Agency B Procurement Process Business Process Map

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Agency B Procurement ProcessBusiness Process Map

Event Analysis and Review of Commonwealth Procurement Processes for procurements under $80,000

Client Department of Finance and Deregulation

DateVersion

30 May 2011FINAL 1.0

ThinkPlace Team Raffaella RecuperoMark Thompson

ANALYSIS AND REVIEW OF COMMONWEALTH PROCUREMENT PROCESSES UNDER $80,000 – AGENCY B PROCUREMENT V1.0

This document contains a business process map for procurements under $80,000, which specifies the requirements set out in Agency B’s Chief Executive Instructions (CEIs), operational guidelines and other internal guidance, as well as the overarching requirements of the Commonwealth Procurement Framework.

ThinkPlace has worked with a small group of people in Agency B to develop this document.

ContentsIntent Statement 3Agency B CEI snapshot – current state 4

Business process maps 5Role statements 6Map Levelling 9Level 0 map 10Level 1 map 11

Process analysis 16Process issues, pressure points and suggestions for improvement 17

Agency B Proposed Procurement Process

About this document


Agency B Proposed Procurement Process

Out of scope The project will not to assess how well agencies implement

the CPGs and relevant FMA legislation when undertaking procurements

The project will not redesign policy

Where are we now?Analysis of ‘2008-09 AUSTENDER statistics indicate 85,000 contracts (over $10,000) were awarded. The total value of these contracts approx. $35bn.Of those contracts, about 65,000 contracts falling under the $80,000 threshold were awarded. The total value of these contracts was about $12.6bn.Over 80% of the total number of contracts correspond to about 4% total value. An APS 5/6 can spend up to 80% their time on low value contractsLow value contracts translate to a high administrative burden Agencies have tailored procurement approaches reflect organisational structure, authority and delegations, approval processes, risk appetite, level of IT maturity, and resourcing, reporting processes and systemsProcurement functions differ in agencies – some functions are centralised, some are decentralisedParticipating agencyes have undertaken work to review CEIs, processes and protocolsWhole of Government CEIs are under developmentWork has also been undertaken to simplify the standard short form contract, reducing the number of pages from 80 to 6

Intent

How do we get there?

Analyse and review Commonwealth procurement practices currently employed by selected agencies when conducting procurements under $80,000, identifying issues, pressure points and opportunities for improvement, and on that basis making recommendations for simplifying and streamlining processes.

What do we need to do?

What would success look like?A better practice model for procurements under the threshold that:

− Standardises the process across FMA agencies− Makes it easier for staff to know what to do and how

to conduct procurements − Reduces administrative burden

Finance will be able to use the project findings and recommendations as a basis for presenting a better practice model to FMA agencies, where appropriate. The project will influence agency CEIs and processes

Focussing question

How can we standardise and streamline the process for procurements under the $80,000 threshold, making it less onerous FMA agencies, while also maintaining the integrity of the FMA Act?

A standardised, simple and safe process for all FMA agencies conducting procurements that fall under the $80,000 threshold

What is the problem/ opportunity?Agency procurement processes are complex, confusing, and onerous for staffRequirements vary from agency to agency – processes are not standardised across governmentSuppliers are frustrated

APPROACH FOR BRIDGING THE GAP

April

• Intent, planning and agency engagement

• CPG process modelling

May

• Agency CEI process mapping

• Case study development by agencies

• Case study analysis

June

• Synthesis • Design ‘better

practice model’

Timing

What do we need to consider?Avoid over-engineering or over prescribingAim to set a benchmarkImpact on behavioural change

Who do we need to involve?Finance’s Procurement Policy BranchProcurement Policy Areas and representatives from line areas

Under the FMA Act, 104 FMA agency CEOs have devolved authority to manage public money within their agency.

The FMA Act and Regulations set the framework for the proper management of public money and public property in the custody and control of the Commonwealth.

The Commonwealth Procurement Guidelines (CPGs) articulate the Government’s expectations for all department and agencies conducting procurement.

Agencies have evolved their procurement policies and practices within the context of the agency’s organisational structure, delegations, approval processes etc.

Agency specific policies and procedures are contained with large and complex volumes of CEIs, departmental policy documents and protocols.

