Tackling Human Trafficking in Governments Supply Chains: Legal Certainty and Effectiveness Issues Under the Australian Commonwealth Procurement Rules Model

Abstract

International organisations emphasise how Governments around the world must use the public procurement process to aid a global drive to eliminate human trafficking in their supply chains. In this significant and original contribution, the authors examine a leading procurement model, the Australian Commonwealth Procurement Rules (CPR), for the purpose of examining whether the CPR model satisfies the necessary standards of Legal Certainty and Effectiveness for addressing the risk of trafficking occurring in public sector supply chains. The research generates new insights for countries seeking to tackle trafficking via public procurement systems and identifies pitfalls for countries to avoid if seeking to emulate the Australia CPR model, making appropriate reference to US and UK models where appropriate. The authors demonstrate how key elements of the CPR model fail to provide for the required degree of Legal Certainty and Effectiveness to tackle trafficking. System failure is demonstrated by analysis of the CPR, showing either how key CPR provisions fail to satisfy these 2 key tests, or because there is a complete absence of appropriate provisions to comprehensively deal with the risk of trafficking in public sector supply chains. This article should serve not only as a guide to countries yet to address human rights considerations in their public procurement supply chains, but also as a blueprint for countries around the world seeking to re-evaluate whether existingprovisions in their domestic procurement frameworks are fit to tackle the global scourge of trafficking in public supply chains.

I Introduction

Public procurement activities present Governments and the public sector with opportunities to use their purchasing power as the medium through which to promote attainment of social, economic and environmental objectives, also known as the sustainable procurement agenda.¹ Typically accounting for 12 per cent of a nation’s GDP, Governments and the wider public sector as major purchasers of goods, works and services are in a strong position to leverage behaviour change on their suppliers' operations and supply chain practices in the drive to attain these worthy objectives.² However, despite holding this strong leverage, a key element of the sustainable procurement agenda — using procurement processes to combat human trafficking in supply chains — has not translated into significant deployment at the implementation level. While advanced economies such as Australia, New Zealand, Canada, the United States (US) and the United Kingdom (UK) have issued a joint statement of intent stating that they will ‘analyse, develop, and implement measures to identify, prevent and reduce the risk of human trafficking in government procurement supply chains’,³ actual implementation of measures at the national level has been slow. Additionally, where anti-trafficking measures have been attempted through these countries’ respective national procurement frameworks, they have proven, to a degree, ineffective and deficient.⁴

In this paper, the authors will analyse this problem by examining, as a case study, the measures adopted by the Commonwealth of Australia’s federal procurement system which seeks to reduce the risk of human trafficking contaminating public sector supply chains.⁵ Guiding this study shall be a key question possessing a dual focus:

To what extent do the Commonwealth Procurement Rules (‘CPR’) provide for Legal Certainty and Effectiveness in addressing trafficking in Commonwealth supply chains, and what lessons can other countries learn from Australia’s model?

In the context of this paper’s focus on using procurement to tackle trafficking, the principle of legal certainty can be understood as referring to the idea that the law must be sufficiently clear, transparent and capable of clear meaning in order to provide its subjects with ‘admirable reliance as to what their obligations are’.⁶ The principle of effectiveness in the current context will focus on the applicability and functionality of public procurement rules for them to be capable of combating trafficking.⁷ Such rules must first, exist; second, be easy to use, rather than suffer from loopholes or lack of scope⁸; and third, must be capable of full force and effect.⁹

Applying these two principles, this paper will analyse the CPR for the purposes of examining whether the current CPR regime meets the necessary standards of legal certainty and effectiveness. This exercise shall be undertaken by examining key CPR provisions in order to assess whether the risk of trafficking is adequately addressed in the CPR model. This should serve not only as a guide to countries yet to address human rights considerations in their public procurement supply chains, but also as a blueprint for other countries around the world seeking to re-evaluate whether existing provisions in their domestic procurement legislation or procurement frameworks are fit for purpose to tackle the global problem of human trafficking.

The rest of this paper is structured as follows. Part II shall provide contextual background relating to the regulation of public procurement in Australia and explores the connection between public procurement, sustainable procurement and combating trafficking. Part III analyses relevant provisions under Commonwealth Procurement Rules that seek to define, identify, prevent or mitigate the risk of trafficking in the procurement process, highlighting their limitations and proposing ways to remedy deficiencies identified by the authors. Final conclusions will be provided in Part IV, alongside a series of recommendations for other countries.

II Context and Background: Public Procurement, Sustainable Procurement and Trafficking in the Commonwealth

A Trafficking and Governments’ Failure to Prohibit It in Procurement Legislation

Human trafficking has withstood the test of time, although the terminology has changed over the years from ‘slavery’, to ‘trafficking’, to ‘modern slavery’.¹⁰ Despite the generationally interchangeable terminology, ‘trafficking’ will be the term chiefly used in this paper because it is widely prohibited by international and domestic legal systems¹¹ and describes a severe violation of human rights occasioned by use of forced labour, child labour and severe labour conditions (excessive working hours, exposure to harmful substances, etc). Defined under Article 3(a) of the Trafficking in Persons Protocol (Palermo Convention), human trafficking is ‘the recruitment, transportation … of persons, by means of the threat or use of force or other forms of coercion … for the purpose of exploitation’.¹² The Protocol goes on to clarify the meaning of exploitation by stating that ‘exploitation shall include, at a minimum, the exploitation of the prostitution of others or other forms of sexual exploitation, forced labour or services, slavery or practices similar to slavery, servitude or the removal of organs’.¹³ This definition illustrates how exploitative labour practices such as commercial sex acts, child labour, forced labour, excessive working policies, exposure to hazardous substance and poor equipment and fraudulent or misleading recruitment practices all fall under the umbrella term of ‘trafficking’.¹⁴ Thus, any reference to trafficking hereafter in this paper encapsulates the above exploitative practices occurring within the public procurement context.

