Finance Circular

No. 2005/12
To all departments, agencies and bodies subject to the Commonwealth
Procurement Guidelines

Definition of Procurement of Construction Services

Purpose
This Circular provides guidance on the definition of the procurement of construction
services as used in the Commonwealth Procurement Guidelines January 2005 (CPGs).
It also provides guidance on the treatment of leases.

Target Audience
This Circular applies to all departments and agencies subject to the Financial
Management and Accountability Act 1997 (FMA Act) and to relevant CAC Act bodies1.

Background
1. The Mandatory Procurement Procedures prescribe rules for the conduct of covered
procurements2. The procurement of construction services is a covered procurement
when the value exceeds the threshold of $6 million and the procurement is not
exempt from the operation of the Mandatory Procurement Procedures under
the CPGs.

Issues
Definition of Construction Services
2. The CPGs define construction services as consisting of two parts:
(a) procurements related to the construction of buildings; and
(b) all procurements covered by the Public Works Committee Act 1969 (PWC Act).
1 Relevant CAC Act bodies are those bodies listed in Schedule 1 of the Commonwealth
Authorities and Companies Regulations 1997.
2 A covered procurement is defined in the CPGs as: a procurement, other than one that
is specifically exempt, where the value of the property or services being procured
exceeds the relevant procurement threshold. The CPGs state that the threshold for
covered procurements for property and services is $80,000 for FMA Act agencies and
$400,000 for relevant CAC Act bodies. For procurements of construction services, the
threshold is $6 million.
Page 1 of 3

Finance Circular 2005/12

Department of Finance and Administration

3. In the first part of the definition, buildings is used according to a normal dictionary
definition. For the purpose of the second part of the definition, construction services
includes all activities meeting the definition of work as stated in the PWC Act3.
4. The PWC Act defines work, as follows:
Work means an architectural or engineering work, and includes:
(a) the construction, alteration, repair, refurbishment or fitting out of buildings and
other structures;
(b) the installation, alteration or repair of plant and equipment designed to be used in,
or in relation to, the provision of services for buildings and other structures;
(c) the undertaking, construction, alteration or repair of landscaping and earthworks
(whether or not in relation to buildings and other structures);
(d) the demolition, destruction, dismantling or removal of:
(i) buildings and other structures;
(ii) plant and equipment falling within paragraph (b); and
(iii) earthworks;
(e) the clearing of land and the development of land for use as urban land or
otherwise; and
(f) any other matter declared by the regulations to be a work;
but does not include:
(g) the production of, or anything done in relation to, intangible things;
(h) the production of, or anything done in relation to, movable property unless the
work is, under the regulations, a movable work to which this Act applies;
[Note: there is no paragraph (i) in this section of the PWC Act.]
(j) the installation, alteration or repair of plant or equipment where the plant or
equipment:
(i) is not designed to be used in, or in relation to, the provision of services for a
building or other structure; and
(ii) is not necessary or desirable to make a building or structure a complete
building or structure; and
(k) any other matter declared by the regulations not to be a work.

5. The Public Works Committee Regulations 1969 (PWC Regulations) effectively

extend the definition in the PWC Act to specify that work also includes a temporary
building or structure, and a demountable building or structure. Therefore, officials
should note that for the purposes of the CPGs, these are also to be considered as
construction services.
6. Officials should note that the application of the CPGs in no way affects the
operation of the PWC Act and Regulations.
Valuation of Construction Services
7. The estimated value of a construction services procurement (including any options
such as contract extensions) determines whether it is a covered procurement and
therefore whether the Mandatory Procurement Procedures apply (unless the
3 Refer part 1, section 5 of the PWC Act for the definition of work.
Page 2 of 3

Finance Circular 2005/12

Department of Finance and Administration

procurement is subject to one of the exemptions to the Mandatory Procurement

Procedures listed in the CPGs).
8. When estimating the value of a construction services procurement in order to
determine if it is a covered procurement, the procurement must not be divided into
separate parts for the purpose of avoiding a procurement threshold.
9. While an initial procurement of construction services may include a contractual
provision for maintenance services for a period after completion of a project, the
procurement of maintenance services after that period becomes subject to the
requirements of the CPGs for the procurement of property and services (that is, the
threshold of $80,000 applies in determining whether it is a covered procurement).
Leasing
10. The CPGs exempt the lease or purchase of real property or accommodation from
the application of the Mandatory Procurement Procedures. In respect of the leasing
of accommodation, the extent of the exemption is the exclusion from the
requirement to apply the Mandatory Procurement Procedures to leases for
accommodation from the commercial property market.
11. The exemption does not apply to situations where leasing by the Australian
Government is being applied or considered as a method of financing a construction
services project, as in the case of some forms of pre-commitment lease or a private
financing initiative (PFI). In such instances, officials should treat these as
procurements of construction services and apply the CPGs accordingly.
Application of the CPGs
12. Officials of FMA Act agencies undertaking procurement of construction services
should note that if the value of the procurement is less than $6 million, or if the
procurement is exempt from the application of the Mandatory Procurement
Procedures, then Divisions 1 and 3 of the CPGs still apply.
13. Even if a construction services procurement is valued below $6 million, or if the
procurement is exempt from the application of the Mandatory Procurement
Procedures, the use of the Mandatory Procurement Procedures by FMA Act agencies
may assist in meeting the requirements of Division 1 of the CPGs. For example, the
use of open tendering may ensure competition and delivery of value for money.

Further Information
14. Questions should be directed to the Procurement Agency Advice Branch or visit our
website at www.finance.gov.au (Government Finances menu).

Steve OLoughlin
Acting Branch Manager
Procurement Policy Branch
Financial Management Group
27 September 2005

Page 3 of 3

Finance Circular 2005/12

Department of Finance and Administration