drafter may elect tochoose Option B.

Option B outlines the services required under the Contract in general terms. General terms are usedbecause the Services themselves are the Deliverable. Duplication of the detail in this table isunnecessary as clause 2 of the SOW will have already created obligations on the Contractor.

When the tasks are outlined in general terms, rather than final delivery of a specific output, an enddate for the Contract may not be clear. If this is the case, drafters must ensure that the Contract



contains an end date. Contracts that do not have an end date, or delivery date for a final phase ofwork, may not be sufficiently certain. Uncertainty must be avoided where ever possible as it may leadto:

a. difficulty in holding the Contractor to the required level of service; and

b. difficulty in ensuring the Commonwealth receives value for money as theContractor may build contingency for uncertainty into the cost of performing theServices.

If the Contractors work location for the duration of the Contract is included in Option B, drafters mustbe consistent with the conditions of contract and with optional clause 6 of the SOW.

4. MEETINGS AND REPORTINGIn providing the Services, the Commonwealth and the Contractor may need to meet regularly toensure that the Contract is conducted efficiently. Any particular meeting or reporting requirements areto be inserted into the SOW, so that the Contractor has an obligation to report or meet as often as theCommonwealth requires. Where it is agreed between the parties, meetings may still be held that arenot included in the SOW.

5. SPECIFIED PERSONNELIf using specific personnel to perform the particular duties is a condition of the Contract, then thosepersonnel and their duties must be listed. There may be times when people listed as SpecifiedPersonnel cannot perform the duties as contracted. If this occurs, the Contractor is under an obligationto advise the Commonwealth and propose substitute personnel with the same standard or level ofskill. If this does not happen the Contractor is in breach of Contract and the Commonwealth mayterminate the Contract for that breach in accordance with clause 10.2 of the conditions of contract.

Drafters should immediately seek specialist advice from General Counsel Division if, due to achange in personnel, a Contractor does not perform their duties under the Contract.

If there is sufficient reason for the specified person not performing the work, and provided anacceptable replacement can be found and the work is completed to the standard specified in theSOW, this should be satisfactory to the Commonwealth.

6. GOVERNMENT FURNISHED MATERIAL (OPTIONAL)For the purposes of a Services Contract, Government Furnished Material (GFM) is everything that theCommonwealth provides to the Contractor for the purposes of performing the Contract. This includeseverything from a workstation or storage space, to Intellectual Property.

In contracts for major capital equipment, (that is, where drafters use ASDEFCON (Strategic Materiel)or ASDEFCON (Complex Materiel)) GFM is divided into categories such as Government FurnishedEquipment, Government Furnished Information and Government Furnished Data. However servicescontracts do not need that level of complexity, so only the generic GFM clauses are used.

Identifying GFMDrafters should insert the details of anything the Commonwealth will provide as GFM. This mayinclude:

� ‘Such normal office services and facilities as are reasonably required by the Contractor’spersonnel for the performance of the Services’; and

� ‘All magnetic media and consumable, storage facilities and messenger services reasonablyrequired by the Contractor’.

Drafters should insert details of the GFM in the ‘Item’ column of the table at optional clause 6. Thedates and location of delivery should be inserted after tender responses are received and negotiationsare complete.

Drafters offering to supply GFM to a Contractor must be certain that the material is actually availableand is available for the entire term of the contract. In particular drafters must be sure that:

a. the Commonwealth actually owns, or has an appropriate licence for, anyIntellectual Property in any item that you plan to allow the Contractor to use;



b. the Contractor can get access to an email account. It should be noted that if aContractor cannot get a security clearance it will be impossible for that person toget onto the Restricted network;

c. any promised desk space is in fact available for the Contractor to use for the wholeof the Contract duration; and

d. if the Contract requires dealing with secure material, that the Contractor has securefacilities to conduct the work.


Guidance on Attachments to Contract (V1.1) B - 1

ATTACHMENT B - PAYMENT (CORE)

1. BASIS OF PAYMENTOption AOption A is the Commonwealth’s preferred option, since it involves the least risk to the Commonwealthand places the greatest incentive on the Contractor to perform. This option ensures that the work hasbeen performed satisfactorily prior to making any payment.

Drafters should use Option A when the Contractor will be paid at the end of a period of work. Option Ais for short contracts of a relatively short duration such as a week, or month. Although this clause isfavourable to the Commonwealth, it may not be accepted by the Contractor if the Contract is for anextended period of time.

Option BOption B should be used when the Contractor is paid a portion of the payment at the satisfactoryconclusion of each phase set out in the SOW. Whilst this method of payment guarantees a cash flowand is beneficial for Contractors, drafters should be cautious and ensure that the interim payments arenot so large that the Contractor has little incentive to complete the Contract. The bulk of the paymentshould be made at the final acceptance stage, thus providing an incentive for the Contractor to providethe final Deliverable and complete the Contract.

Option COption C is for use when a contractor or PSP will be paid at agreed hourly rates for work performed. Inorder to ensure that the Commonwealth complies with its financial accountability requirements, clause1.4 states that the contractor shall provide the Services for a price which shall not exceed the ContractPrice.