SYSTEM IN FOCUS


TOOLS •Checklists•Procurement Protocols•E-procurement system •Contracts register •Purchase orders

PRINCIPLES/ OUTCOMES•All procurement must represent value for money and the efficient, effective and ethical use of Commonwealth resources •All purchases must be made in accordance with the CPGs and the department’s Procurement Guidelines (including checklists) •All potential suppliers must be treated equitably •Offers of gifts or hospitality in connection with, or in close proximity to, any procurement activity must not be accepted (transparency)•Procurement processes must be accountable, transparent and able to withstand scrutiny

PROCESS CONDITIONS/ STANDARDS•All members of tender evaluation panels must have received procurement training•Procurement arrangements should not contain contingent liabilities unless they are considered remote and immaterial. •Legal and probity advice must be obtained for material contracts in accordance with the department’s Procurement Protocols •Declare and manage any actual or perceived conflicts of interest. For actual conflicts of interest this may involve removing oneself from the process •Maintain complete and accurate records of procurement activities on file. Sufficient documentation must be kept on file to provide an understanding of the reasons for the procurement, the process that was followed and all relevant decisions, including approvals and authorisations and the basis of these decisions •Mandatory procurement reporting requirements apply to the department and are outlined in the department’s Procurement Guidelines.

ROLES & RESPONSIBLITIESResponsibilities are specified for the following roles

OfficialsA person who is in or forms a part of this agency. The term is also extended to mean employees, contractors, consultants or other Commonwealth or state or territory government officials who are performing tasks or procedures for or on behalf of Agency B•obtain approval from an FMA regulation 9 delegate provided in writing for medium and major purchases but can be provided verbally for minor purchases (but the approval should be written down as soon as possible after the it was given) •obtain written approval from an FMA regulation 10 delegate (for insufficient existing administered appropriation)•Maintain records•Register all procurements and consultancies contracts valued at $10 000 or more (GST inclusive) on the department’s contracts register and raise a purchase order Delegates•ensure that the requirements of FMA regulation 8 have been met before they enter any procurement arrangement •not act as delegate for procurement activities which they have managed and conducted themselves •declare any actual or perceived conflicts of interest •only approve the purchase of goods and/or services of a nature and value consistent with their delegation •ensure all procurements and consultancy contracts valued at $10 000 or more (GST inclusive) are accurately registered on the department’s contracts register and that a purchase order has been raised.

PROCESS RULES – workflow •Tender documentation must be approved by the delegate before the request for tender is released to the market •All purchases must be approved prior to the purchase by an appropriate FMA regulation 9 delegate and, if required, an appropriate FMA regulation 10 delegate •Reg 8 requirements met before contract•Procurement processes and decisions must be documented and records must be retained for 7 years after completion for standard contracts and 12 years after completion for tenant leases and deeds, such as deeds of standing offer •Register and ensure contract on contracts register

Minor purchases (under $20,000)•Existing arrangements (corporate contracts, panels and whole of government arrangements) must be used where appropriate •In the ACT the department’s E-procurement system must be used to purchase stationery, toner and copy paper •Where e-procurement and existing arrangements are not suitable, minor purchases are to be made using corporate credit cards wherever possible.

Medium purchases (from $20,000 to less than $80,000 including GST)•Existing arrangements (corporate contracts, panels and whole of government arrangements) must be used where appropriate •Where existing arrangements are not appropriate, medium purchases are to be made by obtaining and evaluating quotes from the market and selecting a preferred provider. A minimum of three quotes should be obtained wherever possible

Agency B Procurement Process

Snapshot of agency requirements specified by CEIs



Business process maps


Procurement OfficerWhat are my obligations under the Commonwealth Procurement Framework?Awareness and adherence to process in accordance with CPGs, FMA, and internal CEIs and guidance material

o Value for moneyo Economicalo Ethicalo Efficiento Accountableo Transparent

What is my role? What are my responsibilities? Provide advice regarding procurement and reporting Seek approvals I support and advice the End User I go to the PAU for advice and clarification

What are my concerns?Too much paperwork to read throughHaving PAU ringing and confirming my detailsConfusion regarding which tender processes I should use

o Open o Direct o Select

Alignment of procurement principles to business needsMeeting timeframes set by end userTranslating business need and requirementsBudget and resourcesLack of clarity of my role and responsibilitiesGuidance and advice isn’t always user friendlyThe need to provide an audit trail and documentation

DelegateWhat are my obligations under the Commonwealth Procurement Framework?FMA Reg 9 approval to spend money Understand budget and determine whether funds are available for procurementEnsure Reg 10 is confirmed if requiredDetermine whether procurement activities meet best value for moneyConfirm all business case and procurement process meets Agency B CEIs and Procurement Guidelines Ensure risk evaluation meets procurement typeProvide FMA 44 approval to enter into an arrangementEnsure suitable records and filing is completedProvide input into the Annual Procurement Plan

