Agency C 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
3 June 2011
FINAL V1.0
ThinkPlace
Team
Raffaella Recupero
Mark Thompson
AUSTRALIA  NEW ZEALAND
LEVEL 1 UNIT 3 GREEN SQUARE KINGSTON 2604 P +61 6282 8852 F +61 2 6282 8832 WWW.THINKPLACE.COM.AU
About this document
Methodology
This document contains an analysis of three procurement case
studies provided by Agency C. Each case study was analysed
against a high level process model to understand actual
procurement processes employed and to identify areas of good
practice, unnecessary and / or duplicated processes, and
convoluted processes (inefficient / ineffective).
1. Agency C provided three procurement case studies that
describe actual procurement processes
ThinkPlace has worked with a small group of people in Agency
C to develop this document.
3. ThinkPlace worked with Agency C staff who are directly
involved in the case study to identify areas of good
practice, unnecessary and/or duplicated processes, or
convoluted processes.
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
4
5
6
High Level Analysis of Case Studies
7
Summary of process issues and insights
Good practice, unnecessary and convoluted processes
14
ANALYSIS & REVIEW OF COMMONWEALTH PROCUREMENT
PROCESESS UNDER $80,000 – AGENCY C 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
Selling agent for a cottage in South Australia.
Questions
Comments
What was procured?
Selling agent for a cottage in South Australia.
What was the value of the procurement?
Approximately $10,000 as the contract is still being performed
How was the procurement valued?
Market analysis of previous selling agents % fee and disbursements along with
independent valuation of the property .
Was documentation developed (e.g. file notes,
risk assessment, statement of work)?
If so, what type and why?
I was requested to seek EOIs from market, do a Procurement Plan and Evaluation Plan.
I considered this to be over-engineering a simple, low risk/low value procurement.
After rationalising processes, I utilised file notes, did a Project Disposal Plan (as I had a
number of procurements to coordinate), a thorough RFQ, and thorough Evaluation
Report (including self assessment probity review, simple procurement risk analysis).
Other documents include advice to Department of SEWPAC on Commonwealth Property Disposal
Policy requirements and a full due diligence process on the property
How was the market approached (e.g. direct,
select)?
Select procurement from licensed agents on the Real Estate Institute of South Australia
register – Phoned 5 reputable agents in the area to determine interest, approached 4
agents electronically with RFQ.
How long did the process take, from beginning
to end?
•
•
•
•
Who was involved in the process (e.g. central
procurement area, delegate, line area, etc.)?
What was their role?
Conducted within Property Branch.
Two Property Officers and an Assistant Director on the Evaluation Committee
Tender opening witness from within Property Branch
Director , Divestment Team was the delegate
What did the approval process involve?
•
•
Was there a reporting process?
No
Questions referred to the procurement area (if
any)
Initially, I wanted to reduce the red tape so approached PAT regarding need to do an
EOI. Informal discussions with PAT generally on the need for procurement/evaluation
plans for simple procurements.
RFQ sent 16 March 2011 closing 31 March 2011
EC report signed 11 April 2011
Unsuccessful letters sent 18 April 2011
Debrief unsuccessful respondent 27 April 2011
Simple process - delegate approval of the Project Plan, the Evaluation Committee Report
and Reg 9.
ANALYSIS & REVIEW OF COMMONWEALTH PROCUREMENT
PROCESESS UNDER $80,000 – AGENCY C CASE STUDIES
PAGE 4
Case Study 2
Consultant services for conduct of pricing review
Questions
Comments
What was procured?
Consultant services for conduct of pricing review
What was the value of the procurement?
$40k estimate
$16.5k actual
How was the procurement valued?
Estimated @ 25 days of consultancy time
Was documentation developed (e.g. file notes,
risk assessment, statement of work)?
If so, what type and why?
Procurement Plan incl. risk assessment and outline of requirement
Evaluation Plan incl. Reg 9
Request for Quotation
Emails – clarification of procurement process and timing (probity)
Evaluation report incl. risk assessment and Reg 9 approval – value for money assessment and summary of process
How was the market approached (e.g. direct,
select)?
Select approach from an existing panel
How long did the process take, from beginning
to end?
3 weeks for consultation on business requirements
3 weeks from release of RFQ
Total 6 weeks
Delivery of services – est. 6 weeks – contract delivery has been est. 16 weeks
Who was involved in the process (e.g. central
procurement area, delegate, line area, etc.)?
What was their role?
Line areas – confirm business requirements
Procurement Advice Team – probity
Delegate – approve approach t market and spending proposal
Admin – original contract and purchase order data entry
FSB – report contract
Line area – oversight of service delivery – contract management
What did the approval process involve?
2 stages – sign off if Business Procurement Plan and Evaluation Report
Was there a reporting process?
Yes – automated through data entry (SAP)
Questions referred to the procurement area (if
any).
Yes – probity questions
ANALYSIS & REVIEW OF COMMONWEALTH PROCUREMENT
PROCESESS UNDER $80,000 – AGENCY C CASE STUDIES
PAGE 5
Case Study 3
Purchase of 6 x GigaBit modules
Questions
Comments
What was procured?
6 x GigaBit modules – interface converters
What was the value of the procurement?
$18,249.99
How was the procurement valued?
Cost of equipment
Was documentation developed (e.g. file notes,
risk assessment, statement of work)?
If so, what type and why?
•
How was the market approached (e.g. direct,
select)?
Direct source + approach to existing panel
How long did the process take, from beginning
to end?
1 day for approval
5 days – contract/ purchase order
9 days – delivery
Total 15 days
Who was involved in the process (e.g. central
procurement area, delegate, line area, etc.)?
What was their role?
Line area – business requirement, risk assessment, approach to existing market, evaluation
Delegate – approval of purchase request
Admin – data entry of contract/ purchase order
FSB – report contract
Line are – certify goods received
What did the approval process involve?
Purchase request submitted to delegate
Was there a reporting process?
Yes
Questions referred to the procurement area (if
any).
No
•
Purchase request – summary of the procurement process including rationale, what was required and reason for
selecting vendor/ approach
Risk assessment
ANALYSIS & REVIEW OF COMMONWEALTH PROCUREMENT
PROCESESS UNDER $80,000 – AGENCY C 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 C Procurement Processes
Good practice, unnecessary and convoluted processes
Actual process
Issues
Improvements
Initiate
 procurement
process

