Reform Toolkit€¦ · Web viewLocal Government Structural Reform Reform Toolkit Procurement Guide...

This document will be updated periodically.

Current Version: 1, dated January 2014

Prepared by: Andrew BlitzBusiness Development [email protected]

This resource integrates some content commissioned by WALGA from ArcBlue.

Local Government Structural ReformReform Toolkit

Procurement Guide

mailto:[email protected]

Contents:

Section Name PageIntro Levels of Procurement Maturity 3

1 Procurement structure 5

2 Purchasing policy 12

3 Procurement governance 15

4 Contract register 19

5 Tenders register 22

6 Resources and templates 24

7 Current activity 27

8 Due diligence 34

9 Insurances 37

10 Skills development 40

11 Compliance and probity 43

12 Property contracts and capital assets 47

13 ICT contracts 50

14 Service contracts 53

15 Goods Contracts 55

16 Summary and procurement Reform Support 57

Introduction

Reform Toolkit – Procurement Guide of 59

Well organised procurement functions can deliver significant financial and non-financial benefits to a Local Government.

Procurement functions across Local Governments in WA play a critical role in ensuring that public money is spent through well controlled processes and delivering good value for money.

Procurement functions that are well set up, resourced and organised can use this significant expenditure and focus it in the areas that the Local Government and community requires it most. In this way, well organised Procurement functions can help deliver benefits in helping support local suppliers, support suppliers with strong sustainability credentials, deliver savings through better contracts or any other objectives a Local Government may have.

There is often a mismatch between the Procurement function and the organization in defining the required role. Often Procurement’s own definition of the role and the perceptions of the organisation differ markedly. Perceptions and expectations are drawn from experience, history, individual interactions, the service provided from experience in previous organisations. Therefore the role needs to be defined and constantly reinforced across the organisation.

Levels of Procurement Maturity

Before Procurement organisations can start on their journey towards better practice, it is important to assess what the Local Government needs from Procurement.

Not every Procurement function needs to be best practice. What is important is that Procurement is the right size, shape and has the right role for the Local Government. A maturity assessment can help identify where Procurement currently is and will help identify where it needs to go to deliver against the objectives and goals of the Local Government.

In the model on the right, we identify four levels of maturity.

EmergentProcurement in an emergent function has largely uncoordinated procurement activities, with many stakeholders responsible for buying and the Local Government is likely to have many gaps in compliance – either with its own procurement policy or with legislation.

Basic In a basic function, the compliance issues have been addressed, and the Local Government has a focus on meeting legislative requirements.

DevelopingProcurement in developing functions have started to think strategically and have some category strategies in place.

AdvancedIn the highest level of maturity, Procurement is leading change across the Local Government and is recognised as a Centre of Excellence delivering year on year benefits to the organisation.In defining the required role of Procurement we need to understand:


1. How is Procurement perceived? What is the role today and what does it need to be in the future? Is the focus on process control, cost reduction, value improvement, revenue growth or some other driver? What is the baseline in terms of cost, performance and orientation?

2. What are the priorities and objectives of the CEO and Senior Management Team? Procurement’s value is derived from its ability to meet the organisation’s needs and priorities There is a need to set out a clear vision that meets these priorities It is necessary to create passion and unify purpose which all stakeholders can buy into.

Vision for the role of procurement in Local Government

Every Local Government is different and therefore Procurement functions will have a different role in each organisation. However it is possible to describe a high level vision for the role of Procurement in a Local Government, with the intention that each organisation takes those elements that are appropriate and incorporates into their organisational model.

The Procurement team: Are responsible for the procurement processes that sit above all spend across the Local Government. Responsible for developing 3-5 year procurement strategy, with targets objectives and plans highlighted. Are driving procurement change across the organisation. Have a procurement leader who is highly visible across the organisation. Is involved and adding value to major projects on a regular basis. Articulate value that is very clear Are invited into projects at early stage to add value. Are experienced and have professional qualifications (MCIPS) Are responsible for providing systems and tools to users Provide meaningful reporting on procurement across the organisation. Manage compliance to policy framework and give regular reporting to key business areas. Follow up non-compliance with senior management. Train and develop all procurement related roles across the organisation Have developed consistent Contract Manager roles which are in place for all major contracts. Have an overview of all supplier performance and KPI's measurement methodologies are in place to benchmark suppliers. Have developed category strategies for all key categories. Are experts in analysing supply markets and supply chains Are responsible for savings programs are in place to proactively drive better value

1 Procurement Structure


The key drivers that determine the shape of the procurement team (organisational models) are determined by analysis of the following:

The Local GovernmentHow well does the Local Government collaborate across Business Units? To what extent is centralisation/decentralisation preferred for service functions?What is the intended culture of the organisation?

Supply Market Shape and ActionAre the supply markets regional or local? How are the suppliers organised in managing accounts – industry focus, geographic focus, product/service focus?

SuppliersWhat is the level of supplier concentration? Are there opportunities for consolidation of expenditure?What is the complexity and risk of expenditure?

The core structure of a Procurement team is often defined as either “centralised” or “decentralised”.

Under a centralised structure a team of skilled and experienced professionals will oversee the procurement activities of the organisation.

Key features:

Strong governance Robust compliance Consolidation of spend prominent Low awareness of Business Unit needs; often secondary to corporate or Procurement

objectives Detached – can lead to poor stakeholder alignment Can often be inflexible


Under a decentralised model a functional and integrated approach is taken towards procurement within respective technical areas. Decentralized organisations empower business units and sites with autonomy and control over supply, process, and technology decisions, as well as sourcing and procurement execution. This structure improves satisfaction at the site and business-unit level, but fails to leverage corporate spending; is costly to operate; and leads to inconsistent supply cost and performance across the enterprise.

Key features:

Very low level of connectivity across the business Little or no consolidation of expenditure No overarching governance Strong understanding of needs Fully aligned to meeting the Business Unit strategy Operational focus

It is most common for WA Local Government to centralise a team of Purchasing Officers who are responsible for running compliant procurement processes, and who then deliver executed contracts back to business units for Contract Management.

A centralised system has the advantage of better control, greater expertise, and recognition of the procurement function. However workflow and resource pressures can lead to bottlenecks and lack of technical input relating to business requirements. Conversely, decentralised procurement improves supplier relationship management, however can also result in a lack of scale and experience in procurement competencies and risk breach of policy/compliance. There is also greater inconsistency within approach, leading to different expectations in the marketplace.

WALGA advocates a hybrid procurement structure whereby there is centralised procurement control (policy and compliance) and devolved end user access. The eQuotes system developed by WALGA supports this structural model, delivering process control such that the risk of procuring from unauthorised or uncontracted suppliers is removed.


Some hybrid structural models are presented as follows:

Category Management

Category Management is an organisational structure based around individuals with responsibility for identified areas of expenditure. A category is a group of products/services which can be treated as a single requirement from a sourcing perspective; the supply market largely determines how the category is defined and shape. The focus is typically on non-transactional processes and supported with a structured sourcing methodology and tends to be more centralised.

Within Business Units, a category management structure can be applied to key strategic functions. For example centralising the energy contracts and spend within one business team (e.g. sustainability services), centralising the fleet and fuel spend with depot administration, and facilities maintenance with an area such as asset administration or parks and gardens can also be critical to delivering optimal contract management and supplier relationship management

One of the key benefits of such a structure is that in ensures a market-led focus and enables the organization to consolidate its spend and manage at an enterprise-wide level. Category management has been popular in recent years as it enables alignment to supply markets, but has been challenging to implement in Local Government.


Centre Led Action Networks can work where procurement officers are co-located with business units to support business alignment:

Alternatively, the separation of duties can be asserted by an organisational split between sourcing and transactional purchasing:


The structure of the procurement team, its management, and reporting also requires strategic consideration. Currently it is common for the purchasing staff to report to Finance and/or Corporate Services, and the functions of the team are predominantly transactional in nature. However strategic procurement is critically important to the planning and effective operation of the organisation and procurement can also be structured into the organisation in areas such as governance, economic development, and even technical services. By positioning procurement as more than an administrative function within the organisation structure, a statement is made about the value and importance of procurement as an enabler and efficiency generator to the entity. Many corporate (private sector) organisations have a CPO (Chief Procurement Officer) that directly represents spending efficiency and analytics to the Executive table. There are currently no CPO roles within Western Australian Local Government, however there are several CPO’s within Local Government in the Eastern States, charged with oversight of expenditure into the hundreds of millions.

Summary:

The reform challenge for Local Government is to provide an organisational structure for the procurement team that is sufficient in size, commensurate with the expenditure levels, supplier numbers, and workflow of the new Local Government. Process efficiencies can be identified through technology (electronic tendering, online contract management, eQuotes, etc). The structure should take into account those elements of the procurement process that are to be centralised and which components of activity will be driven by functional business units.


Checklist: Procurement Structure

Task Critical Considerations StageReview and explore current procurement structure, numbers of staff, numbers of contracts and workflow

Are there similar or different structures within the incumbent organisations?

Do the systems and software used by each organisation vary?

Are the internal purchasing thresholds aligned?

Stage 1 – to July 2014 (review)

Determine initial procurement structure and the role of the procurement team

Will there be centralised or decentralised procurement?

Stage 2 – Aug 2014 to March 2015 (plan)

Determine the management structure of procurement What will the title of the Manager be (Purchasing Manager, CPO etc)?

Who will the manager of the procurement team report to?


Consider skills development for staff seeking roles in the future organisation

What development opportunities will be considered for the future procurement team?

What structural enablers will be put in place to position general administrative staff to grow into purchasing based roles?

Stage 3 – April 2015 to June 2015 (mobilise)

Check for alignment between the draft Purchasing Policy and the procurement structure deployed

Refer to Purchasing Policy section, and cross check for structural alignment


Recruit staff for new purchasing team Are specialist procurement recruitment agencies deployed?

Are position descriptions inclusive of procurement capabilities and competencies?

Stage 4 – July 2015 onwards (implement)

Review structure, technology, and workflow Is the optimum structure working as intended from the start date of the new entity? If not, are the issues systemic and structural in nature, or driven by operational circumstances?

Has the procurement team been introduced and have their roles been communicated through the new organisation?


Set annual procurement plan Procurement planning by new procurement team Stage 4 – July 2015 onwards (implement)


Further support resources specific to the procurement structure:

Resource Name Description SourceWALGA Procurement Handbook

Produced by WALGA’s Procurement Consultancy Service to support best practice procurement.

