Review of procurement processes
for procurements under $80,000
For
Department of Finance and Deregulation (Finance)
Contact
Rosemary Deininger, Assistant Secretary Procurement
Policy Branch
Project
Review and Analysis of Commonwealth Procurement
under $80,000
ThinkPlace
Team
Raffaella Recupero, Linda Dewey, Behzad Emami,
Mark Thompson
FROM THINKPLACE PTY LTD ACN 116 993 170
TRADING AS THINKPLACE UNIT TRUST ABN 34 280 130 162
LEVEL 1 UNIT 3 GREEN SQUARE KINGSTON 2604 P +61 2 6282 8852 F +61 2 6282 8832
WWW.THINKPLACE.COM.AU
Contents
Review of procurement processes for procurements under $80,000 ............................. 1
Contents ....................................................................................................................... 2
Executive Summary ...................................................................................................... 4
Section 1 ....................................................................................................................... 6
Purpose of the review ................................................................................................ 7
Project approach ....................................................................................................... 8
Phase 1: Establishing project intent ...................................................................... 8
Phase 2: Research policy and legislative framework and map the overarching
FMA Act procurement process ............................................................................... 8
Phase 3: Business process mapping – agency specific ........................................ 9
Phase 4: Procurement case studies – agency specific .......................................... 9
Phase 5: Identifying good practice ........................................................................ 9
Section 2 ..................................................................................................................... 11
The Conceptual Business Process .......................................................................... 12
Procurement Framework – High Level View for FMA Act requirements ................... 13
Interpreting the CPG Principles ............................................................................ 15
Observations of Agency Business Processes as per CEIs ...................................... 17
Process roles ....................................................................................................... 17
Approvals ............................................................................................................. 19
Value thresholds .................................................................................................. 20
Process mapping insights ........................................................................................ 20
Observations of actual agency case studies ............................................................ 21
Section 3 ..................................................................................................................... 22
Current State Assessment Key Insights................................................................... 23
Practical Implementation of the CPGs.................................................................. 23
Scale of Procurement Processes ......................................................................... 23
Procurement Thresholds ...................................................................................... 23
Over-engineered processes ................................................................................. 23
Agency documentation......................................................................................... 23
Individual Expertise .............................................................................................. 24
Delegate Involvement and Experience ................................................................. 24
Procurement workflows ........................................................................................ 24
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General observations ........................................................................................... 24
Section 4 ..................................................................................................................... 25
Good Practice Model ............................................................................................... 26
The Shift Required to Streamline Processes ........................................................... 26
Determining the Risk Profile of a Procurement ........................................................ 28
Section 5 ..................................................................................................................... 32
Recommendation 1 – Take risk based approach to procurement activities under
$80,000 to streamline processes by implementing the Good Practice Model ....... 33
Recommendation 2 – Improve interpretation of CPGs and agency policies ......... 33
Recommendation 3 – Simplify and standardise documentation toolset ................ 33
Recommendation 4 – Clarify approval requirements ............................................ 33
Recommendation 5 – Enhance people capability ................................................. 34
Recommendation 6 – Automate workflow ............................................................ 34
Next steps ............................................................................................................... 35
Acknowledgements ..................................................................................................... 36
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Executive Summary
The aim of this project has been to review the requirements of the procurement policy
framework, specific policies and practices of three agencies participating in the Review,
and to design a Good Practice Model for procurements of less than $80,000 which
presents a framework for streamlining and simplifying procurement processes. The
model seeks to address inefficiencies in procurement practices, while maximising the
likelihood of agencies achieving the principles set out in the CPGs. The intent is to
conduct high volume procurements at the lowest possible cost per ‘transaction’,
consistent with the procurement risk profile, resulting in simple and sensible processes
for people to follow and savings in overall costs of administration.
The project approach involved five broad phases. The initial phase established the
project intent. The project team then researched the policy and legislative framework to
map the requirements set out in the FMA Act and CPGs. The project team worked with
three FMA Act agencies to map their current process for procurements of under
$80,000 as per the CEIs and operational policies and to review their nominated case
studies. The teams reflected on practical issues experienced by the agencies and
explored elements of their processes that are convoluted and inefficient. The final
phase of the project involved designing the Good Practice Model for procurements of
less than $80,000 with the Department of Finance and Deregulation (Finance).
The following insights are key to all agencies:

While the intent of the CPGs it to provide a principles-based approach to
procurement, participating agencies expressed concerns about the
subjectiveness of terms and practical implementation of the CPGs;

FMA Act agencies do not scale the procurement effort to the impact, complexity
and cost of the procurement (i.e. risk profile) and therefore time, resources,
documentation and approvals can be very high for what is being procured;

FMA Act agencies have introduced thresholds to scale their processes, but
these are based solely on the cost of what is being procured; the thresholds
also differ across agencies;

There are instances of low value and low risk procurements that involve
excessive documentation, market research and approval processes;

Agency CEIs and operational policies are lengthy, convoluted documents that
are not user friendly;

The level of expertise of people involved in procurement is a key factor of how
well procurement processes are executed and whether outcomes are achieved
in an efficient and effective way;

Delegates typically have limited involvement / visibility of the procurement
process yet are responsible for approvals; and

