Frequently Asked Questions
Topics on this page include:
- What does VIPP apply to?
- What is the threshold above which VIPP applies?
- What is a VIPP Plan?
- Have the VIPP thresholds changed recently?
- What were the changes to the VIPP announced in the 2008 Victorian Industry and Manufacturing Statement: Building our Industries for the Future?
- What are the additional local content requirements that Strategic Projects are subjected to?
- What is a Local Industry Development Plan?
- For VIPP purposes, what does 'Metropolitan' and 'Regional' mean?
- What is the VIPP threshold for State-wide projects?
- At what point in the selection process is VIPP applied?
- What is meant by 'local content'?
- Are the recent changes to VIPP in contravention to our international obligations?
- Where a VIPP-applicable project comprises a number of tender processes, some of which fall below VIPP threshold values, how should the VIPP be applied?
- How does VIPP apply to Panel Contracts?
- How is VIPP used in tender selection and contract negotiation?
- What happens if a tenderer does not submit VIPP data or submits non-compliant data?
- What happens if the contractor does not meet its VIPP commitments?
- What is meant by a 'genuine attempt' to identify local industry opportunities and how are satisfactory VIPP commitments determined?
- How does VIPP assist local industry as part of the value for money assessment criteria?
- How does local industry get fair consideration when tenders specify the use of foreign products or services?
- How does VIPP apply to a project that has multiple sources of funding?
- What is the ICN Victoria?
- How is ICN involved with VIPP?
- How can ICN help with the VIPP?
- How long does it take for ICN to certify a VIPP Plan?
What does VIPP apply to?
VIPP applies to all Victorian Government procurement activities above the threshold values listed below. These procurement activities include:
- construction activities
- Major Projects Victoria
- Major Events
- Public Private Partnerships
- investment support grants
- business development grants
- community infrastructure grants
What is the threshold above which VIPP applies?
VIPP applies to projects worth $3 million or more in Metropolitan Melbourne and $1 million or more in Regional Victoria.
What is a VIPP Plan?
A VIPP Plan is a document that must be completed and supplied by shortlisted tenderers for VIPP-applicable projects. The Plan contains the tenderer’s estimates of the levels of local content, local employment and skills/technology transfer that would arise if their bid were successful, as well as a description of how those VIPP commitments would be achieved. VIPP Plans for these projects require mandatory consultation and certification by the Industry Capability Network Victoria (ICN) or DIIRD.
Have the VIPP thresholds changed recently?
Yes. The previous requirement for a VIPP Statement and a VIPP Implementation Plan to be completed for projects above $10m (metropolitan) and $2.5m (regional) has been eliminated. From 1 July 2009, a single document, the VIPP Plan, will be required for VIPP-applicable projects above $3m (metropolitan) and $1m (regional). Projects commenced before 1 July 2009 but continuing after that date are unaffected.
What were the changes to the VIPP announced in the 2008 Victorian Industry and Manufacturing Statement: Building our Industries for the Future?
The changes to the VIPP are:
| Before 1st July 2009 | On and after 1st July 2009 | |
|---|---|---|
| Thresholds and Documentation |
|
|
| Role of VIPP in tender evaluation | VIPP was used in a two envelope system and was only considered in tender evaluation as a tiebreaker in the event of comparable tenders |
VIPP was used in a two envelope system and was only considered in tender evaluation as a tiebreaker in the event of comparable tenders |
| ICN's role | Certification of VIPP Implementation Plan by short-listed bidders |
|
| Strategic Projects | Did not address |
Major projects above $250m as measured on a whole of life basis and that meet certain criteria will be declared of strategic significance to the Victorian economy and will subjected to additional local content requirements to help drive additional economic activity and jobs. Please refer to Question 7 for more details. |
What are the additional local content requirements that Strategic Projects are subjected to?
A target of a minimum percentage of the procurement value (on a whole-of-life basis) to be comprised of local content
Tenderers for projects of State significance will be required to produce detailed Local Industry Development Plans in consultation with ICN which will be used to assess competing bids
In the context of Strategic Projects, rail rolling stock projects will be subject to a minimum local content target of 40% on a whole of life basis and the VIPP commitments of tenderers will have a weighting of 10% in tender evaluation.
What is a Local Industry Development Plan?
The Local Industry Development Plan is a more detailed VIPP Plan reflecting the size and complexity of Strategic Projects. All shortlisted tenderers for Strategic Projects will be required to complete a Local Industry Development Plan instead of the VIPP Plan.
For VIPP purposes, what does 'Metropolitan' and 'Regional' mean?
The terms 'Metropolitan' and 'Regional' refer, respectively, to the areas within the municipal districts of the Metropolitan Melbourne Councils and all other Victorian Councils and Alpine Resorts areas, as designated under the Local Government Act 1989.
