PANEL CONTRACTS John Fisher Program Manager – Procurement

1. PANEL CONTRACTSJohn FisherProgram Manager – Procurement DME

2. OVERALL PRINCIPLES • Obtaining value in the expenditure of public money • Providing for ethical and fair treatment of participants • Ensuring probity, accountability and transparency in the procurement process DME

3. REFERENCES • Commonwealth Purchasing Manual 1983 • SA State Procurement Board – Panel Contracts Guidelines • Victorian Government Procurement DME

4. DEFINITION PANEL CONTRACT A panel contract (panel arrangement or standing offer) is a contractual arrangement established with at least two suppliers for the anticipated provision of goods or services, as and when required over a specified period of time. The panel contract contains standard terms and conditions under which the goods or services will be provided by panel members. DME

5. PERIOD CONTRACTS PERIOD CONTRACT OR STANDING OFFER Agreement under which a vendor allows a buyer to purchase specified goods or services at a predetermined price for a certain period on an 'as and when' requirement basis and in such quantities as may be ordered from time to time. Typically although estimated quantities may be provided there is no commitment to buy any quantity at all. DME

6. FORMS OF PERIOD CONTRACTS • Single Supplier – one contractor supplies good or services at set prices • Multiple Suppliers – supply a range of goods and services at set prices • Panel Contract – available for a range of services and competitive quotes are sought for each order

7. WHEN TO USE • the requirements occurs frequently and is general conformity with commercial standards; • storage is impractical, uneconomical or undesirable; • support can be secured from a sufficient number of Councils prepared to use the with a panel of providers; • there is a strong and ongoing demand for the good or service; • The requirement cannot be adequately predicted in advance and may be required at short notice; • the volume of work may be too large for one supplier to undertake; • there is an advantage in having a choice of suppliers (e.g. to avoid potential conflicts of interest; DME

8. BENEFITS • achieving improved quality, service and prices through the combined purchasing; • achieving cost savings by avoiding duplication in researching and approaching the supply market through preparing tender documents, calling and evaluating tenders and sourcing services; • offering greater choice through access to multiple suppliers; • having fast and streamlined access to suppliers through utilising established secondary procurement processes; • standardising and increasing consistency in procurement processes and documentation; DME

9. BENEFITS • reducing the costs for suppliers by having to respond to fewer tenders; • predetermined contract terms, conditions and performance measures applying over a series of different requests; • maintaining competitive tension over the period of the contract; • minimising contract set up costs through the use of a standard common contract arrangement; and • providing an opportunity for better strategic relationships with suppliers • Allocation of specific spend delegations to ordering officers. DME

10. ESTABLISHMENT Effective contestable process • Open tender • Expression of Interest • Restricted tender process • Exemption process could apply to sole source arrangement DME

11. OPEN & CLOSED PANELS • Closed - Panel is set for the term, no new providers allowed • Open – Panels allow for the addition of new service providers through subsequent procurement or qualification processes. The lead entity must document how potential ‘new’ suppliers are to be added to the panel contract and the circumstances and evaluation criteria for doing so DME

12. USE OF OPEN PANELS Generally discouraged but may be appropriate when: • prices or rates are indicative and may change up or down; • there is diverse expertise or a large number of suppliers in the market place; • the requirement is broad; • the market is emerging or immature, and there is a likelihood of new entrants and changes over time; • the contract term is particularly long; • new products, providers and technologies are constantly emerging; and • where there is a strong potential for the government’s purchasing power to influence the market, which would be restricted if the panel was closed to new entrants. DME

13. LEGAL ASPECTS • Covered by a Deed of Agreement that sets out the terms and conditions of purchase when one occurs • “Contract” – A word of caution • Contract is only formed when an order is placed on the supplier DME

14. DEED OF AGREEMENT • the nature, description and details of the goods or service that may be purchased under the panel arrangement; • the period for which the panel arrangement is in force; • a list of potential user Councils; • price review mechanisms as appropriate; • Reporting and supplier performance (KPIs); • insurance and security requirements; • standard contractual terms and conditions including limitation of liability, confidentiality, termination for default and convenience ; dispute resolution etc ; • the secondary procurement processes for buying from the panel; and • any special conditions. DME

15. DEMAND AGGREGATOR SCENARIO • Head Agreement – might be used this defines the relationship between the Aggregator and the Suppliers on the Panel – any administration fee arrangements, sales reporting, performance management requirements etc. • A schedule can be used for pricing; order terms and conditions etc. DME

16. CONTRACT MANAGEMENT Measurement of the intended objectives and benefits are realised: • Continuous improvement • KPI measurement • Supplier leakage (rogue purchasing) DME

17. ISSUES • Upset suppliers who don’t get the opportunities expected • Continuous selection of a single supplier by users • Using information from a panel to negotiate prices down is unethical DME

18. SUMMARY The panel contract (period contract; panel arrangement; standing offer; common use arrangement) can provide an efficient, productive, fair and transparent purchasing mechanism that works within an organisation’s ordering system. DME