Trafficking is a growing global industry with an approximate annual turnover of one hundred and 50 billion dollars (USD).¹⁵ Statistics produced by the International Labour Organisation (‘ILO’) suggest that at any given time, an estimated 40.3 million people are enslaved, with one in four victims being a child.¹⁶ These statistics make trafficking ‘one of the three evils’ that plague the 21^st century.¹⁷ Despite strong signals from international organisations that Governments should address trafficking within their global supply chains, countries such as Australia are yet to effectively address this issue, as shall be discussed below and in Part III.¹⁸

B International Drivers to Use Public Procurement to Combat Human Trafficking

1 The United Nations

From the UN perspective, the 2015 Sustainable Development Goals encourage Governments to eradicate trafficking under Target 8.7,¹⁹ Target 8.8²⁰ and Target 10.3.²¹ Furthermore, Target 12.7 requires governments to adopt public procurement practices that promote sustainable development (eg, ensuring that public procurement practices ensure respect for human rights).²² Additionally, the aforementioned UN Guiding Principles (‘UNGPs’) on Business and Human Rights (2011) reminds Governments of their existing obligation to protect their citizens from human rights abuses, by promoting ‘respect for human rights by business enterprises with which they conduct commercial transactions’.²³ The commentary under UNGP Principle 6 explicitly refers to ‘procurement activities’ as an area where governments can ‘promote awareness of and respect for human rights’ by implementing effective legislation to meet this objective.²⁴

2 International Labour Organisation (ILO)

The International Labour Organisation (‘ILO’) has enacted many Conventions and Recommendations to tackle trafficking or exploitation of workers, which de facto includes exploitation exerted by government suppliers. For example, the Convention Concerning Forced or Compulsory Labour of 1930²⁵ and Protocol of 2014 to the Forced Labour Convention ²⁶ ‘undertakes to suppress the use of forced or compulsory labour’, while the Convention concerning the Reduction of Hours of Work to Forty a Week of 1935,²⁷ the Convention concerning Minimum Age for Admission to Employment of 1973²⁸ and the Convention concerning the Prohibition and Immediate Action for the Elimination of the Worst Forms of Child Labour of 1999²⁹ deal with extreme labour conditions and child labour.³⁰ In addition to these Conventions, the Labour Clauses (Public Contracts) Convention and Labour Clauses (Public Contracts) Recommendation of 1949 require member states to apply labour clauses related to wages (including allowances), hours of work and other labour conditions to specified public contracts.³¹ The Labour Clauses (Public Contracts) Convention also advocates for the use of labour conditions, tender evaluation criteria, adequate systems for inspection and sanctions such as withholding contracts, suspension and debarment against suppliers who do not comply with fair labour clauses.³²

Despite this recognition of public procurement as a useful tool in addressing trafficking, many ILO member states, including Australia, have failed to see the relevance of incorporating labour clauses in public contracts and thus have not ratified this Convention.³³ As a result, the Labour Clauses (Public Contracts) Convention and Labour Clauses (Public Contracts) Recommendation have not resulted in public procurement frameworks upgrading their protection of workers’ human rights against trafficking or labour exploitation on a mass scale.³⁴

3 Organisation for Security and Co-Operation in Europe (‘OSCE’)

The eradication of trafficking has been part of the Organisation for Security and Cooperation’s ‘three dimensions’ since its establishment.³⁵ Stemming from the third dimension of human rights, the OSCE encouraged governments to actively eradicate trafficking,³⁶ affirming that governments have the ‘prime responsibility’ to protect their citizens’ human rights and can do so through their public procurement frameworks.³⁷ The OSCE recommended that governments should follow examples of existing frameworks such as the California Transparency in Supply Chains Act³⁸ and the anti-trafficking provisions in the US Federal Acquisition Regulation (‘FAR’).³⁹ It was also recommended that governments enact provisions that disqualify suppliers who have engaged in trafficking on the ground of ‘credible allegations … with sufficient evidence’, instead of requiring a conviction by the final court of adjudication.⁴⁰ This recommendation is advantageous because many procurement frameworks rely on suppliers’ conviction as a ground of exclusion, allowing suppliers tainted by trafficking practices to continue to be awarded public contracts due to prosecutorial difficulties securing trafficking convictions.

C COVID-19 and Trafficking

Before moving to look at the Commonwealth specifically, one further factor is worthy of mention, namely, the COVID-19 pandemic. Aggravating the global lack of concerted action to deploy procurement to tackle the scourge of human trafficking is the global pandemic (COVID-19), which has resulted in many rushed and improperly regulated procurements taking place⁴¹ amidst a background of globally increased unemployment rates and rising levels of extreme poverty, factors which can contribute to the exploitation of vulnerable workers and children.⁴² Governments’ pandemic-induced rush to procure vital medical supplies make it highly likely that measures designed to address trafficking before the pandemic have taken a back seat. For example, the necessity to secure medical hazmat equipment supplies to save front line workers lives can come at the expense of human/workers’ rights protection,⁴³ further aggravating an uncertain landscape.

D The Regulation Model of Public Procurement in Australia

In 2019/20, the Commonwealth procuring entities awarded 81,174 contracts valued at $53.9 billion (AUD), with 88.3 per cent of contracts awarded to suppliers in Australia.⁴⁴ The regulation of public procurement in Australia is based on a devolved system. The federal and state governments have separate procurement rules and policies that apply to their procuring entities.⁴⁵ At the federal level, which is the subject of this paper, the authority to regulate public procurement stems from the Public Governance, Performance and Accountability Act 2013 (Cth) (‘PGPA Act’),⁴⁶ the Public Governance, Performance and Accountability Rule 2014 (Cth)⁴⁷ and the Public Governance, Performance and Accountability (Financial Reporting) Rule 2015 (Cth).⁴⁸ The PGPA generally ‘establishes a coherent system of governance and accountability for public resource’ through s 105B(1) of the PGPA Act, authorising the Minister for Finance to regulate public procurement by adopting ‘written instruments’ that promote the efficient, effective, economic and ethical use of public resources.⁴⁹ The Minister for Finance’s written instruments in public procurement include five Procurement Connected Policies,⁵⁰ Procurement Guidelines⁵¹ and the Commonwealth Procurement Rules 2020 (Cth) (‘CPR’).⁵²

