Agency B case studies of procurements under $80,000
Project
Analysis and Review of Commonwealth
Procurement Processes for procurements
under $80,000
Client
Department of Finance and Deregulation
Date
Version
21 June 2011
FINAL 1.0
ThinkPlace
Team
Linda Dewey,
Behzad Emami
AUSTRALIA  NEW ZEALAND
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About this document
Methodology
This document contains an analysis of three procurement case
studies provided by Agency B. 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).
1. The Agency B provided three procurement case studies
that describe actual procurement processes
ThinkPlace has worked with a small group of people in Agency B to
develop this document.
3. ThinkPlace worked with Agency B staff who are directly
involved in the case study to identify areas of good
practice, unnecessary and/or duplicated processes, or
convoluted processes.
2. ThinkPlace reviewed the case studies validating them
against processes mandated by the agency CEIs and
relevant policies.
Contents
Procurement case studies
Procurement narrative - case study 1
Procurement narrative - case study 2
Procurement narrative - case study 3
3
4
5
6
High Level Analysis of Case Studies
7
Summary of process issues and insights
Good practice, unnecessary and convoluted processes
Opportunities for improvement
13
14
15
ANALYSIS & REVIEW OF COMMONWEALTH PROCUREMENT
PROCESESS UNDER $80,000 – AGENCY B CASE STUDIES
PAGE 2
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.
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Case Study 1
Australian Bureau of Statistics (ABS) consultancy services
Questions
Comments
What was procured?
ABS consultancy services procured as part of a subcontract arrangement with ABARES
What was the value of the procurement?
Two separate consultancy products were valued at:
$55,000 (GST inclusive)
$49,500 (GST inclusive)
Advice was that products should have been consolidated and submitted under a single procurement request
How was the procurement valued?
Market research was conducted as part of the initial proposal preparation by ABARES to the client
Was documentation developed (e.g. file notes,
risk assessment, statement of work)?
If so, what type and why?
•
•
•
How was the market approached (e.g. direct,
select)?
Direct sourcing – at the initial proposal preparation stage, existing relationships and specific skills of partners are
known and leveraged. As a rule ABARES always direct sources subcontract consultancy services due to the highly
specialised skills required
How long did the process take, from beginning
to end?
Approximately 3 months (24 September 2010 – 7 December 2010)
Who was involved in the process (e.g. central
procurement area, delegate, line area, etc.)?
What was their role?
End User (Business Line)
Procurement Officer
Delegate
Specialist (Legal)
What did the approval process involve?
Reg 9 approval Minutes
Was there a reporting process?
Contracts register – used by procurement team to report on AusTender. Due to fact that contracts are not monitored
in a central area, the ABARES Division Executive Director (SES 3) signs all consultancy contracts in order to keep a
central record
Questions referred to the procurement area (if
any).
None
Reg 9 approval Minute (24 September 2010)
Reg 9 approval Minute (7 December 2010)
Memorandum of Understanding (MoU) between ABS and ABARES
ANALYSIS & REVIEW OF COMMONWEALTH PROCUREMENT
PROCESESS UNDER $80,000 – AGENCY B CASE STUDIES
PAGE 4
Case Study 2
Contract staff with Hays Specialist recruitment
Questions
Comments
What was procured?
Contract staff
What was the value of the procurement?
$25,000 (GST inclusive)
How was the procurement valued?
Understanding of market rates for similar work multiplied by the number of hours the contract staff member was
required
Was documentation developed (e.g. file notes,
risk assessment, statement of work)?
If so, what type and why?
Statement of work was provided to contract agency
Contract and emails with prior approval
How was the market approached (e.g. direct,
select)?
Direct source
How long did the process take, from beginning
to end?
Actual paperwork takes minimal time. Waiting for delegate approvals and pre-employment activities can take up to
one week
Who was involved in the process (e.g. central
procurement area, delegate, line area, etc.)?