Laura CullBusiness and Procurement ManagerPh 9213 2045Email [email protected]

CIPSA Global Public Sector Portal

Over 80 government agencies and professional associations across the globe have already adopted the Values and Guiding Principles and the Partnership continues to promote them globally as fundamental to good procurement practice.

http://www.globalpublicprocurement.org/

The Faculty FLiP (Future Leaders in Procurement) Roundtable http://www.thefaculty.com.au/roundtables-forums/future-leaders-in-procurement

Local Government Procurement Training

Procurement training including Certificate IV in Government (Procurement and Contracting) available through WALGA Training Solutions

http://walgatraining.com.au/mod/resource/view.php?id=527

Jacqui DoddRTO Training Manager9213 20Email [email protected]

CIPSA White Paper Building the case for Centralisation in Public Procurement. http://www.cips.org/Documents/CIPSAWhitePapers/2006/Building%20the%20case%20for%20centralisation%20in%20public%20procurement.pdf

Tenderlink/Financial Review

Australian Procurement research report and survey results on procurement structures.

http://www2.tenderlink.com/uploads/content/downloads/Australasian%20Procurement%20-%20A%20Challenging%20Role.pdf





http://www.cips.org/Documents/CIPSAWhitePapers/2006/Building%20the%20case%20for%20centralisation%20in%20public%20procurement.pdf




http://walgatraining.com.au/mod/resource/view.php?id=527

http://www.thefaculty.com.au/roundtables-forums/future-leaders-in-procurement

http://www.thefaculty.com.au/roundtables-forums/future-leaders-in-procurement

http://www.globalpublicprocurement.org/


2 Purchasing Policy

The Local Government (Functions and General) Regulations were amended on 2 February, 2007, to introduce a mandatory requirement to implement a Purchasing Policy for the organisation. The regulatory requirements provide for the adoption of quotation thresholds for sub $100,000 purchasing values, form and retention of quotations, and different classifications of purchasing. It is the intention of the regulations to provide an opportunity for all suppliers in the market to have the opportunity to bid for Local Government business, and the resulting policy should both reflect and enable this.

WALGA has developed a Model Purchasing Policy that is included in the Procurement Handbook. The template covers off headings including: Objectives Ethics and Integrity Value for Money Sustainable Procurement Purchasing Thresholds Regulatory Requirements Records Management Regional Price Preference

Using the principles of the Integrated Planning Framework, Local Governments should ensure that the Purchasing policy aligns and converses with other policy documents and corporate documentation. In particular the delegations register should be compatible with the purchasing policy so that an appropriate Head of Power is given operational approval.

Elements of a purchasing policy that extend beyond the basic requirements include oversight of related functions, for example integration of internal audit of procurement, spend analysis, contract review, ethics, and flags for issues such as long-term supplier relationships (review of contracts with no change of service provider over a decade). The division of duties, for example supplier selection and supplier management can also be asserted at policy level if desired. There can be tension within areas of the policy for example, balancing the principles of competitive neutrality against the administrative costs and commercial drivers of the organisation.

The reform challenge for Local Government is to determine optimum minor purchasing thresholds. They should be sufficiently high such that best value is derived through the collection and qualitative evaluation of formal quotes, but not too high to the extent that there is an overinvestment of administrative time into the purchase decision making. Checks and controls to minimise the propensity of fraud are also important considerations within the establishment of a minor purchasing threshold framework and to this end the procedural requirements of each threshold tier should be considered as part of the policy development. Buy Local considerations should also be represented at policy level.

Summary:

A well constructed purchasing policy can derive significant process benefits and also feed into a more meaningful annual budget process. It is a regulatory requirement to have a policy, but good governance will move beyond the minimum requirements and utilise the policy as an effective way to derive value and best practice procurement. Checklist: Procurement Policy


Task Critical Considerations StageReview current purchasing policy documents of the current entities.

Draft a schedule of differences Reconcile content Check all elements of the policy are included Determine if Regional Price Preference is

required and what Buy Local inclusions apply.


Scope future size of procurement operation and determine suitable thresholds

Develop thresholds that are commensurate with the number and value of envisaged contracts.


Review procurement process controls, separation of duties and fraud minimisation strategies.

Relate back to organisational structure and reporting lines, delegations register, and internal audit


Determine additional purchasing policy requirements Beyond the minimum consider audit, analytics, regional economic development and supplier review requirements that should be elevated to policy level outside of operational practice.


Merge the current purchasing policies in conjunction with the model template and other discussions to draft a new Purchasing Policy

Maintain a focus on the future, not the past. The new entity has the opportunity to improve and enhance its procurement function, driven by the new policy.


Check policy for Procedural Fairness Test out procurement processes through reviews and probity audits to ensure that the process is procedurally fair and that objectivity has been applied.


Implement procurement governance compliance and conditioning report

Incorporate a methodology for Elected Members to be able to assess compliance with the policy and to have attention drawn towards any policy departures relating to unique circumstances


Establish regular policy review/check Regularly assess the policy to ensure it is meaningful, effective, and practical.


Further support resources specific to the Purchasing Policy:


Resource Name Description SourceModel Purchasing Policy

Included in the WALGA Procurement Handbook. Produced by WALGA’s Procurement Consultancy Service to support best practice procurement.

Laura Cull, Business and Procurement ManagerPh 9213 2045Email [email protected]

CIPSA Code of Conduct

The purpose of this code of conduct is to define behaviours and actions which CIPS (Chartered Institute of Purchasing and Supply) members must commit to maintain as long as they are members of CIPS.

http://www.cips.org/en-AU/Aboutus/CIPS-Code-of-Conduct/

CIPSA Ethical and Sustainable Procurement Guide

A publication that introduces procurement professionals to the key concepts behind ethical procurement and provides practical advice for getting started.

http://www.cips.org/Documents/About%20CIPS/CIPS_Ethics_Guide_WEB.pdf

State Supply Commission WA

The former SSC is now merged into the Department of Finance. A range of procurement policies and the State Buy Local policy is represented on the website

http://www.ssc.wa.gov.au/

LGMA The LGMA Code of Ethics provides members with an authoritative guide on acceptable standards of professional conduct.

http://www.lgmawa.org.au/about-us/our-governance/our-code-of-ethics

Victorian Government Procurement Board

The Victorian Government Purchasing Board (VGPB) provides leadership in government procurement of goods and services to deliver value-for-money outcomes for Victoria.

http://www.procurement.vic.gov.au/CA2575BA0001417C/pages/home-policy-index

Global Procurement Portal

Values and Guiding Principles of Public Procurement http://www.globalpublicprocurement.org/Documents/Resources/VGPs/Values_Guiding_Principles.pdf

Walk Free Foundation

Eradication of modern slavery through supply chain management http://www.walkfreefoundation.org/

Western Australian Disability Enterprises

The WADE operates a project to increase Government procurement of their goods and services which is often incorporated into policy development.

http://wade.org.au/

The Australian Procurement and Construction Council

The APCC has developed a Government Framework for Sustainable Procurement (Framework) to guide the implementation of sustainable procurement.

http://www.apcc.gov.au/ALLAPCC/APCC%20PUB_ANZ%20Government%20Framework%20for%20Sustainable%20Procurement%20-%20Sept%202007.pdf

AAPCM The Australian Association of Procurement and Contract Management have values and a Members’ Code of Conduct

http://www.aapcm.com.au/aboutassociation/values-code-of-conduct

Public Service Commission

The PSC has a code of ethics, promoted as minimum standards of conduct and integrity to be complied with by all public sector bodies and employees.

http://www.publicsector.wa.gov.au/public-administration/official-conduct-and-integrity/code-ethics

Aus Tender The Federal Government procurement arrangements have policy documents, guidelines and general information online that will assist as examples of purchasing policies and rules.

https://www.tenders.gov.au/?event=public.policydocs.list

3 Procurement Governance


https://www.tenders.gov.au/?event=public.policydocs.list








http://wade.org.au/

http://www.walkfreefoundation.org/

http://www.globalpublicprocurement.org/Documents/Resources/VGPs/Values_Guiding_Principles.pdf

http://www.globalpublicprocurement.org/Documents/Resources/VGPs/Values_Guiding_Principles.pdf








http://www.cips.org/en-AU/Aboutus/CIPS-Code-of-Conduct/


The role of the Elected Member with respect to procurement can often be defined ambiguously. On the one hand the Council is presiding over compliance with policy, transparency and fairness of process. This is a function of promoting the integrity of the sector by ensuring that all suppliers in the market are extended an opportunity to commercially bid for Local Government business. On the other hand, due to the structure of agendas, Council decisions are being made regarding the selection of suppliers to the organisation, which is effectively considered (and perceived by the market) to be an operational function.

It needs to be stressed that when receiving a tender recommendation, the Council is considering the item in the context of ratifying the procurement process which has preceded it. Council should be satisfied that the probity of the process was beyond reproach, that the procurement policy and procurement plan has been followed, that the evaluation has been objective, and that the outcome will deliver the most advantageous supply outcome to the entity. However it is not the role of Council to re-evaluate the tender or to feed into the operational assessment of submissions.

Similar to a Board of Directors, a Council can set principles for the way in which procurement based recommendations are presented and considered by Council. Critical considerations are:

The extent to which delegation has been defined and extended. The amount and format of information required to make an informed decision. Controls and limitations to prevent operational level involvement in the process. Sufficient information to follow the evaluation process and decision making process within the evaluation team assessment. Guidance on the process to be undertaken in the instance that an agenda recommendation is not accepted by Council, and means of justification applied. Governance risks relating to the “process contract” of a procurement process, including timeframes, confidentiality, probity and procedural fairness.

There is a potential conflict between protecting commercial in confidence information, and requiring transparency and disclosure. Best practice is for the full tender process (evaluation report) to be provided to Council under confidential cover, and an executive summary that does not disclose detailed information to be placed as the public agenda item. The overall cost of a winning bid is publically accessible information through the Tenders Register, however price information sitting behind this may require protection from public disclosure.

The reform challenge for Procurement Governance is to skill Elected Members with the knowledge of Local Government procurement regulations, and the skills to balance their role as a decision maker with their role in governing the decision making process. Elected Members should undertake training and build their knowledge in this area, and also develop procurement guidance as a unified body.

The Council, as a body corporate, should also clearly articulate the capabilities and functional duties of the procurement team that operates under the purchasing policy that they adopt. These can be broadly defined as follows:


Procurement Capabilities Defintion

Supply Base Analysis The ability to evaluate suppliers & supply markets to ensure appropriate alignment between the supplier and Local Government.

Risk Management Managing commercial, reputation, ethical and other risks associated with the procurement process to ensure that undesirable consequences of the risks are mitigated and that compliance is asserted.

Negotiation Skills Plan and implement contracts, utilising leverage, identifying the risks, and developing options to close a contract successfully whilst ensuring the most advantageous outcome.

Stakeholder management Determine & implement appropriate management of stakeholder relationships.

Contract Management Provide review and feedback, assess contractual compliance by both parties, establishing appropriate and effective key performance indicators, managing any disputes in a timely, appropriate and effective manner.

Contract Selection and Legal Drafting, negotiating, and agreeing clear, concise, and complete contractual documentation

Procurement Process Management Ensuring the effectiveness and continuing development of the procurement process.

Value for Money Assessment Undertaking a meaningful financial assessments and price analysis and utilising this information in planning, control and decision making.

Summary:


Procurement Governance is a high risk to an organisation, and many contractual and legal disputes can be avoided when good governance is applied. The Council has a collective voice only with respect to resolving supplier appointment recommendations through the Council agenda. Council needs to both govern the process, and receive the outcomes of the process for consideration and deliberation. Council owns the process, but does not drive the procurement itself.

Checklist: Procurement Governance

Task Critical Considerations StageAdministration to collect information relating to current environment (procurement related directives of the current Council)

Are there any policies or reporting requirements?

Is the Delegations register sufficiently detailed to address procurement responsibilities?


Develop principles of procurement governance What values and definitions does the new Council wish to consider to define their own procurement role?


Integrate Governance into corporate planning documentation

Consideration of a Councillors Code of Conduct?

Consideration of a procurement compliance policy?