The inclusion of a not to exceed Contract Price in this "time and materials" based payment optionmeans that the Contractor accepts the risk of not completing the Services within the Contract Price.Option C is the Commonwealth’s least preferred option because if the Contractor does not completethe Services within the estimated allowable hours and the not-to-exceed Contract Price has alreadybeen reached, then there is no incentive for the Contractor to complete the Services. This optionshould therefore only be used when the Services to be provided by the Contractor are well definedand clearly set out in the Contract and a relatively accurate estimation of the hours that will berequired to complete the task can be made.

A time and materials option should not be used when engaging Contractors to perform Services inrelation to a highly developmental or otherwise high risk contract, such as the review of documentationdelivered by another contractor under a project with a high software development component. Whilethe inclusion of a not to exceed Contract Price means that the Commonwealth liability is clearlydefined, if the project for which the Contractor is providing Services runs into delays and the not-to-exceed Contract Price on the Contractor's services contract has already been reached, then theCommonwealth will be under pressure by the Contractor to increase the negotiated not to exceedContract Price.

2. REIMBURSABLE EXPENSESReimbursable expenses are not Contract payments. They cover those things that (in addition topayment for the Services) the Commonwealth will reimburse to the Contractor, if agreed in theContract. Usually reimbursable expenses only include economy air travel, accommodation, meals,telephone, facsimile and interstate communication.

Drafters must be careful to set out the exact conditions and rates under which theCommonwealth will reimburse expenses to a Contractor.Option B: Allowable Reimbursable ExpensesThe following expenses may be reimbursable to the Contractor under the Contract:

a. air travel within Australia at economy class rates;

b. accommodation and meals on a scale commensurate with non-SES officers of theAustralian Public Service; and


Guidance on Attachments to Contract (V1.1) B - 2

c. facsimile, telephone and interstate communication costs incurred, at cost only.

Travel and accommodation reimbursement must not exceed that of the total allowableCommonwealth Non-SES rates.

The Commonwealth Representative should ensure that when Contractors submit an invoice forreimbursement of travel expenses (fares and agreed reimbursable expenses) that the Contractor onlycharges goods and services tax (GST) on the GST exclusive price of the travel expenses as opposedto the GST inclusive price.

Claims for Payment for reimbursable expenses can not be paid unless they are supported byappropriate documentation from the Contractor, such as telephone bills, hire car receipts and creditcard receipts. This allows for verification of expenses and a transparent audit trail for theCommonwealth.

Clause 2.4 contains an obligation on Contractors not to release information regarding Defence travelrates. This clause protects the interests of the Commonwealth and the travel service provider, and thisapproach recognises that the rates, such as travel and accommodation rates, are provided to theCommonwealth under commercial agreements.

Clause 2.4 to Attachment B must always remain in the Contract. It must not be altered duringnegotiations with the preferred tenderer.

3. CLAIMS FOR PAYMENTClause 3 outlines the invoice procedure that enables the Commonwealth to obtain a correctlyrendered invoice for the purpose of fulfilling its reporting obligations to the Parliament, the ATO andthe ANAO. Drafters must ensure that payments are to be made 30 days from receipt and acceptanceof the Services, as this is required by Commonwealth policy.

Drafters should keep abreast of changes in travel procedures as outlined in DEFGRAM 29/2004Defence Travel Reform.


Guidance on Attachments to Contract (V1.1) C - 1

ATTACHMENT C - INTELLECTUAL PROPERTY SCHEDULE (CORE)The purpose of this attachment is to allow the Commonwealth to accurately capture all IP involved in aspecific project and to facilitate the management of IP in Defence. If the Commonwealth is prepared toprovide GFM which includes Intellectual Property that the Commonwealth is entitled to provide, the IPSchedule should be filled out as appropriate before the RFT is released.

The remainder of the Schedule should be filled out by the Contractor before the Contract is signed (ifmaterial is to be produced), and updated, as Foreground IP is developed. The Contract is amendedthrough the Contract Change Proposal process.

A complete and finalised IP Plan should be produced by the Contractor before final acceptance(and payment) of the Services is made and the Contract fully discharged.

All Intellectual Property must be described and recorded. For example if the Contractor is providingIntellectual Property for the development of a database, then all the Intellectual Property in, or relatedto, that database must be listed.


Guidance on Attachments to Contract (V1.1) D - 1

ATTACHMENT D - COMMERCIAL-IN-CONFIDENCE INFORMATION (CORE)The Commonwealth’s preferred position is that nothing in the conditions of contract, either draft orfinal, should be classified as Commercial-in-Confidence (C-in-C) unless it can be demonstrated to beC-in-C in accordance with Commonwealth policy.

This attachment has been developed to meet the requirements of the Senate Order on Departmentaland Agency Contracts (No 192). This order requires Government agencies to place lists of contractswith a consideration of $100,000 or more on the agency’s Internet home page. To comply with thisorder, Government agencies are also required to identify the provisions in contracts that areconsidered to be Commercial-in-Confidence Information, and detail the reason for any provision soidentified.

It is Defence and Commonwealth policy to consider on a case-by-case basis what might constituteCommercial-in-Confidence rather that characterising the entire Contract as Commercial-in-Confidence.

If, after applying the ‘four criteria’ described in the DPPM Section 5, Chapter 5.8, clauses aredemonstrated to be appropriately classified as C-in-C information, the drafter should completeAttachment D.

Completion of Attachment D is mandatory for all contracts, regardless of value.

Further information on Commercial-in-Confidence Information can be found in the DPPMSection 3, Chapter 3.11.