Implemented and updated periodically by the Department of Finance, the CPR applies to all federal procuring entities procuring goods and services⁵³ whether below or above stipulated procurement thresholds.⁵⁴ The CPR contains provisions relating to procurement objectives, rules regarding the publication of opportunities, specifications, time limits, use of procurement methods and conditions for participation. There are also provisions regarding contract award and contract management, in effect covering the entire procurement process. Complying with the CPR provisions is critical in mitigating the risk of bid challenges.⁵⁵

E Sustainable Procurement — Australia’s Procurement Connected Policies

Sustainable procurement, which refers to the promotion of social, environmental and economic policies through public procurement, is at the forefront of the Commonwealth procurement framework in the form of five Procurement Connected Policies, alongside achievement of value for money under the CPR.56 In no particular order, the five connected policies are (1) the Indigenous Procurement Policy, which encourages contract awards to indigenous-owned businesses by setting aside contracts and requiring minimum Indigenous participation requirements for contracts valued at or over AUD $7.5 million in specified sectors⁵⁷; (2) Workplace Gender Equality Procurement Principles require potential suppliers with more than a hundred employees to demonstrate that they comply with the Workplace Gender Equality Act 2012 (Cth)⁵⁸; (3) the Black Economy Procurement Connected Policy requires potential suppliers tendering for contracts over $4 million Australian dollars (AUD) to certify that they have a satisfactory tax record by furnishing a statement to that effect from the Australian Taxation Office⁵⁹; (4) the Australian Industry Participation Plans for Government Procurement policy requires suppliers awarded contracts exceeding $20 million AUD to prepare and implement an industry participation plan outlining how Australian industries will be included in the contract performance⁶⁰ and (5) the Code for Tendering and Performance of Building Work requires procuring entities to apply the Building Code 2016 to all works contracts, to ensure that health and safety, freedom of association and other regulations are adhered to by federal suppliers.⁶¹

These five Procurement Connected Policies are evidence that the Commonwealth Government is prepared to address social injustice and promote compliance with key policies or legislation through public procurement. As such, there appears to be no reason for not effectively addressing human rights violations through the public procurement process as well, as such would appear to be a legitimate pursuit of government policy and a legitimate concern of the public procurement process.⁶² However, as this paper shows, many effectiveness and legal certainty deficiencies are evident when we examine the CPR, thereby causing the question to arise: why has no Procurement Connected Policy been developed specifically to cater for combating trafficking in the Commonwealth procurement governance model?⁶³

F Public Procurement and Trafficking in the Commonwealth of Australia

The call to implement a policy or statutory instrument to tackle trafficking in Commonwealth supply chains can be traced back to the 2013 inquiry of the Parliamentary Joint Standing Committee on Foreign Affairs, Trade and Defence.⁶⁴ Thus, not only has the Commonwealth Government realised for some time that there is an inescapable and compelling obligation to exercise ethical and moral leadership in ensuring supplied goods and services are free of human rights abuses, but there have been calls to amend the CPR to reflect this objective. For example, a Parliamentary Committee consultation on the issue of supply chain reporting considered the issue of modern slavery in the Government’s supply chain.⁶⁵ The Committee noted that in June 2017, the Parliament Joint Select Committee on Government Procurement reported on the effectiveness and adequacy of the CPR.⁶⁶ The report recommended that the Attorney General Department ‘oversee the introduction and application of a procurement connected policy requiring Commonwealth agencies to evaluate suppliers’ compliance with human rights regulation’.⁶⁷ Furthermore, tackling modern slavery through public procurement was explicitly mentioned in the Federal Government’s National Action Plan 2015–2019.⁶⁸ Additionally, in 2013, then Prime Minister Gillard announced a ‘government strategy to reinforce ethical behaviour in procurement so that no firm providing goods or services to the Commonwealth is tainted by slavery or people-trafficking anywhere in the supply chain’.⁶⁹

Despite these indications at the political and legislative level that use of the procurement process to combat trafficking is a legitimate pursuit, no dedicated procurement policies addressing trafficking have been published by the Commonwealth’s Minister for Finance, nor were relevant subject-specific provisions included in revisions to the CPR undertaken in 2017, 2018 or 2019. There was some progress in the 2020 revision of the CPR, which provided that procuring entities must now consider reporting requirements under the Modern Slavery Act 2018 (Cth), but this is not an adequate substitute to address the matter of concern.⁷⁰ Essentially, s 15 of the Modern Slavery Act requires the Minister to publish a modern slavery statement covering all Commonwealth procuring entities.⁷¹ The statement must include the risks of modern slavery practices occurring in the operations and supply chains of all procuring entities; actions to be taken by the procuring entities to address those risks, including due diligence and remediation processes; and provisions on how the effectiveness of such actions are to be assessed.⁷² While inclusion of the Modern Slavery Act to the CPR is a welcome development as it signifies the Government is concerned about trafficking within its supply chains, it does not however detail procedures which procuring entities should follow to mitigate the award of contracts to suppliers tainted by trafficking. For this reason, the next section analyses relevant provisions in the CPR that directly or indirectly address trafficking and shall demonstrate their shortcomings both in terms of lack of legal certainty and effectiveness and how this serves as a warning to other countries seeking to emulate such a model ‘off the shelf’.

III Tackling Trafficking under the Commonwealth Procurement Rules

This section of the paper analyses CPR provisions that identify, prevent or mitigate the risk of trafficking in the public procurement process and highlights their limitations. The rules address several different aspects, including procurement objectives and various elements of the procurement process (procurement planning, supplier qualification, evaluation of tenders and contract award). Each of these will now be examined in turn.

A Public Procurement Objectives — Ethical Purchasing

The CPR recognises various procurement objectives that are critical when procuring goods, works or services, including the achievement of value for money, efficiency, effectiveness, economical and ethical purchasing, accountability and transparency.⁷³ We focus on the standout objective on this list relevant to the current enquiry, namely, ethical purchasing, because this procurement objective is directly relevant to addressing trafficking in Commonwealth supply chains.⁷⁴ Before defining ethical purchasing and discussing CPR 6.7 which attempts to address this issue, it must be observed that the Commonwealth’s attempt to address ethical purchasing suffers from several deficiencies which inhibit both its effectiveness and legal certainty.

