Victorian Industry Participation Policy (Vipp)

VICTORIAN INDUSTRY PARTICIPATION POLICY (VIPP) GUIDELINES

Victorian Industry Participation Policy (VIPP)

The Victorian Government is committed to ensuring that local small and medium enterprises (SMEs) are given a full and fair opportunity to compete for government contracts, while still achieving value for money.

VIPP is implemented by Victorian Government departments and agencies to help drive local industry development. VIPP requires that government agencies consider local content as a key criterion in tender evaluation and other relevant procurement processes.

The Industry Capability Network (Victoria) Ltd (ICN) is engaged by the Victorian Government to provide services to both suppliers for government projects, and to Victorian Government departments/agencies delivering these projects. As part of this role, ICN works under strict probity conditions to facilitate the operation of VIPP.

This document provides an overview of the principles and objectives of VIPP, and guidance for both government departments/agencies and suppliers in applying VIPP to relevant procurements and projects. Detailed information tailored to the needs of suppliers is provided in a companion guide to this document Victorian Industry Participation Policy – Supplier Guideline, and operational information for agencies is provided in the Victorian Industry Participation Policy – Agency Guideline. They are both available online at www.vic.gov.au/vipp Objectives of VIPP

The Victorian Industry Participation Policy Act 2003 (the VIPP Act) sets out the main objectives of VIPP which are: promoting employment and business growth by expanding market opportunities for local industry; providing contractors with increased access to, and raised awareness of, local industry capability; exposing local industry to world’s best practice in workplace innovation, e-commerce and use of new technologies and materials; and developing local industry’s international competitiveness and flexibility in responding to changing global markets by giving local industry a fair opportunity to compete against foreign suppliers. VIPP is delivered by Victorian Government departments and agencies through a requirement that short-listed bidders for procurements and projects must prepare a VIPP Plan that is certified and evaluated by ICN Victoria. VIPP Plans outline the bidder’s commitments to achieving local content, employment, training and innovation outcomes through delivery of the contract. Principles of VIPP

VIPP is built on four fundamental principles that are applied at all stages during the procurement process:

Value: Value for money is a primary consideration in Government purchasing and supply decisions Competitiveness: The ability of local SMEs to compete globally will be strengthened and promoted

VIPP – General Guidelines No discrimination: Consistent with international obligations, there will be no protectionism, subsidies or premiums on price Transparency: All Government tendering mechanisms and processes will be open, clear and accountable VIPP is designed to encourage engagement of local SMEs in government procurement opportunities.

The Governments of the Commonwealth of Australia, New Zealand, New South Wales, Victoria, Queensland, Western Australia, South Australia, Tasmania, the Northern Territory and the Australian Capital Territory recognise the benefits to the Australian and New Zealand industry and to government purchasing bodies of treating Australia and New Zealand as a single market for government procurement in accordance with the objectives and principles of the Australia New Zealand Closer Economic Relations Trade Agreement.

VIPP Roles and Responsibilities Government Departments/Agencies/Principal Contractors

The term ‘Agency’ is used throughout this document to describe the role of Victorian Government Departments and public sector bodies as defined in the Application of VIPP to Procurement Activities section. The term Agency will also occasionally apply where a Government Department has outsourced the responsibility of project delivery in its entirety to a private organisation (e.g. a principal contractor in a construction project).

Government Agencies that are required to apply VIPP must determine: whether the procurement activity is Victoria Government-funded; whether the procurement meets or exceeds the monetary thresholds; and whether the procurement is contestable. In order to determine ‘contestability’, agencies must undertake an online contestability assessment with ICN via the VIPP Management Centre. This process is further explained in the Contestability Model section.

Agencies are also responsible for reporting the commitments and outcomes of the application of VIPP under the VIPP Act. Detailed information on the role of agencies in the application of VIPP is provided in the Victorian Industry Participation Policy – Agency Guideline available at www.vic.gov.au/vipp Suppliers/Bidders

Suppliers and bidders are terms used to describe providers of a service or good to be procured. Both these terms are used interchangeably within this document.

