Supplier performance and shared reporting regime (Public Construction – Guidance 8.2)

Effective date: 30 December 2018

Objective: To provide information on a supplier’s performance to help when selecting suppliers and to encourage positive supplier performance

Summary

Public Construction Procurement starting on or after 1 July 2018 must comply with supplier performance and shared reporting requirements.

Agencies must assess how suppliers perform using the template nominated by the Secretary to the Department of Treasury and Finance when:

• for suppliers of Works - the value of the contract engaging the supplier is $750,000 (inclusive of GST) or higher
• for suppliers of Construction Services - the value of the contract engaging the supplier is $300,000 (inclusive of GST) or higher.

Suppliers engaged under contracts that comply with the Partnerships Victoria Requirements or the Victorian Alliancing Policy are assessed in the manner described in the relevant policy.

Agencies must report on how suppliers perform. Completed reports must be submitted to the website or system nominated by the Secretary to the Department of Treasury and Finance.

This Guidance will help Agencies to maintain effective supplier performance reporting.

What to do before signing a contract

Before entering into an arrangement with a supplier:

• properly analyse the need for the procurement, including its functional and performance requirements
• clearly define the outcomes desired from the procurement
• establish performance indicators that are consistent with the form of contract used
• obtain/maintain and refer to records of past supplier performance
• include clauses in the contract that allow for in-contract evaluations, monitoring procedures and performance measurement
• include clauses in the contract that allow performance assessment information to be collected and for permission to use the information in other projects.

When are assessments of supplier performance required?

Public Construction Procurement starting on or after 1 July 2018 must comply with supplier performance and shared reporting requirements.

Shared reporting is required for suppliers of Works or Construction Services engaged under:

• contracts for Works (including buildings, infrastructure and demolition)
• contracts for Construction Services
• contracts entered into with suppliers sourced from Registers
• contracts made under standing offer arrangements or Supplier Panels (for example, by way of a purchase order issued under the standing offer arrangement). This requirement includes purchase order contracts made under State Purchase Contracts and Sole Entity Purchase Contracts where the services relate to Public Construction.

Legally, types of contracts include:

• contracts under seal (also known as deeds)
• simple contracts (can be oral, or written, or a combination of both).

Formally assess suppliers of Works:

• every six calendar months from the date of possession of the site until practical completion of the Works, when the expected duration of the contract engaging the supplier is 12 months or longer
• within 30 days of the date for practical completion of the Works
• within 30 days of the end of the defects liability period for the Works
• at any time a significant issue affecting supplier performance arises.

Formally assess suppliers of Construction Services:

• every six calendar months from the start of the engagement over the term of the engagement, when the expected duration of the contract engaging the supplier is 12 months or longer
• within 30 days of the end of the contract engaging the supplier of Construction Services
• for suppliers of Construction Services engaged as designers of buildings or infrastructure - within 30 days of the date when the later of the final design or working drawings and related documents (such as the specification) are submitted
• for suppliers of Construction Services where their services affect the delivery of buildings or infrastructure -
  • within 30 days of the date for practical completion of the Works
  • within 30 days of the end of the defects liability period for the Works
• at any time a significant issue affecting supplier performance arises.

Assess how suppliers perform under contracts that comply with the Partnerships Victoria Requirements or the Victorian Alliancing Policy in the manner described in the policy applying to the supplier.

Assess how each individual supplier performed when suppliers are engaged under a joint venture. This is necessary as joint ventures are generally project specific and an assessment of a joint report would be hard to refer to in the future.

If a periodic assessment for suppliers of Works or Construction Services is due to fall within two calendar months of a milestone report, the milestone report supersedes the need to prepare the periodic report.

What is reviewed in a shared reporting assessment?

In addition to any other means of assessing how suppliers perform, Agencies must assess how suppliers perform using the template nominated by the Secretary to the Department of Treasury and Finance when:

• for suppliers of Works – the value of the contract engaging the supplier is $750,000 (inclusive of GST) or more
• for suppliers of Construction Services – the value of the contract engaging the supplier is $300,000 (inclusive of GST) or more.

Agencies may assess and report on how suppliers of Works or Construction Services perform when the value of the contract engaging the supplier is less than the values listed above.

A mediated or negotiated outcome to a dispute may impact what is presented in a performance report if the outcome of the mediation or negotiated is subject to a confidentiality agreement. The subject of a confidential mediated or negotiated outcome should not be discussed in the performance report. Other sections of the performance report should be completed in the normal manner.

How are records of performance assessment stored and used?

Agencies must report on how suppliers perform. Completed reports must be submitted to the website or system nominated by the Secretary to the Department of Treasury and Finance.

Records of supplier performance are held centrally and are accessible for use by practitioners when:

• selecting potential participants in a Selective Tender or Limited Tender process
• determining how a supplier performed on earlier projects when evaluating an open, Selective Tender or Limited Tender, in a similar way to a reference check.

Keep suppliers informed and involved

Suppliers need to be made aware from the outset that their performance will be assessed and recorded. They should be advised of the performance criteria, how they will be measured, when they will be assessed, how performance assessments will be recorded and who will have access to such information.

The performance assessment process should allow for constructive two-way discussion so that both the supplier and the Agency receive feedback on ways to improve. Suppliers must be given an opportunity to comment on the performance assessment. As this is an opportunity not an obligation on the supplier, this opportunity should be limited to a period of 10 business days.

Effective supplier performance monitoring

Shared reporting looks at more than whether a contract has been delivered on time, budget and within the specified quality parameters. Shared reporting also considers relationships and how the contract is managed.

Shared reporting processes will help develop strong partnerships with industry through:

• adopting and committing to co-operative working relationship
• a non-adversarial approach to dispute resolution with arbitration or litigation reserved as a last resort
• a supplier’s right of reply during the performance assessment and the opportunity for the supplier to explain how it will mitigate past poor performance.

Effective performance monitoring and management requires:

• regularly checking the supplier’s performance to ensure contractual obligations are being met
• providing constructive feedback progressively to the supplier, so there are no surprises at the end of the process (identify and respond promptly to any contractual issues and advise the supplier in writing if dissatisfied with any aspect of performance under the contract
• seek progressive feedback from the supplier on how Agency is performing and where appropriate address such issues)
• where appropriate, requesting progressive feedback from stakeholders and making the feedback available to the supplier
• keeping records of all dealings with the supplier and of the administration of the contract (for example, file notes of inspections, telephone conversations, records of meetings and documented invoice processing) – this may include recording the performance outcomes in external databases
• providing a copy of performance reports to the supplier and inviting the supplier to respond to (or acknowledge they have received) the report.

Useful resources

Standing Directions 2018 under the Financial Management Act 1994 Guidance 4.2.1

Sets out performance expectations to be included in contract and for performance monitoring, evaluation and reporting.

National Framework for Traditional Contracting: Topic Specific Guide 4 Performance and Continuous Improvement (Department of Infrastructure and Regional Development, September 2015)

Provides guidance on establishing a formal performance assessment framework.

Tools and support

Submit performance reports via the online buyer portal feedback form.

The Detailed guide to completing a supplier performance report sets out the method to follow when assessing the performance of suppliers. This guide also establishes the grading scales to apply when assessing how suppliers perform

The Practitioners Toolkit includes key documents, guidance and information about the Ministerial Directions and Instructions for public construction.

For further information about the Ministerial Directions and Instructions for public construction procurement, please contact the Construction Policy Team.