Capability - Procurement guide
Assessing the capability of an organisation, business unit or individual to
conduct procurement activities
Governance Policy
Complexity and
Capability Policy
Market Analysis
and Review Policy
Market Approach
Policy
Contract
Management and
Disclosure Policy
What is capability?
Competence, capability and capacity are often used
interchangeably to describe an individual’s or organisation’s ability
to perform tasks or activities effectively.
In the context of managing procurement activity, the term
‘capability’ is increasingly used to describe the combination of an
organisation’s expertise, resourcing, systems, policies and
processes to execute and manage specific procurement tasks and
activities.
Note: Definiton taken from Rogers, Paul, ‘The Glossary’
(https://www.cips.org/Knowledge/procurement-glossary/)
The VGPB’s Complexity and capability
assessment policy states that the head of your
organisation (the accountable officer) must
ensure that your organisation has an
appropriate level of procurement expertise,
resources, systems and processes to enable
procurement activities to be completed
successfully
Your organisation must not carry out
procurement where there is an insufficient level
of capability.
Why assess capability?
An assessment of capability ensures procurement activities are supported by the appropriate skills,
resources, systems and processes. It can be measured at the organisational, business unit or individual level.
The results of your capability assessment, coupled with an understanding of the complexity of your
procurement activities, will identify whether or not you should proceed with a procurement activity.
If sufficient expertise is not available, you can take steps to increase procurement capability through
training, process/system changes, identifying individuals with specific category expertise and/or increasing
internal capability by engaging external expertise.
How often to assess capability?
An assessment of capability at the organisational level forms part of your annual procurement planning
process. You may also need to assess capability at the business unit or individual level if:


you have a multiple or a decentralised procurement function; and/or
there are significantly different levels of procurement capability in the organisation.
Assessing a higher level of capability at the business unit or individual level allows these areas of your
organisation to carry out more complex procurements than would otherwise be permitted by your
organisational capability assessment.
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
A significant change to your governance structure, organisational design, staffing, training, processes, tools
and/or systems, will more than likely require a new capability assessment. A significant change in the
external environment in which the organisation operates can also trigger additional capability assessments.
Your internal procurement unit (IPU) or equivalent is responsible for managing, preparing and monitoring your organisation’s
capability development plan. The IPU must have appropriate knowledge and experience to review and endorse the assessment.
The capability assessment
The capability assessment structure can be used to assess capability at the organisational, business unit, or
individual procurement personnel level. It identifies current procurement capability as well as capability gaps
to drive continuous improvement.
Procurement capability is assessed in three core areas of organisational capability:
1. governance and organisation—governance and operational structure, policy and functioning of the
organisation/business unit/individual personnel;
2. tools, systems, processes—procurement tools, systems and processes used across the
organisation/business unit/individual personnel; and whether certain business units/individuals already
carry out significantly more complex procurement activities; and
3. sourcing—managing and monitoring performance of suppliers, sourcing strategies and procurement
activities.
Each of these core areas of capability are made up of capability criteria, as illustrated in Figure 1 (displayed
at the end of this guide). These criteria indicate the key capabilities that an organisation/business
unit/individual personnel should possess in order to carry out the organisation’s procurement activities.
Capability assessment process
There are four key steps to assessing capability, and an optional fifth action:
1. Is a capability assessment required?
2. Determine appropriate level for capability assessment.
3. Manage the preparation of a capability assessment.
4. Does organisation have required capability?
5. Capability build actions.
Step 1: Is a capability assessment required?
The head of your organisation (or delegate) decides whether the organisation needs a capability assessment.
If required, proceed to Step 2. If not required, it is important to document your reasons.
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Step 2: Determine appropriate level for capability assessment
The head of your organisation (or delegate) determines what level of assessment is required,
i.e. organisational, business unit, or individual procurement personnel level. As a minimum, you
would expect to complete an organisation level assessment every year to cover all areas involved in
procurement.
When deciding the appropriate level for the capability assessment, consider:


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the structure of the procurement function in the organisation, i.e. is it centralised or decentralised;
whether some business units/individual personnel are likely to have significantly higher procurement
capability than the overall organisation; and
whether certain business units/individuals already carry out significantly more complex procurement
activities.
If your organisation has multiple or decentralised procurement functions, you might find a higher level of
capability in individual business units or procurement personnel than is available at the organisation level. In
this instance, it is worth doing a separate assessment for those business units/individuals to allow them to
do more complex procurement.
Once you know the appropriate level for your capability assessment, proceed to Step 3: Perform a capability
assessment.
Step 3: Perform a capability assessment
There are a number of tools and templates available on the Procurement Victoria website to help with your
capability assessment.
The capability assessment tool and template is a two part document. The tool contains the performance
standards used to complete the template. Together they help you assess the maximum level of procurement
complexity that your organisation can take on.
When the capability assessment is complete, proceed to Step 4: Does the organisation have the required
capability?
Step 4: Does the organisation have the required capability?
Where an organisation/business unit/individual procurement personnel is identified as having sufficient
capability to carry out an identified procurement activity, the organisation /business unit/individual
procurement personnel would continue through to the next stage of procurement planning.
Note: The capability assessment tool focuses on current capability. It does not take into account planned enhancement of capability.
A further assessment can be prepared once the added capability has been implemented and is operational.
Where the assessment indicates insufficient capability in relation to the complexity of procurement activity,
proceed to Step 5: Capability build actions.
Step 5: Capability build actions (optional)
Your organisation can develop internal capability and/or increase capability from external sources. Consider
action in one or both of the following areas:
Internal capability


Training: Identify the capabilities that require development and establish appropriate training
program(s) to close the capability gaps. Ensure the successful completion of the identified training
needs.
Process/system changes: Identify the governance, organisational design, collaboration, training,
processes, tools and system which may be improved in order to close the identified capability gaps.
These opportunities for improvement should relate to those identified in your organisation’s
procurement strategy.
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External capability

Engaging external procurement contractors: Identify opportunities to increase the procurement
expertise of the organisation with external expertise and ensure capability gaps are adequately filled.
The accountability, responsibility, inputs, timing and processes for the steps of this process are summarised
in Table 1 at the end of this guide.
Figure 1: Core areas and criteria in the capability assessment
Governance
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Procurement policy
Procurement strategy
Decision making process/probity requirements
Risk management framework
Roles and responsibility
Delegation of authority
Compliance monitoring and reporting
People



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Senior management buy-in
Procurement knowledge (specialised personnel)
Procurement awareness (all personnel)
Cross functional skills and collaboration
Recruiting, staffing, training
Governance and
organisation
Technology
and tools
Complexity
assessment
framework
Tools, systems and
processes
 Procurement tools to aid consistency in approach
 Data management and storage
 Systems supporting procurement

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Procurement planning process
Documentation of process
Contract development
Complaints management system
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Contract management framework
Supplier and stakeholder management (contracts)
Supplier performance requirements
Cost reduction and service improvement
opportunities
Category
management

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Category management plans
Supplier and stakeholder management (categories)
Spend aggregation opportunities
Data analysis
Innovation and demand efficiency initiatives
Performance
management
 Monitoring and management of procurement
performances
 External benchmarking/gap analysis
Procurement
processes
Contract
management
Sourcing
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Table 1: Accountability, responsibility, inputs, timing and process for key steps in capability assessment
process
Steps in the capability assessment process
(1) Is a capability
assessment
required?
(2) Determine
appropriate level of
capability
assessment
(3) Manage the
preparation of a
capability
assessment
(4) Does
organisation have
required
capability?
(5) Capability build
actions
Who is
accountable?
Accountable officer
Accountable officer
Accountable officer
Accountable officer
Accountable officer
Who is
responsible?
CPO or delegate
CPO or delegate
IPU or nominated
assessor where
organisation does not
have IPU
IPU or nominated
assessor where
organisation does not
have IPU
IPU and/or personnel
with sufficient
procurement
knowledge and
experience
What input is
required?
High-level oversight
and knowledge of
organisation
High-level oversight
and knowledge of
organisation
Procurement activity Complexity
Procurement strategy
plan and knowledge assessment outcomes and procurement
of organisation
activity plan
/business unit
processes and related
documentation
What timing is
involved?
Annual
Annual
Annual and as
required to
demonstrate valid
capability build
actions throughout
the year
Within one year of
assessment occurring
but prior to
undertaking the
relevant procurement
activity
On a procurement
activity basis as
required to increase
capability to level
sufficient to
undertake
procurement activity
Process/tools
available
n/a
Refer to capability
assessment tool and
template
Using guides, tools
and templates or
compatible, alternate
guidance material
Compare capability
assessment results to
minimum
requirements for
complex
procurements
Category knowledge
assessment; learning
and development;
systems development
or external assistance
© State of Victoria 2014
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