1. Business Process Map Agency B Procurement Process Event
Analysis and Review of Commonwealth Procurement Processes for procurements under $80,000
Client
Department of Finance and Deregulation
Date
Version
30 May 2011
FINAL 1.0
ThinkPlace Team
Raffaella Recupero
Mark Thompson

2. Contents Agency B Proposed Procurement Process About this document
This document contains a business process map for procurements under $80,000, which specifies the requirements set out in Agency B’s Chief Executive Instructions (CEIs), operational guidelines and other internal guidance, as well as the overarching requirements of the Commonwealth Procurement Framework.
ThinkPlace has worked with a small group of people in Agency B to develop this document.
Contents
Intent Statement 3
Agency B CEI snapshot – current state 4
Business process maps 5
Role statements 6
Map Levelling 9
Level 0 map 10
Level 1 map 11
Process analysis 16
Process issues, pressure points and suggestions for improvement 17

3. Agency B Proposed Procurement Process
Intent
A standardised, simple and safe process for all FMA agencies conducting procurements that fall under the $80,000 threshold
CURRENT STATE
FUTURE STATE
SYSTEM IN FOCUS
The FMA Act and Regulations set the framework for the proper management of public money and public property in the custody and control of the Commonwealth.
The Commonwealth Procurement
Guidelines (CPGs) articulate the
Government’s expectations for all
department and agencies conducting
procurement.
Agencies have evolved their procurement policies and practices within the context of the agency’s organisational structure, delegations, approval processes etc.
Agency specific policies and procedures are
contained with large and complex volumes of
CEIs, departmental policy documents and
protocols.
Under the FMA Act, 104 FMA agency CEOs have devolved authority to manage public money within their agency.
APPROACH FOR BRIDGING THE GAP
Where are we now?
Analysis of ‘ AUSTENDER statistics indicate 85,000 contracts (over $10,000) were awarded. The total value of these contracts approx. $35bn.
Of those contracts, about 65,000 contracts falling under the $80,000 threshold were awarded. The total value of these contracts was about $12.6bn.
Over 80% of the total number of contracts correspond to about 4% total value. An APS 5/6 can spend up to 80% their time on low value contracts
Low value contracts translate to a high administrative burden
Agencies have tailored procurement approaches reflect organisational structure, authority and delegations, approval processes, risk appetite, level of IT maturity, and resourcing, reporting processes and systems
Procurement functions differ in agencies – some functions are centralised, some are decentralised
Participating agencyes have undertaken work to review CEIs, processes and protocols
Whole of Government CEIs are under development
Work has also been undertaken to simplify the standard short form contract, reducing the number of pages from 80 to 6
How do we get there?
Analyse and review Commonwealth procurement practices currently employed by selected agencies when conducting procurements under $80,000, identifying issues, pressure points and opportunities for improvement, and on that basis making recommendations for simplifying and streamlining processes.
What do we need to do?
What would success look like?
A better practice model for procurements under the threshold that:
Standardises the process across FMA agencies
Makes it easier for staff to know what to do and how to conduct procurements
Reduces administrative burden
Finance will be able to use the project findings and recommendations as a basis for presenting a better practice model to FMA agencies, where appropriate.
The project will influence agency CEIs and processes
Who do we need to involve?
Finance’s Procurement Policy Branch
Procurement Policy Areas and representatives from line areas
DRIVERS FOR CHANGE
Out of scope
The project will not to assess how well agencies implement the CPGs and relevant FMA legislation when undertaking procurements
The project will not redesign policy
What do we need to consider?
Avoid over-engineering or over prescribing
Aim to set a benchmark
Impact on behavioural change
What is the problem/ opportunity?
Agency procurement processes are complex, confusing, and onerous for staff
Requirements vary from agency to agency – processes are not standardised across government
Suppliers are frustrated
Timing
April
Intent, planning and agency engagement
CPG process modelling
May
Agency CEI process mapping
Case study development by agencies
Case study analysis
June
Synthesis
Design ‘better practice model’
Focussing question
How can we standardise and streamline the process for procurements under the $80,000 threshold, making it less onerous FMA agencies, while also maintaining the integrity of the FMA Act?