The determination of whether a project is 'Metropolitan' or 'Regional' for VIPP purposes relates to the location where the project is taking place.
What is the VIPP threshold for State-wide projects?
Where a project is undertaken in both metropolitan and regional areas or across the whole State, metropolitan threshold levels will be used in determining whether VIPP should apply. That is the threshold for State-wide projects is $3 million.
At what point in the selection process is VIPP applied?
The VIPP is a primary selection criterion in the tender evaluation process for shortlisted bidders. All shortlisted tenderers are required to complete VIPP Plans.
Where no shortlisting occurs, agencies should apply VIPP to all tenderers. If the scenario arises where application of VIPP seems impractical, agencies should consult DIIRD.
Recipients of grants to which VIPP applies should complete VIPP Plans at an appropriate point of the application process to be determined by the funding agency.
What is meant by 'local content'?
'Local content' refers to goods and services that have value added activities based in Victoria, Australia or New Zealand. For the purposes of a VIPP Plan, bidders need to estimate the level of local content that a bid contains expressed as a percentage of the total value of the bid.
Are the recent changes to VIPP in contravention to our international obligations?
The VIPP is not a protectionist policy and is consistent with our international obligations. The VIPP meets its FTAs and international treaty obligations by operating within a clear policy framework focusing on the encouragement of greater participation in major public sector projects by SMEs, and the inclusion of the whole of Australia and New Zealand in the definition of 'local content'.
Where a VIPP-applicable project comprises a number of tender processes, some of which fall below VIPP threshold values, how should the VIPP be applied?
Many publicly funded activities such as construction and infrastructure projects or major events are described and promoted as single “projects”, e.g EastLink, the Australian Synchrotron or the Commonwealth Games. Where the overall funding for such projects exceeds VIPP threshold levels, it is expected that VIPP should be applied to these activities, even where the delivery of these projects entails the letting of many tenders for specific works, products and services, not all of which are above VIPP threshold levels.
As these projects often represent significant opportunities for local industry participation, it is important that VIPP should apply to the full quantum of funding of such projects, not simply to those individual tenders that exceed VIPP thresholds. It is especially important the VIPP applies to the design stage of the project, regardless of the cost of the design stage contract.
Options for applying VIPP to these projects include:
where a head contractor or project manager is appointed, VIPP may be applied as part of this selection process, with VIPP estimates to be made based on the entire scope of project activity. Subcontractors should then be made aware of the VIPP obligations applying to the project and the requirement for them to contribute to the reporting of VIPP outcomes to the project manager during the course of the project
where a project comprises a relatively small number of large tenders, VIPP should be applied individually to these
If in doubt, the agency responsible for the project should consult with DIIRD and/or the ICN prior to the project commencing to determine the way in which VIPP should be applied.
How does VIPP apply to Panel Contracts?
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), is subject to the VIPP where the total value of the procurement undertaken using the supplier panel exceeds the VIPP threshold levels (above $3 million in metropolitan areas and $1 million in regional areas).
In general, the application of VIPP to panel contracts can be undertaken in one of two ways.
Scenario 1:
Where the agency considers that over the life of the contract, one or more individual suppliers are likely to conduct work with a cumulative value over the relevant VIPP threshold level, it will be a condition of appointment to the panel for each supplier to complete a VIPP Plan.
Scenario 2:
Where the agency considers that it is unlikely that any individual supplier will conduct work with a cumulative value over the relevant VIPP threshold level, suppliers will not be required to complete a VIPP Plan at the time of appointment to the supplier panel. However, they should be advised that, as a condition of contract, they will be required to complete a VIPP Plan should they obtain work through the panel with a cumulative value over the threshold level. If this occurs, the VIPP Plan may report on local content and employment outcomes that the supplier has achieved to date through work won under the panel contract.
The determination of which of the above scenarios should apply is to be made by the responsible agency, having regard for the size of the contract, the number of suppliers and the nature of the allocation of work under the contract. (See Section 3.3 of the VIPP Guidelines for further details).
How is VIPP used in tender selection and contract negotiation?
VIPP documentation is used in the following ways:
The VIPP is assessed as a primary selection criterion for shortlisted bidders alongside fit-for-purpose criteria. The extent of the weighting of VIPP within tender evaluation should be determined by the agency having regard for the nature of the project. In general, it is the objective of the VIPP that it should be influential in the tender selection process, well beyond a check for basic compliance, although not to the extent that it distorts tender selection based on value for money principles. In cases where there is a clear choice between local and imported contents, the VIPP should play a more important role in tender evaluation.
Use of VIPP as additional assessment mechanism. Following tender evaluation, including assessment of bidders’ VIPP commitments, where two or more tenderers still remain comparable, the VIPP may be used as a tiebreaker. Normally, the bidder with the stronger VIPP commitments will be awarded the tender.