Suppliers shortlisted for a VIPP-applicable procurement must prepare a VIPP Plan for a contestable project when requested by the agency. The VIPP Plan must be submitted to ICN for certification and evaluation, before being included as part of the supplier’s bid documentation to the agency. The supplier must maintain records of their VIPP deliverables against VIPP commitments they have made so they can report on outcomes to agencies and seek post- contract verification of results. Detailed information on the role of suppliers in the VIPP process is provided in the Victorian Industry Participation Policy – Supplier Guideline. Department of Economic Development, Jobs, Transport and Resources (DEDJTR)

The Department of Economic Development, Jobs, Transport and Resources (DEDJTR) is responsible for implementing the VIPP across the Victorian Government on behalf of the Responsible Minister. DEDJTR provides advice to agencies and ICN on the objectives of VIPP to ensure it is applied correctly. DEDJTR also prepares the whole-of-Government annual report on VIPP compliance, which is tabled in Parliament by the responsible Minister as required under the VIPP Act.

2 Industry Capability Network Victoria (ICN)

ICN facilitates the VIPP process and manages the online VIPP Management Centre (VMC), through which agencies undertake contestability assessment of procurements, and where suppliers can seek assistance and certification of their VIPP Plans.

ICN must re-certify VIPP Plans when substantial post-tender and post-contract changes are made to the scope of the procurement. ICN also plays a role in the post-contract verification of VIPP outcomes claimed by suppliers.

Specifically, ICN can assist suppliers and agencies with: identification and selection of products and services that meet the contract requirements ICN services are available at no cost to support suppliers in developing VIPP Plans and in identifying areas to increase localisation. VIPP Management Centre (VMC)

The VIPP Management Centre (VMC) is the online system developed to manage the application of VIPP by suppliers and Government agencies and can be accessed at www.icnvic.org.au/vipp

Table 1 - Functions of the VMC

Functions of VMC for suppliers Functions of VMC for agencies include: include: Register/edit agency details Register/edit company details Three levels of user access Request VIPP assistance for further localisation Department Administrator Submit Plans for certification Agency Administrator (Optional) Manage VIPP Plans for ‘Localisation Assistance’ Standard Department & Agency users Monitor certification statuses Upload procurement activity plans Create, edit, re-use VIPP ePlan templates Notify ICN of tender details including View and download certification letters shortlisted suppliers View VIPP history Notify ICN of post-tender negotiated changes Contact ICN VIPP staff via the communication Access certification letters & evaluation reports centre Access suppliers’ VIPP Plans An ICN Interaction Reference Number system View VIPP history specifically for grants and design contracts. Generate VIPP reports (Administrator access only) Manage VIPP status of tenders Manage users (Administrator access only) Correspond with ICN VIPP staff via the communication centre.

Application of VIPP to Procurement Activities

VIPP must be applied to relevant procurement activities by all Victorian Government agencies, as defined in the Financial Management Act 1994, which includes all Victorian Government Departments and public sector bodies.

A public sector body includes:

VIPP – General Guidelines a public statutory authority; a State business corporation or State body within the meaning of the State Owned Enterprises Act 1992; and a body, office or trust body established by or under an Act or enactment; or established by the Governor in Council or a Minister, and that is declared by the Minister, by notice published in the Government Gazette, to be a body or office to which Part 7 of the Financial Management Act 1994 applies. For example, this definition incorporates all water corporations as established under the Water Act 1989.

Public sector bodies within the above definitions must apply VIPP to procurement activities that meet or exceed:

$3 million for procurement activities occurring in metropolitan Melbourne or across all of Victoria; and $1 million for procurement activities occurring in regional Victoria (Regional Victoria has the same meaning as that term is defined in the Regional Growth Fund Act 2011, which includes the municipal councils and alpine resorts of the Hume, Loddon Mallee, Grampians, Barwon South West and Gippsland regions of Victoria). For the purpose of VIPP, “procurement activities” include: procurement of goods and services, regardless of the method of procurement (tenders, State Purchase Contracts and major events) construction activities delivery of major events and other government projects using a panel of suppliers to deliver goods or services grant recipients (funding to private, non-government and local government organisations for investment support, business development and community infrastructure) design contracts (planning and designing capital works or other large infrastructure projects). Contestability Assessment

The VIPP process includes a ‘contestability’ assessment. The contestability model enables the Victorian Government to target VIPP for areas where there is a genuine opportunity to support competitive local suppliers without compromising value for money, by highlighting for government procurement officers where local capability exists to supply a project.