Ethical purchasing refers to ‘honesty, integrity, probity, diligence, fairness and consistency’ in the procurement process and being defined in such terms means that it is often narrowly interpreted as equating to corruption-free procurement.⁷⁵ Rules 6.5 to 6.8 of the CPR govern ethical purchasing. Rule 6.6 covers issues such as conflicts of interest, fair treatment of suppliers, use of public resources and compliance with policies on gifts or hospitality. Of more relevant significance to this paper’s enquiry is r 6.7, which states:

Relevant entities must not seek to benefit from supplier practices that may be dishonest, unethical or unsafe. This includes not entering into contracts with tenderers who have had a judicial decision against them (not including decisions under appeal) relating to employee entitlements and who have not satisfied any resulting order. Officials should seek declarations from all tenderers confirming that they have no such unsettled orders against them.⁷⁶

So far as legal certainty is concerned, this rule is worthy of comment on several grounds. First, it is addressed to ‘relevant entities’ (procuring entities) and not to a procuring officer. This is significant because traditionally it was the personnel of a procuring entity who were the target of legal prohibitions, for example, anti-corruption laws. However, r 6.7 now goes a step further because it makes procuring entities the subject of prohibited behaviour, namely, in this instance, the procuring entity itself must not benefit financially from an unethical or dishonest supplier.

Second, r 6.7 is noteworthy because, in not defining the type of benefits obtainable from suppliers,⁷⁷ it could be argued that engaging in commercial transactions with suppliers tainted by slavery practices such as child labour and forced labour provides a form of financial benefit (ie, cheaper products) to procuring entities, and thus, such benefits are prohibited under r 6.7, though the matter is not beyond legal doubt. Therefore, for the avoidance of doubt, it is submitted that the Commonwealth should provide legal certainty on this point, making it explicitly clear that the award of contracts to suppliers that engage in exploitative or slavery-like practices falls within r 6.7’s ‘dishonest, unethical and unsafe practices’ which procuring entities must not benefit from.⁷⁸

A further legal certainty problem arises with r 6.7’s requirement that suppliers who have been found guilty of violations of ‘employee entitlement’ should not be engaged by procuring entities, that is, procuring entities must not transact with such suppliers. The lack of legal certainty arises because the term ‘employee entitlement’ is not a defined term in the CPR. Some illustration of what employee entitlement could mean could be found in the Fair Work Act 2009 (Cth) (‘FWA’), the primary legislation governing Australia’s labour conditions. Under the FWA, employees are entitled to unpaid parental leave, annual leave, return to work guarantee, compassionate leave, extended service leave, entitlement to be absent from employment on public holidays and so forth.⁷⁹ These entitlements must be available to each employee in a non-discriminatory manner unless the FWA excludes specific groups or classes of employees from receiving the entitlements. As these entitlements relate to labour rights, it could be argued that r 6.7 addresses labour exploitation as suppliers exploiting their workers' entitlements should not be awarded a contract. However, this interpretation of ‘employee entitlements' does not negate the ambiguity caused by the undefined term. To remedy this lack of legal certainty, the Commonwealth should define the term in Appendix B of the CPR. Such an amendment should explicitly include trafficking practices such as forced labour, child labour, recruitment fees, commercial sex acts and other exploitative labour conditions listed under existing federal laws to remedy the lack of legal certainty as to r 6.7’s scope.

Such clarification of employee entitlements may not on its own be enough because another notable limitation on the effectiveness of r 6.7’s prohibition relates to the requirement for there to be finality of ‘judicial decisions’ relating to denial of employee entitlements. Naturally, on one hand, this requirement for judicial determination reflects the traditional respect for due process and presumption of innocence to be observed in a legal system observing the ‘Rule of Law’. However, given the diverse, highly sophisticated and organised nature of trafficking, it may be difficult to convict traffickers, especially legal persons with global networks.⁸⁰ To this end, it is argued that r 6.7’s requirement for a final conviction to be obtained against a supplier before r 6.7’s prohibition comes into effect is no longer appropriate. It brings the CPR out of line with the most recent international thinking⁸¹ in this respect.⁸² The difficulty in obtaining a final judgment for trafficking is evidenced in statistics showing a wide divergence between the estimated number of suspected trafficking-related offences in Australia and the number of convictions.⁸³ The disparity between the lack of convictions and reported incidents is a testament to the difficulties surrounding errant suppliers’ successful prosecution. Thus, this limitation, if maintained, will remain a significant obstacle to procuring entities seeking to exclude suppliers tainted by trafficking practices.

Therefore, it is recommended that r 6.7 should be further amended to require procuring entities to exclude suppliers from tendering exercises where there is a Judgment or credible allegations against such suppliers engaging in trafficking practices. This would bring the CPR into line with international thinking as suggested in the OSCE paper on ending exploitation.⁸⁴ The practicalities of such an exclusion are extensively discussed in Part III(C) below.

Finally, a major problem arises with the effectiveness of r 6.7 with the exclusion of suppliers from the scope of r 6.7’s prohibition. As currently drafted, r 6.7 is directed at prohibiting actions by procuring entities, but it fails to prohibit actions by non-compliant suppliers: in other words, although the Rule does prohibit procuring entities entering into contracts where suppliers have violated ‘employee entitlements’, the rule does not prohibit such suppliers from seeking to enter into contracts with procuring entities. This represents a major lacuna in the CPR and calls its effectiveness into question if this lacuna is not remedied.

In summary therefore, all the CPR r 6.7 currently requires is that officials seek declarations from all bidders that they have not been subjected to a Judgment denying employee entitlements. This is a very weak regime because of (a) the considerable lack of legal certainty whether r 6.7 covers slavery and trafficking practices at all (as discussed above) and (b) even if it does, the requirement for judicial finality leaves the way open for suppliers engaging in slavery practices to be awarded contracts by unsuspecting procuring entities until such time as a Judgment convicting the supplier is handed down.

