The new Supplier Code of Conduct requirements may create probity risks for agencies.

The new Supplier Code of Conduct (Code) requirements took effect on 1 April 2025. While the Agency Guidance (Guidance) provides detailed information on some aspects of the Code, it leaves some questions unanswered. This may create probity risks for agencies, particularly for those new to procurement.

Application of the Code and key questions

The Guidance states that, in addition to including the Code’s standard model clauses in invitation documents and contracts (where such documents are used), agencies should consider:

• how the reputation and behaviour of tenderers will be factored into the procurement process; and
• how compliance failures of a tenderer with the Code will be taken into account during the evaluation of a procurement.

The Guidance goes on to state:

“For example, consider a mandatory requirement that is a pass/fail requirement based on whether a potential supplier has previously breached the Code, a weighted criterion, or as part of the assessment of risk during evaluation.”

The Guidance also states:

An agency’s approach to implementing and enforcing the Code will depend on:

• the size, scope and risk of the procurement; and
• the type of goods, services or works being procured.

This appears to require agencies to tailor their application of the Code from one procurement to the next. Regular tenderers to the State may experience inconsistency across procurement processes – both within and between agencies.

Key questions that must be answered include:

• Will the evaluation criterion be designated as mandatory, weighted, or risk assessed?
• What questions should tenderers be asked?
• How will compliance be assessed depending on the designation of the criterion?
• If there is a mandatory criterion, what will constitute a pass or fail? How serious would a breach have to be to fail?
• If it is a weighted criterion, how will it be scored?
• Similarly, if it is risk assessed, what would constitute an unacceptable level of risk?

Non-compliance, exclusion, and procedural considerations

If a tenderer is perceived to have significant non-compliance, should they be given the opportunity to defend themselves? It may be procedurally unfair not to provide a right of reply, including any mitigation strategies or remedies the tenderer may have undertaken.

The Guidance specifies that, in serious cases of non-compliance with the Code, an agency may seek to suspend or terminate a contract in accordance with its terms.

Before doing so, agencies must consult with:

• a senior officer, such as the Chief Procurement Officer;
• legal advisors; and
• relevant stakeholders, including the Department of Government Services.

The basis for suspension or termination should be documented.

This raises the question of whether similar procedures should apply when a tenderer faces exclusion from a procurement process due to an alleged serious breach of the Code.

Making compliance with the Code a mandatory criterion may potentially cause probity issues. The Victorian Government Purchasing Board policy clearly states that if a tender does not comply with a mandatory criterion, it must not be evaluated. Excluding a tender on the basis of non-compliance – without offering the tenderer the opportunity to present their case – may be procedurally unfair.

Assessing Code compliance

If Code compliance is to be included as a weighted criterion, it should be assigned an appropriate weighting. Consideration should also be given to the overall balance between government policy requirements and project-specific needs. A clear scoring scale should be developed that addresses this criterion specifically. For example:

5 = fully compliant

4 = minor non-compliance, with evidence of adequate mitigation

3 = minor non-compliance, with no evidence of adequate mitigation

2 = significant non-compliance, with evidence of adequate mitigation

1 = significant non-compliance, with no evidence of adequate mitigation

0 = major non-compliance

The simplest approach to compliance is likely to be risk assessment.

Whatever approach is taken, the Guidance recommends agencies conduct due diligence, including as outlined in the Guidance. One example of due diligence in the Guidance is:

conducting reference checks with other agencies to discuss the ethical performance of a proposed Supplier

Unless these checks are conducted fairly and transparently, the evaluation process could easily become subjective and susceptible to bias.

The previous approach of repeatedly requesting Code commitment letters in market invitations has been overly bureaucratic and administrativly burdensome. The change to an ‘automatic’ commitment upon submitting a tender is a step forward. A once-off commitment recorded in a register, as is done with the Fair Jobs Code, would be sufficient.

However, agencies are now left with the challenge of how to designate Code compliance in their evaluation criteria – and then the even greater challenge of how to evaluate compliance in a fair, reasonable, and defensible manner.

Resources

• Agency guidance for the Supplier Code of Conduct pdf (Buying for Victoria)
• Procurement – Supplier Code of Conduct pdf (Buying for Victoria)
• Supplier Code of Conduct: Transition (Buying for Victoria)
• Supplier Code of Conduct: 2025 Key Updates (CourtHeath blog)
• Supplier Code of Conduct: Further Updates (CourtHeath blog)
• Supplier guidance for the Supplier Code of Conduct (Buying for Victoria)

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CourtHeath acknowledges the Traditional Aboriginal Owners of Country throughout Victoria and pays respect to Elders past and present, and to the ongoing living culture of Aboriginal people.

A participant in the UN Global Compact, CourtHeath seeks to raise awareness about the sustainable development goals and the principles of the Global Compact with business and government organisations in Victoria.

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