Agency C Procurement Process Business Process Map

LEVEL 1 UNIT 3 GREEN SQUARE KINGSTON 2604 P +61 6282 8852 F +61 2 6282 8832 WWW.THINKPLACE.COM.AU

AUSTRALIA NEW ZEALAND

Agency C Procurement ProcessBusiness Process Map

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

Client Department of Finance and Deregulation

DateVersion

6 May 2011FINAL V1.0

ThinkPlace Team Raffaella RecuperoBehzad Emami

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

Agency C Procurement Process

Purpose

This document contains a business process map for procurements under $80,000, which specifies the requirements set out in Agency C’s 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 C to develop this document.

ContentsIntent Statement 3

Business process maps 4Agency C CEI snapshot 5Role statements 7Map Levelling 10Level 0 map 11Level 1 map 12

Process analysis 17Process issues, pressure points and suggestions for improvement 18



Out of scope The project will not 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. $35bnOf those contracts, about 65,000 contracts falling under the $80,000 threshold were awarded. The total value of these contracts was about $12.6bnOver 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 reflecting 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 agencies 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 for 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?Agency C’s Procurement Policy BranchProcurement Policy Areas and representatives from line areas

Under the FMA Act, 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



Business process maps



Snapshot agency requirements specified by Operational Guidelines

PRINCIPLES

Outcomes per the procurement framework

Value for money is the core principle governing all procurement within the Australian Government sector Planned procurement is required to comply with the policies of the Commonwealth (refer FMA Regulation 9) Officials will be expected to maintain high ethical standards when they undertake procurementAll participating potential suppliers are to be treated as equitably as possibleThe process rules for any procurement need to be unambiguous, open and equitably applied to all relevant parties It is essential that an appropriate level of documentation is maintained for any procurement

PROCESS CONDITIONSStandards

Officials undertaking procurement are to record all major steps, the selected procurement method and all relevant decisions and authorisations relating to the project/acquisitionFor purchases under $5,000 file details of key decisions are required (handwritten or formal)Purchases between $10,000 to $80,000 require documentation of key decisionsAs the value of the procurement increases, the General Procurement Requirements (Section 2 of Operating Guidelines Vol. 4.3) set a more rigorous set of requirements for testing the market, in line with Division 1 – Procurement Principles of the CPG procurement framework All procurement activity in Agency C should have a risk assessment undertaken as part of the procurement process. This assessment should scale with the size and complexity of the procurement

PROCESS RULES Workflow Leg & Approvals

Section 44 of the FMA Act and Financial Circular 2011/01 charges Chief Executives to promote the efficient, effective, ethical and economic use of Commonwealth resourcesAn agreement to spend public money may not be entered into unless approval for the expenditure of the money has been given under FMA Regulation 9 (and, if necessary, with FMA Regulation 10)FMA Regulation 9 requires an Approver must not approve a spending proposal unless the approver is satisfied, after reasonable inquiries, that giving effect to the spending proposal would be a proper use of Commonwealth resourcesThe CPGs set down the fundamental policies which are to apply to all Commonwealth procurement activity. Officials must act in accordance with the CPGs, as required by FMA Regulation 7 Where an official undertakes procurement that is inconsistent with the CPGs, he or she is required to document his/her reasons for doing so

Note: Information sourced from Agency C and Operating Guidelines



Snapshot agency requirements specified by Operational Guidelines

RULES

Continued…

Purchases under $5,000Obtain verbal or written quotes and pay invoice

Purchases up to $10,000Use existing supplier, panel member, multi-use list member or access suppliers in the open market Obtain single verbal or written quoteWhere appropriate, seek multiple quotes to ensure value for money

Purchases $10,000 up to $80,000The rules for purchases up to $10,000 also applyFor service provider panels, seek one or more written proposalsIn all other cases it is desirable to obtain three written proposals, or more where necessary, to demonstrate value for moneyBusiness Groups to self assess probity, unless rated as Extreme/High riskDetails of all agency procurements, with an estimated contract value of $10,000 or more, must be published on AusTender, within six weeks of entering into the agreement

TOOLS USED

Self assessment formsProcurement formsOperational Guidelines 1.0 Delegations and AuthorisationsOperational Guidelines 4.4 Entering into & Managing ContractsOperational Guidelines 4.5 Payment of AccountsOperating Guidelines 4.6 Official TravelOperating Guidelines 4.7 Official HospitalityOperational Guidelines 7.1 Risk Management Financial Management Information System (SAP)