What was their role?
Line area (Business Line) makes staff request
Delegate (GM) approves
What did the approval process involve?
•
•
•
•
•
•
Was there a reporting process?
Entered into Agency B ‘s system which triggers reporting. Also reported at Senate Estimates and other governance
bodies as required when report consultancies and internal reporting of budget variations
Questions referred to the procurement area (if
any).
None
Line area instruction
Discussion with Programme Manager
Development of paperwork
Approvals
Contract negotiation and signoff
Purchase order
ANALYSIS & REVIEW OF COMMONWEALTH PROCUREMENT
PROCESESS UNDER $80,000 – AGENCY B CASE STUDIES
PAGE 5
Case Study 3
Provision of business cards
Questions
Comments
What was procured?
Standing order for business cards
What was the value of the procurement?
$17,000 per year (approx.) for 4 years (approx,$68,000 total)
How was the procurement valued?
Based on previous prices and estimates of usage from Corporate Communications Branch
Was documentation developed (e.g. file notes,
risk assessment, statement of work)?
If so, what type and why?
•
•
•
•
•
How was the market approached (e.g. direct,
select)?
Select, 3 providers were selected based on past procurement experience of Corporate Communications Branch
How long did the process take, from beginning
to end?
Approximately 1 month
Who was involved in the process (e.g. central
procurement area, delegate, line area, etc.)?
What was their role?
Procurement team (also acted as the Business Line)
RFQ team (comprised of Procurement team and Corporate Communications Branch)
Delegate
Specialist (Corporate Communications Branch)
What did the approval process involve?
•
•
•
Was there a reporting process?
No evidence provided
Questions referred to the procurement area (if
any)
N/A – Procurement team led the procurement
Reg 9 approval (24 Nov 2010)
Evaluation process (25 Nov 2010)
RFQ (29 Nov 2010)
Evaluation report (22 Dec 2010)
Supplier notifications (23 Dec 2010)
Reg 9 approval
RFQ
Evaluation report
ANALYSIS & REVIEW OF COMMONWEALTH PROCUREMENT
PROCESESS UNDER $80,000 – AGENCY B CASE STUDIES
PAGE 6
High level analysis of case studies
In this section, case studies are validated against processes mandated by the agency CEIs and relevant policies
AUSTRALIA  NEW ZEALAND
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Agency B Procurement Processes
Good practice, unnecessary and convoluted processes
Issues
Good practice
Case Study 1 - ABS consultancy services
•
•
•
•
ABARES provides its own consulting services to clients. During service negotiations, ABARES identifies
elements of the service that it will have to subcontract to other specialist agencies. The ABARES procurement
team questioned whether they needed to follow the CPGs since the funds used came from external
revenue.
Detailed background research is undertaken to identify and scope any potential subcontract
arrangements. This also included checking for existing arrangements such as Memorandum of
Understandings (MoUs).
An existing MoU between Agency B and the ABS was identified and used for the subcontract arrangement
Throughout the process, a formal procurement risk assessment was not undertaken. This was identified
as being due to the fact that risk was not well understood by the procurement team. The procurement team
believed that the termination clause contained within the original service contract adequately managed any
inherent risk.
Identify need
Case Study 2 – Contract staff
•
•
•
Due to traditionally high turnover
rates, the Business Area places
provisions in the budget for
contract staff (APS 4 staff for
admin role) each year.
There is no official/formal existing
arrangement between Agency B
and contract staff suppliers.
However there are two suppliers
who Agency B has procured from in
the past that the Business Areas
currently direct source from.
The process is assessed to be
very low procurement risk.
Therefore the rigour and
oversight required is minimal.
Plan
procurement
 Approach
market
Assess
submissions
and
negotiate contract

Receive
good(s)/
service(s) and pay
Case Study 3 – Provision of business cards
•
The procurement team sought to use existing whole of
government contracts for the provision of business cards. To
achieve this, the AusTender register was searched. The team
found that although AusTender has listings for publishing and
printing arrangements, there was no consistent contract
naming convention used between government
departments. This resulted in several hours of fruitless
searching.