Approach
market
Case Study 1
What actually happened
• Market analysis was undertaken to value the price of a
cottage – from that the percentage of agent’s fees could be
calculated
• Procurement Officer developed:
• Procurement plan
• Project Plan
• Evaluation Plan;
• EOI for 5 agents and RFQ to 4 agents;
• Advice to SEWPAC regarding sale
• Due diligence process
• Procurement Officer obtained delegate pre-approval based
on Project Plan and Ministerial Brief
• Sought advice from PAT regarding procurement activities –
was advised not to undertake EOI and to proceed with
RFQ
What were the issues
• Process over-engineered for a simple low risk/ low value
procurement; requirement of management was conflicting
with advice given by PAT regarding EOI process
• Agency CEIs were confusing to an officer new to
procurement resulting in excessive paperwork
• Agency C culture is very risk averse which result in
management requiring excessive paperwork
• Current process is driven by experience of Procurement
Officer and risk appetite of management
What are some improvement ideas?
• Provide education at all levels
• Culture change required to increase level of risk tolerance
• Considerations checklist to guide staff new to procurement
• A single template for procurement plans
• Toolset available in a central place accessible by
procurement officers, delegates, etc.

Establish
contract
Receive
goods and services

Pay for
goods and services
Case Study 3
Case Study 2
What actually happened
• Procurement was valued at approx. 25 days consultancy
time.
• Procurement estimated at $40k
• Procurement actual was $16.5k
• Business requirements were distributed to Branch staff for
consultation, taking 3 weeks
• Procurement Officer developed
• Procurement Plan
• Evaluation Plan
• draft RFQ documentation (using a select
approach from existing panel)
What actually happened
• Procurement officer approached market without planning
What were the issues
• No issues
What are some improvement ideas?
• None
What were the issues
• The clearer the business need the better the assessment
one can make about whether procurement approach will
meet the procurement principles/ outcome
What are some improvement ideas?
• Standard templates for Procurement Plan and Evaluation
Plan (already in use by business area)
• Procurement Plan and Evaluation Plan form the basis for
Delegate Reg 9 pre-approval
ANALYSIS & REVIEW OF COMMONWEALTH PROCUREMENT
PROCESESS UNDER $80,000 – AGENCY C CASE STUDIES
PAGE 8
Agency C Procurement Processes
Good practice, unnecessary and convoluted processes
Actual process
Issues
Improvements
Initiate
 procurement

process
Approach
market
Case Study 1
What actually happened
• Procurement Officer rang 5 real estates asking for their
expression of interest
• Procurement Officer released the RFQ to 4 interested
parties and received quotes
• Procurement officer assessed the quotes and developed
• Evaluation Report incl. probity review and
• Risk assessment
• Procurement officer sought sign off of Evaluation Report
• Procurement officer then sought Reg 9 sign off
What were the issues
• Procurement Officer was advised by a senior manager to
undertake an EOI process in addition to RFQ
• Multiple approvals were sought (EOI, RFQ, Procurement
Plan, Evaluation Report, Reg 9)