Procurement workflows are largely manual.
The Good Practice Model provides a framework for streamlining and simplifying the
process for procurements under $80,000. The model recommends a risk-based
approach to procurement that means processes and standards are scalable and the
effort in the procurement processes is proportionate to the scale and procurement risk.
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The risk profile is determined by asking a number of focusing questions about impact,
overall cost and complexity. The risk profile then determines the procurement pathway.
The following recommendations are made within the report:
1. Take risk based approach to procurement, by implementing the Good Practice
Model, to streamline agency processes
2. Improve the interpretation of CPGs and agency policies, addressing subjective
terms and investigating a whole of government CEI
3. Simplify and standardise the documentation toolset, setting a minimum standard
and that supports the procurement process be developed and provided to FMA
Act agencies.
4. Clarify and reinforce approval requirements
5. Enhance people capability to raise general awareness and address education
needs for the inexperienced procurers in particular
6. Investigate automating workflows at a whole of government level to improve
efficiency, record keeping and auditability.
The following steps are recommended to introduce the Good Practice Model and other
recommendations to FMA Act agencies.

Socialise the Good Practice Model with FMA agencies more broadly – this
needs to involve the most senior levels of agencies, central procurement areas,
and general procurement officers;

Design a suite of supporting templates (i.e. procurement plan, evaluation plan
etc.) and other relevant support material for procurement officers. The
supporting templates should be designed with procurement officers and should
be tested for usability with both specialised and general procurement officers,
and when fully completed, implemented with FMA Act agencies;

Present the Good Practice Model and the suite of supporting templates,
simplified contracts and CPG principles definitions to the Senior Procurement
Officers Reference Group and seek endorsement and commitment to implement
within their agencies;

Work with central procurement areas in agencies to educate in how to apply
Good Practice Model and to work through the implications for agency specific
CEIs and operational policies to ensure agency process are aligned with the
Good Practice Model;

Provide a channel for agencies to share experiences and provide feedback on
how the Good Practice Model operates in practice;

In consultation with FMA Act agencies, prioritise the recommendations outlined
in Section 5 and plan implementation across agencies; and

Review implementation of the Good Practice Model within 12 months to ensure
agencies processes are aligned and as streamlined as possible and that
supporting templates remain useful and useable.
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Section 1
Background and Intent
of the Review
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The FMA Act sets out the financial management responsibilities of heads of agencies
that are financially part of the Commonwealth. The Commonwealth Authorities and
Companies Act 1997 (CAC Act) sets out the requirements for entities that are legally
and financially separate from the Commonwealth.
The FMA Act provides a framework for the proper management of public money and
public property by Chief Executives and officials of FMA Act agencies. Within the FMA
Act framework agencies undertake procurement activities. The framework aims to
ensure that agencies subject to the FMA Act achieve ethical, efficient, economical and
effective outcomes. When undertaking procurement FMA Act agencies are required to
follow the principles and requirements set out in the CPGs.
The CPGs are issued by the Minister for Finance and Deregulation to establish the
procurement policy framework, and articulate the expectations of FMA Act agency
officials (or their agents) when performing duties related to procurement. The CPGs set
out the broad principles under which procurement is to be conducted.
However, responsibility for conducting procurement activities is devolved to enable
each agency to decide how it will conduct its procurement within the framework
provided by the FMA Act and the CPGs. The CEIs are the mechanism for specifying
the procurement processes that will be followed in a Commonwealth agency. Agency
specific policies, processes and procedures are tailored to reflect the uniqueness of the
agency in terms of their organisational structure, delegations, approval processes, risk
appetite, level of IT maturity, resourcing, and reporting processes.
Purpose of the review
The purpose of the project is to review and analyse the procurement rule set expressed
in the FMA Act, the CPGs, and agency CEIs to develop a high level understanding of
the theoretical procurement process used by FMA Act agencies for procurements of
less than $80,000. The review analysed the actual processes used by FMA Act
agencies in procurement to identify ways of streamlining the process to make it less
onerous for FMA Act agencies while maintaining the integrity of the FMA Act.
The drivers for the project include:

Analysis of the AusTender data for 2008-09 indicates that 85,000 contracts with
a value greater than $10,000 were awarded (contracts of less than $10,000 do
not need to be reported to AusTender). Of these contracts, about 65,000 fall
under the $80,000 threshold – approximately 80 per cent of the contracts
awarded corresponds to about 4 per cent of the value of contracts awarded;

Agency procurement processes are complex, confusing and onerous for staff
and when coupled with the volume of activity suggest that considerable effort is
invested for very little value for the Commonwealth;

Requirements vary from agency to agency and are not standardised across
FMA Act agencies;

Suppliers are frustrated with the time and effort that can be required to finalise
low value procurement processes; and

