Government of Western Australia Department of Treasury and Finance Procurement The Procurement...

Government of Government of Western AustraliaWestern AustraliaDepartment of Department of Treasury and Treasury and FinanceFinanceProcurementProcurement

The Procurement Reform Toolkit

An Overview

November 2005

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Government of Government of Western Western AustraliaAustralia

Department of Department of Treasury and Treasury and FinanceFinanceProcurementProcurement

Procurement Reform Toolkit is…

• a collection of resource materials

• constructed around eight smarter buying principles

• recommends various strategies and techniques that agencies can use to:

– implement an on-going program of procurement reform

– identify potential costsaving opportunities

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Procurement Reform Toolkit Contains

1. Introduction– Toolkit Overview

– 8 Principles of Smarter Buying

2. Reform Strategies– Spend Analysis Methodology

– Overview

– User Guide

– Agency Forward Procurement Planning

– Buyer Awareness

3. Self Assessment Template

4. Fact Sheets– Buying What You Need

– Optimising Use of CUAs

– Standardisation

– Minimising Piecemeal Buying

– Consistent Policies & Processes

– Contract Management Practices

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Self Assessment Template

Purpose

A tool to assist agencies assess and monitor their progress in implementing reform strategies and achieving savings targets

Features

• structured around the eight smarter buying principles

• poses a series of questions under each principle

• collectively, the questions provide agencies with:– an indication of areas requiring attention– suggestions on where to look for savings– a means of recording progress and achievements

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Procurement Reform Toolkit

OverviewOverview

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Reform Strategies/Guidelines

There are three inter-related strategies that are central to an agency’s efforts to reform its procurement practices and achieve genuine savings

• Spend Analysis

• Procurement Planning

• Buyer Awareness

These form the basis of the Toolkit logo

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Reform Strategies – Spend Analysis

Analyse past procurement and gain a detailed picture of the agency’s spend profile so as to identify savings opportunities and areas requiring process improvement

For example, research indicates that 80% (by $ value) of most agencies’ purchasing is conducted with less than 20% of their total suppliers list. Focus on this group to find significant contract opportunities and look to the remaining 80% of suppliers to find efficiency improvements and reduced piecemeal buying

80% of purchasingwith

20% of suppliers

Look for contract opportunities

20% of purchasingwith

80% of suppliers

Look forefficiency improvements

Total Purchasing

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Reform Strategies – Procurement Planning

Analyse future procurement (at the branch or cost centre level) so as to adopt a better planned, coordinated and aggregated approach to intended future procurement. This planning should extend across the entire agency and potentially include other agencies with similar contracting intentions.

Many Purchasers, Many Suppliers Many Purchasers, One Supplier

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Reform Strategies – Buyer Awareness

Educate agency staff about approved procurement policies, standards and processes as well as how to implement procurement plans and actions stemming from the Spend Analysis and Procurement Planning

Buyer Buyer AwarenessAwareness

DTF Training Sessions & Seminars

DTF Training Sessions & Seminars

In-house Training

In-house Training

Smarter Buying Guides

Smarter Buying Guides

Buying Behaviour Reports

Buying Behaviour Reports

Published Guidelines & Fact Sheets

Published Guidelines & Fact Sheets

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Continual Cycle

Procurement Reform is not a once-off exercise but rather a continual rotation of analysis, planning and awareness and benchmarking your agency’s progress with the Self Assessment Template

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Procurement Reform Steering Committee

Agencies are strongly advised to establish a Procurement Reform Steering Committee to oversee the implementation of reform initiatives and to monitor progress against agreed milestones and targets. A member of the Corporate Executive or Senior Officer should be appointed to lead this group.

It is critical that the agency’s senior management champion the reform process and actively reinforce the importance of a consistent, well coordinated and strategic approach to procurement.

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Where to From Here?

