Subcontracting

Subcontracting introduces a third party into the relationship between the department and service provider. If not managed correctly, subcontracting may pose significant challenges to your organisation, as well as to the department and our clients.

For example, it may:

• cause confusion about the rights and responsibilities of your organisation versus those of your subcontractors
• make it more difficult for us to monitor the performance and assess the quality of the services contracted by us
• expose us to risk if a subcontractor doesn’t maintain adequate insurance
• inconvenience clients by requiring them to deal with different organisations.

This is why you’re required to apply for our consent to subcontract any part or all of the services, and to notify us in advance of any changes to agreed subcontracting arrangements.

We strongly recommend your organisation:

• discusses your plans to subcontract with your DCJ contract manager before you apply for consent, to make sure you understand the additional responsibilities and obligations of subcontracting
• carries out the necessary due diligence before you make any legally binding commitments
• obtains legal advice before entering into a subcontracting arrangement.

For our purposes, subcontracting is when a service provider uses the department’s funds to pay a third party — whether an organisation or an individual — to fulfil part or all of the services we have contracted the service provider to deliver.

These may include:

1. Where a service provider has a contract with one or more third parties to deliver all or part of the contracted services.
2. A fee-for-service arrangement, where regularly or from time to time a service provider uses purchase orders to buy services from one or more third parties to deliver all or part of the contracted services.

In a subcontracting arrangement, the third party is referred to as a ‘subcontractor’.

Is it always subcontracting when you use a third party?

No.

Here are some typical examples of circumstances that aren’t subcontracting:

• using a labor-hire company to recruit staff to become an employee
• using the department’s funds to cover ancillary costs, such as cleaning and security, when they’re required to support the running of the services you’re contracted to deliver
• hiring temporary staff or contractors for office administration or other duties that aren’t directly related to the services you’re contracted to deliver.

In all other cases, if you pay a third party to fulfil any part of your service delivery obligations under the contract with us, it is subcontracting.

This includes paying a third party to deliver health services that are within the scope of the services for a child or young person’s therapeutic care.

Emergency subcontracting arrangement

If you require an emergency or short-term subcontract arrangement contact your DCJ contract manager.

Independent Assessor

If you are a service provider contracted to undertake assessments for a child or young person in out-of-home-care and proposing to pay a third party to undertake an assessment you need to seek our consent. Follow the steps below.

Your obligations under the contract

To comply with the terms and conditions of your contract with us, you must not subcontract any part or all of the services without our prior written consent. (This is stated in clause 21 of the Funding Deed, and clause 6.3 of the Human Services Agreement – Standard Terms.)

You may apply for our consent to subcontract at any time during the term of the contract.

Subcontracting without our prior written consent may result in termination of your contract with us.

If we grant consent to subcontract, you’ll be subject to additional responsibilities and obligations.

For these reasons, it’s important to obtain independent legal advice, carry out the necessary due diligence, and inform us of your intentions in advance.

Are there any exceptions?

The only exception is when subcontracting has been expressly authorised in your contract because it was agreed at procurement.

For example, when a consortium successfully tenders for services, the subcontracting arrangement is written into the contract. (Note that the contract is only with the lead organisation: the prime contractor. The subcontractors are not parties to the contract.)

Pre-approved subcontract arrangements - if subcontracting arrangements were disclosed by you at tender and approved by DCJ, a list of pre-approved subcontracting arrangements and conditions will be listed in your contract, agreement or deed.  This means that DCJ’s approval has been given for the subcontract arrangement and you are not required to request any further approval.

If the subcontracting arrangement and condition is not listed in the contract you must request and seek approval prior to subcontracting any part of the contracted service.

In addition if there are any changes to the agreed subcontracting arrangements this may also require our consent.

Talk to us in advance

If you propose to subcontract any part or all of the services we’ve contracted you to deliver, it’s to your advantage to discuss it with your DCJ contract manager before you apply for our consent.

This gives you an opportunity to discuss the proposed arrangements and ensure you fully understand the additional responsibilities and obligations of subcontracting.