ANALYSIS & REVIEW OF COMMONWEALTH PROCUREMENT
PROCESESS UNDER $80,000 – AGENCY B CASE STUDIES
PAGE 8
Agency B Procurement Processes
Good practice, unnecessary and convoluted processes
Issues
Good practice
Case Study 1 - ABS consultancy services
•
•
•
•
Identify need
The original proposal given by ABARES to the client is cleared by the Corporate Manager
(Executive). This proposal identifies the subcontract arrangements to be procured and the
indicative costs.
Identified subcontract arrangements are often direct source due to the highly specialised nature
of the skills/services sought.
Line areas engaging subcontract providers find this phase of the process to be slow. This is
due to the approval/internal clearance processes required.
The procurement is required to be formally requested at least one week prior to the procurement
deadline in order to capture it in the financial reporting process and assess the strategic
appropriateness and value of the proposed work.
Plan
procurement
Case Study 2 – Contract staff
•
•
Due to the budgeted provisions for contract staff, which are
approved by the financial delegate each year, there is no
need to develop a business case or seek in-principle
approval from the delegate.
Contract staff procurement for project work would require a
development of a business case and delegate in-principle
approval.
 Approach
market
Assess
submissions
and
negotiate contract

Receive
good(s)/
service(s) and pay
Case Study 3 – Provision of business cards
•
•
•
The procurement was identified as simply continuing an existing
service and thus the procurement phase did not deviate from Agency
B’s procurement process.
In order to plan the procurement appropriately, specialist
knowledge from Corporate Communications Branch was used.
This knowledge was crucial in allowing the business line area and
delegate to understand the need.
A business case was developed for the procurement which identified
the procurement risk as being low. The risk assessment completed
was not understood correctly thereby resulting in what the
procurement team felt was onerous procedures.
ANALYSIS & REVIEW OF COMMONWEALTH PROCUREMENT
PROCESESS UNDER $80,000 – AGENCY B CASE STUDIES
PAGE 9
Agency B Procurement Processes
Good practice, unnecessary and convoluted processes
Issues
Good practice
Case Study 1 - ABS consultancy services
•
•
•
Identify need
Plan
procurement
Documentation developed within this phase served to outline the reasons
why direct sourcing was used for the subcontract.
The procurement team stated that there has been a recent change for
procurement of consultancy services greater that $20,000. Previously only
the Deputy Secretary could approve such procurement however now
approval can be granted by anyone with suitable delegation.
It was revealed that often a subcontractor has already been engaged
(informally) before the phase has commenced. It was felt that this was due to
the fact that the business line has significant pressure to complete work by a
deadline. This gave rise to a perceived culture of placing deadlines ahead
of procurement procedure.
 Approach
market
Case Study 2 – Contract staff
•
•
•
The Business Areas have a good relationship with the suppliers.
They approach each of the two suppliers and identify which one
can provide them with staff that have the skills they need. The
procurement officer is then instructed to direct source from the
supplier. This relationship ensures that Agency B gets staff
with required skills.
The current market approach process does not consider
encouraging competition as required by the CPGs.
There is no formal agency guidance regarding the preferred
supplier for contractors. More guidance on how to achieve
value for money would also be beneficial to procurement
officers.
Assess
submissions
and
negotiate contract

Receive
good(s)/
service(s) and pay
Case Study 3 – Provision of business cards
•
•
•
The procurement phase did not deviate from Agency B’s
procurement process.
The procurement team stated that the specialist advice
provided to develop the specification documents was
vital in planning the market approach.
The market approach selected resulted from a perceived
contradiction contained in the CPGs. The CPGs create a
tension between seeking value for money and
encouraging competition resulting in an onerous market
approach.
