Agency C Procurement Process

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Agency C Procurement Process
Business Process Map
Project
Analysis and Review of Commonwealth
Procurement Processes for procurements
under $80,000
Client
Department of Finance and
Deregulation
Date
Version
6 May 2011
FINAL V1.0
ThinkPlace Team
Raffaella Recupero
Behzad Emami
AUSTRALIA  NEW ZEALAND
LEVEL 1 UNIT 3 GREEN SQUARE KINGSTON 2604 P +61 6282 8852 F +61 2 6282 8832 WWW.THINKPLACE.COM.AU
Agency C Procurement Process
Purpose
This document contains a business process map for
procurements under $80,000, which specifies the requirements
set out in Agency C’s Operational Guidelines and other internal
guidance, as well as the overarching requirements of the
Commonwealth Procurement Framework.
ThinkPlace has worked with a small group of people in Agency
C to develop this document.
Contents
Intent Statement
3
Business process maps
Agency C CEI snapshot
Role statements
Map Levelling
Level 0 map
Level 1 map
4
5
7
10
11
12
Process analysis
Process issues, pressure points and suggestions for improvement
17
18
ANALYSIS AND REVIEW OF COMMONWEALTH PROCUREMENT
PROCESSES UNDER $80,000 – AGENCY C PROCUREMENT V1.0
PAGE 2
Agency C Procurement Process
Intent
A standardised, simple and safe process for all FMA agencies conducting procurements that fall under the $80,000 threshold
SYSTEM IN FOCUS
The FMA Act and Regulations set the framework for the proper
management of public money and public property in the
custody and control of the Commonwealth.
The Commonwealth Procurement
Guidelines (CPGs) articulate the
Government’s expectations for all
department and agencies conducting
procurement.
Agencies have evolved their procurement policies and
practices within the context of the agency’s organisational
structure, delegations, approval processes etc.
Under the FMA Act, FMA agency CEOs have
devolved authority to manage public money
within their agency.
Agency specific policies and procedures are
contained with large and complex volumes of
CEIs, departmental policy documents and
protocols.
CURRENT STATE
APPROACH FOR BRIDGING THE GAP
FUTURE STATE
Where are we now?
 Analysis of ‘2008-09 AUSTENDER statistics indicate 85,000
contracts (over $10,000) were awarded. The total value of
these contracts approx. $35bn
 Of those contracts, about 65,000 contracts falling under the
$80,000 threshold were awarded. The total value of these
contracts was about $12.6bn
 Over 80% of the total number of contracts correspond to about
4% total value. An APS 5/6 can spend up to 80% their time on
low value contracts
 Low value contracts translate to a high administrative burden
 Agencies have tailored procurement approaches reflecting
organisational structure, authority and delegations, approval
processes, risk appetite, level of IT maturity, and resourcing,
reporting processes and systems
 Procurement functions differ in agencies – some functions are
centralised, some are decentralised
 Participating agencies have undertaken work to review CEIs,
processes and protocols
 Whole of Government CEIs are under development
 Work has also been undertaken to simplify the standard short
form contract, reducing the number of pages from 80 to 6
How do we get there?
Analyse and review Commonwealth procurement practices
currently employed by selected agencies when conducting
procurements under $80,000, identifying issues, pressure points
and opportunities for improvement, and on that basis making
recommendations for simplifying and streamlining processes.
What do we need to do?
What would success look like?
 A better practice model for procurements under the threshold
that:
− Standardises the process across FMA agencies
− Makes it easier for staff to know what to do and how
to conduct procurements
− Reduces administrative burden
 Finance will be able to use the project findings and
recommendations as a basis for presenting a better
practice model to FMA agencies, where appropriate.
 The project will influence agency CEIs and processes
Who do we need to
involve?
 Agency C’s
Procurement Policy
Branch
 Procurement Policy
Areas and
representatives from
line areas
What do we need to
consider?
 Avoid overengineering or over
prescribing
 Aim to set a
benchmark
 Impact on
behavioural change
DRIVERS FOR CHANGE
What is the problem/ opportunity?
 Agency procurement processes are complex, confusing,
and onerous for staff
 Requirements vary from agency to agency – processes are
not standardised across government
 Suppliers are frustrated
Focussing question
How can we standardise and streamline the process for
procurements under the $80,000 threshold, making it less onerous
for FMA agencies, while also maintaining the integrity of the FMA
Act?
Out of scope
 The project will not assess how well agencies implement the
CPGs and relevant FMA legislation when undertaking
procurements
 The project will not redesign policy
Timing
April
• Intent, planning
and agency
engagement
• CPG process
modelling
May
• Agency CEI
process mapping
• Case study
development by
agencies
• Case study
analysis
June
• Synthesis
• Design ‘better
practice model’
ANALYSIS AND REVIEW OF COMMONWEALTH PROCUREMENT
PROCESSES UNDER $80,000 – AGENCY C PROCUREMENT V1.0
PAGE 3
Business process maps
AUSTRALIA  NEW ZEALAND
LEVEL 1 UNIT 3 GREEN SQUARE KINGSTON 2604 P +61 6282 8852 F +61 2 6282 8832 WWW.THINKPLACE.COM.AU
Agency C Procurement Process
Snapshot agency requirements specified by Operational Guidelines
Note: Information sourced from Agency C and Operating Guidelines
PRINCIPLES
Outcomes per the procurement framework
PROCESS CONDITIONS
Standards
PROCESS RULES
Workflow Leg & Approvals
Value for money is the core principle governing
all procurement within the Australian Government
sector
Planned procurement is required to comply with
the policies of the Commonwealth (refer FMA
Regulation 9)
Officials will be expected to maintain high ethical
standards when they undertake procurement
All participating potential suppliers are to be
treated as equitably as possible
The process rules for any procurement need to
be unambiguous, open and equitably applied to
all relevant parties
It is essential that an appropriate level of
documentation is maintained for any procurement