Under the contestability model, procurement activities may be classified in one of three ways:

Nil/Limited contestability procurements – procurement activities that meet/exceed the relevant VIPP thresholds but for where there are no competitive international suppliers or no competitive local suppliers. VIPP Plans are not required for nil/limited contestability procurements but there must be a commitment by the agency to fulfil the objectives of VIPP. Agencies must also record an estimated level of local content to be provided by the short-listed suppliers.

Contestable procurements – procurement activities that meet/exceed the relevant VIPP thresholds and where there are both competitive local and international suppliers. The majority of procurement activities will be classified as contestable procurements. The standard VIPP process applies for contestable procurements and an ICN-certified VIPP Plan will be required from shortlisted suppliers.

Strategic projects and procurements – projects which meet/exceed the special criteria for declaration by the Victorian Government as Strategic Projects. The Strategic Projects framework applies to these procurement activities (see Strategic Projects framework section for further information).

Agencies are required to use the Contestability Assessment tool on the ICN Victoria website before preparing a request for tender or other relevant procurement documentation to help them to determine whether VIPP should apply to the procurement activity. If a procurement activity is considered contestable based on the information provided by agencies, ICN will provide a list of potential ‘contestable items’ to include in the request for tender. This will alert suppliers to the possibility for localising these goods and services.

4 Detailed information on the application of the contestability model is included in the Victorian Industry Participation Policy – Agency Guideline. Strategic Projects Framework

Major projects that have an estimated total project value of $50 million or more, excluding maintenance and operational costs, will be declared Strategic Projects subject to an opt-out process. The Strategic Project threshold excludes maintenance and operational costs, as these are not under import competition and tend to be supplied locally.

Strategic Projects will have minimum local content requirements applied to help drive additional economic activity and jobs.

Strategic projects are expected to: contribute to the productive capability of Victoria and make a strategic economic contribution to the State; potentially generate significant local industry participation, employment or skills and training/technology transfer; create opportunities to build ongoing industry capability, skills and employment benefits; and/or contain significant contestable items. A forward work plan of expected future Strategic Projects will be published to highlight these projects to industry.

Suppliers for Strategic Projects will be required to produce detailed Local Industry Development Plans (LIDP) in consultation with ICN. The LIDP will be used to assess competing bids during the tender process. LIDPs are only required for Strategic Projects.

Strategic Projects have minimum local content requirements, determined on a case-by-case basis by the Victorian Government.

Other conditions may include, but are not limited to: requiring additional information on the procurement plans for key strategic items; weighting for local content criterion in tender evaluation; requirements to demonstrate other industry outcomes such as increased employment of apprentices/trainees.

Detailed information on the Strategic Projects Framework is included in the Victorian Industry Participation Policy – Agency Guideline. Information on the LIDP and processes for shortlisted suppliers for Strategic Projects is included in the Victorian Industry Participation Policy – Supplier Guideline. Grants, Design Contracts and Other Procurement Methods Grants and Design Contracts

In order to better target the application of VIPP in areas of contestable procurement, the ICN Interaction Reference Number (IRN) process has been tailored to address the specific needs of agencies and suppliers with VIPP obligations for grant programs and design contracts.

For grants and design contracts that meet the VIPP thresholds and other requirements, there will still be an obligation to fulfil the objectives of VIPP without undergoing the full standard VIPP process.

Grant recipients and design contractors are required to obtain an IRN from ICN. The IRN must then be submitted by the grant recipient or design contractor to the agency in order to demonstrate that they have actively sought ICN’s interaction to assist in increasing opportunities for local SMEs.

Detailed information on the process for applying VIPP to grants and design contracts is included in the Agencies and Suppliers guidelines.

Contract extension, renewal and/or variation

Agencies may choose to extend, renew or otherwise ary existing contracts to which VIPP has been applied. he supplier may not be required to prepare a revised VIPP Plan as a result of a contract extension or renewal if the scope 5

VIPP – General Guidelines of works has not been altered as a result of the extension or renewal. However, any variation to an existing contract, including variations made to the scope of works as a result of a contract renewal may require the supplier to provide a revised VIPP Plan to the agency as part of the new contract. This revised VIPP Plan must be certified by the ICN Victoria for the procurement to be compliant with VIPP.