An APS 5/6 can spend up to 80 per cent of their time undertaking procurement
processes for low value contracts.
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In summary, low value contracts are translating to a very high administrative burden.
Project approach
The approach to this project involved five broad phases:
1. Establishing a shared understanding of the project with Finance and key
stakeholders;
2. Researching various materials which set the policy and legislative framework for
procurements of less than $80,000 and developing an overarching map of the
standard FMA Act procurement processes – this included the FMA Act and
Regulations, CPGs, CEIs, and agency guidelines;
3. Working with three FMA Act agencies to map their business processes for
procurement of less than $80,000. The maps were derived from design
conversations with agency personnel and by using the agency CEIs, policy and
practice statements, procedures, and other internal guidance material.
4. Working with the same agencies to analyse the actual procurement processes.
Three case studies that reflect actual and recent procurement activities were
formulated by each agency. The case studies ranged from good practice to
problematic processes. The case studies were analysed in a collaborative
environment to identify and explore strengths, weaknesses and opportunities for
improving efficiency and effectiveness; and
5. Co-designing with participating agencies a good practice model for
procurements of less than $80,000 that meets the FMA Act and CPG
requirements, that is simple, streamlined and safe, and that can be adopted by
FMA Act agencies.
Phase 1: Establishing project intent
The intent of the project agreed by Finance is “a streamlined, simple and safe process
for all FMA agencies conducting procurements that fall under the $80,000 threshold”.
The detailed ThinkPlace Intent statement is in the Appendix Section 2, page 4.
Phase 2: Research policy and legislative framework and map the overarching FMA Act
procurement process
A core component of the project was to develop a clear understanding of existing
requirements set by the FMA Act and the CPGs.
ThinkPlace researched the FMA Act and CPGs to understand the procurement rule set
and design an overarching business process model. The overarching business
process model was developed and agreed with the Finance project team. Insights
regarding the procurement rule set and overarching business process model are
contained in Appendix Section 2.
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Phase 3: Business process mapping – agency specific
ThinkPlace met with key representatives from the nominated agencies to develop a
current state procurement business process map for each agency. The process maps
were developed with a core team of people from each agency and reflected agency
requirements as per their existing CEIs and operational guidelines.
The business process maps were developed at three levels:

Level 0 describes the process end-to-end at a high level, chunking the process
into key phases and describing the purposes of these phases;

Level 1 drills into the high level phases in more detail, setting out workflows,
activities and tasks and process connections; and

Level 2 is not mapped in detail, but rather references relevant prescribed rules
in legislation or corporate policies and procedures, specific considerations and
support tools (e.g. information systems, and administrative tools such as
templates guidelines, forms etc.).
At each process mapping workshop, ThinkPlace elicited opinions and ideas from the
agencies for improving the procurement policy framework and how agencies can
implement the requirements at a practical level. After the process mapping workshops,
the documented business process maps were returned to the relevant agency and
distributed to the participants to review and validate to ensure the documentation
accurately reflected the process requirements and current practice. Feedback was
incorporated into the maps and final endorsement was given by each agency.
Agency CEI requirements and process maps are contained in Appendix Section 3.
Phase 4: Procurement case studies – agency specific
ThinkPlace worked with each agency to analyse case studies that represented actual
procurements. This allowed a deeper exploration of the actual procurement experience
for each agency, and for different parts of the same agency. It provided participants the
opportunity to identify and analyse major problems that exist, inefficiencies in the
current process, and also to identify good practice. The real-life case studies provided
an opportunity to reflect upon and understand the practical issues experienced by the
agencies in conducting procurements. They also provided the opportunity to explore
whether the problems occur due to complexity, ambiguity and inefficiencies in the
CPGs, or whether they were due to agency specific practices.
Three case studies per agency were explored in a workshop environment and the
discussions from each workshop were documented to highlight good practice and
process inefficiencies. The documentation was validated with each agency.
Agency procurement case studies are outlined in Appendix Section 4.
Phase 5: Identifying good practice
Based on the outcomes from Phases 4 and 5, ThinkPlace developed a prototype good
procurement practice model. The model was validated with Finance and includes:

Identification of the major problems that exist in agency procurement processes;
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
Understanding the reasons for these problems – the FMA Act, the CPGs, or the
agency CEIs and procedures;

Identifying the alignment of agency procurement processes with the
procurement policy framework (FMA Act and CPGs);

Identifying the shifts required to streamline procurement processes, while
ensuring the policy and legislative intent are met; and

