Good Practice Model – 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
27 June 2011
FINAL V1.0
ThinkPlace Team
Raffaella Recupero
Mark Thompson
Linda Dewey
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
About this document
What is the intent of the good practice model?
The good practice model is 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 Commonwealth Procurement
Guidelines (CPGs) – value for money, efficiency, effectiveness, economical, ethical processes, accountability and transparency, and
encouraging competition.
The intent of the model is provide further guidance and clarity in the application of CPG principles (Division 1) by way of case studies. The
case studies are provided to guide decision making rather than prescribe actions.
Who is it for?
The good practice model has been designed primarily for Finance to influence agencies in how to run efficient and effective procurement
processes. The framework aims to meet the needs of Procurement Officer and Delegates when considering the level of oversight and rigour
required for a procurement process.
Contents
Rationale for change
3
Shift required to streamline processes for procurements under $80,000
4
How to determine the risk profile of a procurement under $80,000
5
Procurement pathways
6
Procurements under $80,000 - Case study one – Low risk procurement via credit card transaction
7
Procurements under $80,000 - Case study two – Low risk procurement
8
Procurements under $80,000 - Case study three – Medium risk procurement
9
Procurements under $80,000 - Case study four – High risk procurement (and beyond current financial year)
10
ANALYSIS & REVIEW OF COMMONWEALTH PROCUREMENT
PROCESESS UNDER $80,000
PAGE 2
Rationale for change
Main observations about agency processes
Based on review of agency CEIs and case studies
1. Unanimously, agencies reported that the CPGs lack specificity, and
while it is principles based, further guidance by way of case studies,
needs to be provided to agencies to help them conform with CPG
requirements, address inconsistencies and ambiguity.
4. Documentation requirements are not clearly stated, well understood or
standardised across agencies

Documentation can vary depending on the needs and
experience of a particular delegate

People are unsure of evidentiary requirements so multiple
documents can be created to ensure “the right thing is done”.
2. As evident in CEIs, cost is the determining factor for agency
procurement processes and requirements

There is a tension between business requirements (getting
the procurement done) and following the process

Value for money considerations factor in the cost of the good/
service being procured and not the cost effectiveness of the
procurement process
5. Approval requirements are not clearly stated, well understood or
standardised across agencies

Multiple approvals are sought over and above pre-approvals
and Reg 9 approvals
3. The concept of procurement risk is not well understood or applied

Some agency CEIs and guidance materials advise that risk
should be assessed and managed, but risk is not defined
and risk assessment tools are typically generic checklists

Routine and straightforward procurements are onerous and
over-engineered – a lot of time can be spent producing a
range of documents in an attempt to demonstrate
accountability and defensibility