4. Agency B Procurement Process Snapshot of agency requirements specified by CEIs
PRINCIPLES/ OUTCOMES
All procurement must represent value for money and the efficient, effective and ethical use of Commonwealth resources
All purchases must be made in accordance with the CPGs and the department’s Procurement Guidelines (including checklists)
All potential suppliers must be treated equitably
Offers of gifts or hospitality in connection with, or in close proximity to, any procurement activity must not be accepted (transparency)
Procurement processes must be accountable, transparent and able to withstand scrutiny
PROCESS RULES – workflow
Tender documentation must be approved by the delegate before the request for tender is released to the market
All purchases must be approved prior to the purchase by an appropriate FMA regulation 9 delegate and, if required, an appropriate FMA regulation 10 delegate
Reg 8 requirements met before contract
Procurement processes and decisions must be documented and records must be retained for 7 years after completion for standard contracts and 12 years after completion for tenant leases and deeds, such as deeds of standing offer
Register and ensure contract on contracts register
Minor purchases (under $20,000)
Existing arrangements (corporate contracts, panels and whole of government arrangements) must be used where appropriate
In the ACT the department’s E-procurement system must be used to purchase stationery, toner and copy paper
Where e-procurement and existing arrangements are not suitable, minor purchases are to be made using corporate credit cards wherever possible.
Medium purchases (from $20,000 to less than $80,000 including GST)
Where existing arrangements are not appropriate, medium purchases are to be made by obtaining and evaluating quotes from the market and selecting a preferred provider. A minimum of three quotes should be obtained wherever possible
TOOLS
Checklists
Procurement Protocols
E-procurement system
Contracts register
Purchase orders
ROLES & RESPONSIBLITIES
Responsibilities are specified for the following roles
Officials
A person who is in or forms a part of this agency. The term is also extended to mean employees, contractors, consultants or other Commonwealth or state or territory government officials who are performing tasks or procedures for or on behalf of Agency B
obtain approval from an FMA regulation 9 delegate provided in writing for medium and major purchases but can be provided verbally for minor purchases (but the approval should be written down as soon as possible after the it was given)
obtain written approval from an FMA regulation 10 delegate (for insufficient existing administered appropriation)
Maintain records
Register all procurements and consultancies contracts valued at $ or more (GST inclusive) on the department’s contracts register and raise a purchase order
Delegates
ensure that the requirements of FMA regulation 8 have been met before they enter any procurement arrangement
not act as delegate for procurement activities which they have managed and conducted themselves
declare any actual or perceived conflicts of interest
only approve the purchase of goods and/or services of a nature and value consistent with their delegation
ensure all procurements and consultancy contracts valued at $ or more (GST inclusive) are accurately registered on the department’s contracts register and that a purchase order has been raised.
PROCESS CONDITIONS/ STANDARDS
All members of tender evaluation panels must have received procurement training
Procurement arrangements should not contain contingent liabilities unless they are considered remote and immaterial.
Legal and probity advice must be obtained for material contracts in accordance with the department’s Procurement Protocols
Declare and manage any actual or perceived conflicts of interest. For actual conflicts of interest this may involve removing oneself from the process
Maintain complete and accurate records of procurement activities on file. Sufficient documentation must be kept on file to provide an understanding of the reasons for the procurement, the process that was followed and all relevant decisions, including approvals and authorisations and the basis of these decisions
Mandatory procurement reporting requirements apply to the department and are outlined in the department’s Procurement Guidelines.