Designing procurement pathways for procurement officers undertaking
procurements of different risk profiles, ensuring the process is simple,
streamlined, and workable in practice by relevant agencies.
The Good Practice Model is contained in Appendix Section 1.
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Section 2
Current State
Assessment
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The Conceptual Business Process
The high level process for procurements under $80,000 was derived from the current
requirements set by the FMA Act and CPGs. The process starts with an identified
procurement need and ends with the acceptance of the goods / services. The process
is triggered by a business need or external drivers.
Further detail is provided in Appendix Section 2.
Figure 1: High Level Conceptual Process
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Procurement Framework – High Level View for FMA Act
requirements
The procurement policy framework for FMA Act agencies comprises several legislative
and policy elements, including the FMA Act, the CPGs, policy guidance material, and
other legislation which interacts with the procurement policy framework. The CPGs are
legislative instruments with which agencies must comply. The intent of s. 44 of the
FMA Act is that Chief Executives promote the proper use of Commonwealth resources.
‘Proper use’ is defined as efficient, effective, economical and ethical use that is not
inconsistent with the policies of the Commonwealth. Figure 2 (below) illustrates the
high level view of the FMA Act requirements.
Figure 2: Procurement Framework – high level view of the legislative and policy framework
The operative provisions of the FMA Act and Regulations that are relevant for
procurement are detailed in Figure 3 (over page). The outcome that Parliament
expects is that Chief Executives promote the proper use of Commonwealth resources.
The fundamental procurement rules are expressed in Regulations 6 – 10 and 12,
covering commitments to spend and approvals for spending public money, and how
and when these approvals are to be granted.
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Figure 3: Operative Provisions of the FMA Act and Regulations
Procurement Principles
The procurement principles are outlined in Division 1 of the CPGs. The CPGs prescribe
a number of business rules (denoted by a “must” and “should” or “need”) that govern
the way agencies conduct procurements. There are 21 “musts” which are obligations
with which agencies must comply. There are 20 “shoulds” which are matters of sound
practice. There are 10 “needs” which are standards that agencies ought to meet.
As shown in Figure 4 (over page), the design of the system is geared towards
Accountability and Transparency, given there are more rules for this principle. This can
also be an indication of what is driving agency behaviour in procurement.
The requirements, rules and standards set out by the FMA Act and the CPGs configure
the way the “procurement system” operates in practice and drive the performance of
the system. In the absence of legislative change, agencies need to find ways to ensure
their practices meet the requirements of a regulated system.
Further detail is provided in Appendix Section 2.
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4.3
5.7
5.8
5.3
5.4
6.13
6.14
6.9
6.10
6.19
6.16
6.15
6.21
6.21
6.20
7.17
7.12
7.15
7.9
7.9
Note
•
Clause 4.1 is treated as a ‘must’.
7.18
7.16
7.10
7.2
7.21
7.20
7.19
Accountability and Transparency
6.12
6.8
7.23
7.22
7.21
6.22
Efficient, effective, ethical use of resources
5.5
5.2
Encouraging competition
4.1
Value for money
7.26
7.24
7.23
Figure 4 – Procurement Rules contained in the CPGs
7.30
7.29
7.28
7.33
7.32
7.31
7.34
7.34
7.34
7.34
7.34
7.34
42%
21
15
3
2
1
must
39%
20
10
7
3
should
10
0
19%
5
3
1
1
need
51
100%
Interpreting the CPG Principles
The aim of the CPGs is to provide a principles based approach to procurement.
However, participating agencies indicated that the principle are subjective and required
clearer definitions, an indication of how to demonstrate adherence to the principle and
the respective requirements for documentation. The following table addresses the
issues.
Figure 5: A simple interpretation of the Principles
Principle
Definition
How to demonstrate
Minimum Documentation
requirements
Value for Money
The cost of procurement,
plus the cost of the
goods/ services, over the
life cycle of the goods
The process equates to the risk
of the procurement.



Efficient, effective
and ethical use of
resources
Fitness for purpose
Performance history of the
prospective suppliers
Risk of the proposals
Direct and indirect
financial benefits and
costs over the lifecycle of
the goods
Evaluation of contract
options
Effective processes that
give all suppliers the
same chance to compete
for business
All potential suppliers should be
given the same opportunities to
do business with government.
Appropriately using
agency resources to
achieve agency
outcomes.
Agency processes ensure
resources (including people and
their time) are not wasted on
unnecessary activities, and that
activities are not repeated.
Simple risk identification and
management is the key to
achieving this.
Ensuring procurement
makes maximum
contribution to the
organisation.
Identifying and avoiding
conflicts of interest and
improper use of position.

The evaluation can consider:


Encouraging
competition
The documentation specifies:



What is required (a clear
statement of work)
Why it is required (business
case)
Who and how the good/
services can be provided
(approach to market), and
How the procurement will
be evaluated.
An official email can provide
documentation of the
procurement reasons, process
and all relevant decisions
(including Reg 9 pre-approval,
Reg 9 approval and
authorisations).
Procurement methods should
not unfairly discriminate against
small and medium enterprises.
Risk may be to the project, the
process, or the contract. Low
risk does not need a
complicated process.
A simple risk assessment can be
undertaken and included in the
documentation supporting the
process.
An official email can provide
documentation of the
procurement reasons, process
and all relevant decisions
(including Reg 9 pre-approval,
Reg 9 approval and
authorisations).
The agency should only accept
the risk on contingent liabilities
where the benefits outweigh the
costs.
When undertaking procurement
activities:




The need is correctly
identified
The functional
specifications are written
to match this need,
Responses are
appropriately evaluated,
Contracts effectively
negotiated and managed.
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An open and transparent
process enables officials and
potential suppliers to deal with
each other with mutual trust
and respect.
Accountability and
transparency
Implementation of
procedures to ensure
any procurement
process is open and that
decisions are
transparent and justified.
A well planned, conducted and
documented process that
meets the principles will
withstand scrutiny.
The level of documentation will
match the level of risk. A low
risk procurement does not need
a complicated process.
Documentation must be
retained for three years.
There must be evidence of the
agreement between the agency
and the supplier.
An official email can provide
documentation of the
procurement reasons, process
and all relevant decisions
(including approvals and
authorisations).
For low value contracts a
purchase order will provide
evidence of agreement between
the agency and the supplier, for
higher value contracts a written
contract will provide this.
All agencies publish their
procurement plans on
AusTender by 1 July each year,
and report on AusTender all
procurement activities greater
than $10,000.
Agencies should treat the
information provided by
suppliers and confidential, and
arrange for suppliers to sign
confidentiality agreements for
any information they are
provided.
Successful and unsuccessful
suppliers must be advised of
the results of the procurement
process.
Agencies must apply
complaints handling procedures
that are fair, equitable and nondiscriminatory.
Observations of Agency Business Processes as per CEIs
Three FMA agencies participated in the review. These agencies will be referred to as
Agency A, Agency B and Agency C.
Typically, the procurement function is decentralised across participating agencies, and
a central procurement unit provides general guidance on policy, tools and support on
process. In some agencies it is not clear who owns, runs and supports the
procurement processes. In Agency B for example, it was observed that the planning
phase of the procurement is a mirror image between the client area and the centralised
procurement unit. This suggests there is a duplication of process and responsibilities
are not delineated.
Process roles
The procurement roles are standardised across the participating agencies with slight
variations in role names and responsibilities. The major exception is the role of Budget
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Holder in Agency A. The Budget Holder performs a check on budget availability early
in the procurement process.
Under the FMA Act, the Delegate is ultimately responsible for spending approval and
procurement outcomes. In practice responsibility for meeting the obligations of both the
FMA Act and the CPGs overlaps between the procurement officer and the Delegate.
As the Delegate typically has limited involvement in or visibility of the procurement
process it means the Delegate can defer to the procurement officer to ensure proper
process and documentation.
At a high level, agency procurement processes are not dissimilar (see Figure 5 over
page). Different terminology is used to describe process activities, and within each
phase variations are evident. Thresholds, approval processes and documentation are
primary examples.
In summary, business process mapping revealed that the procurement CEIs and
operational guidelines are convoluted and not user friendly - in some instances they
contained more than 30 templates and checklists. Some agencies reported they would
not read the operational guidance material and the CPGs are too high level to apply in
practice. Participating agencies suggested that simple guidelines and tools that are
mid-way between the CPGs and operational guidance material would make it easier for
people to know what to do and how to run an effective and efficient procurement
process.
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Agency B
Agency C
Agency A
Overarching
process
(CPGs)
Identify
business
need
Identify
business
need
Identify
business
need
Identify
business
need
Includes identifying existing
arrangements and seeking
Reg 9 approval
Includes determining best
approach and valuing
procurement
Includes checking existing arrangements, valuing
procurement, developing a business case, and seeking
approval and confirmation of budget
Plan procurement
Includes negotiating and
establishing a contract,
notifying unsuccessful
suppliers, and
registering contract on
Contracts Register
Includes preparing
specification documents,
seeking approval on
approach, issuing
request and providing
clarification
Includes creating and
raising purchase orders,
receiving goods and
services and paying
invoices, matching CFP and
invoices, documentation
and reporting
Receive goods
and services and
pay
Assess
submissions &
negotiate contract
Approach market
Receive goods
and services
Includes notifying suppliers,
establishing a contract,
gazettal, receiving goods
and services and paying
invoices
Develop and
finalise
arrangement
Includes accepting and
paying for goods/ services
Receive goods
and services
Includes (contract
management) receiving
goods and services and
paying invoices checking
PO and invoices match
Includes seeking quotes,
evaluating submissions,
compiling an evaluation
report, seeking delegate
approval (Reg. 9, 10)
Includes developing requirements, assessing existing
arrangements, valuing the procurement, seeking pre-approval
from delegate approval
Establish contract
Includes developing an
evaluation report,
negotiating with
successful supplier, and
seeking delegate
approval (Reg. 9, 10 )
Evaluate response
Includes assessing
submissions, identifying
successful suppliers,
obtaining approvals (Reg 8,
9,10), entering into
arrangements and
AusTender reporting
Evaluate and
enter contract
Includes negotiating and
establishing a contract,
notifying unsuccessful
suppliers, and preparing
SAP contract and
purchase order
Approach market
Includes seeking quotes,
providing clarification to
potential suppliers and
receiving quotes
Undertake
approach
Includes writing
specification, issuing the
request and receiving
submissions
Go to market
Initiate procurement process
Includes assessing existing arrangements, developing a
plan, valuing the procurement, seeking in-principle approval
and developing request documentation
Plan procurement
Assess existing
arrangements for
suitability
Define
procurement need
Figure 5: Comparison of Agency Procurement Processes
Approvals
Approval requirements are not consistent across the agencies. Business process
mapping highlighted that approvals can be sought several times – for example, in
Agency B approval from the Delegate is sought five times, to commence a procurement
process, to approve the specifications (requirements, value, timing and potential
suppliers), to approach the market, to approve spending before a contract is granted,
and finally to sign the contract.
Value thresholds