In order to implement an effective and comprehensive Procurement Reform program, agencies should -

• Ensure their program covers all procurement – goods and services, corporate and operational, CUAs and agency specific contracts

• Form a steering or coordination group ‘with teeth’ that regularly reports progress to the Corporate Executive

• Undertake a detailed analysis of their spend profile and develop an action plan to address findings

• Proactively educate agency buyers, mandate desired buying behaviours in key areas of procurement, and acknowledge reform achievements

• Develop a whole of agency forward procurement plan

• Regularly monitor performance against savings and efficiency targets – use the Self Assessment Template to help with this

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8 Principles of Smarter Buying

8 Smarter Buying Principles8 Smarter Buying Principles

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8 Principles

• Analyse spend profile

• Procurement planning

• Policies and processes

• Optimise the use of CUAs

• Aggregate purchasing

• Standardise the range of items

• Staff awareness

This toolkit is built around 8 guiding principles that have been identified as being central to a well coordinated reform strategy:

• Contract management practices

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8 Principles -1. Analyse Spend Profile

1. Analyse spend profile and patterns, compare these tosector best practice, and look for savingsopportunities

• Apply procurement analysis techniques to financial (FMIS) data

• Make use of DTF’s Procurement Data Warehouse initiative

• Use DTF Buying Behaviour Reports to assess CUA spend

• Seek assistance from your DTF Cluster Manager

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8 Principles -2. Procurement Planning

2. Implement agency annual forward procurement planning (AFPP)

• For in-scope agencies, complete the 2005-06 AFPP return covering expenditure above the tender threshold of $100,000

– potential for both in-house and multi-agency aggregation

• Apply the principles and tools of AFPP to a wider range of purchasing than that captured by the official return

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8 Principles -3. Policies and Processes

3. Consistently apply whole-of-government policies,processes and documentation

• Ensure existing purchasing policies reflect the new SSC thresholds e.g. no need for multiple quotations for goods or services valued under $1,000

• Use the standardised sector procurement templates available from DTF

• Adopt the new General Conditions of Contract (GCoC) documentation for all non-IT&T agency contracts

• Use waivers available to CEOs up to $100k

• A new standard request template for ICT goods contracting contracting will be available in early 2006

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8 Principles -4. Optimise the Use of CUAs

4. Optimise the use of CUAs and agency specificcontracts

• Minimise leakage from mandatory CUAs and Agency Specific Contracts

• Use standing contracts for as much spend as possible

• Internally mandate and educate staff on the use of these contracts

• Promote easy access to CUA information via intranet links

• Utilise the new Government Contract Directory (CUA Guide) – available as an e-Book in early 2006

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8 Principles -5. Aggregate Purchasing

5. Minimise piecemeal buying and aggregate purchasingwherever possible

• Move as much spend as possible under the scope of standing contracts

• Look for in-house and multi-agency aggregation opportunities with higher value purchases

• Consolidate more regular purchases into larger, less frequent orders

• Use Purchasing Cards – to pay a single monthly account rather than numerous single invoices

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8 Principles -6. Standardise the Range of Items

6. Standardise the range of items available for purchaseand apply demand management practices

• Adopt agency-wide standards

• Limit the range of choices or options available to staff for purchase

• Consider the ‘total cost of ownership’ when deciding on product options

• Only buy what is needed to do the job – particularly when purchasing products with numerous options or graduated modules

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8 Principles -7. Staff Awareness

7. Invest in raising staff awareness of better buyingprinciples and behaviours

• Undertake training on internal procurement policies and procedures – make use of DTF agency based Procurement Practitioners

• Look for external training and awareness opportunities– DTF run programs such as Better Buying Sessions or

Procuring Professional Advisory Services– SSC information sessions

• Encourage relevant staff to seek higher qualifications in procurement

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8 Principles -8. Contract Management Practices

8. Tighten contract management practices, particularlywith service contracts

• Better scoping and performance measurement of service contracts

• Review procedures for contract extensions and variations

• Participation in available training courses focussing on service contracting

• A new whole-of-government Contract Development and Management System will be launched in mid 2006 to replace Gem Contracting and various agency systems

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Further Information

If you have any queries with regard to the Procurement Reform Toolkit, please either

visit the website at www.dtf.wa.gov.au/procurement

or send an email to [email protected]

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