Commonwealth Supplier Code of Conduct consultation
In the wake of the PWC scandal, the Federal Government is engaging with its suppliers to to establish a Commonwealth Supplier Code of Conduct to reinforce expectations that suppliers conduct themselves consistent with integrity and ethical values held by the Commonwealth.
Governance across the Federal Government supplier landscape is changing in the wake of the PWC scandal.
Australia is ranked 14 by Transparency International in its published annual index measuring the perceived levels of public sector corruption in 180 countries. Australia’s ranking has slid in 2023 as corruption allegations have been made against former MPs, and in the wake of both the PWC and Robodebt scandals, moreover public perception of suppliers to the Commonwealth has been tarnished.
In likely response to increasing public pressure, The Department of Finance has called for industry consultation on a draft code of conduct that will apply to suppliers to the Commonwealth in specific scenarios. Get a copy of the draft code here.
Industry regulation risks
Wherever governments seek to regulate markets through code compliance, the barriers to entry increase. Typically, there is a disproportionate impact on SMEs with fewer resources to respond to the increasing business costs. The proposed Department of Finance code is no different, presenting unique compliance challenges for SMEs and start-ups.
The draft code includes some unique challenges for SMEs and start-ups who must demonstrate a positive duty:
A requirement to demonstrate appropriate documented policies, frameworks, or similar measures are in place to tender or supply to the Commonwealth.
A limited timeframe in which to achieve compliance with the code of conduct.
Flowdown provisions that apply the code of conduct to subcontractors.
Requirements to emulate public service values and accountability.
Requirements to adhere to established Commonwealth payment terms for subcontractors.
Competitive pressure is a fundamental driver of economic performance, fostering innovation, efficiency, and choice. However, in markets subject to heavy regulation, competition can become stifled. SMEs, along with start-up organisations, are essential in introducing diversity into supplier options for the Commonwealth, with these entities constituting 97.3% of all Australian businesses.
Positive duty obligations
A positive duty obligation in a code of conduct creates proactive responsibilities that must be fulfilled to uphold ethical standards, promote a positive environment, and prevent misconduct. Unlike passive requirements that dictate what not to do, positive duties demand active engagement and behaviours to ensure specific outcomes. Evidencing a positive duty obligation has been fulfilled is more challenging than passive requirements suggesting a legal context. That legal context may create obligations requiring organisations subject to the code to evidence steps have been taken, concepts that are now more familiar to businesses following the introduction in 2022 of changes to requiring employers to prevent workplace sexual harassment, sex discrimination and victimisation.
The need for increased regulation
Public sentiment will likely support the need for increased regulation, but ultimately, where that regulation applies is best applied is debatable. On the one hand, a large corporation has acted to defraud the Commonwealth of taxes, a clear case for better governance. On the other hand, and perversely, the application of regulations that apply sector-wide will undoubtedly impact smaller organisations, which will be disproportionately affected.
What can you do?
If your organisation is a Commonwealth supplier or looking to become one, there are several things you can do to prepare for increased regulation:
Provide feedback to the Commonwealth and elected politicians about how proposed regulation changes will impact your business.
Review your governance framework and policies through the lens of the proposed regulations and consider changes you need to make to ensure compliance.
Consider how compliance may impact your competitive positioning in the market, and prepare documentation that supports and evidences your compliance to ensure you’re able to respond to tenders for supply in a timely manner.
Budget for increased compliance costs, including obtaining expert or legal advice.
Engage with your supply chain and partners to better understand if your compliance boundary can be met.
Need help?
If you need help to engage in the Commonwealth’s consultation process or to prepare your organisation for compliance with the code of conduct, act now to ensure you can remain competitive. Contact us for help.