Agency C Procurement Process Business Process Map

1. Agency C Procurement Process Business Process Map

2. Agency C Procurement ProcessPurpose 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. Contents Intent Statement 3 Business process maps 4 Agency C CEI snapshot 5 Role statements 7 Map Levelling 10 Level 0 map 11 Level 1 map 12 Process analysis 17 Process issues, pressure points and suggestions for improvement 18

3. Agency C Procurement Process A standardised, simple and safe process for all FMA agencies conducting procurements that fall under the $80,000 threshold Intent CURRENT STATE FUTURE STATE SYSTEM IN FOCUS • 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. • Under the FMA Act, FMA agency CEOs have devolved authority to manage public money within their agency. APPROACH FOR BRIDGING THE GAP • 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 contracts • Low 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 systems • Procurement functions differ in agencies – some functions are centralised, some are decentralised • Participating agencies have undertaken work to review CEIs, processes and protocols • Whole of Government CEIs are under development • Work has also been undertaken to simplify the standard short form contract, reducing the number of pages from 80 to 6 • What would success look like? • A better practice model for procurements under the threshold that: • Standardises the processacross 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 • 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? • Who do we need to involve? • Agency C’s Procurement Policy Branch • Procurement Policy Areas and representatives from line areas DRIVERS FOR CHANGE • Out of scope • The project will notassess how well agencies implement the CPGs and relevant FMA legislation when undertaking procurements • The project will not redesign policy • What do we need to consider? • Avoid over-engineering or over prescribing • Aim to set a benchmark • Impact on behavioural change • What is the problem/ opportunity? • Agency procurement processes are complex, confusing, and onerous for staff • Requirements vary from agency to agency – processes are not standardised across government • Suppliers are frustrated • Timing • 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? April May June • Intent, planning and agency engagement • CPG process modelling • Agency CEI process mapping • Case study development by agencies • Case study analysis • Synthesis • Design ‘better practice model’

4. Business process maps

5. 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 procurement All participating potential suppliers are to be treated as equitably as possible The 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 CONDITIONS Standards Officials undertaking procurement are to record all major steps, the selected procurement method and all relevant decisions and authorisations relating to the project/acquisition For 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 decisions As 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 resources An 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 resources The 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 Agency C Procurement ProcessSnapshot agency requirements specified by Operational Guidelines

6. RULES Continued… Purchases under $5,000 Obtain verbal or written quotes and pay invoice Purchases up to $10,000 Use existing supplier, panel member, multi-use list member or access suppliers in the open market Obtain single verbal or written quote Where appropriate, seek multiple quotes to ensure value for money Purchases $10,000 up to $80,000 The rules for purchases up to $10,000 also apply For service provider panels, seek one or more written proposals In all other cases it is desirable to obtain three written proposals, or more where necessary, to demonstrate value for money Business Groups to self assess probity, unless rated as Extreme/High risk Details 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 forms Procurement forms Operational Guidelines 1.0 Delegations and Authorisations Operational Guidelines 4.4 Entering into & Managing Contracts Operational Guidelines 4.5 Payment of Accounts Operating Guidelines 4.6 Official Travel Operating Guidelines 4.7 Official Hospitality Operational Guidelines 7.1 Risk Management Financial Management Information System (SAP) Note: Information sourced from Agency C Operating Guidelines Agency C Procurement ProcessSnapshot agency requirements specified by Operational Guidelines

7. Agency C Procurement ProcessRole statements

8. Agency C Procurement ProcessRole statements

9. Agency C Procurement ProcessRole statements

10. 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 Agency C Procurement ProcessMap Levelling Level 0 Level 1 Level 2 Decision Trigger End Activity Ongoing Activity Workflow Document Database/ Storage Off page connector

11. Agency C Procurement ProcessLevel 0 – Process Phases Initiate procurement process Identify business need Receive goods and services    Approach market Establish contract Sign contract Review SAP contract  Pay for goods and services Provide procurement submission documentation

12. Agency C Procurement ProcessLevel 1 –Initiate procurement process  • 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 • Considerations • Estimated value of procurement / project • Check for existing arrangements in place • Review approach types 1 x Quote (verbal) < $5,000 Estimate procurement costing Seek delegate approval Identify business need Develop draft statement of work (requirements) Draft business case > $5,000 < $10,000 2x Quote (written) SoW template > $10,000 < $80,000 3 x Quote (written) Assist with formulating statement of work Draft procurement plan Draft request documentation ❷ Pre-approval? Value of procurement? RFQ / RFT Template • Consider • Risk assessment • Procurement method • Identify conflict of interest • Evaluation approach • Identify potential venders Yes No Supply procurement templates Review documents against FMA Reg. 9/10 (as required) Business proc. plan Evaluation plan (draft) End Resources AGIMO wiki, agency intranet or business group share drive contain guidance documents such as Project plans, business plans, client request purchase orders, strategic plan, etc Template storage • Pre-approval considerations • Has 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? Provide advice(as required) Business case template Procurement plan Executive minute

13. Agency C Procurement ProcessLevel 1 – Approach market  Participate in evaluating submissions Approach market Evaluate submissions Seek delegate approval Approved RFQ / RFT ❶ ❸ Approve? Reg. 9/10 Evaluation report Evaluation report AusTender or direct Yes No Re-evaluate submissions or refine requirements ❶ Provide completed procurement submission documentation Tender response or quote

14. Agency C Procurement ProcessLevel 1 – Establish contract  Negotiate contract Advise unsuccessful suppliers of procurement decision ❷ Accept contract? SAP contract acceptable? SAP Release SAP documentation Sign contract ❹ Purchase order s. 44 Procurement contract Review SAP contract Clear SAP contract Yes SAP contract No Prepare SAP contract purchase order SAP “simple” template Provide advice during contract negotiations ❺ If invoice and PO do not match… Yes Negotiate contract No

15. Agency C Procurement ProcessLevel 1 – Receive goods and services  CEI Managing of contract Out of scope Contract management CEI Managing of contract Out of scope Contract management ❺ Supply goods and/or services Invoice for goods and/or services provided ❸ Supplier invoice

16. Agency C Procurement ProcessLevel 1 – Payment for goods and services  CEI Managing of contract Out of scope Certify and receive goods and/or services Contract management CEI Managing of contract Out of scope Contract management Invoice and PO match? Authorise payment Yes (APU) Approve payment Verify supplier invoice Ensure supplier invoice matches purchase order (PO) ❹ AP form or P/ON FMIS Check SAP contract with Procurement Officer No ❸ Receive payment End

17. Process analysis

18. 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 POINTS Elements 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 requirements Time 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 guidance Lack 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 IMPROVEMENT Outcomes 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 Agency C Procurement ProcessProcess issues, pressure points and suggestions for improvement

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