Note: Information sourced from Agency C Operating Guidelines


DELEGATE

What are my specific obligations under the FMA Act and CPGs?Required to make sure the appropriate procurement method is selected and followedWhere appropriate, ensure that the contract is published on AusTender in a timely mannerThat Commonwealth resources are used in an efficient, effective, economical and ethical mannerTo abide by the delegation limit and threshold considerations

What is my role and my responsibilities?Ensuring Commonwealth resources are used in an efficient, effective, economical and ethical mannerAppropriate documentation and justification has been providedBudget has been approved and funds are availableAuthorise payment of supplier invoices

What are my concerns?A lack of understanding of obligations under the FMA Act, CPGs and CEIsPoorly scoped procurement that may not meet agency requirementsI trust that Line Areas are managing obligations (probity, conflict of interest, etc)

END USER

What are my specific obligations under the FMA Act and CPGs?Ensuring that the procurement satisfies the principles of:Efficient, effective, ethical and economic procurementValue for moneyAccountability and transparency (through proper reporting)

What is my role and my responsibilities?Getting the required goods and/or services into the agencyUtilising or directing the goods and/or servicesDealing with supplier invoices by certifying goods and/or services receivedEnsuring due diligence has been demonstratedDeveloping initial specification requirementsEnsuring agreement of purchase order number on contract and invoiceConfirming completed procurement specifications and providing signoff

What are my concerns?That goods and/or services do not meet procurement requirementsBudgeting constraintsMeeting deadlines

PROCUREMENT OFFICER

What are my specific obligations under the FMA Act and CPGs?Ensure procurement meets the Commonwealth principles of:Value for moneyEfficient, effective, ethical and economic procurement processAccountability and transparency

What is my role and my responsibilities?Ultimately provide an outcome to the business area (end user)Appropriately approach the marketRecording procurement process stepsAssessing the risk throughout the processCreating documentationEnsuring value for money has been demonstratedEnsuring due diligence has been demonstratedEnsuring agreement of purchase order number on contract and invoice

What are my concerns?Procurement processes are onerousMaking sure that end user needs are satisfiedMeeting deadlinesEnsuring Statement of Requirements is scoped properly for the procurementMaking sure that the applicable procurement processes have been conducted in compliance with the Rules and Regulations.


Role statements



Role statements

PAYMENT PROCESSING

What are my specific obligations under the FMA Act and CPGs?Obligated under the conditions set out under the Certificate of Compliance

What are my responsibilities?Check if goods and/or services have been receivedMonitor the supply of goods and/or servicesProduce Certification of Suppliers InvoiceAuthorisation of supplier paymentFormally pay suppliers for goods and/or servicesEnsuring duel diligence has been demonstratedEnsure procurements under contract feature contract number on invoiceEnsure payment is made against currently appropriated fundingSAP data entry of Contracts / ordersCertify supplier invoice for correctness

What are my concerns?That Reg. 9 approval is in place and documentation has correct purchase value stated and there is delegate approvalPerson certifying goods receipt has appropriate knowledge of receiptPayment is being processed for the correct vendor

Central Procurement Unit (Procurement Advice Team)

What are my specific obligations under the FMA Act and CPGs?No specific obligations

What is my role and my responsibilities?Assist in meeting compliance requirementsProvide procurement related adviceDevelop templates and support materials for Line Areas Internal policy development (CEIs & OPGs)Reporting contractsDevelop Certificate of ComplianceCoordinate internal delegations instrumentsConducting training and education on procurement mattersEnsuring due diligence has been demonstrated

What are my concerns?Compliance mattersQuality of documentationStaff level of knowledge is appropriate and sufficient to competently perform dutiesCircumstances and processes related to ‘contract splitting’

SPECIALIST

What are my specific obligations under the FMA Act and CPGs?There are no specific obligations as it is assumed that the Procurement Officer is responsible for obligations under the FMA Act and CPGsSpecialists are accountable for the advice they provide, ensuring advice is accurate and complete to the best of their knowledge and that they are competent to provide such advice

What is my role and my responsibilities?To provide appropriate specialist (legal, audit, insurance, risk, etc) advice in accordance with the information provided, within the specified timeframes, and in accordance with legislation and internal policyEnsuring that due diligence has been demonstrated

What are my concerns?That accurate and relevant information has been provided in order to make a judgementTensions between time constraints (i.e. request deadlines) and quality of adviceUnclear whether specialist needs to be proactive in providing advice on procurements or should they wait for the Procurement Officer to solicit information



Role statements

SUPPLIER

What are my specific obligations under the FMA Act and CPGs?No specific obligations