Use of VIPP as a condition of contract. The winning tenderer’s VIPP commitments are to be negotiated and included as a condition of contract against which they must report over the life of the project.
What happens if a tenderer does not submit VIPP data or submits non-compliant data?
Where a tenderer’s VIPP data is not submitted or found to be non-compliant, the agency, letting the tender, should deem the tender non-compliant.
What happens if the contractor does not meet its VIPP commitments?
Where VIPP outcomes reported by a contractor do not meet the levels committed to in the contract, the agency should identify whether there has been a valid reason for this (e.g. an unavoidable change of supplier or product that resulted in a drop of local content or employment). Where no valid reason can be identified, the agency may determine that this represents a breach of contract and impose such remedies as it sees fit.
What is meant by a 'genuine attempt' to identify local industry opportunities and how are satisfactory VIPP commitments determined?
With the exception of the Strategic Projects, there is no mandatory local content level that bidders must commit to in their VIPP Plan. Instead the determination of the quality of bidders’ VIPP estimates must be made on an individual basis by the assessing agency, with the assistance of the ICN, having regard for the size and capability of local firms and suppliers in the industry concerned.
How does VIPP assist local industry as part of the value for money assessment criteria?
By making VIPP commitments one of the primary selection criteria as part of the value for money assessment, for shortlisted tenderers, and also requiring tenderers to consider local industry opportunities at the competitive stage of a tender process, they are more likely to make serious VIPP commitments, knowing that it may influence their selection outcomes. Moreover, making VIPP a condition of contract also ensures that bidders will make a serious attempt to consider local industry.
Agencies should also ensure that in assessing value for money, it is considered on a 'whole of life' basis (including the transitioning-in, the contract term and the transitioning-out phases of the relationship between the Agency and a Tenderer), rather than simply an assessment of 'lowest price'. Considering value for money on a 'whole of life' basis can also deliver significant advantages for local suppliers in areas such as technical support, maintenance and after sales service compared with overseas suppliers. (See Section 3.2 of the VIPP Guidelines for further details on 'value for money').
How does local industry get fair consideration when tenders specify the use of foreign products or services?
Agencies must ensure that tender and design specifications are drawn up in such a way as not to deliberately or inadvertently exclude local suppliers from having full and fair opportunity to tender for projects. Where such specifications lead to the exclusion of local products or suppliers, the VIPP requires that there be a valid justification for this that includes evidence that comparable local products or suppliers do not exist or are not of the necessary technical or performance standard.
Agencies should consult with DIIRD or ICN Vic prior to the approval of a design specification that excludes local suppliers from participation. Bidders are also encouraged to consult the Government agency, as well as DIIRD or ICN Vic on how best to incorporate achievable local supplier participation levels into the design. (See Section 3.1 of the VIPP Guidelines for further details).
How does VIPP apply to a project that has multiple sources of funding?
VIPP applies to projects with multiple funding sources, only when the Victorian Government funding contribution exceeds the relevant threshold for VIPP.
What is the ICN Victoria?
The ICN (Industry Capability Network) is a not for profit company funded by the State Government to promote Australian Industry by increasing local participation in all major procurement activities. ICN provides a technical service to buyers and nominates competitive manufacturers of locally made goods and services across all industry sectors and major projects.
How is ICN involved with VIPP?
ICN facilitates the VIPP of behalf of the Victorian Government. They also provide advice to government departments and to companies seeking to provide goods and services to government and its suppliers.
How can ICN help with the VIPP?
For government agencies ICN provides:
- Advice on activities with potential for local industry involvement
- Guidance in the form of suitable VIPP clauses for use in documentation
- Nomination of potential metropolitan and regional tenderers
- Introduction to competitive suppliers
- Analysis of bidders VIPP Plans
- Certification of post-tender changes and contract outcomes
- Advice and templates for monitoring VIPP compliance
- Provide assessment of VIPP Plan to agencies
For tenderers and industry ICN provides:
- Explanation of VIPP requirements
- Advice on activities with potential for local industry involvement
- Advice on how to complete VIPP Plans
- Introduction to competitive suppliers
- Certification and sign-off of VIPP Plans, post-tender changes and contract outcomes
- Advice and templates for monitoring VIPP activities
How long does it take for ICN to certify a VIPP Plan?
It depends on the scale and complexity of the project, but it is usually possible for the ICN to certify a VIPP Plan within 3 days of lodgement. Agencies should consult the ICN where there are critical deadlines associated with their tender processes that may necessitate a specific period for the certification of VIPP Plans by the ICN.
Agencies should strongly encourage potential tenderers to seek advice from ICN when they are developing their tender submission. ICN provides advice free of charge on local industry capability.
ICN can also provide companies with advice on how to complete a VIPP Plan. Although only shortlisted tenderers will be required to submit their VIPP Plan for certification it is in the interest of the agency to make sure tenderers are well prepared to submit their VIPP Plan when requested.