Agency B Procurement Process Business Process Map

1. Agency B Procurement Process Business Process Map

2. Agency B Proposed Procurement ProcessAbout this document 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. Contents Intent Statement 3 Agency B CEI snapshot – current state 4 Business process maps 5 Role statements 6 Map Levelling 9 Level 0 map 10 Level 1 map 11 Process analysis 16 Process issues, pressure points and suggestions for improvement 17

3. Agency B Proposed 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, 104 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 reflect 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 agencyes 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? • Finance’s Procurement Policy Branch • Procurement Policy Areas and representatives from line areas DRIVERS FOR CHANGE • 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 • 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 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. Agency B Procurement ProcessSnapshot of agency requirements specified by CEIs • 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 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 • TOOLS • Checklists • Procurement Protocols • E-procurement system • Contracts register • Purchase orders • ROLES & RESPONSIBLITIES • Responsibilities are specified for the following roles • Officials • A 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 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.

5. Business process maps

6. Agency B Procurement ProcessRole statements

7. Agency B Procurement ProcessRole statements

8. Agency B Procurement ProcessRole statements

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

10. Agency B Procurement ProcessLevel 0 – Process Phases  Provide input and management approval (as req’d) Identify need  Plan procurement Receive good(s)/ service(s) and pay    Plan procurement Approach market Assess submissions and negotiate contract Provide in-principle approval Provide approval (as req’d) Provide approval Provide advice and support (as req’d) Raise purchase order and process payment Provide advice and support (as req’d) Respond to RFQ Negotiate and enter into arrangement Provide good(s)/ service(s) and receive payment

11. Agency B Procurement ProcessLevel 1 – Identify need Use existing arrangement Yes Check existing arrangements Identify procurement need ❷ No Considerations Procurement has been identified as the method to obtain the good(s)/ service(s) Requirement Use existing arrangements if they are suitable Does a suitable arrangement exist?

12. Agency B Procurement ProcessLevel 1 – Plan procurement Note The business case is scalable. For a simple procurement it could be an email, for a more complex procurement it could be a multipage document Use E-Procurement process Stationary/ office supplies Reg 9 approval built-in CPG 6.8 & 9 Use credit card process < $19,999 Other Understand procurement need Develop business case ❶ $20,000 - $79,999 Checklists Business Case proforma Provide input into business case (as req’d) Seek approval to conduct procurement Understand procurement need No, Refine business case; or End process Value & type of proc’t? Approve (in-principle) ? Review business case and proposed procurement method Check that budget is available ❸ Yes Delegation database Provide advice and support (as req’d) Provide advice and support (as req’d)

13. Agency B Procurement ProcessLevel 1 – Approach market No, Amend specification documents Provide input Provide input Seek manager approval (as req’d) Yes Considerations This approval could be done by either the Business Line Manager or the Delegate. This largely depends on the complexity of the procurement Prepare specification documents Identify potential suppliers Seek Delegate approval (as req’d) Issue RFQ Provide clarification (as req’d) Receive quotes ❹ Approve procurement approach? Manager Approve procurement approach? Considerations For procurements of $20k - $79,999 a minimum of 3 quotes must be sought. Below $19,999, there is no requirement for quotes. ❷ Yes No, Amend specification documents Provide advice and support (as req’d) Provide advice and support (as req’d) Obtain RFQ Understand specifications Provide quote

14. Agency B Procurement ProcessLevel 1 – Assess submissions and negotiate contract Provide advice • Considerations • The Contract Register is used as the source of information for AusTender reporting ❸ Assess submissions Select preferred supplier Recommend supplier to delegate Notify successful supplier and send draft contract Negotiate contract (as req’d) Finalise contract Notify unsuccessful suppliers Register contract on contract register ❺ Grant Reg 9 approval? Sign contract? CPG 7.23 No Contract Register No Re-evaluate submissions or refine requirements Sign contract Yes Yes Reg 9 CPG 7.12 FMA s.44 Conduct reporting obligations Provide advice and support (as req’d) CPG 7.24 CPG 6.10 Sign off on process (as req’d) Provide advice and support (as req’d) Receive notification and draft contract Negotiate contract (as req’d) Finalise contract Sign contract Unsuccessful suppliers Receive notification • Seek feedback if desired ❺ CPG 7.12

15. Agency B Procurement ProcessLevel 1 – Receive good(s)/ service(s) and pay * Claim For Payment Receive good(s)/ service(s) Receive invoice Provide CFP* and invoice for signature QSP Invoice Document process and decisions Create purchase order request Submit purchase order request ❹ CFP Form CPG 7.9 Purchase order request Not standard practice, but ideal to ensure delegate approval can be substantiated, ensuring the procurement process is defensible Sign CFP Conduct reporting obligations CPG 7.24 Process and raise purchase order Receive CFP and invoice Match CFP and invoice Pay invoice Delegation database Purchase order • Considerations • Delegate approval evidenced by delegate signature on CFP possible only if provided Invoice Provide good(s)/ service(s) Issue invoice ❹

16. Process analysis

17. 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 POINTS Elements 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 IMPROVEMENT Outcomes 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? Agency B Procurement ProcessProcess issues, pressure points and suggestions for improvement

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