What is my role and my responsibilities?Win the procurement contract by submitting documentation for evaluation in response to request documentationSupply goods and/or services in accordance with the statement of work/requirements Provide value for money serviceMake sure resources are available for the period of the serviceEnsure allocated resources are competent and competitive for the task at hand

What are my concerns?The amount of time it takes to go through the procurement processAmbiguities about how to do business with government and how to win business in governmentStandardisation of documentationThe possibility of delays or late payments for goods or servicesMeeting the expectations of the purchaserOften there is a lack of transparency which makes it unclear if suppliers have all been equitably treated


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

EndEnd

Level 0Level 0

Level 1Level 1

Level 2Level 2

TriggerTrigger


Map Levelling


End User

ProcurementOfficer

Delegate

CPU (PAT)

PaymentProcessing

Specialist

Supplier

Agency C Procurement ProcessLevel 0 – Process Phases

Initiate procurement

process

Initiate procurement

process

Approachmarket

Approachmarket

Establishcontract

Establishcontract

Receive goods and services

Receive goods and services

Pay for goods and services

Pay for goods and services

Identifybusiness need


Provide procurement submission

documentation

Provide procurement submission

documentation

Sign contractSign contract

Review SAP contract

Review SAP contract


End User

ProcurementOfficer

Delegate

CPU (PAT)

PaymentProcessing

Specialist

Supplier

Agency C Procurement ProcessLevel 1 – Initiate procurement process

❷❷



ResourcesAGIMO wiki, agency intranet or business

group share drive contain guidance documents

such as Project plans, business plans, client

request purchase orders, strategic plan, etc

ResourcesAGIMO wiki, agency intranet or business

group share drive contain guidance documents

such as Project plans, business plans, client

request purchase orders, strategic plan, etc

Develop draft statement of work

(requirements)

Develop draft statement of work

(requirements)

Assist with formulating statement of work

Assist with formulating statement of work

Considerations•Estimated value of procurement / project•Check for existing arrangements in place•Review approach types

Considerations•Estimated value of procurement / project•Check for existing arrangements in place•Review approach types

Supply procurement templates

Supply procurement templates

Draft procurement plan

Draft procurement plan

Consider•Risk assessment•Procurement method•Identify conflict of interest•Evaluation approach•Identify potential venders

Consider•Risk assessment•Procurement method•Identify conflict of interest•Evaluation approach•Identify potential venders

Evaluation plan (draft)

Evaluation plan (draft)

Business proc. plan

Business proc. plan

Review documents against FMA Reg. 9/10 (as required)

Review documents against FMA Reg. 9/10 (as required)

Provide advice(as required)

Provide advice(as required)

Value of procurement

?

> $5,000< $10,000

Draftbusiness case

Draftbusiness case

Business case

template

Business case

template

Procurement plan

Procurement plan

Executive minute

Executive minute

Draft request documentation

Draft request documentation

Pre-approval?

No

EndEnd

Yes

RFQ / RFTTemplate

RFQ / RFTTemplate

Estimate procurement

costing

Estimate procurement

costing

Pre-approval considerationsHas the procurement initiate documentation clearly shown:•What is being purchased?•Why is it being purchased?•How is it being purchased?•Complies with FMA Reg. 9?

Pre-approval considerationsHas the procurement initiate documentation clearly shown:•What is being purchased?•Why is it being purchased?•How is it being purchased?•Complies with FMA Reg. 9?

Template storage

Template storage

SoW template

SoW template

< $5,000

> $10,000< $80,000

1 x Quote (verbal)

2 x Quote (written)

3 x Quote(written)

Issues•The business case, procurement plan executive minute all perform the same function•The requirements for documentation vary across business areas, and usually depend on the delegate’s needs

Seek delegate approval



End User

ProcurementOfficer

Delegate

CPU (PAT)

PaymentProcessing

Specialist

Supplier

Agency C Procurement ProcessLevel 1 – Approach market

❸❸❶❶ Approach marketApproach marketApproved

RFQ / RFT

Approved RFQ / RFT Evaluate submissionsEvaluate submissions Seek delegate

approval


Approve?

Evaluation report

Evaluation report

Reg. 9/10 Evaluation

report

Reg. 9/10 Evaluation

report

Yes

❶❶

Provide completed procurement submission

documentation

Provide completed procurement submission

documentationTender response or quote

Tender response or quote

AusTender or direct

AusTender or direct

Participate in evaluating

submissions

Participate in evaluating

submissions

NoRe-evaluate

submissions or refine requirements


End User

ProcurementOfficer

Delegate

CPU (PAT)

PaymentProcessing

Specialist

Supplier

Agency C Procurement ProcessLevel 1 – Establish contract

❹❹

❷❷ Negotiate contractNegotiate contract

Negotiate contractNegotiate contract

Sign contractSign contract

Advise unsuccessful suppliers of

procurement decision

Advise unsuccessful suppliers of

procurement decision

Accept contract?