Establish
contract
Receive
goods and services
Case Study 2

Pay for
goods and services
Case Study 3
What actually happened
• RFQ was sent out to 3 parties on panel
• Quotes evaluated and documented in Evaluation Report
which also included risk assessment and value for money
statement
• Evaluation Report was the basis for Reg 9 approval
• The process took 3 weeks from release of RFQ to Reg 9
approval
What actually happened
• A quote was obtained via existing panel
• To test value for money principle, another quote was
obtained via ringing supplier directly
• A purchase request was drafted after the procurement was
valued. The request included requirements and reason for
selecting vendor.
What were the issues
• This approach skips the planning process and checks for
available budget
What were the issues
• None
What are some improvement ideas?
• Evaluation Report is the basis for Reg 9 approval.
• Development of Evaluation Plan adds value only for
procurements that involve more than one quote
What are some improvement ideas?
• This approach works for procurement of goods, but may
not work for services.
What are some improvement ideas?
• Consolidate approvals into pre-approval and Reg 9
approval
ANALYSIS & REVIEW OF COMMONWEALTH PROCUREMENT
PROCESESS UNDER $80,000 – AGENCY C CASE STUDIES
PAGE 9
Agency C Procurement Processes
Good practice, unnecessary and convoluted processes
Actual process
Issues
Improvements
Initiate
 procurement

process
Approach
market

Establish
contract
Receive
goods and services

Pay for
goods and services
Case Study 1
Case Study 2
Case Study 3
What actually happened
• Procurement Officer advised unsuccessful applicants via
letter and debrief if requested 1 month after RFQ was sent
out
No change from process map
What actually happened
• Purchase request raised including risk assessment and
justification for using vendor
• Purchase request approved by Delegate (obtaining Reg
9 approval)
What were the issues
• Paperwork for low value procurements is excessive
• Documentary requirements placed on industry discourages
competition
What are some improvement ideas?
• Streamline paperwork for procurement officers
• Streamline documentation requirements for industry
What were the issues
• None
What are some improvement ideas?
• None
ANALYSIS & REVIEW OF COMMONWEALTH PROCUREMENT
PROCESESS UNDER $80,000 – AGENCY C CASE STUDIES
PAGE 10
Agency C Procurement Processes
Good practice, unnecessary and convoluted processes
Actual process
Issues
Improvements
Initiate
 procurement
process

Approach
market

Establish
contract
Receive
goods and
services

Pay for
goods and services
Case Study 1
Case Study 2
Case Study 3
No change from process map
No change from process map
No change from process map
ANALYSIS & REVIEW OF COMMONWEALTH PROCUREMENT
PROCESESS UNDER $80,000 – AGENCY C CASE STUDIES
PAGE 11
Agency C Procurement Processes
Good practice, unnecessary and convoluted processes
Actual process
Issues
Improvements
Initiate
 procurement
process
Case Study 1

Approach
market

Establish
contract
Receive
goods and services
Case Study 2
Pay for
 goods
and
services
Case Study 3
What actually happened
• No AusTender reporting
What actually happened
No change from process map
What actually happened
No change from process map
What were the issues
• Business area not aware of AusTender reporting
requirement
What were the issues
• None
What were the issues
• None
What are some improvement ideas?
• Procurement reviews are not standard practice but would
inform better practice if they were made standard
What are some improvement ideas?
• None
What are some improvement ideas?
• None
ANALYSIS & REVIEW OF COMMONWEALTH PROCUREMENT
PROCESESS UNDER $80,000 – AGENCY C CASE STUDIES
PAGE 12
Summary of process issues and insights
In this section, a summary of process issues and improvements are presented
AUSTRALIA  NEW ZEALAND
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Agency C Procurement Process
Good practice, unnecessary and convoluted processes
GOOD PRACTICE
Proven techniques, methods and processes
UNNECESSARY OR CONVOLUTED PROCESSES
Redundant, inefficient, ineffective processes
•
Consolidate and implement a standard template
for planning and reporting (e.g. Procurement
Plan, Evaluation Plan and Evaluation Report)
•
The lack of a minimum requirement and standard
documentation means that procurement officer is
unsure what is required
•
In circumstances where procurement approach is
direct source to one supplier, an Evaluation Plan
does not add value. For other circumstances, an
Evaluation Plan is considered good practice.
•
Multiple approvals are sought throughout the
process, generally the result of interpretation of
guidance materials or inexperience on behalf of the
Procurement Officer
•
Approach the Delegate for pre-approval with a
Procurement Plan including a plan for how to
evaluate the procurement.
•
Advice given by PAT is not always consistent with
line manager advice, resulting in confusion, excessive
paperwork and in turn driving risk-averse behaviour
•
Approach the Delegate for Reg 9 approval with an
evaluation report.
•
•
Periodic reviews of a sample of procurements to
determine whether the procurement outcome met
the business need, also informing better practice
Lack of training at all levels to show staff how to
undertake a procurement
•
The focus is on getting the procurement through
and approved – rather than the outcome and
achievement of procurement principles.
ANALYSIS & REVIEW OF COMMONWEALTH PROCUREMENT
PROCESESS UNDER $80,000 – AGENCY C CASE STUDIES
PAGE 14
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ANALYSIS & REVIEW OF COMMONWEALTH PROCUREMENT
PROCESESS UNDER $80,000 – AGENCY C CASE STUDIES
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AUSTRALIA  NEW ZEALAND
LEVEL 1 UNIT 3 GREEN SQUARE KINGSTON 2604 P +61 6282 8852 F +61 2 6282 8832 WWW.THINKPLACE.COM.AU