Agencies considering contract extensions, renewals or variations must seek advice from DEDJTR to determine whether a new VIPP Plan is required. More detail on these processes is available in the Victorian Industry Participation Policy – Agency Guideline.

Panel Contract Arrangements

Procurement undertaken through a panel contract arrangement (i.e. where a panel of suppliers is appointed, from which individual suppliers are then selected to provide particular goods or services over the life of the contract), may be subject to VIPP where the total value of the procurement undertaken using the supplier panel exceeds VIPP threshold levels (above $3 million in metropolitan areas and $1 million in regional areas). Panel contracts will also be required to undertake a contestability assessment in order to determine if VIPP is applicable to the project.

The standard method of applying VIPP can lead to unreasonable compliance requirements for agencies and suppliers in certain kinds of panel contract arrangements. Tailored approaches have been developed to ensure agencies and suppliers can comply with VIPP. Detailed information on the methods for applying VIPP to panel contract arrangements can be found in the Victorian Industry Participation Policy – Agency Guideline.

Alliance Contracts

The Alliance model for procurement of major capital assets refers to a process whereby the State Agency (the Owner) or other government/private entities (Non-Owner Participants or NOPs) collaborate with one or more service providers to share common goals, as well as risks and responsibilities, in delivering the capital phase of a project.

For alliance contracts that reach relevant VIPP thresholds, whether or how VIPP should be applied is determined on a case-by-case basis by the agency in collaboration with DEDJTR and ICN Victoria.

A detailed guide to the application of VIPP to alliance contract arrangements is included in the Victorian Industry Participation Policy – Agency Guideline. The VIPP Plan

The VIPP Plan is a document that outlines the supplier’s level of commitment to using local content where it is reasonable to do so. The VIPP Plan is prepared by the supplier as part of a tender submission. If VIPP is applicable to a government tender, VIPP Plans from shortlisted suppliers must receive VIPP certification from ICN. For Strategic Projects, a LIDP is to be prepared rather than a VIPP Plan.

The VIPP Plan requires suppliers to: estimate the level of ANZ value-added activities (level of local content); estimate the number of newly created and existing jobs retained, including apprenticeships/traineeships (number of jobs, apprenticeships/traineeships); identify training, skills development and technology transfer; and identify the implementation process for achieving these commitments. It is reasonable to assume that suppliers will be able to provide realistic estimates of what can be achieved and to detail their proposed steps to achieve it.

In some cases (for example, a large construction project) suppliers may not be able to provide definitive figures on the likely local content, particularly where materials and equipment will be supplied by sub-contractors who have not yet been contracted. In this scenario suppliers are asked to provide their best estimates and a concise statement on the actions they intend to take to implement VIPP.

6 The services of ICN are available to clarify issues relating to VIPP, including how to identify and source local suppliers. Agencies should refer suppliers to ICN for localisation assistance as ICN maintains an extensive database of suppliers in Victoria, Australia and New Zealand. Certification and Evaluation of VIPP Plans

All shortlisted suppliers will be required to have their VIPP Plans certified by the ICN. Agencies will reject tender bids which do not contain VIPP Plans certified by ICN.

Once suppliers have been shortlisted they will be instructed by the agency to develop their VIPP Plans and to submit them to the ICN for certification. ICN will review and certify the competing shortlisted suppliers’ VIPP Plans. The VIPP Management Centre website will provide a VIPP certification letter to the supplier who will then formally submit their VIPP Plan with the certification letter to the tender panel.

Registration and submission of VIPP Plans must be completed online at www.icnvic.org.au/vipp

Suppliers who do not have an internet connection should contact the agency to which they are tendering to seek an alternative arrangement.

ICN will review the VIPP Plans and prepare an assessment of the relative merits of each VIPP Plan. This assessment is only provided to the agency’s tender panel for use in their final tender evaluation and selection of the successful tender. Further detailed information on these processes is included in the guidelines for suppliers and agencies. Consideration of VIPP Plans in the Procurement Process

Information contained in the VIPP Plan must be used by agencies as a key criterion in the final tender evaluation. If an ICN-certified VIPP Plan is not provided as part of the tender or other procurement documentation when required, the agency must reject the submission and it should not be eligible for further consideration in the procurement process.