Officials undertaking procurement are to
record all major steps, the selected
procurement method and all relevant
decisions and authorisations relating to the
project/acquisition
For purchases under $5,000 file details of key
decisions are required (handwritten or formal)
Purchases between $10,000 to $80,000
require documentation of key decisions
As the value of the procurement increases,
the General Procurement Requirements
(Section 2 of Operating Guidelines Vol. 4.3)
set a more rigorous set of requirements for
testing the market, in line with Division 1 –
Procurement Principles of the CPG
procurement framework
All procurement activity in Agency C should
have a risk assessment undertaken as part
of the procurement process. This assessment
should scale with the size and complexity of
the procurement




Section 44 of the FMA Act and Financial
Circular 2011/01 charges Chief Executives to
promote the efficient, effective, ethical and
economic use of Commonwealth resources
An agreement to spend public money may not
be entered into unless approval for the
expenditure of the money has been given
under FMA Regulation 9 (and, if necessary,
with FMA Regulation 10)
FMA Regulation 9 requires an Approver must
not approve a spending proposal unless the
approver is satisfied, after reasonable
inquiries, that giving effect to the spending
proposal would be a proper use of
Commonwealth resources
The CPGs set down the fundamental policies
which are to apply to all Commonwealth
procurement activity. Officials must act in
accordance with the CPGs, as required by
FMA Regulation 7
Where an official undertakes procurement
that is inconsistent with the CPGs, he or she
is required to document his/her reasons for
doing so
ANALYSIS AND REVIEW OF COMMONWEALTH PROCUREMENT
PROCESSES UNDER $80,000 – AGENCY C PROCUREMENT V1.0
PAGE 5
Agency C Procurement Process
Snapshot agency requirements specified by Operational Guidelines
Note: Information sourced from Agency C Operating Guidelines
RULES
Continued…
TOOLS USED
Purchases under $5,000
Obtain verbal or written quotes and pay invoice



Purchases up to $10,000
Use existing supplier, panel member, multi-use
list member or access suppliers in the open
market
Obtain single verbal or written quote
Where appropriate, seek multiple quotes to
ensure value for money
Purchases $10,000 up to $80,000
The rules for purchases up to $10,000 also apply
For service provider panels, seek one or more
written proposals
In all other cases it is desirable to obtain three
written proposals, or more where necessary, to
demonstrate value for money
Business Groups to self assess probity, unless
rated as Extreme/High risk
Details of all agency procurements, with an
estimated contract value of $10,000 or more,
must be published on AusTender, within six
weeks of entering into the agreement






