Frequently asked questions

1. What is the Victorian Industry Participation Policy (VIPP)?

The Victorian Industry Participation Policy (VIPP) is an industry development procurement policy established under the Victorian Industry Participation Policy Act 2003. The policy is designedto ensure local small and medium enterprises (SMEs) are given full and fair opportunity to compete for Victorian government contracts, while still ensuring value for money, competitiveness and transparency. By leveraging government procurement, the VIPP generates local jobs and boosts Victoria's economic activity.

All Victorian government departments and agencies must apply the VIPP to procurement activities that meet the VIPP monetary thresholds. Projects are classified as either VIPP Standard or VIPP Strategic Projects depending on the project value.

2. VIPP standard applied to projects and grants worth

  • $3 million and above in metropolitan Melbourne or state-wide
  • $1 million and above in regional Victoria

For VIPP Standard projects, tender documents should specify that shortlisted bidders are required to maximise local content and submit a VIPP Plan. A VIPP Plan outlines the levels of local content, local employment and skills and technology transfer that would arise if their bid were successful. VIPP Plans require acknowledgement and a risk assessment by the Industry Capability Network Victoria Ltd. (ICN) prior to submission.

Victorian government procurement activities valued at $50 million and above (excluding maintenance and operational costs) are automatically classified as VIPP Strategic Projects.

The Victorian Government sets a mandated minimum local content requirement for VIPP Strategic Projects which is included in tender documents. The minimum local content requirement is determined on a case-by-case basis via a contestability assessment conducted by ICN. Shortlisted bidders must develop and submit a Local Industry Development Plan (LIDP) as part of the tender process. The LIDP is a more detailed VIPP Plan and outlines the bidder's commitment to address the minimum local content requirement and other VIPP tender conditions and how these commitments will be achieved.

There may be exceptional circumstances where the agency can request that a project 'opt-out' of VIPP Strategic Project status. This applies where the project contains nil or limited contestability or for urgent works responding to a natural disaster. This process requires government approval.

3. What is meant by local content?

Under VIPP, the term 'local content' covers all suppliers producing (Australian or New Zealand (ANZ)) goods or services or when they have added value to imported items.

The 'local content' (ANZ value added activity) of a good or service is determined on a cost basis and is the part of a product or service left once the cost of the international component has been subtracted. It can be expressed by the following equation:

Local content = total cost of the good or service less international content

The content of a good or service may include but not be limited to fees, tax, margins, profits, tariffs, insurances, freight, transport, engineering, planning, testing and analysis certification, commissioning, manufacturing or provision of service.

Australia and New Zealand are treated as a single market for government procurement under the Australia and New Zealand Government Procurement Agreement. All other jurisdictions are considered international. Items imported into New Zealand as part of New Zealand-sourced goods and services are considered to be international content.

4. What does contestable mean?

Goods and services in a procurement process are considered to be contestable when there are competitive international suppliers and local suppliers. Competitive means the suppliers are able to offer comparable goods or services that meet the specifications provided in the tender documentation. Contestable items can be goods or services at any stage of a procurement activity, including maintenance.

5. What if the procurement activity meets the VIPP monetary threshold but does not contain contestable items?

If a project meets the VIPP monetary threshold but is determined to have limited or no contestable goods or services, a VIPP Plan or LIDP will not be required. However, the tender documents should still highlight the principles of VIPP and shortlisted bidders must still report on local content in the project by submitting the VIPP Monitoring Table (Appendix B of the Agency Guidelines). The Monitoring Table allows all bidders to document the expected level of local content, whether a VIPP Plan/LIDP is required or not, even when the local content is zero.

6. What is the Industry Capability Network Victoria Ltd. (ICN) and its role in VIPP?

ICN is a not-for-profit organisation funded by the Victorian Government whose primary aim is to maximise opportunities for Victorian industry.

It plays a key role in liaising with government agencies and bidders in VIPP applicable projects and procurements. Its responsibilities include: managing the VIPP Management Centre portal where projects are registered, identifying local products and services that meet the contract requirements, acknowledging and evaluating bidders' local content commitments and publishing a forward plan of larger procurement projects to ensure local suppliers have an opportunity to register interest in upcoming government projects.

7. What VIPP information do I include in tender documents for VIPP applicable projects?

The Victorian Government Solicitor's Office has prepared the VIPP Model Clauses document which provides guidance to including VIPP requirements in tender and contract documents. The model contract clauses are available on the VIPP website guidelines and templates page.