5. Business process maps

6. Agency B Procurement Process Role statements
End User (Business Line)
What are my obligations under the Commonwealth Procurement Framework?
Awareness that Reg 9 and 10 have been adhered to
What is my role? What are my responsibilities?
Ensure that operational requirements are met
Identifying procurement need
Requesting procurement activity
Using the end result of the procurement
What are my concerns?
That the end result meets my needs and works on an operational level
Simple streamlined process that doesn’t cause a high administrative burden
I want to know who to talk to is the result does not work – when and how will it be fixed?
Can I change the result if it does not work?
I only want go through procurement process once, with minimal effort and resources consumed
Procurement Officer
What are my obligations under the Commonwealth Procurement Framework?
Awareness and adherence to process in accordance with CPGs, FMA, and internal CEIs and guidance material
Value for money
Economical
Ethical
Efficient
Accountable
Transparent
What is my role? What are my responsibilities?
Provide advice regarding procurement and reporting
Seek approvals
I support and advice the End User
I go to the PAU for advice and clarification
What are my concerns?
Too much paperwork to read through
Having PAU ringing and confirming my details
Confusion regarding which tender processes I should use
Open
Direct
Select
Alignment of procurement principles to business needs
Meeting timeframes set by end user
Translating business need and requirements
Budget and resources
Lack of clarity of my role and responsibilities
Guidance and advice isn’t always user friendly
The need to provide an audit trail and documentation
Delegate
What are my obligations under the Commonwealth Procurement Framework?
FMA Reg 9 approval to spend money
Understand budget and determine whether funds are available for procurement
Ensure Reg 10 is confirmed if required
Determine whether procurement activities meet best value for money
Confirm all business case and procurement process meets Agency B CEIs and Procurement Guidelines
Ensure risk evaluation meets procurement type
Provide FMA 44 approval to enter into an arrangement
Ensure suitable records and filing is completed
Provide input into the Annual Procurement Plan
What is my role? What are my responsibilities?
As above
What are my concerns?
Have we completed the best value for money procurement method?
Is the process defensible and accountable and will this be reported correctly
Lack of training and understanding of my responsibilities
Has due process been followed?
I rely on the procurement officer to ensure process is defensible
Lack of induction -

7. Agency B Procurement Process Role statements
Procurement Advisory Unit (PAU)
What are my obligations under the Commonwealth Procurement Framework?
Provide independent review for appeals
Ensure contracts >= $10,000 entered into AusTender
Ensure data integrity regarding reporting obligations under CPGs (i.e. APP, Senate Order, Annual Reports)
What is my role? What are my responsibilities?
To provide advice to line areas conducting procurement so that they meet the obligations of the FMA/ CPGs while still meeting their business need
Meeting Departmental reporting requirements – Annual Plan, Senate Orders, annual Procurement Plans
Integrity of data in contracts register
Rely on contracts register for reporting
Provide and maintain procurement tools (e.g. checklists, templates)
What are my concerns?
Not given full information by Line Area which may lead to providing incorrect advice
We do not have visibility/ oversight of what the Line Area are doing. Should PAU be a process checkpoint?
Even if they do seek advice, do they follow it?
Are delegates supportive of following the procurement process? Delegates can influence procurement officers/ end users
Specialist (Legal)
What are my obligations under the Commonwealth Procurement Framework?
None specifically under the FMA (but need to adhere to Legal Services Directions and professional obligations)
Compliance with legal services direction
Legal signoff for contracts
What is my role? What are my responsibilities?
To provide legal. Probity advice, as instructed, in accordance with the law, FMA, CPGs
What are my concerns?
Officers do not follow advice
Officers do not provide all details and therefore compromise advice
If legal advice is not sought/ factored into the procurement process, there is a risk to the reputation of the organisation and possible legal action
Payment Processing
What are my obligations under the Commonwealth Procurement Framework?
Delegate review of FMA delegation
10% sample of payments under $500,000
Ensure purchase order referenced in claim for payment
Links in with contract register (PIN allocation)
What is my role? What are my responsibilities?
Payment of invoices including adherence and payment to Small Business Circular Requirements
Recording/ entering existing/ new supplier information
Adherence to GST legislation
Record/ audit trail
What are my concerns?
Lack of detail on Claim for Payment (CFP) form to meet payment terms
Invoices that do not meet GST requirements
Has appropriate delegate approval been granted (evidenced by delegate signature on CFP)?