Procurement effort (time and other resources) is not
commensurate with the scale (cost, complexity) and impact
(risk) of the procurement
ANALYSIS & REVIEW OF COMMONWEALTH PROCUREMENT
PROCESESS UNDER $80,000
PAGE 3
Shift required to streamline processes for procurements under $80,000
Hypothesis
A risk-based approach to procurement would mean processes and standards (i.e. documentation and approvals) are scalable, and the effort (time and other resources spent) in
the procurement process is proportionate to the scale (cost and complexity) and procurement risk (impact of procurement on reputation and capability)
 For low risk procurements (e.g. travel, stationery), minimal effort in developing documentation, getting quotations and approvals would be required.
 For higher risk procurements (e.g. consultancies), more effort is required in developing comprehensive documentation, testing market value and getting approvals.
Current situation
Low
cost
Value for
money
Efficient
Ethical
Effective
Economical
Encourage
Competition
Transparent and
Accountable
Medium
cost
Value for
money
Efficient
Ethical
Effective
Economical
Encourage
Competition
Transparent
and
Accountable
High
cost
Value for
money
Efficient
Ethical
Effective
Economical
Encourage
Competition
Transparent and
Accountable
Proposed Model
Value
for
money
Low risk
Proper use of
Commonwealth
resources
 Procurement processes and effort determined solely on process cost
− The level of expertise, experience and risk appetite of those involved in the
procurement influences the effort placed on each activity
 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 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”
Medium
risk
High
risk
Value for
money
Value for
money
Efficient
Ethical
Effective
Economical
Efficient
Ethical
Effective
Economical
Efficient
Ethical
Effective
Economical
Encourage
Competition
Transparent
and
Accountable
Encourage
Competition
Encourage
Competition
Transparent
and
Accountable
Proper use of
Commonwealth
resources
Transparent
and
Accountable
 Procurement processes are clearly directed at delivering policy and legislative intent – proper use of
Commonwealth resources
 Procurement effort is proportionate to the risk** profile of a 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)
**Risk comprises impact, overall cost, and complexity of the procurement
 The Process cost can outweigh cost of what is being procured
SIZE The size of each activity represents the amount of oversight and rigour
ANALYSIS & REVIEW OF COMMONWEALTH PROCUREMENT
PROCESESS UNDER $80,000
PAGE 4
How to determine the risk profile of a procurement under $80,000
Procurement risk comprises the following elements – impact, overall cost and complexity.
An individual’s and/or organisation’s perception of risk is subjective and influenced by factors such as technical skills and knowledge, past experiences, and
personal/organisational characteristics and culture. In order to capture the uniqueness of each different agency , the risk elements are explored as focussing questions. The
questions should be considered when determining the risk profile of a procurement. The risk assessment will help in determining a procurement process that is proportionate to
the scale (cost and complexity) and impact on reputation and capability.
Procurement
Officer undertaking
low risk
procurement via
credit card – with
Reg 9 delegation
Impact
Identify and assess what risks need to be managed
throughout the procurement
 Does this procurement impact on the reputation of the
organisation and/or government (political)?
 Does this procurement impact on the capability of the
organisation?
Procurement
Officer undertaking
low risk
procurement
 Is this a supplier who is known for successful delivery?
 Is the good/service readily available?
Overall Cost*
Assess whether to apply agency credit card policies or
Mandatory Procurement Policies (Div 2)
 Is the procurement below $80,000 in value?
 Is it suitable to apply agency credit card policies for the
good(s)/service(s) being purchased?
Complexity
Risk Profile
Determines how much rigour and
oversight you will need to employ for
the procurement
Procurement
Officer undertaking
medium risk
procurement
Assess whether or not your procurement demands close
attention
 Is a good or service being procured?
 Is this a routine or one-off procurement?
 Will procurement of the good(s)/service(s) impact on businessas-usual?
 Is an existing arrangement being used?
* OVERALL COST includes all procurement process costs as well as the cost of the
good/service being procured
Procurement
Officer undertaking
high risk
procurement
ANALYSIS & REVIEW OF COMMONWEALTH PROCUREMENT
PROCESESS UNDER $80,000
PAGE 5
Procurement pathways
The flatter the pathway, the less onerous
the procurement requirements.
Procurement Officer
undertaking
low risk procurement via
credit card – with Reg 9
delegation
1
IDENTIFY BUSINESS NEED
“I need to purchase the monthly stationery
order for my business area.”
Case study examples are illustrative and provided to demonstrate a risk based approach to procurement
under $80,000. Commonwealth policies such as lowest possible fare and agency-specific operational
requirements are not taken into account. Any activities concerning contract management are out of scope.
2
PLAN PROCUREMENT
“I know that there is an existing
arrangement already in place with a
supplier.”
3
APPROACH MARKET