Self assessment forms
Procurement forms
Operational Guidelines 1.0 Delegations and
Authorisations
Operational Guidelines 4.4 Entering into &
Managing Contracts
Operational Guidelines 4.5 Payment of
Accounts
Operating Guidelines 4.6 Official Travel
Operating Guidelines 4.7 Official Hospitality
Operational Guidelines 7.1 Risk Management
Financial Management Information System
(SAP)
ANALYSIS AND REVIEW OF COMMONWEALTH PROCUREMENT
PROCESSES UNDER $80,000 – AGENCY C PROCUREMENT V1.0
PAGE 6
Agency C Procurement Process
Role statements
END USER
PROCUREMENT OFFICER
What are my specific obligations under
the FMA Act and CPGs?
Ensuring that the procurement
satisfies the principles of:
 Efficient, effective, ethical and
economic procurement
 Value for money
 Accountability and transparency
(through proper reporting)
What is my role and my responsibilities?
 Getting the required goods and/or services into the
agency
 Utilising or directing the goods and/or services
 Dealing with supplier invoices by certifying goods
and/or services received
 Ensuring due diligence has been demonstrated
 Developing initial specification requirements
 Ensuring agreement of purchase order number on
contract and invoice
 Confirming completed procurement specifications and
providing signoff
What are my concerns?
 That goods and/or services do not meet procurement
requirements
 Budgeting constraints
 Meeting deadlines
What are my specific obligations under
the FMA Act and CPGs?
Ensure procurement meets the
Commonwealth principles of:
 Value for money
 Efficient, effective, ethical and
economic procurement process
 Accountability and transparency
What is my role and my responsibilities?
 Ultimately provide an outcome to the business area
(end user)
 Appropriately approach the market
 Recording procurement process steps
 Assessing the risk throughout the process
 Creating documentation
 Ensuring value for money has been demonstrated
 Ensuring due diligence has been demonstrated
 Ensuring agreement of purchase order number on
contract and invoice
What are my concerns?
 Procurement processes are onerous
 Making sure that end user needs are satisfied
 Meeting deadlines
 Ensuring Statement of Requirements is scoped
properly for the procurement
 Making sure that the applicable procurement
processes have been conducted in compliance with
the Rules and Regulations.
DELEGATE
What are my specific obligations under
the FMA Act and CPGs?
 Required to make sure the
appropriate procurement method is
selected and followed
 Where appropriate, ensure that the
contract is published on AusTender
in a timely manner
 That Commonwealth resources are
used in an efficient, effective,
economical and ethical manner
 To abide by the delegation limit and
threshold considerations
What is my role and my responsibilities?
 Ensuring Commonwealth resources are used in an
efficient, effective, economical and ethical manner
 Appropriate documentation and justification has been
provided
 Budget has been approved and funds are available
 Authorise payment of supplier invoices
What are my concerns?
 A lack of understanding of obligations under the FMA
Act, CPGs and CEIs
 Poorly scoped procurement that may not meet agency
requirements
 I trust that Line Areas are managing obligations
(probity, conflict of interest, etc)
ANALYSIS AND REVIEW OF COMMONWEALTH PROCUREMENT
PROCESSES UNDER $80,000 – AGENCY C PROCUREMENT V1.0
PAGE 7
Agency C Procurement Process
Role statements
Central Procurement Unit
(Procurement Advice Team)
What are my specific obligations under
the FMA Act and CPGs?
 No specific obligations
What is my role and my responsibilities?
 Assist in meeting compliance requirements
 Provide procurement related advice
 Develop templates and support materials for Line
Areas
 Internal policy development (CEIs & OPGs)
 Reporting contracts
 Develop Certificate of Compliance
 Coordinate internal delegations instruments
 Conducting training and education on procurement
matters
 Ensuring due diligence has been demonstrated
What are my concerns?
 Compliance matters
 Quality of documentation
 Staff level of knowledge is appropriate and sufficient to
competently perform duties
 Circumstances and processes related to ‘contract
