Aggregated purchasing demand – procurement guide
Setting up and using common use arrangement for Victorian Government departments and
agencies
Governance Policy
Complexity and
Capability Policy
Market Analysis
and Review Policy
Market Approach
Policy
Contract
Management and
Disclosure Policy
What is aggregated demand?
Aggregated purchasing demand is grouping together demand for commonly purchased goods and services
to harness greater economies of scale when negotiating with potential suppliers.
An aggregated demand under VGPB policy framework can be a state purchase contract or a sole entity
purchase contract.
 State purchase contracts (SPC) is an aggregated arrangement for use by government departments and
agencies across the Victoria Government
 sole entity purchase contracts (SEPC) is established for one department or a business unit/group of
business units within an organisation.
An aggregated demand can be mandated or non-mandated:
 mandated: Covers all departments and some outer budget
agencies. These are used where there is strong and ongoing
demand for common use goods and services that can be easily
defined in advance.
 non-mandated: Set up for all departments and outer budget
agencies to use as required. Non-mandated SPCs are used
where future demand cannot be adequately defined in
advance.
The Market analysis and review policy details the mandatory
requirements for establishing, managing and operating SPCs and
SEPCs. SPCs and SEPCs must detail the rules of use for buyers
intending to purchase under the contract.
Terminology
Pre-qualified supplier arrangements
(also known as multi-use lists, a
register or multiple supplier
arrangement) are arrangements
where individual suppliers satisfy the
conditions for inclusion but are not
formally contracted to provide goods
and or services.
When to set up an SPC or SEPC
The analysis of spend data and a complexity assessment of your procurement categories will identify
opportunities to aggregate demand.
What does an SPC/SEPC look like?
SPC/SEPCs can be structured in a number of ways including, but not limited to, the following arrangements:
 sole or multiple suppliers (multiple suppliers constitute a panel arrangement);
 open or closed arrangements;
 pre-qualified supplier arrangements;
 brokerage service model;
 master vendor; or
 software licence enterprise agreements (an agreement to supply multiple software licences and
associated services on a whole of government or entity basis).
Using this guide
This guide accompanies the Victorian Government Purchasing Board’s (VGPB) new procurement framework. Refer to the policies for
mandatory requirements. For more information, visit the Procurement Victoria website at www.procurement.vic.gov.au
These sourcing models are explained in more detail in Table 1.
Accessing any of the arrangements listed above requires compliance with the rules of use established for that
arrangement.
Table 1: Sourcing models
Option
Description
Sole supplier
Where one supplier will meet the specified requirements.
Multiple supplier
arrangements
Multiple supply arrangements are used to deliver increased competition which can result in
increased savings and access to a broad range of skillsets, capabilities and innovation.
Pre-qualification arrangements allow all eligible suppliers access to government business
through a pre-qualification process. Typically used where a wide variety of skills and
capabilities are sought across a large supplier base. For further information about
pre-qualification arrangements refer to the guideline for pre-qualified supplier arrangements.
Panels allow contracted suppliers access to government business through a detailed tender
process typically used where products and services sought are generic and where further
savings and administrative efficiencies can be generated through aggregation of spend within
a limited supply base. Panels can be either open or closed (see guidance below).
Master vendor
A single supplier with pre-defined contractual rates responsible for developing partnerships
with second tier suppliers for the purpose of engaging specialists to provide services. Can be
used to reduce complexity and administration in managing contracts while ensuring broader
access to supply (e.g. staffing services).
Broker
Where an individual or group is engaged to source services from a third party (typically various
manufacturers) and provide quotations based on pre-defined statements of work. Used where
market expertise and buying power is low to deliver better value for money (e.g. print
services).
Multiple supplier arrangements
Such arrangements may vary in complexity and scope. They can be a pre-qualification arrangement or a
panel, they can be open or closed arrangements.
A pre-qualification arrangement is a list of suppliers who satisfy certain key selection criteria relating to their
interest and capability in supplying particular goods and/or services. Generally there will be terms and
conditions for being party to the arrangement but no head agreement.
A panel arrangement establishes a contract with suppliers through a more detailed market approach. A head
agreement is established.
Open arrangements
Open arrangements allow new suppliers to be added during the term of the arrangement. The arrangements
for adding/removing suppliers should be included in the information provided to the market when
establishing the arrangement. Open arrangements may be appropriate when:
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prices or rates are indicative and may fluctuate
there is diverse expertise or a large number of suppliers in the marketplace
the requirement is broad
the market is emerging or immature, and there is a likelihood of new entrants and changes over time, or
the period of the arrangement is particularly long.
Closed arrangements
Closed arrangements generally have a set number of suppliers for a given period of time. Such arrangements
may be appropriate when:
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fixed prices, fees or rates apply
there are specific requirements such as specialised skills and knowledge
regional or area based suppliers are needed to ensure responsiveness
product differentiation exists in the marketplace
new products, providers and technologies are constantly emerging
there is a strong potential for government purchasing power to influence the market, which would be
restricted if the arrangement was closed to new entrants, and
demand is not well understood at the start of the arrangement.
Optimal number of suppliers
The number of suppliers in an arrangement should take into account the scope of work to be allocated
among suppliers and the ability to achieve continuous improvement through effective contract
management. In establishing an arrangement, consideration should be given to the following:
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the anticipated amount of work
offering participating parties a choice of suppliers
the type and breadth of goods and services and whether individual suppliers can fulfil all requirements
the cost to the suppliers participating in relation to the estimated work obtained and
the cost to managing the panel arrangement.
The indicative number of suppliers should be considered when developing the business case and noted in
the information provided to the market.
Rules of use
All multiple supplier arrangements are to have rules of use that determine how buyers are to invite, select
and manage suppliers from the arrangement.
Rules of use can be consistent across the whole arrangement or segmented to reflect the different goods
and services available from the arrangement.
Segmenting the rules of use should occur under common core requirements to deliver a high degree of
process consistency. Segmenting the rules of use has particular relevance where:
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the complexity of supply across the arrangement is varied;
suppliers on the arrangement have different skill sets and competencies;
supplier risk is not consistent across the whole arrangement;
there is diversity in the capability of suppliers; and
where the requirement to supply is associated with different geographic regions.
Rules of use can provide consistency in the management of suppliers:
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where a multi supplier arrangement does not have a head agreement in place, the rules of use should
stipulate that procurement from the arrangement valued at over $100 000 (incl. GST) be published on
the Contracts Publishing System; and
the rules of use may also stipulate information to be included on the purchase order to assist with
record management practices.
Changing contract arrangements:
The SPC/SEPC contract manager is usually responsible for approving administrative variations. Financial
commitments or changes in estimated costs in relation to an individual purchase should be approved by a
person with the appropriate financial delegation.
Access to an SPC or SEPC for non-government bodies
Subject to approval of the lead agency, eligible (tax exempt) non-government bodies associated with
philanthropic or other public benefit activities may access the goods and services under contract by
committing to comply with the rules of use.
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