B Procurement Planning

1 Planning Due Diligence

Procurement planning is essential to any tendering exercise. It leads to a well-developed tender specification for the goods or services sought; better risk identification and management and allows procuring entities to be proactive, instead of reactive, to problems unidentified at this pre-tender advertisement stage.⁸⁵

According to the CPR, a range of different activities or exercises take place during the planning phase. For example, CPR rr 7.8 and 7.9 govern the development and publication of annual procurement plans on AusTender⁸⁶ and r 8 addresses risk assessments and management. Concerning the latter, r 8.1 encourages procuring entities to be ‘mindful of the risks [which the procuring entity faces making] … informed decisions in managing these risks and [so that it] identifies and harnesses potential opportunities’ to mitigate these risks.⁸⁷ Furthermore, r 8.2 mandates procuring entities to identify, analyse, allocate and treat risk when conducting a procurement.⁸⁸ The Commonwealth is aware that some sectors are more prone to trafficking and labour exploitations within its supply chain. This is evident from reports published by the Commonwealth, which shows that the apparel, cleaning and agriculture sectors are prone to labour exploitation.⁸⁹ However, the legal obligation to consider trafficking and labour exploitation as risks is not explicitly mentioned in the CPR, and this gives rise to lack of legal certainty as to the scope of the procurement planners’ obligations during the procurement planning phase. Trafficking, labour exploitation or other synonyms are not explicitly mentioned under CPR r 8, yet it is undoubtedly a risk factor that should be considered in every procurement, leading to the development and implementation of strategies to mitigate such risks during the rest of the procurement cycle.⁹⁰

In addition to revising the CPR to remove this lack of legal certainty, it is further proposed that the government expand on its existing data by producing a comprehensive list of products prone to trafficking practices or require procuring entities to carry out a high level of due diligence before going to the market. Updating this list enables procuring officers to conduct risk assessments and determine what information or documentation potential suppliers must submit for the qualification process. Other reports and research produced by recognised institutions and countries can help the Commonwealth draft the recommended list.⁹¹ Conducting due diligence at this stage of the procurement cycle might be resisted because it creates an administrative burden on procuring officers and may require additional costs from taxpayers in developing this list of high-risk products. Although these are valid concerns against the list’s production, the list does not necessarily have to be created by each procuring entity. Instead, it could be collectively developed by key government departments such as the Department of Finance, the Attorney-General’s Department and the Minister for Trade, or in collaboration with leading public sector players.

Another way to improve legal certainty in the procurement planning phase can be brought about by revising the CPR to make it clear that trafficking can be addressed by appropriate conditions and award criteria. Rule 10.6 of the CPR lists six vital pieces of information which must be included in procurement documentation: these include the tender’s acquisition scope and coverage; minimum content and format requirements; conditions for participation; evaluation criteria; dates for delivery and any other terms or conditions relevant to the evaluation of submissions.⁹² These generic requirements are not explicitly sensitised to the tackling of trafficking through the procurement process. Accordingly, it is suggested that any State seeking to improve these matters, such as the Commonwealth, may learn by drawing on the experiences of jurisdictions such as the US and UK which are leading on this issue.

For example, in the US, Subpart 22.15 of the US FAR provides an example of a procurement framework that utilises the tender planning stage to address the risk that the goods being sought might be of a category typically produced by forced or indentured child labour.⁹³ Unlike the Commonwealth model, there is no lack of legal certainty evident in this respect under this US model: under the US FAR, procuring entities must check if the acquisition falls within the list of products commonly produced by forced/indentured child labour before publishing the tender solicitation documents. This due diligence prompts procuring entities to include a condition in the tender documents that anti-child labour certification will be required from the successful bidder prior to contract award.⁹⁴ Similarly, Subpart 22.17 of the FAR (prohibiting trafficking practices during contract performance) requires US federal procuring entities to include the Subpart’s anti-trafficking provisions pertaining to the contract performance (by the bid winner) in bid solicitation documents.⁹⁵

In the UK, legal certainty is catered for by the requirement for suppliers to declare whether they have been found guilty of trafficking, and this condition is specified in the published procurement documents.⁹⁶ Essentially, this stage of the procurement process acts as a process of self-elimination. Potential suppliers who acquire the procurement documentation by expressing an interest in the procurement opportunity will be able to assess whether they meet the anti-trafficking conditions stipulated in the document before preparing or submitting a tender. Potentially, this means that those suppliers who are tainted by a trafficking conviction should naturally eliminate themselves from the tendering process.

2 Technical Specification

A second method for addressing trafficking during the tender planning stage is through the technical specifications part of the tender. Currently the CPR model fails to take advantage of this opportunity, hence resulting in a major lack of legal certainty as to whether this is legally possible under the Commonwealth CPR model. Technical specifications define the physical and operational characteristics required of goods, services or works and, as such, form a critical part of the procurement process. Suppliers whose tenders do not meet the technical specification must be excluded from further participation in a tender competition.⁹⁷ Accordingly, drafting an appropriate technical specification presents an excellent opportunity to address trafficking concerns.⁹⁸

Caldwell, Bakker and Reed argue that the functional aspect of the specification describes ‘what the product or services have to do’ and the technical aspect considers the ‘properties and characteristics of the product and activities the supplier must perform’.⁹⁹ This means that technical specifications can be influenced not only by the procurement’s subject matter, but also by institutional and national policies and practices, for example, environmental policy or characteristics.¹⁰⁰ Research conducted by Parikka-Alhola found that in most procurements where environmental objectives are being promoted, ‘over 60% of the environmental criteria were presented in technical specifications’.¹⁰¹ However, while environmental characteristics are increasingly used in the design of technical specifications, social characteristics are not as widely used. This is probably because, traditionally, procurement officers did not see pursuit of social agendas as part of the tender’s remit and also because of the fear of unwittingly causing discrimination to occur, as the cases discussed below will attest. However, notwithstanding such risks, inclusion of social characteristics within a tender’s technical specifications is permissible, provided that the social characteristics satisfy a crucial parameter, that is, they must (just as in the case of environmental or any other extra-mural characteristics) relate to the procurement subject matter.¹⁰²