Review What regulatory or legislative changes will impact future procurement processes in Local Government?


Prepare and present procurement governance framework to the new Council

Potential for the new Council to workshop and set modifications to proposed Procurement Governance structure.


Further support resources specific to the Procurement Governance:

Resource Name Description SourceDepartmental Operational Guidelines 17 – Delegations

Department of Local Government Available through the Local Government Advisory Hotlinehttp://www.dlg.wa.gov.au/Content/Publications/LGGuidelines.aspx

Western Councillor Article about Elected Member Governance of Tender Recommendations appears in the Nov/Dec 2013 edition.

http://www.walga.asn.au/NewsPublications/Publications/WesternCouncillor.aspx

Elected Member Local Government Procurement Training and Elected Member Training has http://walgatraining.com.au/


http://walgatraining.com.au/



http://www.dlg.wa.gov.au/Content/Publications/LGGuidelines.aspx

http://www.dlg.wa.gov.au/Content/Publications/LGGuidelines.aspx

Training been developed including a Certificate IV in Government (Procurement and Contracting).

[email protected] - (08) 9213 2098

Councillors Manual section 8.10

Some brief commentary regarding the Elected Members procurement role is included in the Councillors Manual

James McGovernManager [email protected] 9213 2093

Ombudsman The Ombudsman serves Parliament and Western Australians by resolving complaints about the decision making of public authorities and improving the standard of public administration. In 2011/12 there were 285 complaints received about the Local Government sector, many relating to contracts and property management. The office has produced publications relating to this activity.

http://www.ombudsman.wa.gov.au

http://www.ombudsman.wa.gov.au/Publications/Documents/reports/OWA_2009-10_Complaint_Handling_Survey_Report_30610.pdf

CCC The Corruption and Crime Commission (CCC) works to improve the integrity of the Western Australian public sector and helps public sector agencies minimise and manage misconduct. A number of Local Government investigations have been undertaken specific to procurement.

http://www.ccc.wa.gov.au

http://www.ccc.wa.gov.au/Publications/Reports/Published%20Reports%202013/Local%20Governments%20in%20the%20Pilbara.pdf

Local Government (Functions and General) Regulations, 1996

Part 4 of the Regulations govern Local Government Procurement. http://www.slp.wa.gov.au/legislation/statutes.nsf/main_mrtitle_1753_homepage.html

Australian National Audit Office (ANAO)

ANAO Fairness and Transparency in purchasing decisions; Probity in Australian Government Procurement

http://www.anao.gov.au/~/media/Uploads/Documents/anao_probity_bpg.pdf

Australian National Audit Office (ANAO)

Paper outlining ANAO Fraud Control in Australian Government Entities http://www.anao.gov.au/html/Files/BPG%20HTML/Government%20Fraud%20Control%20BPG/index.html

Institute of Company Directors

The AICD website contains governance information, analysis tools and a wealth of information about Not For Profit sector Governance.

http://www.companydirectors.com.au/In-My-State/WA

WALGA Systemic Sustainability Study

Appendix 3 of the SSS report advocates an increase in public tender thresholds. The Collaborative Economic Development examples in the Best Practice Management and Administration resources reference regional based purchasing.

http://www.walga.asn.au/LGReform/SystemicSustainabilityStudy/SSSPanelReport.aspx

Independent Commission Against Corruption (ICAC)

The ICAC are the NSW Regulatory body for Local Government and have dealt with a number of Local Government enquiries that relate to procurement and governance

http://www.icac.nsw.gov.au/

4 Contracts Register





http://www.companydirectors.com.au/In-My-State/WA

http://www.anao.gov.au/html/Files/BPG%20HTML/Government%20Fraud%20Control%20BPG/index.html

http://www.anao.gov.au/html/Files/BPG%20HTML/Government%20Fraud%20Control%20BPG/index.html



http://www.slp.wa.gov.au/legislation/statutes.nsf/main_mrtitle_1753_homepage.html

http://www.slp.wa.gov.au/legislation/statutes.nsf/main_mrtitle_1753_homepage.html




http://www.ccc.wa.gov.au/




http://www.ombudsman.wa.gov.au/



Unlike the Tenders Register, which is a statutory document, a Contracts Register is not mandated or required. Many organisations choose different ways of managing their Contracts activity, but all maintain a central database of information. A contracts register, particularly electronic, can deliver control of information for goods, services and works contracts that they have with often hundreds of suppliers. Important details relating to the term of contract, compliance and due diligence, licenses and registrations, insurances, accountabilities and responsible officers can be maintained as part of this.

Some public sector agencies make contracts registers public in the interests of transparency. This is not current practice for Local Government outside of placing the minimum information required by statutory regulation into the public domain.

In a reform context consideration should be given to the methodology by which contract information will be stored, secured and accessed. Major Council business systems have modules that accommodate this functionality, and there are a number of specific systems that are standalone applications. Choosing the right technology is important, however having the resources to manage and maintain information within the system is more important. The currency of contract information, variations, version control, contacts and up to date information relating to KPI’s and performance reviews need to be maintained in the system. Some input data can be automated, however use and production of the system functionality and maintenance of supplier information is important intellectual property for the organisation that will assist with deriving best outcomes through contract management.

Electronic contracts including electronic signature functionality is becoming mainstream for many procurement businesses and can be considered as part of contract register development for easy development, storage, access and version control.

Summary:

The function of Contract Management is not necessarily an activity of the Procurement team, and is most often a business unit activity. However the ability to collate and track all activity, maintain consistency and organisational control, and deliver procurement support for Contract Management is to utilise the Contracts Register, and its associated contract management functionality to assist to bridge the gap between the procurement process and the contract deliverables. The Contracts Register ensures full contract lifecycle activity by managing the contract through its term and through to the point of renewal. Triggers and key milestones can be recorded and proactively activated through this medium.

Checklist: Contracts Register


Task Critical Considerations StageAssess current Contract Register What is the format of the current registers

Are the registers used to just record information or to drive workflow?

What training and support is currently delivered?


Assess future Contract Register What systems and technology platform will be deployed?

What workflow efficiencies and process controls can be delivered?


Organise legacy data from previous contracts and determine archive format

How will old information be accessible yet retained separate from current contract information?

Will transitioned and novated contracts be specifically coded for identification as pre-existing arrangements?

What breaks can be made between old and new classifications


Determine a contract category classification system Has consideration been given to The United Nations Standard Products and Services Codes (UNSPSC)?


Implement Contract Management Systems implementation and testing Input of data


Training and Development Identification of training structure for contract management

Inclusion of contracts register skills development


Plan for Contract Management development Ongoing review and continual improvement Stage 4 – July 2015 onwards (implement)

Further support resources specific to the Contracts Register:


Resource Name Description Source

WALGA Procurement Handbook



UNSPSC Contract Classifications

Harmonised codes to support the categorisation of supplies for management, analysis and benchmarking

https://www.ungm.org/info/Unspsc.aspx and https://www.ungm.org/Publications/UserManuals/Suppliers/UNSPSC%20Codes%20Guide%20-%20Suppliers.pdf

Docusign Electronic signature application http://www.docusign.com/

Secured Signing Electronic signature application http://www.securedsigning.com.au/local-government-solutions.aspx

5 Tenders Register


http://www.securedsigning.com.au/local-government-solutions.aspx

http://www.securedsigning.com.au/local-government-solutions.aspx

http://www.docusign.com/

https://www.ungm.org/Publications/UserManuals/Suppliers/UNSPSC%20Codes%20Guide%20-%20Suppliers.pdf

https://www.ungm.org/Publications/UserManuals/Suppliers/UNSPSC%20Codes%20Guide%20-%20Suppliers.pdf

https://www.ungm.org/info/Unspsc.aspx


The Tenders Register is a Statutory document that is accessible by members of the Public. The Tenders Register must be securely maintained by the administration (a delegate of the CEO) and available for inspection on request.

The information stored in the Tenders Register (recorded at the Tender Opening) are the names and identification details of each Tenderer to the process. When the Tender evaluation has been complete and the tender is awarded, the total consideration (overall project/procurement cost) should be recorded alongside identification of the winning bidder. It is not advisable to record further information, inclusive of the details of each tenderers price as this should be regarded as commercial in confidence information. Also, if the contract lapses and requires a tender recall, the market information of the previous process should not become accessible data for suppliers to leverage into a subsequent process.

It is common for electronic tender systems to maintain an electronic Tenders Register.

The reform context is for Local Government to ensure compliance with the Regulations, which still require a public tender opening and minimal register content. Security and controls should be in place, for example the use of electronic keys that require two officers to jointly access information when a member of the public inspects the register if protected information sits within it. Policy and protocol that protects the information in the register from being lost or manipulated should be established. An online presence of the Tender register could be considered in the context of transparency containing high level information only.

Summary:

No changes to regulations for the Tender Register are likely to be effected through reform, however the technology and methodology applied to guiding the process differs from that which was common (a physical handwritten register) when the regulations were first implemented. The automated process has efficiency benefits but also requires procedural and security controls.

Checklist: Tenders Register


Task Critical Considerations StageAssess current tender register format and procedural controls

What level of compatibility exists between amalgamating organisations?

Schedule of differences in format and approach

Is the current information up to date


Determine future system Electronic format Security and process controls Develop guidelines, use and policy


Skills Development and Operational guidelines Adopt process map for tender opening Provide procedure and operating manual Training and information development for

future use


Implement new Tender Register Process and security controls Ensure technology is licensed and that IP is

protected


Internal Audit Checks and balance to determine that compliance is fully tested.


Further support resources specific to the Tenders Register:



A Tender Register Template is included in the WALGA Procurement Handbook. Produced by WALGA’s Procurement Consultancy Service to support best practice procurement.


Tenderlink Online tender box and portal for e-procurement. http://www2.tenderlink.com/tendering-for-purchasers.php

APET Online tender management software including online tender lodgement and tenderbox

http://www.apetsoftware.com.au/

6 Resources and Templates


http://www.apetsoftware.com.au/

http://www2.tenderlink.com/tendering-for-purchasers.php


Using standardised pre-qualified documentation can assist to engender consistency and contractual protection to the organisation. At a sector level, WALGA has prepared template documentation through its Procurement Consultancy Service, developed by legal advisors to assist Local Governments promote consistency to the market that would otherwise encounter many various forms of contract and sets of conditions.

The templates can not only provide protection to the procurement process and contract structure, but also serve as a checklist to ensure each critical element of the procurement process and contracting is addressed.

The Procurement Handbook resources contain templates including:

Procurement Plan Service Level Agreement RFx templates Contract Management Plan

Whereas for each supply arrangement the contract specifics will vary (scope of works and specification) the terms and conditions of supply, in particular General Conditions of Contract can be standardised to the organisation. This makes the procurement activity of the organisation easier to manage and minimises the incidence and potential of dispute.

Local Government contracts are becoming increasingly more complex, particularly blending the supply of goods and services (maintenance and operation) into the scope. Specific to reform, it is more likely in the future that contracts will become larger and that outsourced service provision, including critical activity areas, will become more prevalent. Legal input into the adaptation of contract documentation, General Conditions and review of scope is often necessary to support well-constructed and defensible contracts. In particular exit and termination provisions are critical to adapt to each contract situation.

In many cases model documentation should be adapted and utilised as a checklist or catalyst for consideration of an issue, and verbatim use may not be suitable.