ANALYSIS & REVIEW OF COMMONWEALTH PROCUREMENT
PROCESESS UNDER $80,000 – AGENCY B CASE STUDIES
PAGE 10
Agency B Procurement Processes
Good practice, unnecessary and convoluted processes
Issues
Good practice
Case Study 1 - ABS consultancy services
•
•
•
Identify need
During contract negotiations , the following standard forms were used to make negotiations straight forward.
• MoU – between Agency B and other CoA FMA agencies
• Custom template – for repeat suppliers
• Modified short form contract – for CSIRO
• All others – standard Agency B terms and conditions template
There is no standard Agency B template for Reg 9 approvals. Issues also arise when attempting to utilise the above
mentioned forms.
After gaining approval, Agency B’s contracts register is completed. This register is also used by the procurement team to
enter details into AusTender. The process has no checking mechanism to determine if the contract was executed.
Furthermore, the Division Executive Director (SES Band 3) signs off on all consultancy service procurements in order to
maintain a central record for ABARES. While ensure traceability and transparency, the process adds time to the
procurement process.
Plan
procurement
 Approach
market
Assess
submissions
and
negotiate contract

Receive
good(s)/
service(s) and pay
Case Study 2 – Contract staff
Case Study 3 – Provision of business cards
•
•
•
•
The Business Areas assess the
supplied contract staff via an
interview process. This ensures that
the staff are competent and a
suitable fit for the business need.
Reg 9 approval is granted as part of
the acceptance of the service
provider’s orders.
Tools such as spreadsheets are
developed to help the procurement
officer track period of the contracts.
•
•
The procurement phase did not deviate from the outlined Agency B procurement
process.
The evaluation team formed to assess submissions included technical
specialists. This was done to understand the requirements of the business line
and was not influenced by any risk assessment.
Furthermore, the procurement team identified that the level of reporting and
rigour shown throughout the phase was influenced by the Delegate’s risk
appetite and not a formal risk assessment.
ANALYSIS & REVIEW OF COMMONWEALTH PROCUREMENT
PROCESESS UNDER $80,000 – AGENCY B CASE STUDIES
PAGE 11
Agency B Procurement Processes
Good practice, unnecessary and convoluted processes
Issues
Good practice
Case Study 1 - ABS consultancy services
•
Identify need
Plan
procurement
 Approach
market
Assess
submissions
and
negotiate contract
The project identified that this phase occurs at
the business area and not the line area that
engaged the provider. Therefore it is beyond
the scope of the project.

Receive
good(s)/
service(s) and pay
Case Study 2 – Contract
staff
•
The procurement did not
deviate from Agency B’s
process map.
Case Study 3 – Provision
of business cards
•
The procurement was for a
standing order meaning
that this phase of the
procurement is yet to occur
and beyond the scope of
the project.