Currently, the CPR (rr 10.9 to 10.13) does not contain any rules that require procuring entities to incorporate relevant social characteristics (eg, addressing labour exploitation or slavery) within the technical specifications. Therefore, it is recommended that, where appropriate, Commonwealth procuring entities should incorporate social characteristics that address labour exploitation within public tenders’ technical specification. European Union Law already takes this approach: Directive 2014/24/EU permits procuring entities to use labour conditions and labels as part of the technical specification, as long as these characteristics are not discriminatory of nationality and provided that they relate to the procurement subject matter. As an illustration, in the case of Commission v Netherlands (‘Dutch Coffee’),¹⁰³ the technical specification required payment of a living wage and use of fair trade products that possessed the Max Havelaar label.¹⁰⁴ While the specification was deemed illegal due to the requirement to possess a specific brand label (which could constitute discrimination because that label was not available to all potential bidders), the Court of Justice was of the view that inserting social criteria into the technical specifications (seeking promotion of fair labour conditions) was legitimate because it would not give any bidder an unfair advantage. Thus, the matters condemned in this case were not due to deployment of social characteristics requirements seeking to address labour exploitation, but rather was related to where such characteristics' deployment would achieve discrimination, that is, via national measures or specific trade labels which constrain or hinder suppliers from other Member States from participating in the tendering exercises.

In proposing transplanting this European Union approach into the CPR, the authors recommend that the CPR be revised to explicitly make it clear that deployment of social and labour conditions in tenders’ technical specifications where appropriate to do so, is legally permissible. This will bring the CPR into conformity with Target 12.7 of the UN Sustainable Development Goals. Hence, for example, the procurement can, within the technical specifications, impose a range of relevant requirements, such as a requirement that tenderers commit to payment of legislatively mandated minimum wage levels; or that the products or services to be acquired are to be produced or supplied free from use of forced or child labour; or that suitable and safe equipment and facilities be used, etc.¹⁰⁵ In construction contracts, procuring entities could require potential suppliers to include their equipment, facilities and working conditions to satisfy the technical specifications' technical and performance aspects.¹⁰⁶

C Qualification of Suppliers Stage

The CPR model exhibits several major weaknesses in terms of its effectiveness to combat trafficking in procurement as becomes evident when analysis is undertaken of the CPR’s requirements for the suppliers qualification stage of a public procurement. In this section of the paper, the authors shall identify the problem and propose how it may be remedied. It will be seen how the CPR employs an approach that is no longer fit for purpose, which allows errant suppliers to enter the tender process because the CPR is not assessing them from a trafficking compliance perspective at this early stage. This represents a fundamental weakness in the CPR model as currently constituted.

Many international procurement frameworks approach the matter of ‘not letting the fox into the henhouse’ by allowing their procuring entities to pre-qualify potential suppliers using the procurement framework’s mandatory exclusion and supplier-qualification selection criteria.¹⁰⁷ Currently, the CPR does not take such an approach. It does not explicitly provide for the exclusion of suppliers guilty of criminal activities such as trafficking from the procurement process.¹⁰⁸ Instead, r 10.17 of the CPR provides for mandatory supplier exclusion from further participation in the tender where potential suppliers have not satisfied the commercial, financial and technical conditions for participation.¹⁰⁹ It is submitted that this provision is not sufficient for the purpose of addressing trafficking in public supply chains. To remedy this lacuna, the CPR should address this gap, by introducing an exclusion list that permits procuring entities to exclude suppliers convicted of, or against whom there is strong credible evidence presented, that they have been engaged in trafficking-related activities, such as child labour, forced labour, smuggling and labour violations.

In a well-designed supplier qualification system, each competing supplier’s eligibility to go forward and be evaluated as the winning tenderer first requires a determination to be made as to the supplier’s integrity and capability to perform the contract were they to be eventually selected as the winning bid.¹¹⁰ To set the background to achieve this objective, procuring entities must set clear conditions for participation in the tender and elaborate supplier evaluation criteria in the procurement documentation against which suppliers will be assessed (assuming they pass the eligibility and capacity to perform the contract stage).¹¹¹ Only those suppliers who satisfy such tender participation conditions and provide an otherwise compliant tender can go forward to the tender evaluation stage (to decide whether they, rather than others, should be awarded the contract).¹¹²

However, the Commonwealth’s CPR model approaches the qualification of suppliers by reference to assessing only the capacity and capability of a supplier to perform the contract (CPR rr 10.15–10.19).¹¹³ This paper therefore recommends that Rules 10.17 and 10.19 be amended to include provisions that will require tenderers to demonstrate anti-trafficking integrity at the supplier-qualification stage. We also submit that clear guidelines are required to be developed to steer procuring officers on how to assess suppliers under such amended CPR Rules.

A further example of how the CPR is not sufficiently effective to cater for trafficking at the supplier qualification stage in the procurement context arises when CPR r 10.19 is considered, presenting yet another example of how major revision of the Commonwealth’s CPR model is required if it is to become effective for combating non-compliant suppliers, and become compliant with UN Sustainable Development Goals for conduct of public procurement.

Rule 10.19 states that:

Officials must make reasonable enquiries that the procurement is carried out considering relevant regulations and/or regulatory frameworks, including but not limited to tenderers' practices regarding labour regulations, including ethical employment practices, workplace health and safety; and environmental impacts.¹¹⁴

Rule 10.19 insufficiently addresses trafficking at the supplier assessment stage on several grounds. First, exhibiting lack of legal certainty, the Commonwealth does not provide a definitive (nor regularly updated) list of labour regulations or unethical practices that procuring entities should always consider when conducting their due diligence on suppliers. Second, the CPR does not detail for procuring officers what constitutes ‘reasonable enquiries’. For example, should procuring entities carry out mandatory criminal checks on all suppliers who have submitted a tender? Or should there be some form of uniform declaration/certification that suppliers must submit for consideration along with their tender (the UK approach). As already discussed earlier above, r 6.7 is not sufficient to address this issue because it only requires declarations as to past convictions but does not extend to require declarations as to unethical practices not the subject of judicial determination.¹¹⁵ Third, another issue relating to r 10.19 concerns the lack of transparency relating to procuring entities’ decisions when reasonable enquiry has shown that a potential supplier is tainted by trafficking. For example, under the US FAR, procuring entities are required to exclude suppliers that do not demonstrate sufficient integrity and do not operate ethically.¹¹⁶ The EU Public Sector Directive 2014/24/EU takes a somewhat narrower approach by requiring mandatory exclusion of suppliers convicted of trafficking by a final judgment.¹¹⁷ However, in contrast to these two models, the CPR model provides no guidance on this key matter. So, while it is expected that procuring entities should exclude such suppliers, the lack of clarity and lack of legal certainty as to whether there is a legal obligation to exclude may lead to procuring entities’ approaches to this question varying widely across the Commonwealth’s entities and territories.