8. Agency B Procurement Process Role statements
Supplier
What are my obligations under the Commonwealth Procurement Framework?
None specifically
What is my role? What are my responsibilities?
Provide quotes
Provide good(s)/ service(s), in line with contractual obligations, including ongoing contract management
Issue invoices
Follow up on outstanding payments if required
What are my concerns?
Late payments
Transparency of procurement process
Time taken to complete procurement process
Different procurement requirements between agencies
Competitors having an unfair advantage

9. Agency B Procurement Process Map Levelling
Level 0 – Process phases This map provides an overview of the entire process end to end, including the process triggers, process phases, and main workflows. Level 1 – Process activities These maps drills down into each of the Level 0 process phases, detailing the activities that occur. Level 2 – Procedural tasks, support products and systems Level 2 is not generally documented as a map, but rather references guidelines, operational instructions, instruments and / or business systems such as databases. These things underpin the delivery of a process. Symbols
Decision
Trigger
End
Activity
Ongoing Activity
Workflow
Document
Database/ Storage
Off page connector

10.      Agency B Procurement Process Level 0 – Process Phases
Identify need 
Plan
procurement
Provide input and management approval (as req’d)
Receive good(s)/ service(s) and pay 
Plan
procurement 
Approach
market 
Assess submissions and negotiate contract 
Provide in-principle approval
Provide approval (as req’d)
Provide approval
Provide advice and support
(as req’d)
Raise purchase order and process payment
Provide advice and support
(as req’d)
Respond to RFQ
Negotiate and enter into arrangement
Provide good(s)/ service(s) and receive payment

11. Agency B Procurement Process Level 1 –  Identify need
Use existing arrangement
Yes
Does a suitable arrangement exist?
Identify procurement need
Check existing arrangements ❷ No
Considerations
Procurement has been identified as the method to obtain the good(s)/ service(s)
Requirement
Use existing arrangements if they are suitable

12. Stationary/ office supplies
Agency B Procurement Process Level 1 –  Plan procurement
Note
The business case is scalable. For a simple procurement it could be an , for a more complex procurement it could be a multipage document
Stationary/ office supplies
Use E-Procurement process
Reg 9 approval built-in
CPG
6.8 & 9
< $19,999
Use credit card process
Value &
type of proc’t?
Other ❶
Understand procurement need
Develop business case
$20,000 - $79,999
Checklists
Business Case proforma
Understand procurement need
Provide input into business case (as req’d)
Seek approval to conduct procurement
No,
Refine business case; or
End process
Review business case and proposed procurement method
Check that budget is available
Approve
(in-principle) ?
Yes ❸
Delegation database
Provide advice and support
(as req’d)
Provide advice and support
(as req’d)

13. Agency B Procurement Process Level 1 –  Approach market
No,
Amend specification documents
Manager
Approve procurement approach?
Provide input
Provide input
Seek manager approval
(as req’d)
Yes
Considerations
This approval could be done by either the Business Line Manager or the Delegate. This largely depends on the complexity of the procurement
Prepare specification documents
Identify potential suppliers
Seek Delegate approval
(as req’d)
Issue RFQ
Provide clarification
(as req’d)
Receive quotes ❹
Approve procurement approach?
Considerations
For procurements of $20k - $79,999 a minimum of 3 quotes must be sought.
Below $19,999, there is no requirement for quotes. ❷
Yes
No,
Amend specification documents
Provide advice and support
(as req’d)
Provide advice and support
(as req’d)
Obtain RFQ
Understand specifications
Provide quote