ANALYSIS & REVIEW OF COMMONWEALTH PROCUREMENT
PROCESESS UNDER $80,000 – AGENCY B CASE STUDIES
PAGE 12
Summary of process issues and insights
In this section, case studies are validated against processes mandated by the agency CEIs and relevant policies
AUSTRALIA  NEW ZEALAND
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Agency B Procurement Process
Good practice, unnecessary and convoluted processes
GOOD PRACTICE
Proven techniques, methods and processes
UNNECESSARY PROCESSES
Repetitive and / or duplicate processes
CONVOLUTED PROCESSES
Inefficient and / or ineffective processes
•
A process commensurate with the procurement risk
ensures that simple, low risk procurements follow a
streamlined process while high risk procurements
require more oversight and rigour
•
•
•
Central approval process within some divisions
allowed for:
Central approval processes within some divisions
resulted in added administrative burden caused by a
delegate potentially being required to approve all
procurement contracts. This led to increased delays and
can often be difficult to implement
•
Indemnity and public liability issues were often dealt
with by both the procurement team and the
business line. This resulted in duplication of work and
failure to adequately address the legal issues
Education regarding procurement requirements/
processes appears to be ineffective. This results
in business areas engaging (formally or informally)
services before the procurement process is
completed. With the funds being already committed,
the procurement team is under pressure to
successfully deliver the procurement
•
There is a lack of clarity regarding the CPG
principles governing the approach to market
phase. These include conflicting requirements
between:
•
The capture of information for reporting
•
Alignment work with strategic goals
•
Workforce/resource planning
•
Inclusion of subcontract arrangements to initial
contract ensured that subcontract procurement will be
approved
•
The negotiation process was made straight forward
through the use of:
•
Standard templates, MoUs
•
Existing relationships with service providers
•
Customised contracts for specific agencies /
suppliers
•
Establishment of a procurement coordinator ensured
that the appropriate procedures were being followed and
any over arching indemnity and confidentiality
requirements are followed
•
Inclusion of a technical specialist in the procurement
team assisted with the development of specification
documentation and reduced the delays associated with
seeking advice from a subject matter expert
•
Conducting detailed background research resulted in
the ability to scope and appropriately specify the
procurement process
•
•
•
•
There is a lack of guidance regarding documentation
required. For example, a separate business case is
often unnecessary and can be adequately substituted
with a official minute
The standard agency templates do not cover the
documentation requirements of the entire
procurement process. For instance there is no
standard Agency B Reg 9 approval form
While searching existing arrangements on AusTender,
the lack of a consistent contract naming
conventions between government departments
resulted in much wasted time. Existing arrangements
were unable to be identified and leverage leading to
duplication of government procurements
Procurement teams often spend resources producing
documentation over and above the amount required
by the CEIs and operating guidelines in an attempt
to be accountable. This is because there is a
perception that the quantity of documentation produced
equates to the level of rigour applied to the procurement
process
•
Effective and efficient use of commonwealth
resources vs risk management
(minimisation)
•
Value for money vs encouraging
competition
•
The procurement process is primarily focussed
on the monetary value of the procurement. This
means that the same procurement processes are
followed regardless of considerations of value for
money or procurement risk
•
Procurement risk is not assessed or managed
consistently. An initial risk assessment may be
completed but it does not influence the procurement
process. Resulting in simply, low risk procurements
following the same process as complex
procurements
ANALYSIS & REVIEW OF COMMONWEALTH PROCUREMENT
PROCESESS UNDER $80,000 – AGENCY B CASE STUDIES
PAGE 14
Agency B Procurement Process
Opportunities for improvement
Standardised documentation and contract naming conventions
• A clear, standard set of documentation requirements and contract naming conventions with guidance for procurements under
$80,000 would reduce instances of ‘over engineering’ and repetition of work. Standardised documentation would also reduce
the need to have very experienced procurement officers on all procurements thereby allowing them to focus on complex and
high risk procurements
Pre-process activities
• A pre-procurement requirement such as market research, would result in better selections of market approaches and timely
input from specialist would reduce the risk of taking ‘shortcuts’ in order to meet client deadlines
Technical specialists
• Inclusion of technical specialists in the procurement team would result in a better procurement specification documents and
timely input concerning the evaluation of responses to request documentation
Standard and holistic risk assessment process
• Currently the $80,000 threshold is driving the procurement process rather than the overarching principle of achieving an
appropriate use of Commonwealth resources.
•
Risk assessments should not be based solely on procurement costs. Risk to organisational capability and other factors pertinent
to Agency B should also be considered. For example the procurement of $10,000 of off the shelf stationary should be
considered as low risk compared to the procurement of $10,000 worth of consulting services from a sole trader. Procurement
processes ought to be commensurate with the level of risk.
ANALYSIS & REVIEW OF COMMONWEALTH PROCUREMENT
PROCESESS UNDER $80,000 – AGENCY B CASE STUDIES
PAGE 15
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