What is my role? What are my responsibilities?As above

What are my concerns?Have we completed the best value for money procurement method?Is the process defensible and accountable and will this be reported correctlyLack of training and understanding of my responsibilitiesHas due process been followed?I rely on the procurement officer to ensure process is defensibleLack of induction -

End User (Business Line)What are my obligations under the Commonwealth Procurement Framework?Awareness that Reg 9 and 10 have been adhered to

What is my role? What are my responsibilities? Ensure that operational requirements are metIdentifying procurement needRequesting procurement activityUsing the end result of the procurement

What are my concerns?That the end result meets my needs and works on an operational level

o Simple streamlined process that doesn’t cause a high administrative burden

o I want to know who to talk to is the result does not work – when and how will it be fixed?

o Can I change the result if it does not work?

I only want go through procurement process once, with minimal effort and resources consumed


Role statements


Specialist (Legal)What are my obligations under the Commonwealth Procurement Framework?None specifically under the FMA (but need to adhere to Legal Services Directions and professional obligations)Compliance with legal services directionLegal signoff for contracts

What is my role? What are my responsibilities?To provide legal. Probity advice, as instructed, in accordance with the law, FMA, CPGs

What are my concerns?Officers do not follow adviceOfficers do not provide all details and therefore compromise adviceIf legal advice is not sought/ factored into the procurement process, there is a risk to the reputation of the organisation and possible legal action

Payment ProcessingWhat are my obligations under the Commonwealth Procurement Framework?Delegate review of FMA delegation

o 10% sample of payments under $500,000

Ensure purchase order referenced in claim for payment

o Links in with contract register (PIN allocation)

What is my role? What are my responsibilities? Payment of invoices including adherence and payment

to Small Business Circular Requirements Recording/ entering existing/ new supplier information Adherence to GST legislation Record/ audit trail

What are my concerns?Lack of detail on Claim for Payment (CFP) form to meet payment termsInvoices that do not meet GST requirementsHas appropriate delegate approval been granted (evidenced by delegate signature on CFP)?

Procurement Advisory Unit (PAU)What are my obligations under the Commonwealth Procurement Framework?Provide independent review for appealsEnsure contracts >= $10,000 entered into AusTenderEnsure data integrity regarding reporting obligations under CPGs (i.e. APP, Senate Order, Annual Reports)

What is my role? What are my responsibilities? To provide advice to line areas conducting

procurement so that they meet the obligations of the FMA/ CPGs while still meeting their business need

Meeting Departmental reporting requirements – Annual Plan, Senate Orders, annual Procurement Plans

Integrity of data in contracts register Rely on contracts register for reporting Provide and maintain procurement tools (e.g.

checklists, templates)

What are my concerns?Not given full information by Line Area which may lead to providing incorrect adviceWe do not have visibility/ oversight of what the Line Area are doing. Should PAU be a process checkpoint? Even if they do seek advice, do they follow it?Are delegates supportive of following the procurement process? Delegates can influence procurement officers/ end users


Role statements


SupplierWhat are my obligations under the Commonwealth Procurement Framework?None specifically

What is my role? What are my responsibilities? Provide quotesProvide good(s)/ service(s), in line with contractual obligations, including ongoing contract managementIssue invoicesFollow up on outstanding payments if required

What are my concerns?Late paymentsTransparency of procurement processTime taken to complete procurement processDifferent procurement requirements between agenciesCompetitors having an unfair advantage


Role statements


Level 0 – Process phases

This map provides an overview of the entire process end to end, including the process triggers, process phases, and main workflows.

Level 1 – Process activities

These maps drills down into each of the Level 0 process phases, detailing the activities that occur.

Level 2 – Procedural tasks, support products and systems

Level 2 is not generally documented as a map, but rather references guidelines, operational instructions, instruments and / or business systems such as databases. These things underpin the delivery of a process.

Symbols

ActivityActivity

DecisionDecision

Database/ Storage

Workflow

DocumentDocument Off page connector

Ongoing Activity

Ongoing Activity

Level 0Level 0

Level 1Level 1

Level 2Level 2

TriggerTrigger


Map Levelling

EndEnd


End UserBusiness Line

Procurement Officer

Delegate

PAU

Payment Processing

Specialist

Supplier

Identify needIdentify need

Agency B Procurement ProcessLevel 0 – Process Phases

Plan procurement

Plan procurement

Approach market

Approach market

Assess submissions and negotiate contract

Assess submissions and negotiate contract

Receive good(s)/ service(s) and pay

Receive good(s)/ service(s) and pay

Respond to RFQRespond to RFQNegotiate and

enter into arrangement

Negotiate and enter into

arrangement

Provide good(s)/ service(s) and

receive payment

Provide good(s)/ service(s) and

receive payment

Provide in-principle approval

Provide in-principle approval

Provide approvalProvide approval

Plan procurement

Plan procurement

Raise purchase order and process

payment

Raise purchase order and process

payment

Provide advice and support (as req’d)