8. How do I apply the new 10 per cent weighting for evaluating local content in VIPP projects?

The minimum 10 per cent formal weighting system for local content in the evaluation (VIPP Plans and VIPP Local Industry Development Plans) will come into effect from 1 September 2016 and will apply to all government tender documents for VIPP applicable projects released on and after this date.

The weighting forms one of a number of evaluation criteria procuring agencies will use when assessing bids.

Value for money remains the primary criterion in selecting the preferred supplier. The Victorian Government Purchasing Board (VGPB) describes value for money as:

A balanced judgment of a range of financial and non-financial factors, taking into account the mix of quality, cost and resources, fitness for purpose, total cost of ownership, and risk.

For further guidance on applying the 10 per cent local content weighting including example methodologies see Appendix D of the VIPP Agency Guidelines.

9. What are the VIPP reporting requirements?

Agencies should ensure that the successful bidder's contract includes a requirement to report on the VIPP obligations as outlined in the VIPP Plan or LIDP. Project should be monitored during the project contract and reporting should occur at the practical completion of the project, when works have finished. Contractors are required to complete a VIPP Monitoring Table (Appendix A in the Agency Guidelines) and accompanying Statutory Declaration (Appendix B in the Agency Guidelines).

Agencies must report to the Minister responsible for VIPP to inform the preparation of the VIPP Annual Report, which must be tabled in Parliament by 30 November each year, in accordance with the Victorian Industry Participation Policy Act 2003. Agencies must also report on VIPP through their normal annual financial reporting arrangements. 

10. What compliance measures are in place to enforce VIPP?

The commitments detail in the VIPP plan or LIDP become a condition of the contract. An agency may determine whether or not consequences will apply if successful contractors do not deliver the local content outcomes committed to in their VIPP plan or LIDP. Agencies may choose to build into their contracts financial disincentives that apply if VIPP obligations are not met.

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.

A random audit program will be undertaken annually from 1 September 2016 to investigate and report on contractors' compliance with VIPP against their contracted VIPP obligations.

Agencies can be reported in the VIPP Annual Report for serious contraventions in complying with VIPP. As such, it is recommended that agencies take reasonable steps to monitor the implementation of suppliers' VIPP Plans and LIDPs.

11. Steps for agencies applying VIPP

Step Key actions
Step 1 – Project planning Agency secures an approved project budget
If a project is valued at $3 million and above in metropolitan Melbourne or statewide and $1 million and above in regional areas, standard VIPP applies. Projects valued at $50 million and above are deemed to be VIPP Strategic Projects. If an expression of interest is issued, agencies should specify the project status. Agencies refer VIPP Standard and VIPP strategic projects to ICN for a contestability assessment.
Step 2 – Local content analysis ICN examines projects for contestable items
If contestable items are identified, a VIPP Plan will be required for VIPP Standard Projects and a Local Industry Development Plan (LIDP) will be required for strategic projects.
Step 3 – Tender proposals Agencies prepare tender documents including details of VIPP requirements
Agencies to include VIPP requirements in all tender documents. Agencies short-list bidders. Bidders complete and submit either a VIPP Plan or a LIDP to ICN, which issues an acknowledgement letter. The project's evaluation panel considers the VIPP Plan or LIDP and ICN's risk assessment (evaluation report) and applies the 10 per cent local content weighting to the evaluation criteria in assessing the bid.
Step 4 – Contract awarding and project delivery Agencies award the project contract, incorporating all VIPP requirements
Agencies monitor and verify VIPP compliance on project completion. Report on VIPP activities for the agency's annual report and the VIPP annual report.

12. More information about VIPP and contacts

VIPP guidelines and templates

For detailed information about your agency's requirements under VIPP, refer to the agency VIPP guidelines.

Departmental or agency contact

Each agency has a nominated VIPP administrator (normally located in an agency procurement team) who can provide advice on applying VIPP, act as a liaison for the ICN and coordinates the agency's monitoring and reporting requirements.

VIPP administration team (DEDJTR)

For any administration enquiries email vipp@ecodev.vic.gov.au or call 13 22 15.

Industry Capability Network Victoria Ltd. (ICN)

Contact ICN by email vipp@icnvic.org.au, or by calling (03) 9864 6700 or visiting the ICN website.

Page last updated: 6 January 2017