The procurement value thresholds differ across participating agencies. These
thresholds determine the process adopted by the agency, for example Agency A and
Agency B have specific processes and approvals for the procurement of consultancies;
and Agency A and Agency C can undertake procurement of less than $5,000 and
paying by credit card.
Process mapping insights
One of the significant insights from mapping business process is the consideration of
‘risk’ in the procurement process. Agencies do not have a common definitions of risk,
nor a standard methodology for assessing risk. The CPGs do not clearly define
‘procurement risk’. Participating agencies tend to define risk as the final cost/price of
the purchased goods or services. Some agency CEIs and guidance material include
checklists to support the identification and mitigation of risks, however participants
indicated these tools are more daunting than helpful. All agencies indicated that a
focus on risk management would streamline the process as the process could then be
scaled according to the risk profile of the procurement.
The process mapping exercise highlighted that the agency processes are largely
manual and involve the use of disparate systems and databases. Each agency is using
different financial and information management systems, and with differing levels of
compatibility that is encouraging the establishment and maintenance of individual
methods of record keeping. There is an opportunity to automate workflows to ensure
proper record keeping and audit trials.
There is no minimum standard for documentation. In practice, documentation is not
commensurate with procurement value. The case study agencies produce business
cases, executive minutes, statements of work and procurement plans – they all perform
the same function in initiating the procurement process. Aligning documentation
requirements with the risk and complexity of the procurement activity will simplify the
process for agencies.
Appendix Section 3 is the record of findings from mapping agency business
processes as per their CEIs and operational policies.
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Observations of actual agency case studies
Each agency selected three case studies to be reviewed as part of this project. The
case studies highlighted the issues that were exposed during the business process
mapping experience. Essentially, procurement is a straightforward process that should
be efficient. However, efficiency is being lost due to layers of controls, prescriptive
approaches and even a lack of clarity of, misinterpretation of, or ‘administrability’ of the
CPG principles.
The key observation from the case studies is that the behaviour of agencies in the
procurement process is a focus on the cost of the item being procured and
demonstrating accountability and transparency. This is demonstrated by the use of the
same, over engineered process, for all procurement activities. For low value/low risk
procurements this is not representing value for money, and streamlining the process
will provide administrative cost savings for FMA Act agencies.
Appendix Section 4 is the record of findings from the analysis of agency case studies.
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Section 3
Key Insights
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Current State Assessment Key Insights
The review of the FMA Act framework, principles, agency business processes as per
their CEIs, and agency case studies revealed a number of key insights. These are
outlined below:
Practical Implementation of the CPGs
While the intent of the CPGs is to provide a principles-based approach to procurement,
participating agencies expressed concerns about the practical implementation of the
CPGs. Participating agencies reported that the CPGs are non-specific for
procurements under $80,000 and subjective terms such as “value for money” are open
to interpretation.
Scale of Procurement Processes
FMA Act agencies do not scale their procurement processes. Agency specific
processes for procurement of less than $80,000 are typically focused on the cost of
what is being procured. Cost will determine the process requirements such as the
number of quotes required, the level of documentation required, delegation and
approval processes, reporting processes and which part of the agency will take
responsibility for the procurement activity.
Procurement Thresholds
The application of thresholds will influence procurement activity, and these thresholds
are inconsistent across the FMA Act agencies. Each participating agency has a
credit card threshold with a simple procurement process requirement. Each agency
then applies varying thresholds that will influence the delegate and approval process,
and which part of the agency will take responsibility for the procurement activity.
Over-engineered processes
Analysis of participating agency case studies revealed instances of low value and low
risk procurements that involved excessive documentation, market research and
approval processes. Two factors appear to drive this – the level of experience of the
procurement officer, and the risk appetite of the agency or the delegate, that is, the
lower the risk appetite of the agency, the greater the emphasis on demonstrating
accountability and transparency.
Agency documentation
Procurement CEIs and operational policies are lengthy, convoluted documents
that are not user friendly. In some agencies procurement guidelines can contain up
to 30 different templates and checklists. Staff undertaking procurements have reported
that there are many rules within their agency that they are expected to follow.
Inexperienced staff can feel overwhelmed and not know where to start. Procurement
processes can be confusing and onerous for staff, particularly if that is not their core
role.
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Individual Expertise
The level of expertise of people involved in procurement is a key factor of how well
procurement processes are executed and whether outcomes are achieved in an
efficient and effective way. It is especially difficult for people new to procurement to
know what to do and how to navigate the process. Very experienced people know how
to navigate the process and manipulate it if they believe it is in the interests of their
business outcome.
Delegate Involvement and Experience
Delegates typically have limited involvement / visibility of the procurement
process. However they are ultimately accountable forming procurement decisions that
constitute “proper use of Commonwealth resources”. Agencies reported that the
previous experience of a delegate, often with another agency, would influence the
behaviour in procurement activities
Procurement workflows
Procurement workflows are largely manual (with the exception of raising purchase
orders and payment processing). Workflows involve usage of disparate systems and
databases that are not integrated systems.
General observations
Throughout the project a number of general observations were made regarding the
impact the procurement policy framework may be having:

One of the principles of the CPGs is to encourage competition by providing all
suppliers the same chance to compete for business. A case was cited where
for work in some remote areas of Australia, local providers do not have the
capacity, compared to their city counterparts, to dedicate the effort required to
effectively complete request documentation. The end result is that contracts are
awarded to city contractors who have the capacity to respond to requests, while
local contractors are inadvertently disaffected.

Examples were also cited of splitting procurement activities or altering the
specification of the work to keep the final price under the $80,000 threshold, and
signing extensions with a provider (sometimes multiple times) with each
extension coming under the threshold. This behaviour is driven by a couple of
factors: an intention to avoid the $80,000 threshold and therefore avoid the
application of Mandatory Procurement Procedures, and a perception that the
threshold is arbitrary and can hinder delivery on the business need.
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Section 4
Future Directions
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Good Practice Model
The intent of the “good practice model” is to provide a framework for streamlining and
simplifying the process for procurements under $80,000. The model seeks to address
inefficiencies in procurement practices and maximise the likelihood of achieving the
CPG principles: value for money; encouraging competition; efficient, effective,
economical and ethical process; and accountability and transparency.
The impact for the FMA Act agencies will be the delivery of high volume transactions at
the lowest possible cost per transaction. These transactions will be consistent with the
procurement risk profile and generate savings to FMA Act agencies in the overall cost
of administration.
Appendix Section 1 provides the detailed Good Practice Model for procurements
under $80,000.
The Shift Required to Streamline Processes
The current processes reflect a focus on cost rather than on risk. There is little
difference in process between low cost and high cost procurements and there is a
disproportionate effort and attention to transparency and accountability. Process cost
can well exceed and outweigh the cost of what is being procured.
The shift to a risk based approach to procurement, as represented in Figure 6 (over
page) means processes and standards are scalable and the effort in the procurement
process is proportionate to the scale and procurement risk. For low risk procurements
(for example – travel or stationery) minimal effort would be required in developing
documentation and seeking quotes and approvals. For higher risk procurements (for
example – consultancies) more effort is required in developing comprehensive
documentation, market testing and seeking approvals.
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Value for
money
High
cost
Encourage
Competition
Encourage
Competition
Efficient
Ethical
Effective
Economical
Encourage
Competition
Efficient
Ethical
Effective
Economical
Efficient
Ethical
Effective
Economical
Transparent and
Accountable
Transparent
and
Accountable
Transparent and
Accountable
Proper use of
Commonwealth
resources
SIZE The size of each activity represents the amount of oversight and rigour
 The Process cost can outweigh cost of what is being procured
 The effort and attention on transparency and accountability is disproportionate with the
procurement – the behaviour is “I’ll make sure I do everything to demonstrate I’m doing the right
thing”
 There is little differentiation in process between low cost and high cost procurements – in practice,
the same level of documentation and approvals for low cost procurements as for high cost
procurements
− The level of expertise, experience and risk appetite of those involved in the
procurement influences the effort placed on each activity
 Procurement processes and effort determined solely on process cost
Value for
money
Value for
money
Medium
cost
Low
cost
Current situation
Figure 6: Shift to Streamline Procurement Process
Value for
money
Encourage
Competition
Transparent
and
Accountable
Transparent
and
Accountable
Transparent
and
Accountable
Encourage
Competition
Encourage
Competition
Efficient
Ethical
Effective
Economical
Efficient
Ethical
Effective
Economical
Efficient
Ethical
Effective
Economical
Value for
money
Value
for
money
Proper use of
Commonwealth
resources
**Risk comprises impact, overall cost, and complexity of the procurement
 As the scale and risk profile of the procurement increases, greater attention is paid to the ‘defensibility’ of
the procurement activities (able to withstand public scrutiny)
 Procurement effort is proportionate to the risk** profile of a procurement
 Procurement processes are clearly directed at delivering policy and legislative intent – proper use of
Commonwealth resources
High
risk
Medium
risk
Low risk
Proposed Model
In order to streamline procurements, a shift in the way procurement processes are
managed is required:

Procurement processes are clearly directed towards delivering policy and
legislative intent – the proper use of Commonwealth resources;

Procurement effort is proportionate to the risk profile of a procurement; and

As the scale and risk profile of the procurement increases, greater attention is
paid to the “defensibility” of the procurement activities.
Determining the Risk Profile of a Procurement
FMA Act agencies currently have procurement processes that are based on cost of
goods/ services rather than risk thresholds. A simplified process would have minimal
documentation and quotation requirements for low risk procurements and more
comprehensive documentation, market testing and approval requirements for higher
risk procurement.
Procurement risk comprises the following elements – impact, cost and complexity. The
perception of risk to either an individual or an organisation is subjective and influences
by past experiences, organisational culture, technical skills and knowledge. Therefore,
a number of focussing questions ought to be considered when determining the risk
profile of procurement.
Figure 7 (over page) provides a simple risk framework that is based on a series of
focussing questions that enable a procurement officer to make defensible decisions
regarding the level of risk for a procurement.
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* OVERALL COST includes all procurement process costs as well as the cost of the
good/service being procured
 Is an existing arrangement being used?
 Will procurement of the good(s)/service(s) impact on businessas-usual?
 Is this a routine or one-off procurement?
 Is a good or service being procured?
Assess whether or not your procurement demands close
attention
Complexity
 Is it suitable to apply agency credit card policies for the
good(s)/service(s) being purchased?
 Is the procurement below $80,000 in value?
Assess whether to apply agency credit card policies or
Mandatory Procurement Policies (Div 2)
Overall Cost*
 Is the good/service readily available?
 Is this a supplier who is known for successful delivery?
 Does this procurement impact on the capability of the
organisation?
 Does this procurement impact on the reputation of the
organisation and/or government (political)?
Identify and assess what risks need to be managed
throughout the procurement
Impact
Figure 7: Determining the risk profile of a procurement
Risk Profile
Determines how much rigour and
oversight you will need to employ for
the procurement
Procurement
Officer
undertaking
high risk
procurement
Procurement
Officer
undertaking
medium risk
procurement
Procurement
Officer
undertaking
low risk
procurement
Procurement
Officer
undertaking
low risk
procurement via
credit card – with
Reg 9 delegation
The level of risk identified will determine the procurement pathway as outlined in
Figure 8 (over page). As the level of risk increases, so does the requirement for
documentation. The low risk credit card procurement illustrated in grey below shows a
very simple process that is completed on-line using existing arrangements. As the risk
levels increase the pathway illustrates additional documentation and delegate approval
steps.
The Good Practice Model (in Appendix Section 1) represents the most efficient way of
undertaking procurement up to $80,000 in an FMA Act agency. It meets the FMA Act
framework and CPG requirements, and provides FMA Act agencies with a streamlined,
simple and safe process. The streamlined process provides a Delegate with the
confidence that the process they are approving provides value for money. It details the
pathways and provides illustrative case studies to highlight the differences in the levels
of process activity needed as the risk level increase.
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Figure 8: Procurement Pathways
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Section 5
Recommendations and
Implementation
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The following recommendations would improve the efficiency and effectiveness of
procurement processes for procurements under $80,000. These recommendations are
based on the findings of the review and input from participating agencies.
Recommendation 1 – Take risk based approach to procurement activities under
$80,000 to streamline processes by implementing the Good Practice Model
The current procurement processes developed by agencies to address the FMA Act
framework are complex. APS 5/6 level staff are investing excessive amounts of time to
complete low value and low risk procurements. The inconsistent thresholds, templates
and approval delegations within and between agencies are resulting in ineffective and
inefficient processes. Addressing these issues will enable FMA Act agencies to
generate savings in the costs of administration.
It is recommended that the Good Practice Model be adopted and recommended to
FMA Act agencies in order to take a risk based approach to streamline procurements
which fall under $80,000.
Recommendation 2 – Improve interpretation of CPGs and agency policies
The research established that the CPG principles lack specificity and are too high level
to be ‘administrable’ in practice. The principles are open to interpretation by individual
agencies and can result in agency CEIs being too prescriptive. These prescriptive
CEIs are translated into operational policies that are lengthy, convoluted and not user
friendly. An agency’s CEIs and operational guidelines contained up to 30 different
templates and checklists.
In order to address these issues it is recommended that:

Definitions of subjective terms within the CPGs be developed – for example:
value for money; and

A single CEI that is easy to follow and adopt by FMA Act agencies be
developed.
Recommendation 3 – Simplify and standardise documentation toolset
There is no minimum standard for documentation and evidentiary requirements are
unclear so multiple documents are created to “ensure the right thing is done”. This is
resulting in the over-engineering of documentation for low value procurements and the
subsequent administrative impost on employees undertaking procurement activities. It
is also not unusual to have the Delegate prescribing documentation requirements.
It is recommended that a suite of simple and standard documentation that supports the
procurement process be developed and provided to FMA Act agencies.
Recommendation 4 – Clarify approval requirements
Multiple approvals are sought over and above the two (2) required delegate approvals.
In some agencies Delegate approvals are sought at least three (3) times in addition to
signing contracts.
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It is recommended that approval requirements under the FMA Act be clarified and
standardised across FMA Act agencies. The Good Practice Model reinforces the
approval requirements prescribed by the FMA Act.
Recommendation 5 – Enhance people capability
The level of expertise and experience of the procurement officer is a key factor in the
easy and effectiveness of the process. New people find the process daunting and are
unsure of the “next step”. Delegates typically have limited involvement or visibility of
the process although they are ultimately accountable for making procurement
decisions.
It is recommended that general awareness and education for staff needs undertaking a
procurement activity be developed and that it include:

Self-help mechanisms such as on-line learning and web-based document
libraries be established to facilitate access to information to improve awareness
and efficiency;

A Centre of Excellence that promotes using best practices around procurement
to drive better results; and

Greater training be provided to staff involved in procurement (including
Delegates) to improve understanding of principles, rules, and practices.
Recommendation 6 – Automate workflow
Procurement workflows and documentation are largely manual (with the exception of
raising purchase orders and payment processing). Workflows involve usage of
disparate systems and databases that are not integrated.
It is recommended that automation of workflows at a whole of government level be
investigated as part of a scoping study, to improve efficiency, record keeping and
auditability.
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Next steps
The following steps are recommended to introduce the Good Practice Model and other
recommendations to FMA Act agencies.
1. Socialise the Good Practice Model with FMA agencies more broadly – this
needs to involve the most senior levels of agencies, central procurement areas,
and general procurement officers;
2. Design a suite of supporting templates (i.e. procurement plan, evaluation plan
etc.) and other relevant support material for procurement officers. The
supporting templates should be designed with procurement officers and should
be tested for usability with both specialised and general procurement officers,
and when fully completed, implemented with FMA Act agencies;
3. Present the Good Practice Model and the suite of supporting templates,
simplified contracts and CPG principles definitions to the Senior Procurement
Officers Reference Group and seek endorsement and commitment to implement
within their agencies;
4. Work with central procurement areas in agencies to educate in how to apply
Good Practice Model and to work through the implications for agency specific
CEIs and operational policies to ensure agency process are aligned with the
Good Practice Model;
5. Provide a channel for agencies to share experiences and provide feedback on
how the Good Practice Model operates in practice;
6. In consultation with FMA Act agencies, prioritise the recommendations outlined
in Section 5 and plan implementation across agencies; and
7. Review implementation of the Good Practice Model within 12 months to ensure
agencies processes are aligned and as streamlined as possible and that
supporting templates remain useful and useable.
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Acknowledgements
The ThinkPlace Team would like to thank the Department of Finance and Deregulation
for their input into the review and coordinating the effort associated with this project.
ThinkPlace would also like to thank the agencies which participated in the Review.
ThinkPlace consultants:

Raffaella Recupero (lead consultant)

Linda Dewey

Mark Thompson

Behzad Emami
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About Us
We design strategies, services and organisations
www.thinkplace.com.au
THINKPLACE PTY LTD ACN 116 993 170
TRADING AS THINKPLACE UNIT TRUST ABN 34 280 130 162
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