1. Contracts and Procurement
Part of today’s discussion will be around the LGA requirements and we will also cover some aspects of procurement regarding best practice, keeping in mind financial sustainability.
Procurement is an area where costs can exceed budget expectations when correct procedures are not followed
Whole of life costs should be part of the planning process to ensure financial sustainability.

2. Contracts
Local government has the power to do anything that is necessary or convenient for performing their responsibilities, including entering into contracts
When entering into a contract the local government must have regard for sound contracting principles

3. Procurement
Local governments are major purchases of goods and services
Simplified framework
Sound Contracting Principles
Long term financial plan
Incorporate an investment policy
Incorporate a procurement policy
Procedural fairness

4. Sound contracting principles
“Value for money; and
Open and effective competition; and
The development of competitive local business and industry; and
Environmental protection; and
Ethical behaviour and fair dealing.”
S 104 Financial Management Systems
To remove any doubt, it is declared that subsection (1)(a) does not require equal consideration to be given to each of the sound contracting principles.
Weighted criteria

5. Value for Money
How is value measured?

6. Cost
Time
Quality
Safety

7. Situation – Temporary accommodation, short asset life
Need – Bookcase
Situation – Temporary accommodation, short asset life
Criteria
Expect
Cost
Low
Quality
Time
High- Deliver now
Temporary – no long term need
Cost – keep expenditure to a minimum. Look for being available as a low margin commodity
Quality – short life requirement, expect mass produced low quality products
Time – the need is now. Seek availability “off the shelf.”

8. Low -Long delivery time
Need – Bookcase
Situation – Permanent accommodation, match existing style, high quality furniture, long life
Criteria
Expect
Cost
High
Quality
Time
Low -Long delivery time
Need – A bookcase with a long life, built to match other high quality furniture
Cost – Would not be expecting a similar low cost to the previous example.
Quality – Inherently high, solid timber, tradesman finishes.
Time – Likely to be an individually fabricated item, hence need to allow for fabrication and delivery time.

9. Further discussion on Value for Money?
Sustainability (Asset life, environmental impacts)
Prudent and efficient expenditure

10. Ethical behaviour and fair dealing
Equal opportunity
Transparency
Commercial-in-confidence
Defendable decision making
Open to challenge
Another of the Sound Contracting Principles

11. Procurement Policy
“A local government must prepare and adopt a policy about procurement
The procurement policy must include details of the principles, including the sound contracting principles, that the local government will apply in the financial year for purchasing goods and services.
A local government must review its procurement policy annually.”

12. Procurement Plan
Council must resolve to adopt a procurement plan (as part of long term investment plan) that outlines:
Proposed activities for the financial year
How procurement principles will be applied
How measured (value for money)
Policy regarding delegations
Significant procurement activities and policy for making a plan
Market and Risk assessment
A market assessment is an assessment of the relative cost and difficulty in securing supply under each type of contract.

13. Asset Disposal Plan
Council must resolve to adopt an asset disposal plan that states:
Proposed disposal for the financial year
Identify significant disposal activities
Strategies/principles
How measured and recorded
Market Assessment
Risk Assessment

14. Estimating and budgeting Procurement
Asset Creation
Planning
Estimating and budgeting
Procurement
Financial Sustainability - questions
Repair/replace?
New/ upgrade?
Fit for purpose?

15. Planning Fail to Plan = Plan to Fail Stakeholder involvement
What is the need for the asset?
How will the need be satisfied?
Does it comply with Council’s strategy and investment policies?
What will be the success factors?
Multi-criteria analysis
Be clear what is needed
Involve all stakeholders who will be impacted
List all the expectations
List the rocks in the road
Identify risks
Allows the projects to be correctly scoped
Should all be included in the tender documents

16. Opportunity to influence project outcomes
Concept is the same for any type of project –
Creation of infrastructure, large or small;
Procurement of new IT system

17. Opportunity to influence project outcomes

18. Opportunity to influence project outcomes

19. Discussion Question- Contingencies - what percentage to allow5%
10%
15%
Other

20. Discussion Question – Estimate contingencies – why are they included?
Not sufficient costing experience with this type of work?
Not sufficient knowledge of the site?
Allowance for scope creep?
Allowance for variations?
Other?
Contingency amounts calculated to cover cost of Risks

21. Direct Costs – People, Plant, Materials
Indirect Costs – Admin, Approvals etc

22. A brown bag is required to be used as an overnight or weekend bag
It will be used by family members. Family members have been consulted.
It needs to be good quality
It needs to be leather
It needs to have shoulder straps
It needs to have large waterproof external pockets each side
Delivery time is flexible - but as soon as possible
The Brown Bag ?
A brown bag is required to be used as an overnight or weekend bag
It will be used by family members. Family members have been consulted.
It needs to be good quality
It needs to be leather
It needs to have shoulder straps
It needs to have large waterproof external pockets each side
Delivery is required now or within two weeks
What is missing in the scope?
Overall dimensions?
Does it need a hard base?
Able to tow along?
Type of seams – glued? stitching?
Fasteners on main bag and external pockets?

23. Project Scope Clear and unambiguous Include: Need for new asset
Fit with Council strategies
Design parameters
Timings
Constraints
Links with other assets and projects
Risks
Multi-criteria for assessment
KPIs

24. Variations Lump Sum contract – no schedule items to calculate cost
Schedule of Rates contract – no schedule items to calculate cost if not included in tendered schedule
Can result in major cost over-run, time delays and legal argument

25. Questions /discussion?