With the exception of Strategic Projects VIPP does not require a prescribed level of local content. The key consideration for agency staff is that the supplier has made a genuine attempt to identify and use local value-added contents wherever it makes good commercial sense to do so.

Agencies will be required as part of their annual reporting process to demonstrate that ICN-certified VIPP Plans were sought for each VIPP-applicable contract, and this information will be included in the Minister’s Annual VIPP Report to Parliament. VIPP in Post-Tender Negotiations and Contract Award

Once the preferred supplier has been selected, their VIPP commitments will be negotiated as reportable conditions of the contract. This negotiation should seek to improve the supplier’s VIPP commitments where appropriate. This is especially the case where the preferred supplier’s VIPP Plan has been assessed by the ICN as having scope for improved local content commitments.

The negotiated contract will include: the agreed VIPP commitments; how the commitments will be implemented; a timetable for implementing them; and an agreed monitoring, reporting and review process for VIPP commitments that occurs on a regular basis for the life of the project. Where negotiations result in VIPP commitments below the level originally estimated by the supplier, ICN re- certification and re-assessment will be required. This will ensure that VIPP commitments are retained at the levels originally estimated in the tendering process where feasible.

The agency is required to notify ICN of the successful supplier once the contract has been awarded to ensure that post-contract verification of outcomes can take place.

VIPP – General Guidelines Details on the specific roles of suppliers and agencies in applying VIPP during post-tender negotiations and contract award are included in the Agencies and Suppliers guidelines. VIPP Compliance

The VIPP Act provides direction to agencies in reporting their compliance with VIPP. This is further enhanced by Financial Reporting Direction 25B which outlines the way in which agencies must provide this information in their own annual reports. Suppliers are required to support the monitoring and reporting process by fulfilling their contractual obligations to provide details on the outcomes achieved in the delivery of a contract. Detailed information on the roles and responsibilities of agencies and suppliers in the monitoring and reporting process are included in the Agencies and Suppliers guidelines available at www.vic.gov.au/vipp Monitoring and Reporting Processes

Post-Contract Verification

Upon the completion of contracts where VIPP applies, the supplier must provide a copy of VIPP outcomes to the agency at their request, using the VIPP Monitoring Table, and a declaration attesting to the veracity of the outcomes reported. The agency must then provide these details to the ICN for verification.

If ICN cannot verify that the outcomes reported are reasonable based on the evidence presented by the supplier, the agency responsible will be notified by ICN to seek clarification of the outcomes from the supplier.

Audits by DEDJTR on correct application of the VIPP and its outcomes may also be performed at random where necessary.

Annual Reporting

In order to demonstrate compliance with VIPP, agencies are responsible for reporting on VIPP commitments and outcomes made by suppliers. Under the VIPP Act, all public bodies as defined in the Financial Management Act 1994 must report on their implementation of VIPP in two ways: a consolidated report on VIPP implementation as part of the agencies’ normal Annual Reporting arrangements; and a detailed report to the Responsible Minister, to enable the Minister to report annually to Parliament on VIPP outcomes. The report to the Minister will include a comparison of the projects for which a contestability assessment was sought by agencies, ICN’s recommendations for each of these projects, and whether VIPP was correctly applied. The report will also provide an overall estimate of the percentage of local content contained within all projects above the VIPP thresholds each year, and information on employment and training outcomes, as well as any other benefits to the Victorian economy. Contact Information Department of Economic Development, Jobs, Transport and Resources

For any policy queries regarding the application of the VIPP, contact:

Department of Economic Development, Jobs, Transport and Resources Email: [email protected] Tel: 13 22 15 www.vic.gov.au/vipp Industry Capability Network (Victoria) Ltd

For queries regarding the VIPP process, to register your project, or to submit a VIPP Plan, please visit the VIPP Management Centre website or contact:

8 Industry Capability Network (Victoria) Ltd Email: [email protected] Tel: (03) 9864 6700 www.icnvic.org.au/vipp Definitions

% Imported Content

Refers to products and services which contain imported content consisting either of imported materials, parts, components, consumables, labour, services or other inputs.

