Post on 28-May-2020
The New Challenges Facing
Local Government Procurement
08 August 2016
Chris Newman – Director
Chris.newman@arcblue.com.au
0412 318 384
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Value
The value curve of procurement
Need StrategyMarket
engagementNegotiate contract
Manage contract
Stages of Procurement
Time
Spent
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Becoming Strategic in approach
Moving: from Reactive...through....Proactive….to....Deterministic
Key Features:
• Collaborative cross business team based approach
• Explicit department involvement: commitment by all stakeholders
• Inclusive workshop approach that encourages ownership, commitment and knowledge transfer
• Deep understanding of the category, supply market, suppliers, and business needs
• Using market knowledge and innovation as a source of leverage
• Striving to have a deterministic influence on the supply markets
• With short, medium and long term SMART goals
• Bringing real value to the organisation
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“The process that ensures both parties to a contract fully meet
their respective obligations to deliver both the business and
operational objectives required from the contract.”
“The process by which a contractor is motivated, enabled and
empowered to successfully meet expected outcomes, and
achieve extra value beyond the requirements of the original
contract.”
“The active management of the relationship between the
client and the contractor over the term of the contract for the
provision of goods, services and infrastructure.”
Managing Contracts - definitions
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Supplier’s Motivation
Value or Performance
Sourcing TimeContract Management
Well-Aligned and
Managed, Performing
Well
Poorly-Aligned and
Managed,
Performance Drifting
Misaligned, Under-
managed and Non
Performing
Effective management of suppliers is critical to ensuring that
value and performance objectives are achieved
From a good deal to a good supplier
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– Contract Management Framework
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• Oversight of organisation-wide contract management has
been established and clearly assigned
• Good contract management practice is widely recognised as
a priority across all levels of the organisation
• Contract management practice is integrated and aligned
with Procurement/ Risk/ WHS Policies and Guidelines
• Executive and management accountability for good contract
management practice is established and acted on
consistently
– Leadership and Culture
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• A mandatory Contract Management Induction and Training
Program is operating;
• Roles and responsibilities are clearly understood;
• Appropriate resourcing is in place (centrally and in Business
Areas)
• Skills and Expertise
• Personnel and time
• Contract management responsibilities are included in PDs
and in staff performance management processes.
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– People
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• A clear and well-understood organisational framework is in place
• Good practice contract management guidance, procedures and
templates are approved, maintained and adhered to
• Contract management processes are being followed appropriately
across all areas of the organisation
• Well understood records management processes are followed for all
contract documentation
• A contract management system is in place for recording all agreed
contract information, including performance and milestone
information
• Regular individual and aggregated reporting is in place
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– Framework and Systems
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Risk model to ‘Tier’ contracts:
1. Answer a series of risk related questions to grade
the total risk for the contract
2. Determine value of the contract
3. Use these factors to categorise contracts to
represent the contract grouping
4. Each grouping is then designated into a ‘Tier’
5. The selected ‘Tier’ represents the level of
contract management process required to
effectively manage the contract
Contract Risk Model - Overview
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Risks (H/L) - Are any of these risks in the high range?
• Political, Media/Reputation
• Community
• Operational
• Work Health Safety
• Environment
• Technical skill/ expertise
• Legal/ regulatory
• Relationship complexity
Value – Link with delegations/ thresholds
• E.g. 4 levels: 25,000/ <$200,000/ <$1,000,000/ >$1,000,000
Contract Risk and Value Assessment
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Contract Risk Assessment Model
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Tier 1 – Major construction and civil works/ major IT
projects/ Waste collection
Tier 2 – Medium-sized ICT Projects/ Larger maintenance
and service contract/ Minor infrastructure Projects
Tier 3 – Plant purchasers/ Minor works/ Non-critical
consultancy
Tier 4 – Catering/ one-off purchases
Tiers of Contracts - examples
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Capability
Experience (in years) – Technical expertise (qualification) – Contract management capability (benchmarked assessment)
KPIs
Level – quantity – how often assessed
Supplier Meetings
How often – operation and/or strategic – with who
Documentation
Contract Form – Contract Management Plan –Approvals
System Requirements and Reporting
Impact of Contract Risk Assessment
The LEAP Program?
Ongoing spend & opportunity analysis | Dashboards | Capability and maturity assessments | Workshops | LEAP Development Plan
Workshops | Benchmarking | Collaboration | Regional LEAP Development Plan
Category events & communities of practice | Annual Procurement Conference | Targeted training | Guidelines, Tools and Tips Development | Sector-wide contracts | Advocacy support
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Local
Regional
Sector-wide
Dashboards & Data
Updates