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

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Presentation on theme: "LEVEL 1 UNIT 3 GREEN SQUARE KINGSTON 2604 P +61 6282 8852 F +61 2 6282 8832 WWW.THINKPLACE.COM.AU AUSTRALIA NEW ZEALAND Agency C case studies of procurements."— Presentation transcript:

1 LEVEL 1 UNIT 3 GREEN SQUARE KINGSTON 2604 P F AUSTRALIA NEW ZEALAND Agency C case studies of procurements under $80,000 ProjectAnalysis and Review of Commonwealth Procurement Processes for procurements under $80,000 ClientDepartment of Finance and Deregulation Date Version 3 June 2011 FINAL V1.0 ThinkPlace Team Raffaella Recupero Mark Thompson

2 PAGE 2 ANALYSIS & REVIEW OF COMMONWEALTH PROCUREMENT PROCESESS UNDER $80,000 – AGENCY C CASE STUDIES About this document This 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. Contents Procurement case studies Procurement narrative - case study 14 Procurement narrative - case study 25 Procurement narrative - case study 3 6 High Level Analysis of Case Studies7 Summary of process issues and insights Good practice, unnecessary and convoluted processes14 Methodology 1.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.

3 LEVEL 1 UNIT 3 GREEN SQUARE KINGSTON 2604 P F AUSTRALIA NEW ZEALAND 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.

4 PAGE 4 ANALYSIS & REVIEW OF COMMONWEALTH PROCUREMENT PROCESESS UNDER $80,000 – AGENCY C CASE STUDIES Case Study 1 Selling agent for a cottage in South Australia. QuestionsComments 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 Committee Tender opening witness from within Property Branch Director, 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.

5 PAGE 5 ANALYSIS & REVIEW OF COMMONWEALTH PROCUREMENT PROCESESS UNDER $80,000 – AGENCY C CASE STUDIES Case Study 2 Consultant services for conduct of pricing review QuestionsComments 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 25 days of consultancy time Was documentation developed (e.g. file notes, risk assessment, statement of work)? If so, what type and why? Procurement Plan incl. risk assessment and outline of requirement Evaluation Plan incl. Reg 9 Request for Quotation s – clarification of procurement process and timing (probity) Evaluation report incl. risk assessment and Reg 9 approval – value for money assessment and summary of process How was the market approached (e.g. direct, select)? Select approach from an existing panel How long did the process take, from beginning to end? 3 weeks for consultation on business requirements 3 weeks from release of RFQ Total 6 weeks Delivery of services – est. 6 weeks – contract delivery has been est. 16 weeks Who was involved in the process (e.g. central procurement area, delegate, line area, etc.)? What was their role? Line areas – confirm business requirements Procurement Advice Team – probity Delegate – approve approach t market and spending proposal Admin – original contract and purchase order data entry FSB – report contract Line 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

6 PAGE 6 ANALYSIS & REVIEW OF COMMONWEALTH PROCUREMENT PROCESESS UNDER $80,000 – AGENCY C CASE STUDIES Case Study 3 Purchase of 6 x GigaBit modules QuestionsComments What was procured?6 x GigaBit modules – interface converters What was the value of the procurement?$18, How was the procurement valued?Cost of equipment Was documentation developed (e.g. file notes, risk assessment, statement of work)? If so, what type and why? Purchase request – summary of the procurement process including rationale, what was required and reason for selecting vendor/ approach Risk assessment How was the market approached (e.g. direct, select)? Direct source + approach to existing panel How long did the process take, from beginning to end? 1 day for approval 5 days – contract/ purchase order 9 days – delivery Total 15 days Who was involved in the process (e.g. central procurement area, delegate, line area, etc.)? What was their role? Line area – business requirement, risk assessment, approach to existing market, evaluation Delegate – approval of purchase request Admin – data entry of contract/ purchase order FSB – report contract Line 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

7 LEVEL 1 UNIT 3 GREEN SQUARE KINGSTON 2604 P F AUSTRALIA NEW ZEALAND High level analysis of case studies In this section, case studies are validated against processes mandated by the agency CEIs and relevant policies

8 PAGE 8 ANALYSIS & REVIEW OF COMMONWEALTH PROCUREMENT PROCESESS UNDER $80,000 – AGENCY C CASE STUDIES Issues Improvements Agency C Procurement Processes Good practice, unnecessary and convoluted processes Initiate procurement process Approach market Approach market  Establish contract Establish contract Receive goods and services Receive goods and services  Pay for goods and services Pay for goods and services  Case Study 1 What 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 2 What 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 3 What actually happened Procurement officer approached market without planning What were the issues No issues What are some improvement ideas? None Actual process

9 PAGE 9 ANALYSIS & REVIEW OF COMMONWEALTH PROCUREMENT PROCESESS UNDER $80,000 – AGENCY C CASE STUDIES Agency C Procurement Processes Good practice, unnecessary and convoluted processes Initiate procurement process Initiate procurement process Approach market Approach market  Establish contract Establish contract Receive goods and services Receive goods and services  Pay for goods and services Pay for goods and services  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

10 PAGE 10 ANALYSIS & REVIEW OF COMMONWEALTH PROCUREMENT PROCESESS UNDER $80,000 – AGENCY C CASE STUDIES Agency C Procurement Processes Good practice, unnecessary and convoluted processes Initiate procurement process Initiate procurement process Approach market Approach market  Establish contract Establish contract Receive goods and services Receive goods and services  Pay for goods and services Pay for goods and services  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) What were the issues None What are some improvement ideas? None Issues Improvements Actual process

11 PAGE 11 ANALYSIS & REVIEW OF COMMONWEALTH PROCUREMENT PROCESESS UNDER $80,000 – AGENCY C CASE STUDIES Agency C Procurement Processes Good practice, unnecessary and convoluted processes Initiate procurement process Initiate procurement process Approach market Approach market  Establish contract Establish contract Receive goods and services Receive goods and services  Pay for goods and services Pay for goods and services  Case Study 1 No change from process map Case Study 2 No change from process map Case Study 3 No change from process map Issues Improvements Actual process

12 PAGE 12 ANALYSIS & REVIEW OF COMMONWEALTH PROCUREMENT PROCESESS UNDER $80,000 – AGENCY C CASE STUDIES Agency C Procurement Processes Good practice, unnecessary and convoluted processes Initiate procurement process Initiate procurement process Approach market Approach market  Establish contract Establish contract Receive goods and services Receive goods and services  Pay for goods and services Pay for goods and services  Case Study 1 What actually happened No AusTender reporting What were the issues Business area not aware of AusTender reporting requirement What are some improvement ideas? None Case Study 3 What actually happened No change from process map What were the issues None What are some improvement ideas? None Case Study 2 What actually happened No change from process map What were the issues None 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

13 LEVEL 1 UNIT 3 GREEN SQUARE KINGSTON 2604 P F AUSTRALIA NEW ZEALAND Summary of process issues and insights In this section, a summary of process issues and improvements are presented

14 PAGE 14 ANALYSIS & REVIEW OF COMMONWEALTH PROCUREMENT PROCESESS UNDER $80,000 – AGENCY C CASE STUDIES Agency C Procurement Process Good practice, unnecessary and convoluted processes 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 PROCESSES Redundant, 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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16 LEVEL 1 UNIT 3 GREEN SQUARE KINGSTON 2604 P F AUSTRALIA NEW ZEALAND


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