Model documentation can be centrally maintained and accessed (intranet) and should be regularly reviewed for currency and suitability.

Checklist: Resources and Templates


Task Critical Considerations StageAssess current contract models within amalgamating organisations

Is model documentation in place? What access and controls sit around use of

templates? What are the differences in General

Conditions applied to each organisation? How often does a review process take place?


Assess future organisational needs in conjunction with procurement structure and purchasing policy

Has feedback been obtained from suppliers regarding contract structures?

Will the WALGA Procurement Handbook be applied and if so, what specific variances will be needed?

What naming conventions will be applied for easy access to procurement records?

What process will be put in place to record and manage departures from the Organisations terms?


Develop and prepare templates Set new model documentation with access and instructions for organisation

Set the KPI’s within contract templates to ensure they are relevant with the new organisation

If the WALGA templates are not utilised, has the model RFX documentation been legally checked?


Implementation Run information sessions for suppliers and potential suppliers

Provide training and support within the organisation


Review Process Set triggers and regular process Stage 4 – July 2015 onwards (implement)

Further support resources specific to Resources and Templates:






Department of Foreign Affairs and Trade (DFAT)

Procurement and Contracts Operational Handbook http://www.dfat.gov.au/publications/procurement-and-contracts/

CIPSA The Chartered Institute of Purchasing and Supply have a range of online templates in their knowledge database. Member access is required for this area of the website.

http://www.cips.org/en-AU/Aboutus/mycips/?cipsReturnUrl=/Templates/Pages/Public/StandardPage.aspx?id%3d5033%26epslanguage%3den-AU

Victorian Government Procurement Board Policy

The Victorian Government Purchasing Board (VGPB) provides leadership in government procurement of goods and services to deliver value-for-money outcomes for Victoria.

http://www.procurement.vic.gov.au/CA2575BA0001417C/pages/procurement-practitioners-stage-2---bid-process-and-contract-award-step-4---preparation-of-bid-documents-(rfqs--rfts)

Office of Government Procurement

The WA State Government have a range of templates on their website http://www.finance.wa.gov.au/cms/content.aspx?id=12269&linkidentifier=id&itemid=12269

Aus Tender Federal Government procurement templates https://www.tenders.gov.au/?event=public.document.list

Government Information Technology and Communications (GITC)

The Government Information Technology and Communications (GITC) contractual framework, initially established in 1991, is a set of terms and conditions that Australian Government agencies may use to create contracts for ICT procurement.

http://agict.gov.au/policy-guides-procurement/contractual-framework

EcoBuy ECO-Buy provides a number of resources for members and the general public including guidance tools, sample specifications and templates (members only)

http://ecobuy.org.au/resources


http://ecobuy.org.au/resources



https://www.tenders.gov.au/?event=public.document.list

http://www.finance.wa.gov.au/cms/content.aspx?id=12269&linkidentifier=id&itemid=12269

http://www.finance.wa.gov.au/cms/content.aspx?id=12269&linkidentifier=id&itemid=12269




http://www.cips.org/en-AU/Aboutus/mycips/?cipsReturnUrl=/Templates/Pages/Public/StandardPage.aspx?id%3D5033%26epslanguage%3Den-AU



http://www.dfat.gov.au/publications/procurement-and-contracts/

http://www.dfat.gov.au/publications/procurement-and-contracts/


7 Current Activity

The most common procurement question asked with respect to the reform process is what happens to current contracts through the amalgamation process. Each contract will have specific contractual conditions, and a number of factors will impact the future of the contract. These include:

The terms of Amalgamation (whether one Council integrates another or whether a new entity is created). The contractual terms and Head of Power within the contract to either terminate or transition. The merging entities, service providers, and ease of ability to transition. The strength of the supplier relationship and mutual willingness to transition, novate and renegotiate (where applicable). The culture of the new organisation and procurement principles applied (desire to test the market). The level of risk, critical nature of the supply, and strategic importance of the supply to the organisation. Issues relating to the security of supply and business continuity (priority access to limited resources) The amount of resource applied to contract management, account executives, service and support structures The alignment of contract expiry dates, short-term rollover considerations and creation of a work-cycle and price-cycle for key strategic contracts.

Local Governments will be given legislative contiguity to effectively carry their historic business into the newly named entity, and as such, even contracts without reference to reform or amalgamation will be able to transition to the new entity. Specifically, Regulation 6(4)(i) of the Local Government (Constitution) Regulations reads as follows:

6. Abolishing a district: consequences

(1) In this regulation — commencement means the commencement of the order referred to in subregulation (2).

(2) This regulation applies if an order is made under section 2.1 abolishing a district (“district A”).

(3) On commencement — (a) local government A is disestablished; (b) all offices of members of the council of local government A cease to exist.

(4) If on commencement the whole of the area of district A is included in the area of one other district (“district B”), whether by means of a boundary change to an existing district or by means of a declaration of a new district, then on commencement —

(i) a reference in any instrument, contract, written law, or proceedings made or commenced before commencement to local government A shall be read and construed as a reference to local government B;


From a contract law perspective, if the ABN of the contract has not changed, then the contract itself may not need to be terminated, rather varied to account for the change of circumstance (e.g. volume and scope of supply). It is an easier scenario to effect transition by way of variation of contract to incorporate new areas where only one common supplier is available. Where the nature of the supply remains unchanged it is easier to justify transition, however if there is a material difference in the contract scale and scope, it is best to test the market as early as practicable.

Decisions will be required where a Local Government has two contracts for the same supply of goods and/or services with different companies. The starting point for the Local Government is to determine how easy (or difficult) it will be to terminate their current contracts prior to the term of the contract, so that the opportunity is then available to retender. Alternatively both contracts may be best left to run their course until expiry and alignment can be achieved. The following process map may assist to work out the best approach to be taken:


Will the Contract reach term

prior to Amalgamation?

Lapse Contract at

Term

No Yes

Does the Contract have Terminate for

Cause rights?

Yes

Yes

Yes

No

No

No

Is the Supplier mutually agreeable to

termination?

Terminate for Cause

Terminate on the basis

of mutual agreement

Do all amalgamating Councils have the

same supplier?

Negotiate interim

transition and

extension Allow contracts to run

term, plan for procurement process

that provides for future alignment

Existing Contracts

The options for Local Government with respect to existing contracts are as follows:

Lapse – allow the existing contract to reach its term then lapse. This option is least desirable as it may come at an administrative cost, especially if there are different services providers within the entities. However in the worst case scenario a newly amalgamated organisations may have to operate with multiple service providers within previously defined borders until such time as their pre-contracted arrangements reach their contractual term.

Novate – take the terms of the existing contract and novate them to the new entity. Some variations may be negotiated as part of this process to account for volumes and area of supply, and pricing schedules. However these variations should be minor in scope and not change the nature or intent of the supply. A novation can provide for direct transition without the need for a separate procurement process to renew.

Transition – Terminate the current Contract. This provides a clean break and allows a new contract to be set. Once the transition has been made a procurement process (Preferred Supplier quotation or tender) is required to establish a new arrangement. It is a governance risk (procedural fairness) not to test the market in the event of termination, and the intention of Local Government regulations is to provide the marketplace to bid for the organisations business in the event that a Contractual relationship has been ended.

Re-engineer – Re-establish the contract in a different format. The structure of the contract may change, the mix of goods and services and the medium of access may also shift. Examples include services that were previously undertaken internally being outsourced, or being blended with other supplies (a standalone graffiti removal contract may be integrated into a broader facilities management arrangement).

The following checklist of questions will also assist to determine what options and arrangements are most appropriate:

Does the Contract have Termination for Cause rights within it? Is the supplier mutually agreeable to termination? What happens if a newly amalgamated Local Government is dealing with the same service provider however the schedules of rates differ? Are any contractual provisions of confidentiality breached or are any laws relating to privacy of information being compromised as a result of a newly

amalgamated entity receiving information from previous entities? What happens if one of the local governments that is party to an amalgamation has a regional price preference, but when amalgamated this is no longer

applicable to the entity? How will this impact upon current and future tender evaluations? What happens with risk profile assessments, due diligence, bonds, guarantees and insurances due to the changed circumstance of amalgamation? Are KPI’s being monitored, performance being tracked and supplier relationships being measured in the lead up a contract term?


Long term strategic and high value supplies can take several months to establish through tender or quotation processes, inclusive of evaluation, negotiation (if appropriate) and council resolution (if appropriate). The Local Government may undertake a categorisation process to determine which contracts will be accorded an extension or short term rollover, and which contracts require priority placement to a procurement process. Risk and business continuity is paramount to this consideration and prioritisation, with the practical reality that not every contract can be put to market at the same time.

Short term new Contracts

It is not recommended that Local Governments enter long-term contracts that will operate well into the term of the future entity.

WALGA has developed a specific clause that can be incorporated into contracts that are currently pending. If the procurement process is complete the clause can be put forward as a minor variation. If the contracting process has yet to commence then the clauses can be incorporated into the General Conditions of Contract.

RESTRUCTURE OF THE PRINCIPAL

If the Principal is restructured by Law, then the rights and obligations of the Principal under the Contract are assigned to and assumed by the appropriate legal entity as determined the Principal or the successors of the Principal under the restructure.


Future Contracts

Future contracts that are signed prior to the Amalgamation process should include clear indication and justification of termination and transition rights with respect to structural reform. The above contract clauses, and additional protection through commentary and information provided through the procurement process will mitigate contractual risk.

Summary

From a practical perspective, there will be too much administration involved in attempting to renew or refresh each contract arrangement from day one of an amalgamation. Much of the work needs to be undertaken prior to amalgamation to determine which of the contracts will require immediate attention for the new organisation.

In the lead up to reform Local Governments should avoid making long-term supply commitments that would bind the new entity into a contractual arrangement that is medium to long-term without any exit or termination rights that are specifically invoked through the contracting process.

It is the intention of the Local Government (Functions and General) Regulations to provide all supplies in the market the opportunity to bid for business. Sometimes the Local Government decision making process may be adversely influenced by the strength of existing relationships, the attractiveness of not having to transition (educate, induct and manage a new service provider), and other factors. It is important that the market is tested by Local Government and that the entity is not abrogating its responsibility to take the most advantageous offer. This means that incumbency should not be provided with an unfair advantage or inappropriate weighting through supplier selection processes. Transition should therefore be focused as an interim and not long-term measure in the context of the reform process.

Finally, whilst much of the transition focus is on shifting arrangements to the newly amalgamated Council, focus also needs to be maintained on communicating and managing the relationship with the unsuccessful companies that have their incumbent supply contracts terminated with no renewal or transition of business to the new entity. These relationships can be difficult to maintain and manage, however a future competitive market is important to the sector, and it is vital that these companies will have the confidence to bid into future tender and quotation processes for the new entity as the business comes up for periodic renewal.


Checklist: Current Activity

Task Critical Considerations StageReview and map out expiry date of contracts, suppliers to those contracts, and nature/importance of contracts

Which of the contracts are of most strategic importance?

Which of the contracts are of high value? Which of the contracts are most complex to

operate? Which of the contracts have limited service

providers in the market?


Ensure entry to new contracts contains clauses specific to termination and transition with respect to Local Government reform

Are the model clauses provided by WALGA suitable?

Has context been provided within the procurement process?


