Cooperation and coordination across the federal system has been the Government’s greatest challenge over the last two years, for legal teams 2020 and 2021 brought a whole new lens to terms such as: ‘force majeure’, ‘time is of the essence’ and ‘step in rights’, which became hot topics for discussion.
Across private and public sectors lawyers were drawn back into contracts signed months, or years ago, to assure business teams that existing supply chains could continue to deliver and, if not, there were ways to obtain relief from, step into or strictly enforce the obligations of an agreement.
Business teams rolled up their sleeves and started negotiating to assure supply chains at a time of great uncertainty, while lawyers jumped into their law texts to review common law theories of frustration of contract and impossibility, working out how to define new and emerging terms such as ‘essential business’, ‘social distance’ and ‘fully vaccinated’.
In the last 2 years, digital transformation has hit top speed as traditional businesses were forced to urgently adapt to new ways of working. Whilst organisations can have confidence in further digitisation and the positive impact it can have on their businesses, this is tempered by concern about risks including increased cyber threats and increased regulatory compliance challenges.
Supply chains have been around forever, but the global disruption caused by the pandemic has stress-tested supply chains to breaking point. We are now all alert to the many hidden connections in our supply chains that are a legacy of history. These are now under threat by unplanned and rapid increase in demand and, amongst other things, a lack of workforce to deliver. Whilst the pandemic may be a once in a lifetime event, there will be other disruptions in supply chains going forward and we are now more than ever acutely aware of the need to anticipate and plan for disruption.
Supply chains must not only be robust and sustainable, but there is a growing expectation that our supply chains will be ethical. With the introduction of the Modern Slavery Act 2018, Boards are now required to approve reporting entities modern slavery statements and report against them.
Human rights, climate, and environmental impacts are now also at the forefront of many directors minds given the very real threat of future litigation following cases such as McVeigh v REST and O’Donnell v Commonwealth.
So, if we have learned anything from the last two years, it will be what we do in this third year of the Pandemic Trilogy that will set us up for the future, and any more variants that may come.
If we start with anything, it should be with an upstream approach to how goods and/or services are procured.
Strategic sourcing provides a key opportunity to ensure robust and sustainable supply chains are built. Government agencies have key portfolio responsibilities. Whilst political parties may come and go, and charter letters provide agencies a direction to execute against the desires of the Government of the day, forecasting procurements and who is in the market to provide the goods and/or services required, helps map supply. Due diligence can then be a strategic and targeted effort to verify supply chains from the outset.
Robust, strategic and adaptive procurement processes and compliance requirements baked into tenders cannot only help organisations effectively evaluate a supplier’s compliance with necessary laws and policies, but also help effect and verify ethical and sustainable supply chains. Mapping vulnerability points and baking compliance expectations into any procurement process will help mitigate risk.
Significant innovation and new technologies can also be applied to support and even improve supply chain challenges. These include:
Artificial intelligence (AI), machine learning, robotics, and advanced modelling.
Blockchain technology can play an important role in improving delivery efficiencies, security, and transparency.
In addition, given increasing geopolitical issues and threats to our supply chains, blockchain solutions can support and monitor ethical supply, without the need to increase regulation unnecessarily.
The pandemic has highlighted geopolitical struggles facing countries that haven’t presented for many decades. Offshoring risks, data sovereignty imperatives and Government broadening the definition of critical infrastructure need further consideration. Trusted cybersecurity partners that are not influenced by foreign ownership or offshore service models are hard to find. Forensic readiness, data sovereignty and supply chain risk are terms that will be front of mind for years to come. Investing in active and adaptive cyber security defence is key as security cannot be a set-and-forget process. It will become akin to health and safety, and another ‘essential service’.
Whilst the federal Government will continue to consider the economic cost of supply chain issues during the pandemic, we have also experienced the limits of our influence to bargain on the global supply negotiating table. Though no sovereign capability can be considered permanent given the need for a continual technical innovation ecosystem, investing in sovereign industry, and ensuring that all Intellectual Property remains wholly Australian owned and controlled will help long term national security and prosperity interests. Investing in verifying intellectual property ownership in technology and infrastructure can help support ethical and sustainable supply and can mitigate supply chain risks.
We cannot predict with any certainty what 2022 will look like or what issues may come to the forefront as the year unfolds, but we at Synergy Law will continue to watch and reflect on issues and anticipate the consequences as they unfold. In the meantime, the following legal aspects should be front of mind for Government:
1. Procurement to assure ethical and sustainable supply chains
Procurements need to be audited and assured, with those to come strategically considered to ensure agencies can evaluate and secure transparent lines of sight to supply. Whilst the Commonwealth Procurement Framework and suite of contracts provide for minimum standards and compliance requirements, more needs to be ‘baked into’ tenders to provide necessary assurance and help secure evidence for evaluation and ongoing compliance.
2. Coordination and cooperation
Sharing of information will be imperative to effect cooperation and coordination across governments and the agencies that effect Government policy. Whilst technical solutions can assist, Government will need to set the baseline on how information can and will be shared. Changes to the Privacy Act 1988 have been mooted – but building trust with consumers will be of paramount importance. Careful consideration of options for leveraging sovereign identity, potential amendments to the Privacy Act or permissions-based data licensing schemes, is required to affect changes to legislation which give consumers confidence their data will be protected, but also shared when needed for safety and security purposes.
3. Public/Private partnerships
Leveraging partnerships, forming joint ventures or even executing strategic relational contracts between the public and private sectors will be imperative to fill skills shortages and workforce gaps evident across the public sector. If experience across the world has any weight, public and private partnerships are not only effective but efficient and can work to solve critical supply chain issues. Different domestic procurement models are available to mitigate critical vulnerabilities and effect good outcomes.
Whilst this is a snapshot of what we believe will be key legal opportunities for Government in 2022, no doubt time will tell.