This failure by the CPR to require procuring entities to use the tendering process to adequately pre-qualify potential suppliers on trafficking grounds before they can proceed to evaluating the bid and contract award stages threatens Australia’s credibility that it operates a procurement legal framework possessing effective mechanisms to prevent the awarding of contracts to errant suppliers. This may lead to poor performance, delay in completing contracts, reputational damage to the procuring entity, increased costs as well as administrative burdens.¹¹⁸ It is critical that an effective assessment of every potential supplier, including the practices adopted in their organisation and supply chain, is conducted at this (early) qualification of suppliers stage in the public tender process, in order to determine the integrity of all tenderers well in advance of them being allowed to proceed to the tender evaluation and contract award stage. According to Koker and Harwood, if adequate integrity checks are not performed, ‘unscrupulous suppliers can access and abuse public procurement’.¹¹⁹

Thus, in order to maintain the integrity of the Commonwealth CPR procurement regime, it is essential that effective due diligence of suppliers is conducted at the supplier qualification stage to prevent unethical suppliers accessing public contracts. This would enable procuring entities to uncover trafficking practices adopted by potential or incumbent suppliers and allow for the adoption of measures designed to prevent or mitigate against occurrence of this illegal activity contaminating the public procurement system of the Commonwealth.

To enable procuring entities to prevent the award of contracts to suppliers tainted by trafficking practices, the following measures (if adopted) would strengthen the CPR model by leading to the effective exclusion of unscrupulous suppliers at the supplier-qualification stage of the procurement process. If procuring entities adopt these recommendations as pre-conditions for participation, they will need to be brought to potential tenderers attention in tender preparatory documentation in order to comply with observance of transparency. As the following discussion will now illustrate, the adoption of such measures will undoubtedly increase the CPR model’s effectiveness to act as a tool for the disruption of labour trafficking and conduct of unethical labour practices via the public procurement process and additionally address the lack of legal certainty.

Measure 1: Disclosure of Trafficking-Related Offences

The first measure proposed is to require potential suppliers to disclose whether they have been subject to any judicial or administrative orders relating to trafficking or labour violations. Such disclosure would encompass all judgments or decisions rendered against a supplier by an institution recognised by the Commonwealth, irrespective of whether the decision is interim or final. This disclosure should include administrative decisions relating to labour conditions. For example, decisions made by an employment tribunal or department of labour against a supplier for mandating employees to work excessive hours would be covered by this measure.¹²⁰

It is to be noted that while the exclusion of suppliers convicted of trafficking offences is an essential and customary way of addressing trafficking through procurement, adopting this recommendation may have unintended consequences for procuring entities. For example, the disclosure of offences might deter competent suppliers from participating in tendering exercises, thereby having an indirect effect of limiting competition to those that are free of criminal convictions,¹²¹ unless they are accompanied by ‘self-cleaning’ measures.¹²² Such a measure could also increase procuring officers' responsibilities by requiring them to carry out more due diligence, such as checking the alleged violation with the relevant judicial or administrative bodies.

Moreover, it could be argued that the disclosure of trafficking offences or practices do not prevent suppliers from engaging in future prohibited practices; instead, it notifies procuring entities of the supplier’s past conduct. It is important to note that this recommendation relies solely on suppliers’ conviction and so will not catch all offending suppliers as convictions for trafficking are difficult to obtain in practice, due to supply chain complexities and the difficulties of acquiring tangible evidence to support a successful prosecution. Therefore, while this recommendation may help identify suppliers tainted with trafficking, on its own it is not sufficient to adequately address trafficking and labour exploitation at the supplier qualification stage. Thus, other flanking measures, as detailed below, should also be adopted alongside.

Measure 2: Certification of Commitment Not to Engage in Trafficking

In addition to the disclosure of prior offences, potential suppliers should be required to certify that they will not engage in trafficking practices during contract performance.¹²³ Such certification should be submitted along with the tender, as this will form part of the supplier qualification process, and can also be made a contractual condition should the supplier be successful in winning the tender. The certification language should be consistent with a template provided by the procuring entity in the procurement documentation. Doing so will avoid disparities in the certification submitted by various suppliers. To ensure the certification remains effective, procuring entities should require this certification from all contractors and subcontractors at regular intervals throughout the performance of the contract as well.

The certification commitment provides a better prospect of tackling trafficking rather than sole reliance on the disclosure of prior offences alone, because it focuses on the supplier’s practices — current and future — and encourages behaviour change or maintenance of ethical behaviour during contract performance. Adopting this kind of measure covers practices that suppliers have not been convicted of, thereby mitigating the weaknesses of confining disclosure only to offences for which a conviction followed. Furthermore, it can also constrain future unethical supplier behaviour, by underpinning a contractual commitment for which financial penalties can be provided in the contract awarded to the successful tenderer should a breach be subsequently detected.