Provide approval (as req’d)

Provide approval (as req’d)

Provide input and management approval (as

req’d)

Provide input and management approval (as

req’d)





Procurement Officer

Delegate

PAU

Payment Processing

Specialist

Supplier

Check existing arrangements

Check existing arrangements

Agency B Procurement ProcessLevel 1 – Identify need

❷❷

Use existing arrangement

Use existing arrangement

Identify procurement

need

Identify procurement

need

ConsiderationsProcurement has been identified as the method

to obtain the good(s)/ service(s)

ConsiderationsProcurement has been identified as the method

to obtain the good(s)/ service(s)

Does a suitable

arrangement exist?

Yes

No

Requirement Use existing

arrangements if they are suitable

Requirement Use existing

arrangements if they are suitable



Procurement Officer

Delegate

PAU

Payment Processing

Specialist

Supplier

Understand procurement

need


need

Agency B Procurement ProcessLevel 1 – Plan procurement

Value & type of proc’t?

< $19,999


need


need

NoteThe business case is scalable. For a simple

procurement it could be an email, for a more complex procurement it could be a

multipage document

NoteThe business case is scalable. For a simple

procurement it could be an email, for a more complex procurement it could be a

multipage document

Provide input into business case (as

req’d)

Provide input into business case (as

req’d)

Review business case and proposed procurement method

Review business case and proposed procurement method

Check that budget is available

Check that budget is available

Approve(in-principle)

?

❶❶

❸❸

Yes

No,Refine business

case; or End process



Develop business case

Develop business case

Business Case

proforma

Business Case

proformaChecklistsChecklists

CPG6.8 &

9

CPG6.8 &

9

Delegation database

Delegation database



$20,000 - $79,999

Stationary/ office supplies

Other

Reg 9 approval built-in

Use E-Procurement

process

Use E-Procurement

process

Use credit card process

Use credit card process

Seek approval to conduct

procurement

Seek approval to conduct

procurement



Procurement Officer

Delegate

PAU

Payment Processing

Specialist

Supplier

Prepare specification documents

Prepare specification documents

Provide inputProvide input

Identify potential suppliers

Identify potential suppliers

Seek Delegate approval (as req’d)

Seek Delegate approval (as req’d)

Seek manager approval(as req’d)

Seek manager approval(as req’d)

ManagerApprove

procurement approach?

Approve procurement approach?

Issue RFQ Issue RFQ

Obtain RFQ Obtain RFQ Understand specifications

Understand specifications Provide quoteProvide quote

Provide clarification(as req’d)

Provide clarification(as req’d)

Receive quotesReceive quotes

❹❹

❷❷

No,Amend specification

documents

No,Amend specification

documents

Yes

Yes

ConsiderationsFor procurements of

$20k - $79,999 a minimum of 3 quotes

must be sought.Below $19,999, there is

no requirement for quotes.

ConsiderationsFor procurements of

$20k - $79,999 a minimum of 3 quotes

must be sought.Below $19,999, there is

no requirement for quotes.

Agency B Procurement ProcessLevel 1 – Approach market



ConsiderationsThis approval could be done by either the Business Line Manager or the Delegate.

This largely depends on the complexity of the

procurement

ConsiderationsThis approval could be done by either the Business Line Manager or the Delegate.

This largely depends on the complexity of the

procurement



Provide inputProvide input



Procurement Officer

Delegate

PAU

Payment Processing

Specialist

Supplier

Assess submissions

Assess submissions

Select preferred supplier

Select preferred supplier

Recommend supplier to delegate

Recommend supplier to delegate

Notify successful supplier and send

draft contract

Notify successful supplier and send

draft contract

Negotiate contract

(as req’d)

Negotiate contract

(as req’d)

Grant Reg 9 approval?

Negotiate contract

(as req’d)

Negotiate contract

(as req’d)

Receive notification and draft contract

Receive notification and draft contract

Finalise contract

Finalise contract

Notify unsuccessful

suppliers

Notify unsuccessful

suppliers

Sign contract?