“I check with the supplier to see the cost of
the monthly order.”
4
NEGOTIATE AND
FINALISE CONTRACT
“I decide to get the monthly order from the
supplier through the existing arrangement.”
5
RECEIVE GOODS /
SERVICES
“I pay for the stationery with my corporate credit
card and provide the details to my Director.
“I print a receipt and I file it.”
Procurement Officer
undertaking
low risk procurement
“My Branch Head has asked me to arrange a
venue for our Branch Planning Day”
“I discuss our venue requirements and budget
more fully with my Branch Head”
“I know of a few suppliers our agency uses often
and so I phone them to discuss their facilities
and packages”
“I quickly compare the packages for value
for money – a particular supplier will
provide everything we need for a
successful planning day. I document my
proposal and email it to my delegate for
approval”
“The delegate approves the payment of monies
(Reg 9) so I prepare a purchase order and send
it to the supplier”
“We report the contract to AusTender”
Reg 9 Approval
Reg 10A Approval (if req.)
Procurement Officer
undertaking
medium risk procurement
“I need to find a publisher to create and deliver a
series of public and industry information booklets.
The production standards are high”
“I check our existing supplier arrangements
for suitability. I identify three suppliers from
the panel”
“Once my delegate approves, I send our
requirements to potential suppliers”
“I develop a short procurement plan (approx.
2 pages) which includes a brief business
case and method for evaluating supplier
quotes”
“I compare quotes in line with the agreed
evaluation plan. The quotes are evaluated
and a brief evaluation report is
documented”
“The delegate approves the payment of
monies (Reg 9)”
Pre-approval
“I need to organise the maintenance of the air
conditioning in the IT data centre”
“I develop a comprehensive procurement
plan and detail business case and
evaluation panel
“I check our existing supplier
arrangements for suitability. I identify
three suppliers from the panel.
Reg 9 Approval
Prior to going to market, I discuss the
procurement plan and the evaluation plan with
the delegate and seek a commitment to spend
monies from the delegate. I also request Reg
10 approval because the work is likely to
involve expenditure beyond the current
financial year
“I set up an evaluation panel who will be
responsible for evaluating supplier quotes
and making a recommendation to the
delegate”
Delegate granting
Reg 9 Approval
“We report the contract to AusTender”
“I negotiate the terms of the contract and
obtain Reg 9 approval from the delegate”
“I provide my delegate with a draft
procurement plan and seek approval to
approach potential suppliers”
Procurement Officer
undertaking
high risk procurement
“I prepare a purchase order and send it to
the supplier”
Once my delegate approves, I send our
requirements to potential suppliers
Pre-approval
The evaluation panel compare quotes in line
with the agreed evaluation plan. The quotes
are evaluated and an evaluation report is
documented. I send the evaluation report to
the delegate, making a recommendation and
requesting Reg 9 approval
“I receive goods and services and provide
relevant payment info for processing”
“We report the contract to AusTender”
The delegate approves the payment of
monies (Reg 9). A contract is prepared with
the advice of our legal area and provided to
the supplier to start negotiations of the terms
Reg 9 approval
Reg 10 approval
ANALYSIS & REVIEW OF COMMONWEALTH PROCUREMENT
PROCESESS UNDER $80,000
PAGE 6
Case study one
Low risk procurement via credit card transaction
The flatter the pathway, the less
onerous the procurement requirements.
Scenario –Stationery Order

I need to purchase the monthly stationery order (pens, pencils, paper, etc.) for my business area.
Experience
Procurement Officer
undertaking
low risk procurement
via credit card – with
Reg 9 delegation
1
IDENTIFY BUSINESS NEED
2
PLAN PROCUREMENT
Musts stated in the Commonwealth
Procurement Guidelines
3
APPROACH MARKET
4
NEGOTIATE AND
FINALISE CONTRACT
5
RECEIVE GOODS /
SERVICES

“I need to purchase the monthly
stationery order for my business
area.”
“I know that there is an existing
arrangement already in place with a
supplier.”
“I check with the supplier to see the
cost of the monthly order.”
“I decide to get the monthly order
from the supplier through the
existing arrangement.”
“I pay for the stationery with my
corporate credit card and provide the
details to my Director.
“I print a receipt and I file it.”
Simplified view
of process
CPG
Requirements
Identify
procurement need
Identify potential
suppliers
Select preferred
supplier
Assess market

Compare all costs,
benefits and risks to
determine value for
money

A delegate must be
satisfied that the
procurement is a proper
use of Commonwealth
resources and the
decision is defensible
(able to withstand public
scrutiny)
Document process and
decisions

Records are retained for a
period of 3 years
ANALYSIS & REVIEW OF COMMONWEALTH PROCUREMENT
PROCESESS UNDER $80,000
PAGE 7
Case study two
Low risk procurement
The flatter the pathway, the less
onerous the procurement requirements.
Scenario –venue hire