Yes

No

s. 44 Procurement

contract

s. 44 Procurement

contract

Provide advice during contract negotiations

Provide advice during contract negotiations

Prepare SAP contract purchase order

Prepare SAP contract purchase order

SAP “simple” template

SAP “simple” template

Review SAP contractReview SAP contractSAP

contract acceptable?

Clear SAP contractClear SAP contract

Release SAP documentation

Release SAP documentation

Yes

No

SAP contract

SAP contract

Purchase order

Purchase order

❺❺If invoice and PO do not match…

SAPSAP


End User

ProcurementOfficer

Delegate

CPU (PAT)

PaymentProcessing

Specialist

Supplier

Agency C Procurement ProcessLevel 1 – Receive goods and services

❺❺

Supply goods and/or services

Supply goods and/or services❸❸

Invoice for goods and/or services

provided

Invoice for goods and/or services

provided Supplier invoice

Supplier invoice

Contract managementContract management


CEIManaging of contract




Out of scope

Out of scope


End User

ProcurementOfficer

Delegate

CPU (PAT)

PaymentProcessing

Specialist

Supplier

Agency C Procurement ProcessLevel 1 – Payment for goods and services

❹❹ Verify supplier invoiceVerify supplier invoiceEnsure supplier invoice matches

purchase order (PO)

Ensure supplier invoice matches

purchase order (PO)AP form or

P/ON

AP form or P/ON

(APU) Approve payment

(APU) Approve payment

Receive paymentReceive payment

Invoice and PO match?

❸❸No

EndEnd


Contract managementContract management Certify and receive goods and/or services

Certify and receive goods and/or services





Out of scope

Out of scope

Check SAP contract with Procurement Officer

Yes

FMISFMIS

Authorise paymentAuthorise payment



Process analysis



Process issues, pressure points and suggestions for improvement

ISSUES

Current problems with the process – Documentation

Business Case, Procurement Plan, Statement of Work, Executive Minute, and request documentation all perform a similar function, yet are separate documents, resulting in several documents being developed at different stages of the procurement process.

It is also not clear which documentation is required for which procurement type.

In conjunction with the ambiguous documentation requirements, there is no minimum standard of documentation outlined for Delegate approval

The process is the same irrespective of procurement value. That is, all procurements require a business case.

Some business areas within the agency have their own set of procurement templates e.g. Government Network Services Branch This results in multiple and varied templates for common forms. The lack of standardisation of document templates is a major concern.

PRESSURE POINTSElements of the process that affect efficiency

For people new to procurement− Difficulties in specifying requirements− Unclear what quality looks like− Lack of understanding of red tape− End user doesn’t understand technical

requirementsTime constraints

Tight deadlines and onerous processes lead to shortcuts that comprise the procurement (at a principles level)

Risk assessments Assessment of risks are subjective and no

clear definitions, examples, methodologies are present

Roles and responsibilities A number of roles in the process have

accountability, yet it is not clear who is ultimately accountable

Processes and templates General lack of standardisation and ambiguity

of process and documentation Duplication of effort through the implementation

of different standards Tools not appropriately used for streamlining

due to lack of user friendly tools and guidanceLack of flexibility

Lack of recognition for the different categories of procurement and streamlining of processes

Whole of govt. arrangements and coop arrangements are disconnected and treated differently

SUGGESTIONS FOR IMPROVEMENTOutcomes from the workshop

Implement a standardised and streamlined process, minimum standards documentation that is commensurate with the procurement (i.e. less documentation for procurements <$5,000)

Educate relevant staff on processes, roles, accountabilities, etc

Investigate options to centralise procurement to specialists to reduce the impact / burden on business areas

Simplify procurement risk assessment procedures and tools

Increase implementation of e-tools for : Contract reporting (AusTender, SAP,

other) Volume purchase orders (Blanket

orders) in SAP Provide common terms & conditions

on internet

Create single product catalogue (for common items) across whole of government

Create more multi-use lists that leverage the expertise of other agencies e.g. Archives for file storage procurements


Page intentionally blank



About Us

We design strategies, services and organisationswww.thinkplace.com.au

Agency C Procurement Process Business Process Map

Documents

Transcript of Agency C Procurement Process Business Process Map