LEVEL 1 UNIT 3 GREEN SQUARE KINGSTON 2604 P +61 6282 8852 F +61 2 6282 8832 AUSTRALIA NEW ZEALAND Agency C case studies of procurements

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AUSTRALIA NEW ZEALAND

Agency C case studies of procurements under $80,000Project Analysis and Review of Commonwealth

Procurement Processes for procurements under $80,000

Client Department of Finance and Deregulation

DateVersion

3 June 2011 FINAL V1.0

ThinkPlace Team

Raffaella RecuperoMark Thompson

PAGE 2ANALYSIS & REVIEW OF COMMONWEALTH PROCUREMENT PROCESESS UNDER $80,000 – AGENCY C CASE STUDIES

About this documentThis document contains an analysis of three procurement case studies provided by Agency C. Each case study was analysed against a high level process model to understand actual procurement processes employed and to identify areas of good practice, unnecessary and / or duplicated processes, and convoluted processes (inefficient / ineffective).

ThinkPlace has worked with a small group of people in Agency C to develop this document.

ContentsProcurement case studiesProcurement narrative - case study 1 4Procurement narrative - case study 2 5Procurement narrative - case study 3 6

High Level Analysis of Case Studies 7

Summary of process issues and insightsGood practice, unnecessary and convoluted processes 14

Methodology1. Agency C provided three procurement case studies that

describe actual procurement processes

2. ThinkPlace reviewed the case studies validating them against processes mandated by the agency CEIs and relevant policies.

3. ThinkPlace worked with Agency C staff who are directly involved in the case study to identify areas of good practice, unnecessary and/or duplicated processes, or convoluted processes.



Procurement case studies In this section, three procurements under $80,000 that best represent typical procurements, examples of good practice and examples of convoluted processes are explored.

These case studies describe the facts, processes and experiences of the procurement.


Case Study 1Selling agent for a cottage in South Australia.

Questions Comments

What was procured? Selling agent for a cottage in South Australia.

What was the value of the procurement? Approximately $10,000 as the contract is still being performed

How was the procurement valued? Market analysis of previous selling agents % fee and disbursements along with independent valuation of the property .

Was documentation developed (e.g. file notes, risk assessment, statement of work)?If so, what type and why?

I was requested to seek EOIs from market, do a Procurement Plan and Evaluation Plan. I considered this to be over-engineering a simple, low risk/low value procurement. After rationalising processes, I utilised file notes, did a Project Disposal Plan (as I had a number of procurements to coordinate), a thorough RFQ, and thorough Evaluation Report (including self assessment probity review, simple procurement risk analysis). Other documents include advice to Department of SEWPAC on Commonwealth Property Disposal Policy requirements and a full due diligence process on the property

How was the market approached (e.g. direct, select)?

Select procurement from licensed agents on the Real Estate Institute of South Australia register – Phoned 5 reputable agents in the area to determine interest, approached 4 agents electronically with RFQ.

How long did the process take, from beginning to end?

• RFQ sent 16 March 2011 closing 31 March 2011• EC report signed 11 April 2011• Unsuccessful letters sent 18 April 2011• Debrief unsuccessful respondent 27 April 2011

Who was involved in the process (e.g. central procurement area, delegate, line area, etc.)?What was their role?

Conducted within Property Branch. Two Property Officers and an Assistant Director on the Evaluation CommitteeTender opening witness from within Property BranchDirector , Divestment Team was the delegate

What did the approval process involve? • Simple process - delegate approval of the Project Plan, the Evaluation Committee Report • and Reg 9.

Was there a reporting process? No

Questions referred to the procurement area (if any)

Initially, I wanted to reduce the red tape so approached PAT regarding need to do an EOI. Informal discussions with PAT generally on the need for procurement/evaluation plans for simple procurements.