Our Branch needs a venue to hold a Branch planning day.
Experience
1
IDENTIFY BUSINESS NEED
Musts stated in the Commonwealth
Procurement Guidelines
2
PLAN PROCUREMENT
3
APPROACH MARKET
4
NEGOTIATE AND
FINALISE CONTRACT
5
RECEIVE GOODS /
SERVICES
Procurement Officer
undertaking
low risk procurement
“My Branch Head has asked me to arrange a
venue for our Branch Planning Day.”
“I discuss our venue requirements and budget
more fully with my Branch Head”
“I quickly compare the packages for value
for money – a particular supplier will
provide everything we need for a
successful planning day. I document my
proposal and email it to my delegate for
approval”
“I know of a few suppliers our agency uses
often and so I phone them to discuss their
facilities and packages”
Delegate granting
Reg 9 Approval
“The delegate approves the payment of monies
(Reg 9) so I prepare a purchase order and send
it to the supplier”
“We report the contract to AusTender”
Reg 9 Approval
Reg 10A Approval (if req.)
Simplified view of
process
CPG Requirements
Identify
procurement
need
Understand
procurement need
Identify potential
suppliers

Call suppliers for
quotes
Ethical and non-discriminatory
approach to suppliers,
including small to medium
enteprises (SMEs)
Assess quotes
Select preferred
supplier
Recommend
supplier to
delegate

Compare all costs, benefits
and risks to determine value
for money

Before entering into a
contractual arrangement,
spending proposal approved
by delegate (Reg. 9 approval)
– in writing

A delegate must be satisfied
that the procurement is a
proper use of Commonwealth
resources and the decision is
defensible (can withstand
public scrutiny)
Create
purchase
order
Pay the account
Document process
and decisions

Use simple contractual
arrangements, such as
purchase orders or the
standard suite of contracts (if
applicable to agency) instead
of a long written contract

Decisions are documented and
retained for a period of 3 years

Report to AusTender contracts
> $10,000
ANALYSIS & REVIEW OF COMMONWEALTH PROCUREMENT
PROCESESS UNDER $80,000
PAGE 8
Case study three
Medium risk procurement
The flatter the pathway, the less
onerous the procurement requirements.
Scenario –graphic design consultancy

Our agency needs publisher to create and deliver a short series of public and industry information booklets. These
will be high quality publications.
Experience
1
IDENTIFY BUSINESS NEED
2
PLAN PROCUREMENT
3
Musts stated in the Commonwealth
Procurement Guidelines
APPROACH MARKET
4
5
NEGOTIATE AND
FINALISE CONTRACT
RECEIVE GOODS /
SERVICES
Procurement Officer
undertaking
medium risk procurement
“I need to find a publisher to create and deliver a
series of public and industry information
booklets. The production standards are high”
“I check our existing supplier arrangements
for suitability. I identify three suppliers from
the panel”
“Once my delegate approves, I send our
requirements to potential suppliers and request
a proposal”
“I develop a short procurement plan (approx.
2 pages) which includes a brief business
case and method for evaluating supplier
quotes”
Simplified view of
process
CPG Requirements
Understand
procurement
need
I determine the risk
profile of a
procurement
Check existing
arrangements

Develop brief
procurement plan
Prepare
statement of
work
Before approaching potential
suppliers get pre-approval from
a delegate – commitment to
spend public monies
“We report the contract to AusTender”
“The delegate approves the payment of
monies (Reg 9)”
Pre-approval
Identify
procurement
need
“I prepare a purchase order and send it to
the supplier”
“I negotiate the terms of the contract and
obtain Reg 9 approval from the delegate”
“I provide my delegate with a draft
procurement plan and seek approval to
approach potential suppliers”
Delegate granting
Reg 9 Approval
“I compare quotes in line with the agreed
evaluation plan. The quotes are evaluated
and a brief evaluation report is
documented”
Reg 9 Approval
Identify potential
suppliers

Issue RFQ
Receive quotes
Ethical and non-discriminatory
approach to suppliers, including
small to medium enterprises
Assess submissions
and write brief
evaluation report
Select preferred
supplier and
recommend to
Delegate
Negotiate
and finalise
contract

Compare all costs, benefits
and risks to determine value
for money

Before entering into a
contractual arrangement,
spending proposal approved
by delegate (Reg. 9 approval)
– in writing

A delegate must be satisfied
that the procurement is a
proper use of Commonwealth
resources and the decision is
defensible (can withstand
public scrutiny)