Carry out your due diligence

Each third party you propose to subcontract must be capable of delivering the agreed services on your behalf, on terms and conditions consistent with those you’ve agreed in the contract with us.

It’s important to understand that if consent is granted, you’ll be responsible for the performance of any third party you subcontract to deliver the services.

For this reason, it’s important you carry out the necessary due diligence before making any legally binding commitments.

This includes:

• ensuring that each third party has the relevant qualifications, capability and capacity to deliver the services
• verifying that each third party has the requisite and up-to-date insurances to deliver the services, as well as the requisite and up-to-date recognition by a regulator (accreditation, certification, registration or licence, as applicable)
• ensuring that all applicable staff of each third party have a current Working with Children Check and National Police Certificate for the purpose of delivering child-related services.

In the case of subcontracting to another organisation in a consortium or fee-for-service arrangement, your due diligence also includes:

• assessing the financial viability of each third party, and its ability to remain financially viable for the term of the contract
• sighting relevant documents such as each third party’s constitution, and policies and procedures that demonstrate the organisation’s practices.

You’re required to declare in your application that you’ve performed due diligence checks.

To obtain the department’s consent to subcontract, you must complete an application for consent to subcontract.

There is a different application form for each type of subcontracting arrangement:

• Use the Application for consent to subcontract to another organisation form if you’re applying to subcontract an organisation in a consortium or fee-for-service arrangement, but not for labour hire.
• Use the Application for consent to subcontract to individuals form if you’re applying to subcontract individuals, either directly or through another organisation, in a labour-hire arrangement.
• Use the Application for consent to subcontract - Independent Assessor form if you’re applying to subcontract a third party to undertake an independent assessment.

We only consider applications that have used the current applicable form.

Your application must satisfy us that:

• each third party has the required capability and capacity, and is suitable to deliver the services
• each third party is willing and able to deliver the services on terms and conditions consistent with those you have agreed in the contract with us
• the proposed subcontracting arrangement won’t compromise your responsibilities and obligations under the contract with us.

You must answer all questions truthfully and sign the declaration at the end of the application form.

You’re not required to attach any supporting documents referred to in the application form’s declaration. We may request copies of the supporting documents while reviewing your application or at any time during the term of the contract if we consent to your application.

Once you’ve completed all required details in the application form and signed the declaration, submit the application by email to your DCJ contract manager.

We strongly recommend you obtain independent legal advice in relation to the application before submitting it to us.

What to do if the circumstances change before you receive a decision from us

If, during your negotiations with the proposed third parties, there are substantial changes to your proposed subcontracting arrangements, you must notify us as soon as the changes occur so that we may advise you of how to proceed.

Depending on the circumstances, we may ask you to submit a revised application for consent to subcontract.

The department has the right to accept or refuse applications to subcontract.

We’ll refuse applications if the subcontracting arrangements pose a risk to either the department or to the continued and successful delivery of services to our clients.

We’ll notify you, in writing, of whether consent is granted or not, usually:

• within 4 weeks, for a consortium
• within 2 weeks, for a fee-for-service arrangement
• within1 week, for a labour-hire arrangement.

These timeframes are estimates and subject to variation, and are dependent on the specific nature of an application. We’ll notify you if we require more time to consider your application.

The application is assessed by your DCJ contract manager, who may consult others within the department as required.

In the case of a consortium or fee-for-service arrangement, we may consent to some third parties but not others.

If a third party is not consented to, you’ll have the opportunity to propose an alternative. In this circumstance, a new application isn’t required; you only need to provide the details for the alternative third party. We’ll then assess whether to consent to you subcontracting the alternative party.

Successful applications

Consent may be subject to certain terms and conditions. These will be explained, in writing, with our decision.

In all cases, consent is effective within the term of the contract with us. That means when the contract expires, consent to subcontract also expires. If you sign a new contract with us, you must lodge a new application for consent to subcontract.

If we consent to your application to subcontract, we may request, and you must make available to us, the contract with the subcontractors and/or purchase order terms and conditions.