% Local Content

Refers to products and services which contain local materials, parts, components, consumables, labour, services or other inputs.

Annualised Employee Equivalent (AEE)

It is calculated by dividing the total number of ordinary working hours that an employee worked and was paid over the reporting period by the total number of full-time working hours paid per annum.

Agency

The government department or division, or their representative, responsible for the tender, which may be any department or public body within the meaning of the Financial Management Act 1994.

Agency contact

The government contact person/project manager (or their representative) responsible for the tender.

Australian and New Zealand value-added (local content)

Refers to cost of Australian and New Zealand (ANZ) goods or service less the cost of the imported components.

Note: This includes all aspects of value-added activity (including fees, tariffs, insurances, freight, transport, engineering, planning, testing & analysis, certification, commissioning, manufacturing or provision of services) in Australian and New Zealand. Items imported into New Zealand as part of New Zealand sourced goods and services are considered as imported components.

Construction

Construction of a building or other structure (e.g. hospital, multistorey car park, school, stations, offices). Includes Major Projects.

Construction of infrastructure, includes facilities, services and installations needed for the functioning of a community such as roads, bridges, rail lines, water supply, sewers, electrical grids, gas reticulation and telecommunications.

Consumables (e.g. uniforms)

Products purchased recurrently because they wear out or are used up. This includes components of an end product that are used up or permanently altered in the process of manufacturing e.g. basic chemicals.

Contestable items

Contestable items can be goods, products and/or services.

Goods and products are items that can be manufactured locally, but are readily available from imported competitors. Services refer to skills, technical know-how, labour, which is often sourced locally, but could also be acquired from international competitors.

VIPP – General Guidelines DEDJTR

Department of Economic Development, Jobs, Transport and Resources.

Industry Capability Network (Victoria) Ltd.

Interaction Reference Number (IRN)

Used in the application of the VIPP in grants and in design contracts to demonstrate compliance with the principles of VIPP and contact with ICN.

Covers Australia and New Zealand, so as to be in accord with the Australia New Zealand Government Procurement Agreement entered into by Australian State and Federal Governments and New Zealand.

Local Industry Development Plan (LIDP)

A document prepared by the supplier as part of the tender submission for a VIPP Strategic Project. The LIDP outlines the supplier’s commitment to address the minimum local content target and other VIPP tender conditions. The LIDP must receive certification from ICN.

Procurement activities

Includes purchasing capital equipment, goods, and services, regardless of the procurement process used (e.g. tendering, panel arrangements, state purchase contracts, etc); building construction; infrastructure construction; grants to private, non-government and local government; delivery of major events and other government projects.

Purchasing of capital equipment/goods

Acquisition of equipment/goods used to operate a business where the equipment/goods are not disposable or consumable. This includes repairing, restoring and upgrading of existing equipment/goods.

Responsible Minister

The Minister with responsibility for administering the Victorian Industry Participation Policy Act 2003.

Services

Intangible products such as accounting, banking, cleaning, consultancy, education, insurance, expertise, medical treatment, or transportation.

Supplier

A contractor, bidder, or vendor who responds to an invitation to bid.

Value-for-money

Refers to the acquisition of the appropriate quantity and quality of goods or services at the optimum combination of quality, quantity, risk, timeframes and cost for government on a whole-of-life basis.

Victorian Industry Participation Policy – Agencies

A detailed document designed for agencies that outlines all procedures and processes for applying VIPP, as well as monitoring and reporting responsibilities of agencies.

10 Victorian Industry Participation Policy – Suppliers

A detailed document designed for suppliers that provides information on the roles and responsibilities of suppliers in the application of VIPP in procurement activities.

Victorian Industry Participation Policy.

VIPP Management Centre (VMC)

A secure online system that is used by both government agencies and suppliers to manage the VIPP process and documentation. The VMC (www.icnvic.org.au/vipp ) also allows the user to contact ICN.

VIPP Plan

A document prepared by the supplier as part of the tender submission. The VIPP Plan outlines the supplier’s level of commitment to using local content where possible and viable. If the VIPP is applicable to a government tender, VIPP Plans from shortlisted suppliers must receive VIPP certification from ICN.

VIPP – General Guidelines