Case Study 2Consultant services for conduct of pricing review

Questions Comments

What was procured? Consultant services for conduct of pricing review

What was the value of the procurement? $40k estimate$16.5k actual

How was the procurement valued? Estimated @ 25 days of consultancy time


Procurement Plan incl. risk assessment and outline of requirementEvaluation Plan incl. Reg 9Request for QuotationEmails – clarification of procurement process and timing (probity)Evaluation report incl. risk assessment and Reg 9 approval – value for money assessment and summary of process


Select approach from an existing panel


3 weeks for consultation on business requirements3 weeks from release of RFQTotal 6 weeksDelivery of services – est. 6 weeks – contract delivery has been est. 16 weeks


Line areas – confirm business requirementsProcurement Advice Team – probity Delegate – approve approach t market and spending proposalAdmin – original contract and purchase order data entryFSB – report contractLine area – oversight of service delivery – contract management

What did the approval process involve? 2 stages – sign off if Business Procurement Plan and Evaluation Report

Was there a reporting process? Yes – automated through data entry (SAP)

Questions referred to the procurement area (if any).

Yes – probity questions


Case Study 3Purchase of 6 x GigaBit modules

Questions Comments

What was procured? 6 x GigaBit modules – interface converters

What was the value of the procurement? $18,249.99

How was the procurement valued? Cost of equipment


• Purchase request – summary of the procurement process including rationale, what was required and reason for selecting vendor/ approach

• Risk assessment


Direct source + approach to existing panel


1 day for approval5 days – contract/ purchase order9 days – deliveryTotal 15 days


Line area – business requirement, risk assessment, approach to existing market, evaluationDelegate – approval of purchase requestAdmin – data entry of contract/ purchase orderFSB – report contractLine are – certify goods received

What did the approval process involve? Purchase request submitted to delegate

Was there a reporting process? Yes

Questions referred to the procurement area (if any).

No



High level analysis of case studiesIn this section, case studies are validated against processes mandated by the agency CEIs and relevant policies


Issues

Improvements

Agency C Procurement Processes

Good practice, unnecessary and convoluted processes

Initiate procurement

process


process

Approachmarket

Approachmarket

Establishcontract

Establishcontract

Receive goods and services


Pay for goods and services


Case Study 1What actually happened•Market analysis was undertaken to value the price of a cottage – from that the percentage of agent’s fees could be calculated•Procurement Officer developed:

• Procurement plan• Project Plan• Evaluation Plan;• EOI for 5 agents and RFQ to 4 agents; • Advice to SEWPAC regarding sale • Due diligence process

•Procurement Officer obtained delegate pre-approval based on Project Plan and Ministerial Brief•Sought advice from PAT regarding procurement activities – was advised not to undertake EOI and to proceed with RFQ

What were the issues•Process over-engineered for a simple low risk/ low value procurement; requirement of management was conflicting with advice given by PAT regarding EOI process•Agency CEIs were confusing to an officer new to procurement resulting in excessive paperwork •Agency C culture is very risk averse which result in management requiring excessive paperwork •Current process is driven by experience of Procurement Officer and risk appetite of management

What are some improvement ideas?•Provide education at all levels•Culture change required to increase level of risk tolerance•Considerations checklist to guide staff new to procurement•A single template for procurement plans•Toolset available in a central place accessible by procurement officers, delegates, etc.

Case Study 2What actually happened•Procurement was valued at approx. 25 days consultancy time.

• Procurement estimated at $40k • Procurement actual was $16.5k

•Business requirements were distributed to Branch staff for consultation, taking 3 weeks•Procurement Officer developed

• Procurement Plan• Evaluation Plan • draft RFQ documentation (using a select

approach from existing panel)

What were the issues•The clearer the business need the better the assessment one can make about whether procurement approach will meet the procurement principles/ outcome

What are some improvement ideas?•Standard templates for Procurement Plan and Evaluation Plan (already in use by business area)•Procurement Plan and Evaluation Plan form the basis for Delegate Reg 9 pre-approval

Case Study 3What actually happened•Procurement officer approached market without planning

What were the issues•No issues

What are some improvement ideas?•None

Actual process





process


process

Approachmarket

Approachmarket

Establishcontract

Establishcontract





Case Study 1

What actually happened•Procurement Officer rang 5 real estates asking for their expression of interest •Procurement Officer released the RFQ to 4 interested parties and received quotes •Procurement officer assessed the quotes and developed