Create purchase
order
Document process
and decisions

Use simple contractual
arrangements, such as
purchase orders, the standard
suite of contracts (if applicable
to agency) or agency-specific
templates instead of a long
written contract

Decisions are documented and
retained for a period of 3 years

Report to AusTender contracts
> $10,000
Unsuccessful suppliers are
notified and offered a debrief
ANALYSIS & REVIEW OF COMMONWEALTH PROCUREMENT
PROCESESS UNDER $80,000
PAGE 9
Case study four
High risk procurement (and beyond current financial year)
The flatter the pathway, the less
onerous the procurement requirements.
Scenario –unscheduled maintenance of air-conditioning service in data centre
Our agency requires unscheduled air conditioning maintenance in the data centre. IT systems will need to be shut down for a defined period of time. The risk of the maintenance not
being done properly or within the allocated timeframe could result in IT service disruption or unavailability. Further difficulties in restarting IT services after the maintenance may
also result in services difficulties. This work is likely to involve expenditure beyond the current financial year.
Experience
Procurement Officer
undertaking
high risk procurement
1
IDENTIFY BUSINESS NEED
“I need to organise the maintenance of the air
conditioning in the IT data centre”
2
PLAN PROCUREMENT
“I develop a comprehensive
procurement plan, incl. a detailed
business case and evaluation process”
“I check our existing supplier
arrangements for suitability. I identify
three suppliers from the panel.”
“I set up an evaluation panel who will be
responsible for evaluating supplier quotes
and making a recommendation to the
delegate”
Delegate granting
Reg 9 Approval
Simplified view of
process
CPG Requirements
3
APPROACH MARKET
4
Understand
procurement
need
I determine the risk
profile of a
procurement
Check existing
arrangements

Develop
comprehensive
procurement plan
Prepare
statement of
work
Before approaching potential
suppliers get pre-approval from
a delegate – commitment to
spend public monies
“Once my delegate approves, I send our
requirements to potential suppliers and request
a proposal”
5
RECEIVE GOODS /
SERVICES
“I receive goods and services and provide
relevant payment info for processing”
“We report the contract to AusTender”
“The delegate approves the payment of
monies (Reg 9). A contract is prepared with
the advice of our legal area and provided to
the supplier to start negotiations of the
terms”
Reg 9 and
10 Approval
Identify potential
suppliers

Musts stated in the Commonwealth
Procurement Guidelines
“The evaluation panel compare quotes in line
with the agreed evaluation plan and
evaluation report is documented. I send the
evaluation report to the delegate, making a
recommendation and requesting Reg 9
approval and Reg 10 approval because the
work is likely to involve expenditure beyond
the current financial year”
“Prior to going to market, I discuss the
procurement plan and the evaluation plan with
the delegate and seek a commitment to spend
monies from the delegate”
Pre-approval
Identify
procurement
need
NEGOTIATE AND
FINALISE CONTRACT

Issue RFQ
Receive quotes
Ethical and non-discriminatory
approach to suppliers, including
SMEs
Assess submissions
and write
comprehensive
evaluation report
Select preferred
supplier and
recommend to
Delegate
Negotiate
and finalise
contract
Create purchase
order
Document process
and decisions

Before entering into a
contractual arrangement,
spending proposal approved
by delegate (Reg. 9 approval)
– in writing
Use simple contractual
arrangements, such as
purchase orders, the standard
suite of contracts (if applicable
to agency) or agency-specific
templates instead of a long
written contract


Reg 10 approval obtained –in
writing
Decisions are documented and
retained for a period of 3 years


A delegate must be satisfied
that the procurement is a
proper use of Commonwealth
resources and the decision is
defensible
Report to AusTender contracts
> $10,000

Unsuccessful suppliers are
notified and offered a debrief

Compare all costs, benefits
and risks to determine value
for money

ANALYSIS & REVIEW OF COMMONWEALTH PROCUREMENT
PROCESESS UNDER $80,000
PAGE 10
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ANALYSIS & REVIEW OF COMMONWEALTH PROCUREMENT
PROCESESS UNDER $80,000
PAGE 11
AUSTRALIA  NEW ZEALAND
LEVEL 1 UNIT 3 GREEN SQUARE KINGSTON 2604 P +61 6282 8852 F +61 2 6282 8832 WWW.THINKPLACE.COM.AU