14. Unsuccessful suppliers
Agency B Procurement Process Level 1 –  Assess submissions and negotiate contract
Provide advice
Considerations
The Contract Register is used as the source of information for AusTender reporting ❸
Assess submissions
Select preferred supplier
Recommend supplier to delegate
Notify successful supplier and send draft contract
Negotiate contract
(as req’d)
Finalise contract
Notify unsuccessful suppliers
Register contract on contract register ❺ No
CPG
7.23
Contract Register No
Re-evaluate submissions or refine requirements
Grant Reg 9 approval?
Sign contract?
Yes
Sign contract
Yes
Reg 9
CPG
7.12
FMA s.44
Provide advice and support
(as req’d)
Conduct reporting obligations
CPG
7.24
CPG
6.10
Sign off on process
(as req’d)
Provide advice and support
(as req’d)
Receive notification and draft contract
Negotiate contract
(as req’d)
Finalise contract
Sign contract
Unsuccessful suppliers
Receive notification
Seek feedback if desired ❺
CPG
7.12

15. Agency B Procurement Process Level 1 –  Receive good(s)/ service(s) and pay
* Claim For Payment
Receive good(s)/ service(s)
Receive invoice
Provide CFP* and invoice for signature
QSP
Invoice
Document process and decisions
Create purchase order request
Submit purchase order request ❹
CFP Form
CPG
7.9
Purchase order request
Not standard practice, but ideal to ensure delegate approval can be substantiated, ensuring the procurement process is defensible
Sign CFP
Conduct reporting obligations
CPG
7.24
Process and raise purchase order
Receive CFP and invoice
Match CFP and invoice
Pay invoice
Purchase order
Delegation database
Considerations
Delegate approval evidenced by delegate signature on CFP possible only if provided
Invoice
Provide good(s)/ service(s)
Issue invoice ❹

16. Process analysis

17. Agency B Procurement Process Process issues, pressure points and suggestions for improvement
Current problems with the process
There is a general lack of understanding of FMA Act and CPGs, posing a risk to the department for possible breaches of CPGs and FMA Act
Need for role-specific training for procurement officers and delegates, PAU staff, specialists (e.g. legal), and general admin
Advice from Finance (DoFD) is not always consistent
Procurement staff are not always clear on which process should be used (e.g. open, select, direct, etc.)
AusTender issues
Reporting to AusTender process is not straight forward
Selection processes (e.g. select, direct) are a mandatory field in AusTender, reporting on the selection process is required only by Division 2 of the CPGs (i.e. why should it be a mandatory field for < $80,000)
Data integrity issues
CPG Principles create cumbersome processes for <$80,000
‘Efficient and effective’ may contradict ‘encouraging competition’
The ‘value for money’ principle is not well understood (i.e.. may be interpreted as ‘cost)
PRESSURE POINTS
Elements of the process that affect efficiency
The workflow and documentation is largely manual, with usage of disparate systems and databases (e.g. QSP, contracts register, delegations database) that are not integrated with the workflow
Three different approvals are required
To commence a procurement process
To approve specifications (incl. requirements, value, timing, potential suppliers, etc.)
To approve spending (Reg 9), before a contract is entered
The requirements for Secretary/ Dep. Sec./ CFO approval for consultancies valued at $20,00 or more may create a bottleneck and unnecessary paperwork
The absence of a minimum requirement for documentation can drive risk averse behaviours (i.e. raising unnecessary paperwork that is not commensurate with the value/risk of the procurement)
SUGGESTIONS FOR IMPROVEMENT
Outcomes from the workshop
Automate the process workflow and documentation as much as possible (e.g. end to end and documentation, from the development of a business case through to purchase order and contracts register
The refresh of the Framework (CPGs, Circulars etc.) should be informed by this Review
Guidance should be provided in “plain English” and terms should not subjective or left to interpretation
Limit the requirements for documentation for low value procurements
Provide agencies with one simple form
Streamline reporting to AusTender
Streamlining non-covered contracts was a good initiative but needs more work
Provide role-specific training for procurement officers and delegates, PAU staff, specialists (e.g. legal), and general admin
PAU do not have visibility/ oversight of what the Line Area are doing. Should PAU be a process checkpoint?

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