• Evaluation Report incl. probity review and • Risk assessment

•Procurement officer sought sign off of Evaluation Report•Procurement officer then sought Reg 9 sign off

What were the issues•Procurement Officer was advised by a senior manager to undertake an EOI process in addition to RFQ•Multiple approvals were sought (EOI, RFQ, Procurement Plan, Evaluation Report, Reg 9)

What are some improvement ideas?•Consolidate approvals into pre-approval and Reg 9 approval

Case Study 3

What actually happened•A quote was obtained via existing panel•To test value for money principle, another quote was obtained via ringing supplier directly •A purchase request was drafted after the procurement was valued. The request included requirements and reason for selecting vendor.

What were the issues•This approach skips the planning process and checks for available budget

What are some improvement ideas?•This approach works for procurement of goods, but may not work for services.

Case Study 2

What actually happened•RFQ was sent out to 3 parties on panel•Quotes evaluated and documented in Evaluation Report which also included risk assessment and value for money statement•Evaluation Report was the basis for Reg 9 approval•The process took 3 weeks from release of RFQ to Reg 9 approval

What were the issues•None

What are some improvement ideas?•Evaluation Report is the basis for Reg 9 approval.•Development of Evaluation Plan adds value only for procurements that involve more than one quote

Issues

Improvements

Actual process





process


process

Approachmarket

Approachmarket

Establishcontract

Establishcontract





Case Study 1

What actually happened•Procurement Officer advised unsuccessful applicants via letter and debrief if requested 1 month after RFQ was sent out

What were the issues•Paperwork for low value procurements is excessive•Documentary requirements placed on industry discourages competition

What are some improvement ideas?•Streamline paperwork for procurement officers •Streamline documentation requirements for industry

Case Study 2

No change from process map

Case Study 3

What actually happened•Purchase request raised including risk assessment and justification for using vendor•Purchase request approved by Delegate (obtaining Reg 9 approval)



Issues

Improvements

Actual process





process


process

Approachmarket

Approachmarket

Establishcontract

Establishcontract





Case Study 1


Case Study 2


Case Study 3


Issues

Improvements

Actual process





process


process

Approachmarket

Approachmarket

Establishcontract

Establishcontract





Case Study 1

What actually happened•No AusTender reporting

What were the issues•Business area not aware of AusTender reporting requirement


Case Study 3

What actually happenedNo change from process map



Case Study 2

What actually happenedNo change from process map


What are some improvement ideas?•Procurement reviews are not standard practice but would inform better practice if they were made standard

Issues

Improvements

Actual process



Summary of process issues and insights In this section, a summary of process issues and improvements are presented


Agency C Procurement Process


GOOD PRACTICE

Proven techniques, methods and processes

• Consolidate and implement a standard template for planning and reporting (e.g. Procurement Plan, Evaluation Plan and Evaluation Report)

• In circumstances where procurement approach is direct source to one supplier, an Evaluation Plan does not add value. For other circumstances, an Evaluation Plan is considered good practice.

• Approach the Delegate for pre-approval with a Procurement Plan including a plan for how to evaluate the procurement.

• Approach the Delegate for Reg 9 approval with an evaluation report.

• Periodic reviews of a sample of procurements to determine whether the procurement outcome met the business need, also informing better practice

UNNECESSARY OR CONVOLUTED PROCESSESRedundant, inefficient, ineffective processes

•The lack of a minimum requirement and standard documentation means that procurement officer is unsure what is required

•Multiple approvals are sought throughout the process, generally the result of interpretation of guidance materials or inexperience on behalf of the Procurement Officer

•Advice given by PAT is not always consistent with line manager advice, resulting in confusion, excessive paperwork and in turn driving risk-averse behaviour

•Lack of training at all levels to show staff how to undertake a procurement

•The focus is on getting the procurement through and approved – rather than the outcome and achievement of procurement principles.


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LEVEL 1 UNIT 3 GREEN SQUARE KINGSTON 2604 P +61 6282 8852 F +61 2 6282 8832 AUSTRALIA NEW ZEALAND Agency C case studies of procurements