splitting’
PAYMENT PROCESSING
SPECIALIST
What are my specific obligations under
the FMA Act and CPGs?
 Obligated under the conditions set
out under the Certificate of
Compliance
What are my responsibilities?
 Check if goods and/or services have been received
 Monitor the supply of goods and/or services
 Produce Certification of Suppliers Invoice
 Authorisation of supplier payment
 Formally pay suppliers for goods and/or services
 Ensuring duel diligence has been demonstrated
 Ensure procurements under contract feature contract
number on invoice
 Ensure payment is made against currently
appropriated funding
 SAP data entry of Contracts / orders
 Certify supplier invoice for correctness
What are my concerns?
 That Reg. 9 approval is in place and documentation
has correct purchase value stated and there is
delegate approval
 Person certifying goods receipt has appropriate
knowledge of receipt
 Payment is being processed for the correct vendor
What are my specific obligations under
the FMA Act and CPGs?
 There are no specific obligations as
it is assumed that the Procurement
Officer is responsible for obligations
under the FMA Act and CPGs
 Specialists are accountable for the
advice they provide, ensuring advice
is accurate and complete to the best
of their knowledge and that they are
competent to provide such advice
What is my role and my responsibilities?
 To provide appropriate specialist (legal, audit,
insurance, risk, etc) advice in accordance with the
information provided, within the specified timeframes,
and in accordance with legislation and internal policy
 Ensuring that due diligence has been demonstrated
What are my concerns?
 That accurate and relevant information has been
provided in order to make a judgement
 Tensions between time constraints (i.e. request
deadlines) and quality of advice
 Unclear whether specialist needs to be proactive in
providing advice on procurements or should they wait
for the Procurement Officer to solicit information
ANALYSIS AND REVIEW OF COMMONWEALTH PROCUREMENT
PROCESSES UNDER $80,000 – AGENCY C PROCUREMENT V1.0
PAGE 8
Agency C Procurement Process
Role statements
SUPPLIER
What are my specific obligations under
the FMA Act and CPGs?
 No specific obligations
What is my role and my responsibilities?
 Win the procurement contract by submitting
documentation for evaluation in response to request
documentation
 Supply goods and/or services in accordance with the
statement of work/requirements
 Provide value for money service
 Make sure resources are available for the period of the
service
 Ensure allocated resources are competent and
competitive for the task at hand
What are my concerns?
 The amount of time it takes to go through the
procurement process
 Ambiguities about how to do business with
government and how to win business in government
 Standardisation of documentation
 The possibility of delays or late payments for goods or
services
 Meeting the expectations of the purchaser
 Often there is a lack of transparency which makes it
unclear if suppliers have all been equitably treated
ANALYSIS AND REVIEW OF COMMONWEALTH PROCUREMENT
PROCESSES UNDER $80,000 – AGENCY C PROCUREMENT V1.0
PAGE 9
Agency C Procurement Process
Map Levelling
Level 0 – Process phases
This map provides an overview of the entire process end to end,
including the process triggers, process phases, and main
workflows.
Level 0
Level 1 – Process activities
These maps drills down into each of the Level 0 process phases,
detailing the activities that occur.
Level 1
Level 2
Level 2 – Procedural tasks, support products and systems
Level 2 is not generally documented as a map, but rather
references guidelines, operational instructions, instruments and / or
business systems such as databases. These things underpin the
delivery of a process.
Symbols
Trigger
Activity
Document
Decision
Ongoing
Activity
End
Workflow
Database/
Storage
ANALYSIS AND REVIEW OF COMMONWEALTH PROCUREMENT
PROCESSES UNDER $80,000 – AGENCY C PROCUREMENT V1.0
Off page
connector
PAGE 10
Agency C Procurement Process
Level 0 – Process Phases
End User
Procurement
Officer
Identify
business need
Initiate
Receive
goods and
services
 procurement
process
 Approach
market
Delegate