Review longer term contracts that will continue past July 2015 and future contract extension options with respect to reform

Have discussions been held with suppliers? Is there a contractual head of power to terminate

for cause or to transition? Is it appropriate to test the market or to extend a

contract? Will the risk and value of the contract be

substantially impacted due to amalgamation? Will there be service providers who want to bid

for the new entities business?


Prepare and sign contract transition/extension documents and negotiate revised terms of supply

Propose transition using new terms effective from date of new entity

Ensure communication and written paper trail of intentions with respect to interim and transitional arrangements.

Ensure further extension options are provisioned in case they are required.

Utilise legal services where appropriate (where there is non acceptance by the supplier)


Implementation of transitional and extended Ensure that contract management activity is Stage 4 – July 2015 onwards (implement)


arrangements maintained and tracked from day one Maintain and audit compliance with contract and

pricing applied to services provided to the new entity.

Prepare procurement plan and run procurement processes for new supply arrangements

Utilise and continuously review priorities set and timetables applied.


Further support resources specific to Current Activity:

Resource Name Description SourceeQuotes WALGA online procurement facility for calling quotations under

Preferred Supply. Can meet interim and long-term purchase needs irrespective of supply value or volume through the Preferred Supplier Program

Emma GillespieContracts ManagerPh 9213 2016Email [email protected]

State Government CUA Guide

Tender exemption applied to purchasing through Western Australian Government.

http://www.finance.wa.gov.au/cms/content.aspx?id=12609


Templates for RFx documents and model contract documentation


Australian Centre of Excellence for Local Government

The ACELG have a range of publications and research papers relating to financial reform and future development.

http://www.acelg.org.au/library.php?id=mostRecent

ECObuy Sustainable Procurement Assessment Tool - online self-assessment

https://eco-buy.squarespace.com/assessment-tool


https://eco-buy.squarespace.com/assessment-tool

http://www.acelg.org.au/library.php?id=mostRecent




8 Due Diligence

Through the supplier selection process, and through the term of Contract, it is critical for Local Government to have awareness and confidence in the ongoing operating of the contracted entity. If a supplier is unable to remain an ongoing concern, there is a business continuity risk to the Local Government. Some high profile and high impact examples of service providers to Local Government being placed into administration in recent years include a managed facility provider for recreation centres, a bill payment service provider for rates and accounts payments, and a financial advisor managing Local Government investment funds.

Local Governments through procurement processes (supplier selection), contract management processes, and contract review processes can be supported in their decision making by external credit reference reports, business research facilities and similar analytical and predictive indicators to measure the financial strength and credit rating of their supplier. This is particularly critical to construction and infrastructure based contracts.

The service providers in this market draw on a range of sources to provide products such as health checks, credit reference reports, and financial predictors. For example a financial delinquency score or analysis of financial ratios can allow the assignment of a confidence rating to a particular supplier, and a recommendation to transact to specified values or conditions (e.g. provision of a bond or bank guarantee).

Specific to the reform process, the risk profile of the service provider is enhanced by checks that are undertaken prior to offering a transition, or a third party assessment to ensure that the capacity exists for the supplier to deal with enhanced volumes and values of supply in a post-reform environment.

Internal due diligence can also be undertaken. The following are sources of information that can contribute to an internal due diligence:

Performance ratings, KPI’s and Contract Management reports Trade and other (employee and former employee) references Review of Financial Statements and Audit Reports, including tracking of profitability over time Licenses and registrations Memberships to industry associations Quality Assurance and Accreditation Level of insurances Court information ASIC information ASX profiles and releases ATO private rulings Personal Property Securities Register (PPSR) Reports from regulatory bodies

Activity relating to existing contracts can also be proactively considered. Some agencies offer alert services where particular entities are monitored and should any media reports, voluntary disclosures or regulatory activity occur attention is drawn towards this.


Ethical considerations can also be undertaken through due diligence, including an assessment of CSR (Corporate Social Responsibility). This could be internal initiatives to support staff, including employment of people with disabilities, promotion of local and indigenous employment programs, graduate and traineeship programs and other initiatives in place to recruit, develop and up-skill staff. CSR can also relate to external factors, including sponsorships, charitable, community and philanthropic contributions, environmental and sustainability initiatives, and other participation in activities that deliver a public benefit. Other ethical considerations specific to procurement include programs such as “Walk Free”, aimed at ensuring global production is done under fair conditions and that modern slavery is not present in manufacturing and production supply chains. With all CSR and supply chain due diligence it is often important not to accept claims at face value, but to have in place the ability to audit, test and verify the CSR that is represented through procurement and contract management processes.

Checklist: Due Diligence

Task Critical Considerations StageAssess current practices and levels of due diligence within procurement processes

Is regular activity undertaken? Are external agencies utilised to obtain credit

ratings? What measures are in place to identify and

respond to suppliers encountering financial distress?


Establish operational guidelines for future activity What processes will be implemented for supplier selection, management and renewal?

What triggers, thresholds and risk profiles will be set for obtaining external information

What internal processes, audit and review/check activity will be put in place

Meet with potential agency service providers and assess products and services available

Which combination of products will be selected Will proactive alert services be engaged?


Undertake updated assessments of key suppliers through consideration of transition and novation

Advise suppliers of due diligence Raise any issues with suppliers that are identified

through assessment activity


Incorporate due diligence into procurement process activity

Amend tender and quotation documentation When using Preferred Supply access to due

diligence can be facilitated through the WALGA prequalification.

Incorporate due diligence into regular procurement activity

Tender evaluation guidelines Contract Management activity Contract Review activity


Further support resources specific to Due Diligence:


Resource Name Description SourceD&B Reference Guide A summary of the risk management solutions and products

available from D&B, inclusive of sample reportsCraig Brooks, State Manager WA, Dun & Bradstreet AustraliaPhone: 9426 1851Email: [email protected] Web: www.dnb.com.au

Corporate Scorecard Corporate Scorecard offers information and analytical services including ASIC searches/data matching, Financial Viability Assessments, Project Risk & Comprehensive Credit Rating Reports.

John Rowell, Business Development ManagerPhone: (03) 9646-2331Email: [email protected]: www.corporatescorecard.com.au

WALGA eQuotes Buyers Guide summaries for each panel will highlight any departures from the panel compliance criteria

http://www.walga.asn.au


http://www.walga.asn.au/

http://www.corporatescorecard.com.au/


http://www.dnb.com.au/

9 Insurances

The Local Government sector is self-insured and the liabilities and risks of the sector are protected through this medium. However in a procurement context it is not the Local Government Authorities insurances, but those of the service suppliers and suppliers that need to be assessed and monitored to protect the business continuity and civil infrastructure development of the sector.

Common Insurance types include:

Contract Works Public and Product Liability Insurance of Employees (Workers Compensation) Motor Vehicles and Equipment Professional Indemnity

Insurances are a complex area of procurement. Issues arise which can leave the Local Government buyer at risk as follows:

Suppliers with the incorrect classifications of insurance (e.g. not professional indemnity cover when advice is provided) Suppliers with insufficient levels of cover (e.g. cap on aggregate activity) can leave inadequate recourse in a major disaster situation Imposing onerous requirements on providers that are not commensurate with the level of supply. For example, a supplier may be obliged to spend thousands of

dollars on insurance cover, which are overheads passed back to the buyer, when this level of cover is beyond the adequate requirements for the supply. Presentation of global policies and the reliance and limitation of these in the Australian market Absence of cross liability clauses which preserve the right to sue the Contractor and subrogation (ability to be sued) Non-prejudicial breach and status of when the Local Government is potentially deemed to be at fault in accordance with the terms of the policy. Indemnities

WALGA has been advised by Herbert Smith Freehills of particular clauses and limitations that sit within the body of insurance policies. It is common practice for Local Governments to receive and maintain Certificates of Currency, but not to check the specifics of an insurance policy itself. For high risk and strategically critical supplies, a review of key clauses of the Insurance coverage, either directly undertaken or engaged through a third party may be appropriate.

Through its Preferred Supplier program WALGA maintains insurances for all its prequalified suppliers, and visibility of all certificates of currency through eQuotes.

Through an Amalgamation process the transition and renewal of contracts should include specific and particular review in the area of insurance coverage to ensure that appropriate insurance types, levels of cover, and contents of policy protect the entity, especially in high risk areas such as outsourced service arrangements.

Checklist: Insurances


Task Critical Considerations StageReview all contracts to ensure the extent to which suppliers are insured.

Review compliance (actual levels of insurance against contractual requirement) Review insurance types and classifications by contract


Develop a risk allocation framework to determine appropriate insurance levels

Set desired insurance levels based on future estimated contract spend value and risk Consult with suppliers and other stakeholders where substantial change is proposed


Implement contracts (transition and new contract development)

Represent new levels of insurance in documentation Ensure a process is available to maintain access to certificates of currency Where appropriate assess the contents of the insurance policy to ensure sufficient protection


Review activity Review insurance coverage and risk allocation framework Maintain register of supplier insurances invoked/claims processed through contractor activity.


Maintain register of insurance compliance Consideration of contract management KPI inclusion Stage 4 – July 2015 onwards (implement)

Further support resources specific to Insurances:


Resource Name Description SourceLGIS Through LGIS, Local Governments across WA are working

together to achieve the best insurance and risk management solutions. This unique and exclusive partnership brings the benefits of an industry-based self-insurance Scheme, specialist risk management programmes, and advice and solutions from a Client Services Team focused on WA Local Government needs.

https://www.lgiswa.com.au/

LGIS Online Contractor Induction

An online tool to support Local Government’s legal obligation to ensure that contractors are aware of the safety requirements of supplying to the sector.

https://www.lgiswa.com.au/contractor-induction

WALGA Business Solutions

WALGA’s Procurement Consultancy has developed a list of common insurance types and clauses relating to representation of insurances in contracts


Australian Prudential Regulation Authority (APRA)

The Australian Prudential Regulation Authority (APRA) is the prudential regulator of the Australian financial services industry. Their website contains General Insurance information including a register of licensed insurers, authorisation guidelines and reporting frameworks.

http://www.apra.gov.au

Australian Procurement and Construction Council (APCC)

Professional Indemnity Insurance Guidelines in the Building and Construction Industry.

http://www.apcc.gov.au/ALLAPCC/APCC%20PUB_Professional%20Indemnity%20Insurance%20Guidelines.pdf

Tasmanian Risk Management Fund

Guidelines for Determining Appropriate Levels of Insurance for Goods and Services Contracts

http://www.treasury.tas.gov.au/domino/dtf/dtf.nsf/LookupFiles/Guideline-Insurance-Clauses-in-Contracts.pdf/$file/Guideline-Insurance-Clauses-in-Contracts.pdf

Chartered Institute of Purchasing and Supply

CIPS / AIRMIC Insurance procurement guidehttp://cipsintelligence.cips.org/opencontent/cips-airmic-insurance-procurement-guide

10 Skills Development


http://cipsintelligence.cips.org/opencontent/cips-airmic-insurance-procurement-guide





http://www.apra.gov.au/

https://www.lgiswa.com.au/contractor-induction

https://www.lgiswa.com.au/

Professional procurement requires recognised skills development, professional training and competence. The evolution of professional procurement has led to qualifications (academic and VET qualifications) and industry development in recent years, with further recent moves by the procurement industries peak professional body, the Chartered Institute of Purchasing and Supply (CIPSA) to shift the global professional standard of MCIPS to a licensed based model for their affiliated practitioners.