Sign contract

Sign contract

Register contract on

contract register

Register contract on

contract register

Unsuccessful suppliersReceive

notification

Unsuccessful suppliersReceive

notification

Sign contract

Sign contract

Agency B Procurement ProcessLevel 1 – Assess submissions and negotiate contract

❸❸

Yes

Finalise contract

Finalise contract

Yes

❺❺❺❺



Reg 9

Reg 9

Provide advice

Provide advice

CPG7.23

CPG7.23

CPG7.12

CPG7.12

CPG7.12

CPG7.12

FMA s.44

FMA s.44

ConsiderationsThe Contract Register is

used as the source of information for

AusTender reporting

ConsiderationsThe Contract Register is

used as the source of information for

AusTender reporting



Sign off on process(as req’d)

Sign off on process(as req’d)

CPG6.10

CPG6.10

NoRe-evaluate

submissions or refine requirements

No

Seek feedback if desired

Conduct reporting

obligations

Conduct reporting

obligations

Contract Register

Contract Register

CPG7.24

CPG7.24



Procurement Officer

Delegate

PAU

Payment Processing

Specialist

Supplier

Receive good(s)/

service(s)

Receive good(s)/

service(s)

Provide good(s)/

service(s)

Provide good(s)/

service(s)

Receive invoiceReceive invoice

Issue invoiceIssue invoice

Provide CFP* and invoice for

signature

Provide CFP* and invoice for

signature

Receive CFP and invoice

Receive CFP and invoice

Document process and

decisions

Document process and

decisions

Conduct reporting

obligations

Conduct reporting

obligations

Match CFP and invoice

Match CFP and invoice Pay invoicePay invoice

Agency B Procurement ProcessLevel 1 – Receive good(s)/ service(s) and pay

Create purchase order

request

Create purchase order

request

Submit purchase order

request

Submit purchase order

request

Process and raise purchase

order

Process and raise purchase

order

❹❹❹❹

CPG7.9

CPG7.9

CPG7.24

CPG7.24

Purchase order

Purchase order

Purchase order

request

Purchase order

request

InvoiceInvoice

InvoiceInvoice

CFP FormCFP Form

* Claim For Payment

ConsiderationsDelegate approval evidenced by delegate signature on CFP possible only if provided

ConsiderationsDelegate approval evidenced by delegate signature on CFP possible only if provided

Sign CFP

Delegation database

Delegation database

QSPQSP

Not standard practice, but ideal to ensure delegate approval can be substantiated, ensuring the procurement process is defensible



Process analysis



Process issues, pressure points and suggestions for improvement

ISSUES

Current problems with the process

There is a general lack of understanding of FMA Act and CPGs, posing a risk to the department for possible breaches of CPGs and FMA Act

Need for role-specific training for procurement officers and delegates, PAU staff, specialists (e.g. legal), and general admin

Advice from Finance (DoFD) is not always consistent Procurement staff are not always clear on which

process should be used (e.g. open, select, direct, etc.)

AusTender issues−Reporting to AusTender process is not straight forward−Selection processes (e.g. select, direct) are a mandatory field in AusTender, reporting on the selection process is required only by Division 2 of the CPGs (i.e. why should it be a mandatory field for < $80,000)− Data integrity issues CPG Principles create cumbersome processes for

<$80,000−‘Efficient and effective’ may contradict ‘encouraging competition’ −The ‘value for money’ principle is not well understood (i.e.. may be interpreted as ‘cost)

PRESSURE POINTSElements of the process that affect efficiency

The workflow and documentation is largely manual, with usage of disparate systems and databases (e.g. QSP, contracts register, delegations database) that are not integrated with the workflow Three different approvals are required − To commence a procurement process− To approve specifications (incl. requirements,

value, timing, potential suppliers, etc.)− To approve spending (Reg 9), before a

contract is entered The requirements for Secretary/ Dep. Sec./

CFO approval for consultancies valued at $20,00 or more may create a bottleneck and unnecessary paperwork

The absence of a minimum requirement for documentation can drive risk averse behaviours (i.e. raising unnecessary paperwork that is not commensurate with the value/risk of the procurement)

SUGGESTIONS FOR IMPROVEMENTOutcomes from the workshop

Automate the process workflow and documentation as much as possible (e.g. end to end and documentation, from the development of a business case through to purchase order and contracts register

The refresh of the Framework (CPGs, Circulars etc.) should be informed by this Review

− Guidance should be provided in “plain English” and terms should not subjective or left to interpretation

Limit the requirements for documentation for low value procurements

− Provide agencies with one simple form Streamline reporting to AusTender Streamlining non-covered contracts was a

good initiative but needs more work Provide role-specific training for procurement

officers and delegates, PAU staff, specialists (e.g. legal), and general admin

PAU do not have visibility/ oversight of what the Line Area are doing. Should PAU be a process checkpoint?



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Agency B Procurement Process Business Process Map

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