Establish
contract
Sign contract
Review SAP
contract
CPU (PAT)
Pay for
 goods
and
Payment
Processing
services
Specialist
Supplier
Provide
procurement
submission
documentation
ANALYSIS AND REVIEW OF COMMONWEALTH PROCUREMENT
PROCESSES UNDER $80,000 – AGENCY C PROCUREMENT V1.0
PAGE 11
Agency C Procurement Process
Level 1 – Initiate procurement process 
Considerations
• Estimated value of procurement
/ project
• Check for existing
arrangements in place
• Review approach types
End User
Identify
business need
Develop draft
statement of work
(requirements)
Value of
procurement
?
< $5,000
> $5,000
< $10,000
Issues
• The business case, procurement plan executive minute all perform
the same function
• The requirements for documentation vary across business areas,
and usually depend on the delegate’s needs
1 x Quote
(verbal)
Draft
business case
2 x Quote
(written)
SoW
template
> $10,000
< $80,000
Procurement
Officer
Assist with formulating
statement of work
3 x Quote
(written)
Business
Procureme
case
nt plan
template
Executive
minute
Draft procurement
plan
Business
proc. plan
Evaluation
plan (draft)
Estimate
procurement
costing
Draft request
documentation
❷
RFQ / RFT
Template
Consider
• Risk assessment
• Procurement method
• Identify conflict of interest
• Evaluation approach
• Identify potential venders
Delegate
Seek delegate
approval
Preapproval?
Yes
No
CPU (PAT)
Supply procurement
templates
Template
storage
Payment
Processing
Specialist
Resources
AGIMO wiki, agency
intranet or business
group share drive
contain guidance
documents such as
Project plans, business
plans, client request
purchase orders,
strategic plan, etc
Review documents
against FMA Reg.
9/10 (as required)
End
Pre-approval considerations
Has the procurement initiate
documentation clearly shown:
• What is being purchased?
• Why is it being purchased?
• How is it being purchased?
• Complies with FMA Reg. 9?
Provide advice(as
required)
Supplier
ANALYSIS AND REVIEW OF COMMONWEALTH PROCUREMENT
PROCESSES UNDER $80,000 – AGENCY C PROCUREMENT V1.0
PAGE 12
Agency C Procurement Process
Level 1 – Approach market 
Participate in
evaluating
submissions
End User
Procurement ❶
Officer
Approved
RFQ / RFT
Approach market
Evaluate submissions
Evaluation
report
AusTender or
direct
Delegate
Seek delegate
approval
❸
Reg. 9/10
Evaluation
report
Approve?
Yes
No
Re-evaluate
submissions or refine
requirements
CPU (PAT)
❶
Payment
Processing
Specialist
Supplier
Provide completed
procurement
submission
Tender
response documentation
or quote
ANALYSIS AND REVIEW OF COMMONWEALTH PROCUREMENT
PROCESSES UNDER $80,000 – AGENCY C PROCUREMENT V1.0
PAGE 13
Agency C Procurement Process
Level 1 – Establish contract 
End User
Procurement ❷
Officer
Advise unsuccessful
suppliers of
procurement decision
Negotiate contract
SAP
Release SAP
documentation
Sign contract
Delegate
Purchase
order
s. 44
Procurement
contract
Review SAP contract
CPU (PAT)
SAP
contract
acceptable?
Yes
Clear SAP contract
SAP
contract
No
Prepare SAP contract
purchase order
Payment
Processing
Specialist
SAP
“simple”
template
Provide advice during
contract negotiations
Yes
Supplier
Negotiate contract
❺
If invoice and PO do
not match…
Accept
contract?
No
ANALYSIS AND REVIEW OF COMMONWEALTH PROCUREMENT
PROCESSES UNDER $80,000 – AGENCY C PROCUREMENT V1.0
PAGE 14
❹
Agency C Procurement Process
Level 1 – Receive goods and services 
CEI
Managing
of contract
Out of scope
Contract management
End User
CEI
Managing
of contract
Out of scope
Contract management
Procurement
Officer
Delegate
CPU (PAT)
Payment
Processing
❺
Specialist
Supplier
❸
Supply goods and/or
services
Invoice for goods
and/or services
Supplier
provided
invoice
ANALYSIS AND REVIEW OF COMMONWEALTH PROCUREMENT
PROCESSES UNDER $80,000 – AGENCY C PROCUREMENT V1.0
PAGE 15
Agency C Procurement Process
Level 1 – Payment for goods and services 
CEI
Managing
of contract
Out of scope
End User
Certify and receive
goods and/or services
Contract management
CEI
Managing
of contract
Out of scope
Procurement
Officer
Contract management
Authorise payment
Delegate
CPU (PAT)
Yes
Payment
❹
Processing
Verify supplier invoice
AP form or
P/ON
Specialist
Supplier
Ensure supplier
invoice matches
purchase order (PO)
(APU) Approve
payment
Invoice and
PO match?
FMIS
No
❸
Check SAP
contract with
Procurement
Officer
Receive payment
ANALYSIS AND REVIEW OF COMMONWEALTH PROCUREMENT
PROCESSES UNDER $80,000 – AGENCY C PROCUREMENT V1.0
End
PAGE 16
Process analysis
AUSTRALIA  NEW ZEALAND
LEVEL 1 UNIT 3 GREEN SQUARE KINGSTON 2604 P +61 6282 8852 F +61 2 6282 8832 WWW.THINKPLACE.COM.AU
Agency C Procurement Process
Process issues, pressure points and suggestions for improvement
ISSUES
Current problems with the process –
Documentation