Historically, Local Government has entrusted large and complex procurement projects to officers that have had little exposure and no skills development in the area of managing tenders and procurement processes. This creates a process contract risk, in addition to resulting in outcomes that are not predicated on best value. Procurement professionals trained in techniques to identify and assess Total Cost of Ownership (TCO) can deliver benefits such as value for money, security of supply, strong supplier relationships, risk and compliance benefits, and also introduce innovation and entrepreneurship into an organisation. A strategic approach towards building procurement capabilities into business processes elevates the purchasing role from an administrative and transactional function into one of business development, delivering cost savings and an enhanced reputation to the Local Government.

When assessing the professional development needs of current and future officers in procurement related roles a range of development areas can be identified. These commonly include:

Business research and analysis skills Technical competence and process skills for tendering and contracting Local Government knowledge in regulations and compliance Commercial acumen, negotiation skills Administrative skills relating to records and information management and time management Service skills relating to Supplier Relationship Management (SRM) Softskills relating to human relationships and emotional intelligence ICT skills relating to systems and applications used to manage procurement and contracts activity

Local Government officers can also attend workshops and non-assessed training. This assists to supplement formalised education, and promotes cultural change, awareness of issues, tools and techniques, and the identification of knowledge gaps

Local Government reform will bring unique challenges to the market, especially given the blend of skills and knowledge required for Local Government purchasing (a combination of technical procurement and Local Government operational knowledge combined with sound business acumen). The ability of the Local Government sector to compete with other industries for procurement staff is already limited and has created a capacity issue for Councils. Whilst procurement professionals often develop most of their skills from within a procurement role, clear strategies for the growth and development of purchasing staff are required. Career path identification, skills development matrices, and measureable performance targets will assist to enhance the professional standing of Local Government as a market place for procurement aspirants.


WALGA is an accredited RTO and offers procurement training for Local Government. This includes Procurement Training for Local Government (a two day workshop delivering skills development), Contract Management for Local Government, and the nationally recognised qualification Certificate IV in Government (Procurement and Contracting).

The Chartered Institute of Purchasing and Supply offer MCIPS which is recognised worldwide as the global standard for top quality procurement professionals.

Curtin University Graduate School Of Management offers a specialised Master of Business Administration (MBA) major which has been designed for those currently working in the field of strategic procurement, or those considering a career in this growing field. It is unique major combining strategic procurement knowledge, and supply chain management with the core requirements of an MBA to ensure that graduates have a broad coverage of key functional disciplines of business management, as well as specialised knowledge of strategic procurement. The MBA (Strategic Procurement) is accredited by the Chartered Institute of Purchasing and Supply - Australia (CIPSA).

Summary:

The service providers for Local Government who negotiate and arrange contractual relationships want to deal with professionally qualified procurement staff with astute business and commercial awareness. By nature Local Government purchasing involves bureaucratic process requirements, but procurement practitioners that demonstrate an understanding of their suppliers business drivers (incorporating sustainable service structures, commercial margins, innovation and development) assist to position a Local Government as a customer of choice. Procurement training should extend beyond the basic administrative disciplines to focus on business disciplines that improve their ability to add value both to their organisation and the supply chain that sits behind it.

Checklist:

Task Critical Considerations StageReview current staff qualifications Are current competencies and training

opportunities provided?Stage 1 – to July 2014 (review)

Develop professional development plans What skills and qualifications are sought Which agencies and providers will be used


Incorporate required and desired qualifications and skills into procurement related position descriptions

Will MCIPS be referenced? What tertiary and post graduate qualifications will form the standard for senior procurement roles?


Provide training and development to staff Consider in-house training Staff development plans External qualifications, events and activities Participation in WALGA Procurement Network


Further support resources specific to Skills Development:


Resource Name Description SourceTraining Solutions WALGA offers procurement training to the sector including http://walgatraining.com.au/course/view.php?id=6

Jacquiline Dodd, Training Manager9213 [email protected]

CIPSA White paper on the Business Case for Professional Development

http://cipsintelligence.cips.org/opencontent/the-business-case-for-professional-development

CIPSA Information about the MCIPS global standard http://www.cips.org/en-AU/Qualifications/About-CIPS-qualifications/

Curtin University 310527 v.1 Strategic Procurement Major (MBA) http://handbook.curtin.edu.au/courses/31/310527.html

The Faculty The Faculty delivers specialised professional development courses for procurement professionals and those new to procurement.

http://www.thefaculty.com.au

AAPCM The Australian Association of Procurement and Contract Management supports and encourages the uptake of AQF qualifications in procurement and offers a formal certification framework

http://www.aapcm.com.au/

BTTB BTTB offer procurement events and publications, as well as category management expertise in specific industries

www.procurementandsupply.com

Department of Finance

Offers a Procurement Vocational Program http://www.finance.wa.gov.au/cms/content.aspx?id=12674

APPC The Australian Procurement and Construction Council have produced a framework called Building Government Procurement Capabilities that incorporates an aspirational capability matrix for procurement practitioners.

http://www.apcc.gov.au/SitePages/PCD%20Home%20Page.aspxhttp://www.apcc.gov.au/ALLAPCC/APCC%20PUB_Building%20Government%20Procurement%20Capabilities%20Guide%20-%20May%202008.pdfhttp://www.apcc.gov.au/ALLAPCC/Business%20Case%20Procurement%20training%20and%20education%20is%20an%20investment.pdf

SCMEA Supply Chain Management Education Australia has provided extensive Local Government training specialising in the facilitation of CIPS qualifications.

http://www.scmea.com.au

Questamon Questamon training services is a Perth based consultancy specialising in procurement, contract administration and management.

http://www.questamon.com.au

11 Compliance and Probity


http://www.questamon.com.au/

http://www.scmea.com.au/

http://www.apcc.gov.au/ALLAPCC/Business%20Case%20Procurement%20training%20and%20education%20is%20an%20investment.pdf

http://www.apcc.gov.au/ALLAPCC/Business%20Case%20Procurement%20training%20and%20education%20is%20an%20investment.pdf

http://www.apcc.gov.au/ALLAPCC/APCC%20PUB_Building%20Government%20Procurement%20Capabilities%20Guide%20-%20May%202008.pdf

http://www.apcc.gov.au/ALLAPCC/APCC%20PUB_Building%20Government%20Procurement%20Capabilities%20Guide%20-%20May%202008.pdf

http://www.apcc.gov.au/SitePages/PCD%20Home%20Page.aspx


http://www.procurementandsupply.com/

http://www.aapcm.com.au/

http://www.thefaculty.com.au/

http://handbook.curtin.edu.au/courses/31/310527.html

http://www.cips.org/en-AU/Qualifications/About-CIPS-qualifications/




http://walgatraining.com.au/course/view.php?id=6

The integrity of Local Government and reputation of the sector stands on the basis of compliance. Best practice procurement can assist Local Government to move beyond a minimalistic approach and to deliver greater value to the organisation, however underpinning this are basic regulatory requirements, and fundamental ethics and values that govern and guide the procurement operation.

It is however possible and desirable for Local Government to take a proactive approach towards compliance and probity. Self-regulation can be delivered to the sector in the form of review and checks, internal audit, and other forms of self-assessment. External checks and balances can also be facilitated.

WALGA provides a probity audit service that can deliver independent checks of particular procurement projects. WALGA has also conducted a large number of procurement review services which provides Local Governments with an analysis of their procurement processes and practices to help Local Governments identify potential problems and improve their procurement function with benchmark assessments. WALGA employs qualified probity auditors to undertake this activity.

Regulatory bodies have, and remain, active in both scrutinising the sector, and engaging Local Government to support process improvement. When breaches of compliance are identified, voluntary disclosure and cooperation are common and appropriate forms of response from the Executive, however are also fraught with risk in an environment of uncertain circumstances.

Common compliance, risk and probity issues for Local Government include;

Breach of regulations, particularly anti-avoidance provisions Interpretive issues relating to application of the Tender Threshold Processes that are weighted to support particular outcomes Breach of purchasing policy and operational process guidelines Poor structure of procurement plan, insufficient skill and technical balance within evaluation panels Governance and external interference in process Long-term established supplier relationships and incumbency Poorly constructed specifications that lack detail and increase propensity for fraud Lack of procedural fairness and breach of duty to be fair Inappropriate relationships, gifts and inducements, and bribes. Corruption and fraud through procurement processes and contract management

Procurement capability development will assist to avoid these problems, as will knowledge and awareness of the regulatory framework. The reform process provides a unique opportunity for Local Government to review the procurement function and integrate best practice procurement structures and controls into the new organisation, with heightened awareness of the consequences of non-compliance.

The procurement regulations and consumer and competition law provide clear minimum requirements, however the structuring of procurement activity is in accordance with Local Government operations. Care is needed to ensure that procurement risks are identified and addressed, that core separation of duties alongside clear communication of policy, values and operational guidelines support the compliance and probity objectives of the organisation.


Summary

Each year the Local Government sector will undertake thousands of tenders, Requests for Quotation and sourcing exercises, the majority of which are fair and transparent processes which deliver the intended outcomes. However a small portion of poorly constructed procurement processes, and at worst corrupt and fraudulent processes, can have a widespread and detrimental impact on the reputation of the Local Government and the sector as a whole. Each of the Commissions of Enquiry and suspended Councils over the past decade in Western Australia has involved procurement related issues.

It is critical to address appropriate controls at the governance level, and to regularly test the impartiality of the organisations procurement. The ideal operating environment is for the sector to stand proud and uphold the structure of its procurement activity, however a strong reputation and evidential support is required to underpin this.

Checklist:

Task Critical Considerations StageReview current corporate documentation Code of conduct

Procurement policy Procurement plan documentation Declaration of interest and other disclosures Delegations register and structure


Research and Development Current sector activity Best Practice procurement documentation Identify future requirements


Develop new organisational standards Policy development Procurement guidelines


Monitor compliance and probity Code of conduct training (ethics and procurement) Corporate Governance standards Audit and forensic review guidelines Procurement review /probity audit


Further support resources specific to Compliance and Probity:



WALGA The Procurement Consultancy Service offer Procurement Review and Probity Audit Services.

