Delegations of Authority versus Financial Delegations and their implication for councils when using LGP Contracts.
As we know, the use of contracts established by Local Government Procurement (LGP) is an exemption from Section 55 of the Local Government Act 1993 (NSW). This means that when councils use LGP contracts, the open tendering requirements set out in Section 55 of the Local Government Act 1993 and Part 7 of the Local Government Regulations 2023 (NSW) do not apply.
One of the requirements set out in Part 7 of the Regulations is the need for the elected council to accept or decline tender submissions. As the use of LGP contracts provides councils with an exemption from the open tendering requirements of the Act and Regulations, there is no legislative requirement for the procurement to be reported to the elected council members when it is undertaken through an LGP contract.
Council staff often raise concerns with LGP about the approval process for high value purchases through LGP contracts. We are told that, as an example, “my General Manager only has delegation of $1M so the purchase needs to be reported to the elected Council.”
It is important to understand the two types of delegations that apply to procurement activities:
- Delegation of Authority: is the process of transferring responsibility for a task to another council employee. An example of this is the ability for the elected council to delegate the acceptance of tenders to the General Manager as provided for under Section 377 of the Act. This is the type of delegation that the council officer is referring to in the example above.
- Financial Delegation: is the authority to approve expenditure or enter into financial commitments on behalf of the council. For example, signing contracts for the provision of goods, works, or services and approving requisitions to create purchase orders.
When engaging a supplier under an LGP Contract, there is no need for the formal acceptance or decline of tender submissions by council (or the General Manager if so delegated). This means that in the example above, the limit of delegation of authority of $1M is not relevant. What is relevant is the financial delegation of the General Manager. If the General Manager (or other council officer) has a financial delegation limit over the value of the contract, it is that council officer that can approve the purchase.
Subject to council’s procurement policies, council staff should feel comfortable with the staff member with the appropriate financial delegation approving a purchase under an LGP Contract.
For further information, please contact your Business Development Manager.
Disclaimer: this article is based on the experience of the author and is not intended to be legal advice. If councils have any concerns, councils should seek their own independent legal advice.