Earlier this month, The Joint Committee of Public Accounts Audit (JCPAA) released a report addressing aspects of Commonwealth procurement. Report 498, titled "Commitment issues' - An inquiry into Commonwealth Procurement" provided strong recommendations following a recent Parliamentary Joint Committee inquiry into five reports released by the Australian National Audit Office (ANAO) that focused on Commonwealth procurement over the last year. The inquiry paid particular attention to procurement processes, achievement of value for money through competition, and contract management.
The inquiry and the recommendations published by JCPAA highlighted systemic procurement issues across four of the five ANAO audits examined. These issues included but were not limited to:
- difficulties interpreting what "value for money" means and how this should be determined;
- an erosion of procurement/contracting expertise across the Commonwealth;
- ethical engagement with the market that strengthens Australian industry capability; and
- audit approaches that enhanced processes and practices.
The inquiry also highlighted information that is released to the public concerning Commonwealth procurement practices and issues around basic compliance with the Commonwealth Procurement Rules (CPRs).
The JCPAA recommendations make it clear that procurement practices need to be overhauled.
There are ways to target and uplift practices that are not overly resource intensive. It is possible to be effective, efficient, ethical, and economical in a manner that is compliant with the CPRs, while also driving business outcomes and engaging with the market in a fair and transparent manner. We have put together a list of focus areas below, highlighting areas identified in the JCPAA report that require improvement. We have grouped these into eight practical objectives to facilitate better procurement practices. Our tips as follows:
1. Compliance with the Commonwealth Procurement Rules (CPRs)
It is important to ensure adherence to the Commonwealth Procurement Rules (CPRs). Be accountable and transparent in your procurement practices by complying with all aspects and requirements of the CPRs. Follow the requirements of Divisions 1 and 2, use open approaches to market, include panels whenever possible and only use the limited tender provisions in the way in which they are intended. (Hint: most things are not urgent and unforeseen. It is more effective to follow the process, rather than circumvent the process.)
2. Achieving Value for Money
Achieving value for money is the core principle of the CPRs, but within this we need to ensure we focus on the four pillars. We should ask:
- Is the good/service offered fit for purpose (Effective)?
- Is the pricing in line with expectations (which we should know through market testing/scanning) and have we considered whole of life costs (Economical)?
- Are the negative impacts of the procurement minimised (Ethical)?
- Is the good or service being facilitated in the best way possible (Efficient)?
3. Expert Knowledge of Procurement
The JCPAA report and many others show the need for subject matter experts (SME) in procurement processes. Procurement, just like contract management is a skill set that needs to be learnt, preferably through VET accredited courses as well as experience, incorporating mentoring from more seasoned officers and SME. Procurement can be complex, whether due to subject matter, risk, or value, so the use of SME should be facilitated to ensure that value for money and required outcomes can be achieved.
4. Regular Reporting and Record Keeping
Good governance is absolutely essential in a procurement process. Adequate reporting and record keeping ensures that procurement procedures are being followed and inefficiencies and irregularities are caught from commencement. Ensure that procurements are subject to governance protocols that withstand audit scrutiny, demonstrating transparency and fairness. This includes reporting all contracts over $10,000 on AusTender (unless exempt) but it goes well beyond that. Include reasons for decisions, records of decisions and a comprehensive "paper trail" of what was done and why.
5. Auditing and Procurement Process
In addition to the above, it is essential that procurement records be properly maintained, organised, and kept up to date so that an accurate audit trail can be facilitated to allow for audit accuracy. compliance, and evidence of value for money. This means storing files in a central location, making records of meetings, retaining signed documents into the records management system, while maintaining security aligned with the classification of the procurement process. This has the added benefit that when a procurement is audited, file references can be shared with auditors with the full confidence that all documentation, decision points and considerations are retained as a single source of truth.
6. Identify and Manage Risk Complexities
There should be no surprises in procurement! Exercise effective procurement risk management and identify, leverage, and manage risks appropriately. Align this to agency risk appetite and the agency's risk management framework. While there are standard procurement risks, risk management should not be a "tick and flick" exercise. It should be a comprehensive and ongoing discussion with relevant personnel (including SME) to not only identify but also manage any risks before they turn into issues. This allows the delegate a holistic picture of the risk associated with the procurement, ensuring that they are empowered in their decision making.
7. Contract Management
Good contract management is another component to achieving value for money. We put a lot of effort into the procurement process, with a strong focus on value for money, as required by the CORs. However, if we do not manage the contract with the same rigour, this value can be eroded rapidly. Contract management, like procurement is a specialist skillset that needs investment, training, and mentoring.
8. Ethical Market Approaches
Approaches to market must be fair, equitable, and ethical. This must be manifested throughout the procurement process, whether it is signaling upcoming procurement processes to the market (through an agency Annual Procurement Plan), giving the market sufficient time to respond to a tender, providing sufficient information to the market to form a comprehensive response, maintaining probity, or providing useful debrief. If we approach any procurement process through an ethical lens, everyone benefits as industry will be more willing to openly engage with the Commonwealth.
While this list may appear short and relatively simple, what the JCPAA report indicates is that it is proving difficult for agencies to implement. This could stem from red tape, internal policy and processes, eroded capability, and short funding cycles that do not allow for comprehensive engagement with the market. If you feel you need more, a procurement health check might be an effective way to get visibility on how health your current procurement practices are. For more information or enquiries, or if you need in conducting a 'procurement health check' contact the Synergy Team