Laura Cull, Business and Procurement ManagerPh 9213 2045Email [email protected]

Department of Local Government and Communities

The Department supports Local Government guidelines, a compliance framework, the Local Government Standards Panel, and is the administrator of the Local Government Act, 1995

www.dlg.wa.gov.au

CCC The Corruption and Crime Commission works to improve the integrity of the Western Australian public sector and helps public sector agencies minimise and manage misconduct.

www.ccc.wa.gov.au

Ombudsman The Ombudsman serves Parliament and Western Australians by resolving complaints about the decision making of public authorities and improving the standard of public administration. In 2011/12 there were 285 complaints received about the Local Government sector, many relating to contracts and property management. The office has produced publications relating to this activity.

http://www.ombudsman.wa.gov.au


ACCC The Australian Competition and Consumer Commission regulates and monitors industries where there is limited competition and regulates Consumer and Competition law.

www.accc.gov.au

PSC The Public Sector Commission brings leadership and expertise to the public sector to enhance integrity, effectiveness and efficiency. The PSC may take a greater role in the oversight of Local Government conduct in the future.

www.publicsector.wa.gov.au

Governance Institute of Australia

Formerly Chartered Secretaries Australia, this agency is the peak body for over 7,000 governance and risk professionals.

www.governanceinstitute.com.au

ICAC The Independent Commission Against Corruption is the NSW public sector agency to investigate and expose corrupt conduct and prevent corruption. There are website resources specific to Local Government.

www.icac.nsw.gov.au

State Supply Commission

The SSC has merged with the Department of Finance however online resources are retained including buyer alerts, examples of aggressive marketing strategies and

www.ssc.wa.gov.au




http://www.governanceinstitute.com.au/

http://www.publicsector.wa.gov.au/

http://www.accc.gov.au/



http://www.ombudsman.wa.gov.au/

http://www.ccc.wa.gov.au/

http://www.dlg.wa.gov.au/


publications.SAT The State Administrative Tribunal (SAT) in Western

Australia is the primary place for the review of decisions made by Government agencies, public officials and local governments.

www.sat.justice.wa.gov.au

VAGO Victoria Auditor General’s Report on Fraud Prevention strategies in Local Government

http://www.audit.vic.gov.au/publications/20120606-Fraud-in-LG/20120606-Fraud-in-LG.pdf

OAG Office of the Auditor General resource on Fraud Prevention and Detection in the Public Sector

https://audit.wa.gov.au/reports-and-publications/reports/fraud-prevention-and-detection-in-the-public-sector/

AICD Australia's pre-eminent organisation for directors, dedicated to making a difference in the quality of governance and directorship.

www.companydirectors.com.au

AIM The Australian Institute of Management advances education and learning in the field of management and leadership.

www.aim.com.au

SAI Global SAI Global provides information services and solutions for managing risk, achieving compliance and driving business improvement, and access to Australian Standards

www.saiglobal.com

SMRC Southern Metropolitan Regional Council Corporate Policy on misconduct, fraud & corruption prevention.

http://www.smrc.com.au/files/4.3%20Misconduct%20Fraud%20and%20Corruption%20Prevention%20Policy.pdf

12 Property Contracts and Capital Assets




http://www.saiglobal.com/

http://www.aim.com.au/

http://www.companydirectors.com.au/





http://www.sat.justice.wa.gov.au/

Procurement within Local Government has a strong interface with business units that oversee asset and facilities management, construction and works, technical services, parks and gardens, leisure centres and other areas of operation that involve buildings and fixed infrastructure.

In 2009/10 the Australian Centre of Excellence for Local Government recorded the collective capital value of Local Government buildings in Western Australia at $2.7 billion1.

One of the most important aspects of Local Government reform relates to Local Government Asset Management, as articulated in the WALGA Systemic Sustainability Study and associated economic research. There is a cost of ownership associated with assets, in particular buildings, which need to be conditioned, maintained, operated, refreshed and renewed. This comes at a cost and the procurement team are integrally involved in sourcing both supplies and service providers (facilities managers and civil contractors) to drive the building maintenance and construction activities of the organisation.

The reform experience of Local Government in other Australian States and globally has been that in a post reform environment, funding allocations and financial grants to the sector are reduced. The sector response has been to divest assets such that the operational cost of owning and operating facilities is removed from the budget. The sale of assets also reduces debt ratios.

It is common for buildings sold by Local Government to remain as community based infrastructure of Not For Profit and other agencies, however divestment of ownership by Local Government means that the assets are not retained as an expenditure burden for the former Local Government owner. New Capex budgets are provisioned for further infrastructure development as the capacity of the new entity is consolidated, however the short term impact of reform is likely to lead to a reduction of the property portfolio. For example, former Local Government buildings which are no longer required as civic administration centres can be redeployed.

Astute Local Governments will be aware of the economic cycle associated with property ownership and management. By upgrading and refreshing facilities prior to the reform process, the saleable value of the asset increases and can deliver a greater capital gain for the future entity. In the lead up to reform, identification of those assets likely to be sold in a post-reform environment will allow for valuations, condition review, and upgrade to maximise the value of the asset. Examples of upgrade may include an energy efficiency retrofit with LED and PV panel installation, improved access, external landscaping, and internal fitout.

Another aspect of property management within the sector relates to the role of Local Government as a landlord. Many facilities have tenants including coffee shops, and small businesses predominantly in the leisure, health and education markets. Procurement can assist by facilitating contractual arrangements with Tenants and integrating the management of these arrangements into the organisations contract management activity. For example, a contracts register can set triggers for contract review and term, as well as track review requirements.

Checklist:

Task Critical Considerations Stage

1 Source: Local Government Fact Sheet 3, Local Roads, Building and Land (complied January 2012), ACELG. www.acelg.org.au


http://www.acelg.org.au/

Update and maintain asset register Accuracy and completion of register Currency of valuations Condition assessment criteria Data and analysis from Asset Management system


Future planning for Buildings Define procurement relationship to Asset Management Indicative profiling of future assets to be retained/divested Maintenance and upgrade prioritisation


Review current arrangements Determine term and future status of property lease contracts Determine term and future status of current service provider and property management contracts


Preparation for post reform Preparation of property and asset strategies, systems, and processes Preparation for novation of property leases Upgrade of buildings


New Building Management activity Transition of leases New service provider contracts Ownership and divestment strategy adopted


Further support resources specific to Property Contracts:



ROMAN II Local Government Asset Management Software for all asset classes

http://www.roman2.com.au/

Department of Commerce

Commercial tenancy forms http://www.commerce.wa.gov.au/consumerprotection/content/business/Commercial_tenancy/Forms_specified_by_regulations.html

APCC The Australian Procurement and Construction Council operate a Government Property Group that supports best practice procurement in built asset management.

http://www.apcc.gov.au/SitePages/GPG%20Home.aspx

Property Council The Property Council of Australia is an advocate for the property industry.

http://www.propertyoz.com.au/wa/Division/Default.aspx

REIWA The Real Estate Institute of WA website has resources available such as a residential property lease template

http://reiwa.com.au/home/default.aspx

DLG Department of Local Government and Communities Integrated Planning Framework

http://integratedplanning.dlg.wa.gov.au/DeliverAssetManagement.aspx

IPWEA IPWEA Asset Management Community http://www.ipwea.org/assetmanagement/home/

NAMAF The National Asset Management Assessment Framework (NAMAF) is a methodology for assessing the maturity of a Council's Asset Management practices and processes.

http://www.lgam.info/national-asset-management-assessment-framework

UDIA Urban Development Institute of Australia Sustainable Urban Development Matrix.

http://www.udiawa.com.au/go/Sustainable-Urban-Development

BMW Building Management and Work delivers the State Government’s non residential building program.

http://www.finance.wa.gov.au/cms/section.aspx?id=2520

ANAO The Australian National Audit office maintain an online Managing the Contract Checklist amongst better practice guides.

http://www.anao.gov.au/html/Files/BPG%20HTML/Developing%20and%20Managing%20Contracts/managing_checklist.html

13 ICT Contracts




http://www.finance.wa.gov.au/cms/section.aspx?id=2520

http://www.udiawa.com.au/go/Sustainable-Urban-Development

http://www.lgam.info/national-asset-management-assessment-framework

http://www.ipwea.org/assetmanagement/home/

http://integratedplanning.dlg.wa.gov.au/DeliverAssetManagement.aspx

http://reiwa.com.au/home/default.aspx

http://www.propertyoz.com.au/wa/Division/Default.aspx

http://www.apcc.gov.au/SitePages/GPG%20Home.aspx

http://www.commerce.wa.gov.au/consumerprotection/content/business/Commercial_tenancy/Forms_specified_by_regulations.html

http://www.commerce.wa.gov.au/consumerprotection/content/business/Commercial_tenancy/Forms_specified_by_regulations.html

http://www.roman2.com.au/

The ICT platforms that support Local Government business are critical to the efficiency and effectiveness of the organisation. There are currently a limited number of specialised and integrated Council Business System providers in the market. The evolvement of cloud based technologies has already led to a functional diversification of technology within the sector and is likely to continue to allow for independent and customised activity that is specific to a business area. The challenge then becomes to integrate data and allow various applications to converse.

Procurement processes for ICT are complex due to the licensing structures applied and the various service structures associated with the supply. Core components of an ICT contract include the license agreement, terms of use, a service level agreement, and a framework for support and maintenance, commonly charged as a percentage of the license provision. However it is the deployment and configuration of the technology that becomes complex, and contractual protection is needed to ensure business continuity. Economies of scale through compatible technologies such as virtualisation also require consideration.

The Government Information Technology and Communications (GITC) contractual framework comprises of standard legal documentation that has been developed in cooperation with industry representatives and government for ICT contracts. GITC is designed to assist government buyers and industry suppliers to develop contracts for the supply of information and communications technology (ICT) products and services in the most efficient and effective manner and is recommended for use by WALGA. A number of Government procurement agencies have reviewed GITC (current version 4.1) in 2013, and whilst noting some limitations have concluded there is benefit in retention of this model.

When procuring ICT products and services the following requirements should be carefully considered and tested through the procurement process: Functionality and fit for purpose design Legacy data integrity and transition Deployment and Configuration including warranty and testing process Service Level and Support Account Management User responsibilities and training Length of contract and renewal (perpetual licence) rights Type of licence (concurrent or named users) License structure including maintenance and renewal Research and Development Liability caps Ownership and security of intellectual property Hardware and peripheral requirements Termination and transition Data extraction time and format on termination Decommissioning and disposal

Reform provides an opportunity for Local Governments to approach ICT strategic development with new intent, and the ability to transform the operating environment of the sector based on automated processes, e-service delivery, access to real time information through mobility, and the embrace of new and emerging technologies.


Checklist:

Task Critical Considerations StageDocument current systems and technology platforms Type of system (hosted, local client)

Integration of systems Number of suppliers Length and renewal options of current contracts Test and refine audit processes and integrity of data


Identify Day Zero requirements Identify procurement needs for goods and services that will be necessary for first-day operations.


Develop ICT Strategy Identify commonalities and differences within systems use for amalgamating organisations Consider schedule of changeover to systems, in particular the release of future ratings Create contingency strategies Archive and access for legacy data Telecommunications strategy for external hosting


Preparation of ICT Procurement Plan Consider ETI (early tender involvement) strategy Identification of timetable Development of specifications Establishment of contract model


Selection, contracting and deployment of new systems Implementation Testing and migration of data Redundancy and support Ongoing development


Further support resources specific to ICT Contracts:



Commonwealth GITC v4

Commonwealth Government Information Technology and Communications (GITC) contractual framework home page.

http://www.gitc.finance.gov.au/

CIPSA Chartered Institute of Purchasing and Supply, Model form of contract for the servicing (maintenance) of computer equipment

http://www.cips.org/en-AU/book-shop/Books1/modelformofcontractfortheservicingmaintenanceofcomputerequipment/

CIPSA Model form of contract for the support and maintenance of bespoke software

http://www.cips.org/en-AU/book-shop/Books1/modelformofcontractforthesupportandmaintenanceofbespokesoftware/

CIPSA Model form of contract for software development http://www.cips.org/en-AU/book-shop/Books1/modelformofcontractforsoftwaredevelopment

Department of Finance

The model ICT contracts provide templates for Federal Australian Government agencies to develop sound commercial agreements efficiently and effectively.

http://agict.gov.au/policy-guides-procurement/sourceit-model-contracts

Australian Computer Society

The Australian Computer Society is the professional association for Australia’s Information and Communication Technology (ICT) sector.

https://www.acs.org.au/government

14 Service Contracts


https://www.acs.org.au/government

http://agict.gov.au/policy-guides-procurement/sourceit-model-contracts

http://www.cips.org/en-AU/book-shop/Books1/modelformofcontractforsoftwaredevelopment/

http://www.cips.org/en-AU/book-shop/Books1/modelformofcontractforsoftwaredevelopment/





http://www.gitc.finance.gov.au/

Service contracts are not a discreet purchase requirement, and therefore require strong contract management resources to track, maintain and evolve the contract. A key feature of service contracts is that they contain measurable Key Performance Indicators (KPI’s), service level targets or similar mechanisms to assert compliance.