Business Case, Procurement Plan,
Statement of Work, Executive Minute, and
request documentation all perform a similar
function, yet are separate documents,
resulting in several documents being
developed at different stages of the
procurement process.

It is also not clear which documentation is
required for which procurement type.

In conjunction with the ambiguous
documentation requirements, there is no
minimum standard of documentation
outlined for Delegate approval

The process is the same irrespective of
procurement value. That is, all procurements
require a business case.

Some business areas within the agency
have their own set of procurement templates
e.g. Government Network Services Branch
This results in multiple and varied templates
for common forms. The lack of
standardisation of document templates is a
major concern.
PRESSURE POINTS
Elements of the process that affect efficiency






For people new to procurement
− Difficulties in specifying requirements
− Unclear what quality looks like
− Lack of understanding of red tape
− End user doesn’t understand technical
requirements
Time constraints

Tight deadlines and onerous processes lead to
shortcuts that comprise the procurement (at a
principles level)
Risk assessments

Assessment of risks are subjective and no clear
definitions, examples, methodologies are
present
Roles and responsibilities

A number of roles in the process have
accountability, yet it is not clear who is
ultimately accountable
Processes and templates

General lack of standardisation and ambiguity
of process and documentation

Duplication of effort through the implementation
of different standards

Tools not appropriately used for streamlining
due to lack of user friendly tools and guidance
Lack of flexibility

Lack of recognition for the different categories
of procurement and streamlining of processes

Whole of govt. arrangements and coop
arrangements are disconnected and treated
differently
SUGGESTIONS FOR IMPROVEMENT
Outcomes from the workshop

Implement a standardised and streamlined
process, minimum standards documentation
that is commensurate with the procurement
(i.e. less documentation for procurements
<$5,000)

Educate relevant staff on processes, roles,
accountabilities, etc

Investigate options to centralise procurement
to specialists to reduce the impact / burden on
business areas

Simplify procurement risk assessment
procedures and tools

Increase implementation of e-tools for :
 Contract reporting (AusTender, SAP,
other)
 Volume purchase orders (Blanket
orders) in SAP
 Provide common terms & conditions
on internet

Create single product catalogue (for common
items) across whole of government

Create more multi-use lists that leverage the
expertise of other agencies e.g. Archives for
file storage procurements
ANALYSIS AND REVIEW OF COMMONWEALTH PROCUREMENT
PROCESSES UNDER $80,000 – AGENCY C PROCUREMENT V1.0
PAGE 18
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ANALYSIS AND REVIEW OF COMMONWEALTH PROCUREMENT
PROCESSES UNDER $80,000 – AGENCY C PROCUREMENT V1.0
PAGE 19
About Us
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AUSTRALIA  NEW ZEALAND
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