D Contract Award

As part of the process of determining a contract award, procuring entities must evaluate tenders received against pre-defined evaluation criteria set out in the procurement documentation to determine the ranking of competing submitted tenders.¹²⁴ The contract award stage of the procurement process therefore presents another critical phase of the procurement process which presents a key opportunity to use the procurement process to tackle trafficking.¹²⁵

The CPR r 7.12 requires procuring entities to include ‘relevant’ evaluation criteria and ‘the relative importance of those criteria’ in the request documentation ‘to enable the proper identification, assessment and comparison of submissions’.¹²⁶ Beyond this general provision, the CPR does not specify the content of such criteria.¹²⁷ Thus, procuring entities have considerable discretion in this area, as long as the evaluation criteria are applied fairly and transparently. The weight attached to each criterion should reflect the priorities of the procuring entity.¹²⁸ The flexibility afforded to procuring entities under r 7.12 is advantageous for the procuring entities because it means that procuring entities can adopt evaluation criteria without any infringement or conflict with the current CPR. This approach can be contrasted with the comprehensive approach adopted in international procurement frameworks, such as the European Union’s Directive 2014/24/EU and the UK Public Contracts Regulations, which explicitly permit contracting authorities to include social criteria (such as trading conditions and suppliers’ production processes) in the tender award criteria provided that they can be genuinely linked to the procurement subject matter.¹²⁹ In this way, award criteria relating to labour conditions can form part of the tender award evaluation criteria as long as they do not restrict competition; do not give rise to discriminatory treatment between suppliers; are proportionate to the nature of the contract and are applied uniformly, fairly and transparently.¹³⁰ It is submitted that the Commonwealth should consider and follow this approach followed in other jurisdictions, by supplementing the CPR with ample guidance on r 7.12 in order to make it clear to procuring entities how to include social considerations such as labour conditions in public tenders’ award criteria.

Another significant part of the contract award process where trafficking can be addressed is in the awarded public contract. The public contract presents a crucial opportunity for procuring entities to tackle trafficking within their supply chains primarily through the insertion of anti-trafficking contract terms and providing effective contract remedies for breach, to deter suppliers from engaging in unethical activities.

The inclusion of contract terms and conditions in the awarded contract to address trafficking is not regulated in the CPR and is not included in the Commonwealth Contract Terms (a generic non-negotiable template used by federal procuring entities when awarding contracts).¹³¹ This lack of anti-trafficking contract terms in public contracts contributes to the lack of effectiveness in the Commonwealth procurement framework because the absence of such terms in the contract means that pertinent legally enforceable provisions are not being used, when they could be, to contractually deter suppliers from engaging in trafficking practices when implementing procurement contracts.¹³²

Including anti-trafficking contract terms in all public contracts is not a revolutionary proposal: procuring entities already use contract conditions to ensure supplier observance of procuring entities' social or environmental objectives and preferences.¹³³ Countries such as the US, and South Africa,¹³⁴ all use contract conditions to promote observance of ethical labour conditions, by making observance during the period of contract performance the subject of essential contractual conditions.¹³⁵ Thus, the assumption is that nothing precludes Commonwealth (or other) procuring entities from using the contract to address trafficking practices during contract performance, notwithstanding their absence from the CPR.¹³⁶

E Contract Management

Contract management’s primary purpose is to ensure suppliers perform the contract to the required standard and in accordance with their contractual obligations, which should include adherence to anti-trafficking clauses.¹³⁷ Therefore, every procuring entity should have a procedure or strategy for managing and monitoring contracts, as doing so is likely to improve performance, manage budgets, ensure satisfactory delivery of the services, minimise risks and ensure the procuring entity continues to obtain value for money during the contract performance period.¹³⁸

Contract management is lightly regulated under r 7.26 of the CPR. According to r 7.26, ‘where applying a standard for goods or services, relevant entities must make reasonable enquiries to determine compliance with that standard, including gathering evidence of relevant certifications’.¹³⁹ While the requirement of certifications to validate the standard of the goods or services supplied would obviously come under this requirement, it is unclear whether such standard is confined to certification of the quality of the product or services specified in the technical specification, or whether it also includes contract performance conditions.¹⁴⁰ For example, in the Commission v Netherlands,¹⁴¹ Dutch procuring entities were in principle able to assess the conformance to specified fair trade product production standards by requiring suppliers of food products to supply products meeting fair trade production standards. The European Court of Justice held against the procuring entities because they were not permitted to specify that fair trade had to be demonstrated by use of a particular named fair trade label, the Max Havelaar label: to do so was discriminatory against suppliers holding other fair trade labels meeting the same objective fair trade product production standards. Applied to the Australian context, it is unclear whether requiring such certification of the standard surrounding contract performance is applicable under r 7.26. Despite the lack of legal certainty with r 7.26, it could be argued that nothing precludes federal procuring entities from requesting such certification from their suppliers, as long as the requirement of such certification is set out in the procurement documents and is not limited to a particular certification label or constitute an arbitrary form of discrimination between potential suppliers.

Furthermore, if certification relating to the standard of contract performance is permitted under r 7.26, to improve the effectiveness of the rule, it is recommended that procuring entities should request an annual (and also) end of contract certificates, similar to the certification of knowledge mentioned in Part III(C) earlier above. The certifications should specify that the supplier has not engaged or supplied products or performed services tainted by trafficking practices. This effective approach is adopted in Subpart 22.17 of the US FAR. The annual submission is a continous reminder to suppliers that the federal government adopts a zero-tolerance policy on engaging in trafficking. Therefore, it minimises the risk of contract performance being tainted by trafficking. Suppliers that fail to provide such annual and end-of-contract certification would lie open to being subject to remedies such as suspension of payment, termination of contract or suspension and debarment.

IV Conclusion

Tackling modern slavery in public sector supply chains has been advocated by many international organisations such as the United Nations, the International Labour Organization, the Organization for Security and Co-operation in Europe and leading economies, including the Commonwealth of Australia, US and UK. This paper analysed the Australia’s Commonwealth Procurement Rules for the purposes of examining whether the current CPR regime meets the necessary standards of legal certainty and effectiveness, by examining key CPR provisions in order to assess whether the risk of trafficking is adequately addressed in the CPR procurement model. The paper demonstrates how key elements of the CPR model fail to provide for the required degree of legal certainty and effectiveness to tackle trafficking, with system failure demonstrated by analysis of key CPR provisions which either fail to satisfy these two key tests, or because of the complete absence of appropriate provisions to comprehensively deal with the risk of trafficking in the public sector supply chain. The research in this paper generates new insights for countries seeking to tackle labour exploitation and trafficking via public procurement systems and identifies pitfalls for countries to avoid if seeking to emulate the Australian CPR model. Appropriate reference to US, EU and UK models was made where appropriate and will assist countries seeking to design improved models for tackling morally exploitative practices within national and global supply chains.