There are common service contracts for Local Government in technically complex areas that require additional security and resource for Contract Management. Some examples include:

Cleaning contracts Tree pruning contracts Graffiti removal contracts Electrical inspection and testing services

To assist with the management of service contracts, it is important to take a strategic and outcomes focused approach and to use tools such as a balanced scorecard, service level agreements, and reporting to equip the Local Government Principal with information about delivery and performance. Disputes relating to service contracts are also difficult to resolve due to the immediate need for service continuity. Being able to identify key conditions within a contract (and the contract law that underpins it) is critical to managing service escalations and resolving issues prior to reaching a point of contractual dispute. Service providers must be clearly made aware of circumstances where performance is not satisfactory or to expectation.

Specific to the reform process, Local Governments can work with service providers to develop and approve a Services Delivery Plan, or similar document that can span the timetable of an amalgamation process. This can incorporate a standing agenda for regular contract meetings and provide a medium to identify unforseen issues, management of communications, and track anticipated workflow and volume of activity. Some flexibility must be accorded to account for variances in an environment where activity levels are only estimated and there is an unknown capacity due to reform based changes.

Summary:

The structure and level of value within a service based contract is determined by the ownership of risk within the contract structure. If a service provider is commissioned on a fee for service basis, and is only charging for time and expertise allocated, then the Local Government bears the risk of cost, and needs to set in place budgetary controls to contain expenditure blowout. If however the service provision is on the basis of a retainer, then the service provider maintains the cost risk, and is unlikely to provision resources beyond the allocation of time and expertise that has been contracted. In this context the Local Government requires strong performance measurement and control to ensure that the contracted services are delivered.

Checklist:


Task Critical Considerations StageCompile a list of current service arrangements and incumbent contractors.

How many suppliers are there? What systems and processes are in place to monitor and report compliance against KPIs?


Merge service provision information across current Local Government areas and map out future structures for service provision.

Which suppliers are common to amalgamating organisations, and which are different supply arrangements? Benchmark pricing in key service areas from current suppliers. Determine supply areas and capacity to supply on an interim basis


Schedule interim and contract transition plan Which contracts will be retained and varied on an interim basis Which contracts will be put to market (procurement plan schedule development) Apply communications processes to advise supplies of the intentions and processes of the organisation Incorporate service level and key performance indicators into future contract templates


Implementation Effect new arrangements for the entity Action procurement plan and regularly review Engage in contract management performance review


Further support resources specific to Reference Resources:

Resource Name Description SourceConsult Australia Consult Australia is the industry association for consulting

companies in the built environment sectorhttp://www.consultaustralia.com.au/Home/default.aspx

BSCAA The Western Australian division of the Building Service Contractors Association of Australia (BSCAA) has produced tenders and contract templates recommended for use.

http://www.cleaningcouncilwa.com.au/

Lawlive Online service conract templates http://www.lawlive.com.au/service-agreement-templates/

15 Goods Contracts


http://www.lawlive.com.au/service-agreement-templates/

http://www.cleaningcouncilwa.com.au/

http://www.consultaustralia.com.au/Home/default.aspx

Contracts for the supply of goods are easier to manage due to their tangible nature and the quantifiable attributes associated with supply.

The security of supply of key strategic supplies is paramount, and to this extent Local Government should weigh the cost of ownership and storage against the need to access and manage activity (e.g works, events etc) based on physical stocks.

Obtaining value through the supply of goods is predicated on the following: The ability to aggregate volume (within regional areas and through WALGA’s Statewide and National contracts) Management of delivery and haulage costs Creative control of inventories that reduces the cost and risk of storage, especially for high risk supplies by using “Just In Time” supply chain management Consumption measurement and benchmarking to assess commodity use over time, inclusive of seasonal fluctuations and forward estimates of predicted purchase

volumes Checking of quality and management of return of goods policies, inclusive of access to guarantee and warranty information Optimising the number of suppliers in key category areas and strengthening the account management structures applied

The reform process delivers an opportunity for Local Government to rethink traditional supply models and buying processes relating to the supply of goods. For some decades Local Governments have been purchasing on the basis of public tender, and often tendering to establish annual or bi-annual supply contracts. When locking in rates on an annual basis, suppliers need to predict future input costs and will pass the risk and contingency factors to the purchaser through their forward estimates. The Local Government is therefore charged for this, irrespective of whether these costs eventuate for the supplier. WALGA has developed a compliant quotation based ordering system that pre-qualifies the supplier, but provides for the quotation of supplies at the point of purchase. This allows Local Government to buy from within market cycles and obtain pricing that is contemporary to the market. It also increases the competitive tension associated with the sourcing of supplies.

Even without a change of methodology, Local Governments can consider a change of order cycle. For example, instead of ordering twice a year for a product, the feasibility of ordering more frequently for lower quantities could be costed. There is a cost and risk of holding stocks of inventory, and with the right framework, ordering from the market at the time of need can derive better value. For example quarry supplies for road building vary according to input costs (fuel, labour) and seasonal impacts. Buying from the market in accordance with a price cycle will deliver lower costs than having annual supply.

Summary

Local Governments have the opportunity to reform to revisit their buying methodology, and in particular to assess the inventories and contract structures under which the supply of goods is provisioned. Supplier optimisation and strong Supplier Relationship Management are key elements of a successful inventory management program.

Checklist:


Compile a list of current goods contracts (contracts register extract)

How many suppliers are there? What tracking mechanisms are in place to monitor inventories?


Determine future mechanisms for managing and tracking supplies

Contracts Management system Ordering and tracking functionality within purchasing system

Stage 2 – Aug 2014 to March 2015 (plan) Stage 3 – April 2015 to June 2015 (mobilise)

Future operations Effect new arrangements for the entity Action procurement plan and regularly review Engage in contract management performance review Shift from annual and biannual supply contracts to point of purchase buying structure


Further support resources specific to Reference Resources:

The WALGA Procurement Handbook contains template documentation including General Terms and Conditions for the supply of goods.

WALGA eQuotes contains buyers guides and other contract information relating to supply contracts.

15 Summary and Procurement Reform Support


Structural reform delivers the opportunity for the procurement function to be elevated from its transactional focus to a key and integral strategic function. A well planned amalgamation will ensure that the new procurement model takes advantage of the opportunity to become more strategic and deliver the benefits of scale and efficiency.

When planning for the Amalgamation, we need to clearly understand the present state. This will involve: mapping out the current procurement processes across the Local Governments identifying the legal and contractual issues Identify the spend and supplier profiles Understanding the systems across the entities Identify the people issues

Having a clear mandate for the Procurement function is essential to ensuring success. Procurement is sometimes a complex function involving many processes and interactions with stakeholders and suppliers. In each of these interactions we expect the procurement team to do many things: manage stakeholders, challenge stakeholders, influence suppliers, get the best deal, manage risk, manage probity. In any organisation, but especially in Local Government this is a challenge as often the role for procurement is unclear and there is no mandate to take on a more strategic role. Some of the most successful procurement functions in local government ensure that initially there is a clear mandate for how procurement should behave and work with its stakeholders and suppliers. This mandate needs to define clarity around functional boundaries and level of influence, and active sponsorship and endorsement of the vision and mandate at the Executive level.

Broad objectives specific to Local Government procurement reform strategic development include: Ease of doing business (procurement process efficiencies Value for money determination (a greater focus on measured savings) Local Government enablement of Small to Medium Enterprise (SME) and local business communities Achieving sustainability objectives through green purchasing Building Local Government capacity (through continuous improvement e.g. Kaizen)

The reputation of the sector not only relates to the procurement process itself, but also the contract management and fostering of Supplier Relationships, which will become even more critical in the post-reform environment due to greater predicted levels of functional outsourcing. Better outcomes for staff and the community are achieved through improved services from suppliers, increased transparency of the procurement function, and optimal application of the Total Cost of Ownership. Practically speaking, engagement with suppliers assists them to understand our situation. Any issues or problems associated with the supplier can be jointly approached if they have a different perspective on the same issue.

Academic models relating to procurement optimisation, such as the Kraljic matrix can have a practical impact on business outcomes. Specialist procurement consultants can assist with modelling and adapting procurement theory and applying it to a procurement cultural transformation.

The future procurement capability of Local Government in Western Australia will blend the following values to deliver heightened awareness of good procurement practice and an enhanced reputation of the sector from the marketplace of suppliers:


Procurement Governance – good policy, strategy and direction and a well- structured procurement function, delegations, and accountabilities. People and Culture – a skilled and professional procurement team that engages across and beyond the organisation. Contract Management – a category based, business unit approach to delivering well developed supplier relationship management and performance management

of suppliers. Systems and Platforms – blending the right technology to deliver optimal performance, administrative efficiency and spend analytics. Corporate Social Responsibility – Meeting social and sustainability objectives through procurement.

List of Professional Consultants that have capabilities specific to Procurement:


WALGA does not prequalify or endorse the services of the consultants below, but lists the links as specialist suppliers that have an active presence in the Western Australian market. WALGA also notes that although external consultants may bring procurement competencies to an engagement, these cannot always be contextualised to Local Government due to the regulatory framework that is mandated to the sector.

WALGA delivers specialist procurement consultancy services directly to Local Government through a specialised team of experienced and qualified practitioners that can provide both strategic and operational services to the sector. The contact for WALGA’s Procurement Consultancy is:


Resource Name Description SourceArcblue ArcBlue are a specialist procurement consultancy group

operating across all aspects of procurement.http://arcblue.com.au

The Faculty The Faculty is a medium-sized management consulting business, focused on delivering innovative and pragmatic procurement and supply chain solutions

www.thefaculty.com.au

The Portland Group

expertise in achieving material improvements in the procurement and supply chain functions as well as in optimising the operational performance of assets and organisations.

www.PortlandGroup.com

Red Ochre Consulting

The company has worked with indigenous enterprises to support winning supply arrangements into the resources sector. The company has developed procurement process and supply chain capabilities.

http://www.redochreconsulting.com.au/services/procurement-supply-chain-improvement/

The Lonsdale Group

A business advisory firm specialising in strategy, supply chain and procurement optimisation.

www.thelonsdalegroup.com.au


http://www.thelonsdalegroup.com.au/



http://www.PortlandGroup.com/

http://www.thefaculty.com.au/

http://arcblue.com.au/


Reform Toolkit€¦ · Web viewLocal Government Structural Reform Reform Toolkit Procurement Guide...

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