Reasons your application may be unsuccessful

If your application for consent to subcontract is unsuccessful, we’ll tell you the reasons.

An application may be unsuccessful if we determine you haven’t adequately prepared for the responsibilities and obligations required to subcontract the services.

In reviewing an application, we consider the following factors:

• the amount of evidence provided to clearly explain each party’s responsibilities and accountabilities
• any substantiated concerns we may have about the performance of a third party
• whether we consider the proposed subcontracting arrangement poses any risk to delivery of the services.

You may appeal our decision in writing, and explain the grounds of your appeal. However, the department reserves the right to make the final decision, and whether to accept or reject your appeal.

If the department consents to your application to subcontract, you’ll have additional responsibilities and obligations.

It’s important you understand that, when you subcontract any part of the services, you become the prime contractor, as holder of the contract with us.

This means:

• you’re ultimately responsible for delivery of the services in accordance with the terms and conditions of your contract with us, regardless of whether some or all service delivery has been subcontracted
• you must make sure the subcontractors are aware of, and deliver the services on terms and conditions consistent with those you have agreed in your contract with us
• you’re responsible for the performance of the subcontractors
• you’re liable for the actions and omissions of the subcontractors, as if the actions or omissions were your own.

Because you’re responsible for the subcontractors, it’s also important you understand that:

• we have no relationship with the subcontractors
• we’re under no obligation to pay any fees to the subcontractors
• we’re not liable for any loss to your organisation resulting from the actions or omissions of any of the subcontractors.

In practice, this means you must manage the relationship with the subcontractors and that you’re responsible for:

• making payments to the subcontractors
• managing any issues, complaints and disputes with the subcontractors
• ensuring the subcontractors comply with all laws, regulations, recognition by regulators (accreditation, certification, registration or licence, as applicable) and polices published by us
• making sure the subcontractors have adequate governance and financial controls, policies and procedures for delivering the services
• verifying the subcontractors’ staff are properly authorised, maintain the relevant qualifications, maintain relevant recognition by regulators — including a current Working with Children Check and National Police Certificate for the purpose of delivering child-related services — and are trained and experienced
• maintaining the highest professional and ethical standards
• minimising risks posed to delivery of the services
• adhering to all other provisions of the declaration you signed as part of your application.

For these reasons, we strongly recommend your organisation obtains independent legal advice before entering into a subcontracting arrangement.

For agreed subcontracting to other organisations (excluding labour hire)

The conditions of consent to subcontract include notifying us immediately, in writing, if:

• you decide not to subcontract any or all of the agreed services to any or all of the agreed organisations
• you want to change and/or terminate the subcontracting arrangement with any or all of the agreed organisations, or
• any of the agreed organisations is involved in a merger, acquisition or amalgamation.

In these circumstances, we’ll advise you of how to proceed, in consideration of the importance of maintaining your capacity and capability to deliver the services. If we consider the changes to the subcontracting arrangement will pose a risk to delivery of the services, we may withdraw our consent to subcontract.

The conditions of consent to subcontract also require you to make a new application for consent to subcontract if you want to either:

• subcontract any services other than the agreed services, or
• subcontract to any organisation other than the agreed organisations.

For agreed subcontracting to individuals (labour hire)

The conditions of consent to subcontract include notifying us immediately, in writing, if you want to change and/or terminate the subcontracting arrangement.

In this circumstance, we’ll advise you of how to proceed, in consideration of the importance of maintaining your capacity and capability to deliver the services.

If we consider the changes to the subcontracting arrangement will pose a risk to the delivery of the services, we may withdraw our consent to subcontract.

The conditions of consent to subcontract also require you to make a new application for consent to subcontract if you want to subcontract any services other than the agreed services.

For further information and free advice about subcontracting:

• speak to your peak organisation
• contact Justice Connect.

Please contact your DCJ contract manager if your organisation:

• is considering subcontracting
• wants clarification about what it is, what it requires, or what your responsibilities are when subcontracting, or
• wants to change agreed subcontracting arrangements.

In addition, we strongly recommend you obtain independent legal advice in this regard.