The objective of the audit was to assess the extent to which FMA Act agencies’ establishment and use of procurement panels supported value for money, efficiency and effectiveness in procurement. The objective of the audit was to assess the extent to which FMA Act agencies’ establishment and use of procurement panels supported value for money, efficiency and effectiveness in procurement.

Summary

Introduction

1. In 2010–11, Australian Government agencies entered into over 79 000 contracts for property and services valued in excess of $32.6 billion, ranging from relatively straightforward or short‐term procurement, through to more complex and longer term acquisitions.1 Agencies purchased a wide variety of property and services, including enabling assets such as buildings and information and communications technology; and services such as legal and consultancy advice.

2. Given the large number of procurements undertaken by many agencies and the centrality of purchased property and services to the operation of government and program delivery, agencies’ procurement practices are expected to be efficient, effective, and suited to the size and complexity of the property or services sought. Where an agency needs to make regular purchases of property and services, procurement panels are one approach used to achieve efficiencies in procurement practice.

3. A procurement panel is an arrangement whereby specific suppliers, usually selected through a single procurement process, may supply property or services to an agency (or agencies where it is intended that a number of agencies will access the panel). To establish a panel an agency enters into contracts or deeds of standing offer (DoSOs), (known as panel arrangements) with each supplier on the panel, setting out:

  • the type of property or services the supplier will provide;
  • the set/indicative price for the property or services; and
  • the manner in which in the agency will obtain the property or services from the supplier, including any process for competition between panel members, where appropriate.2

4. There is no complete data on the level and value of procurement through panels across government. However, at 31 December 2011, there were 602 standing offer arrangements involving more than one supplier recorded on the Australian Government’s web-based procurement information system (AusTender).3

5. In recent years, Australian Government procurement policy has pursued greater use of coordinated (whole-of-government) and cooperative (use of a procurement contract by more than one agency) procurement arrangements. To undertake cooperative procurement agencies can either approach the market together (known as clustering) or utilise the contractual or standing offer arrangement of another agency (known as piggybacking).4 Through these arrangements the Government seeks to reduce duplication between agencies, improve the efficiency of procurement processes, and support the achievement of value for money through economies of scale and aggregation of government demand.

Legislative and policy framework

6. Chief Executives of departments and agencies subject to the Financial Management and Accountability Act 1997 (FMA Act) must promote the proper use of Commonwealth resources.5 Under the Financial Management and Accountability Regulations 1997 (FMA Regulations6), the Finance Minister issues Commonwealth Procurement Guidelines (CPGs) for officials to follow when performing duties in relation to procurement.7 It is also a key requirement under FMA Regulation 9 that approvers of spending proposals must be satisfied, after undertaking reasonable inquiries, that the spending proposal provides for the proper use of Commonwealth resources.

7. The CPGs promote the procurement principles to be applied in all procurement processes. Value for money is the core principle while other key principles—encouraging competition, efficient, effective and ethical use of resources, and accountability and transparency in decision‐making—enhance and complement the concept of value for money. Panel procurements are subject to the procurement principles and there is a requirement that value for money is assessed at two stages. Firstly, when selecting suppliers as part of the initial establishment of the panel arrangement; and secondly, each time an individual panel supplier is chosen to undertake specific work under the panel arrangement.

8. Under the CPGs, agencies also need to ensure that small and medium enterprises (SMEs) have appropriate opportunities to compete for business, and are not unfairly discriminated against by agencies’ procurement processes. In this respect, the Australian Government has committed to sourcing at least 10 per cent of the purchases of FMA Act agencies by value, in aggregate across agencies, from SMEs.8

9. The CPGs are supported by guidance material prepared by the Department of Finance and Deregulation (Finance) to assist agencies undertake procurement.9 FMA Act agencies determine their own procurement practices, consistent with the CPGs, through Chief Executive’s Instructions (CEIs) and, if appropriate, supporting operational guidelines. The CPGs encourage agencies to adopt processes that are commensurate with the scale and risk profile of each procurement.

Audit objective, criteria and scope

10. The objective of the audit was to assess the extent to which FMA Act agencies’ establishment and use of procurement panels supported value for money, efficiency and effectiveness in procurement.

11. Three high level criteria were used to assess the performance of agencies’ panel procurement. The criteria examined whether selected agencies had:

  • established a sound procurement framework that supported panel procurement, including by communicating the existence of panels and providing guidance on procuring from them;
  • adhered to the requirements of relevant FMA Regulations (including application of the CPGs) and applied sound practices when establishing and procuring using a panel; and
  • established effective procurement monitoring and review arrangements to inform panel procurement.

12. ANAO also considered the current impetus towards greater use of coordinated and cooperative procurement, and the implications for Finance and agencies of this trend.

13. Three FMA Act agencies were selected for the audit as, based on available data, they were identified as large users of panels (both in terms of number of procurements using panels and panel procurements as a proportion of their total contracts). The agencies selected were the:

  • Australian Securities Investment Commission (ASIC);
  • Department of Broadband, Communications and the Digital Economy (DBCDE); and the
  • Department of Foreign Affairs and Trade (DFAT).

14. The audit involved analysis of a selection of the audited agencies’ procurement processes and supporting records. ANAO examined procurement processes used to establish 13 panels and access three panels of other agencies,10 and then examined processes for a sample of procurements made using each of the selected panels. A total of 139 procurements11 under the panels were selected for examination across the three agencies.12

15. ANAO also consulted representatives of panel suppliers to obtain their feedback on the operation of Australian Government procurement panels. This included a number of representatives of SMEs. Where appropriate, feedback from the suppliers is included throughout the report.

Overall conclusion

16. Procurement of property and services is central to the delivery of programs by Australian Government agencies. In undertaking procurement, agencies are required to adhere to the CPGs, including principles to be applied to all procurement processes. The core principle of value for money is enhanced and complemented by the other procurement principles—encouraging competition, efficient, effective and ethical use of resources, and accountability and transparency in decision-making. Panel arrangements are one of the fundamental management approaches used by agencies for procurement and provide agencies with ready access to a suitable group of suppliers for relevant property and services. Panels are most useful where there are recurrent needs for property or services, and, if used effectively, can benefit both agencies and suppliers, through shared understanding, lower cost and consistent procurement practices.

17. Available data from AusTender indicates that procurement using panels accounts for a substantial proportion of some agencies’ total procurement, in terms of both the number of procurements and their value. However, AusTender data on procurement from panels is incomplete. Agencies must report on AusTender all Commonwealth contracts (including from panels) which meet the contract reporting criteria.13 Nevertheless, under Finance’s current guidance, it is not mandatory for agencies to report on AusTender whether the procurement was made under a particular standing offer, which would identify it as a panel procurement. As a consequence, there is a lack of information on the actual use of standing offers by Australian Government agencies.

18. Overall, the audited agencies generally established panels through sound open tender processes, providing for efficient procurement from the panels in order meet their business needs for property and services. However, in selecting preferred suppliers to undertake work under panel arrangements, there was considerable scope for the agencies to employ more competitive arrangements and better demonstrate value for money in their selection processes, consistent with the requirements of the CPGs. The agencies also did not evaluate the effectiveness of panels in meeting procurement requirements and to assist in informing the design of prospective procurement arrangements.

19. When forming panels, the audited agencies issued appropriate documentation to potential suppliers, known as request documentation14, including evaluation criteria that provided a basis for assessing value for money. Additionally, the agencies were able to provide evidence of a soundly based value for money assessment for selecting suppliers for 12 of the 13 agency panels examined. Nevertheless, there were opportunities for the agencies in their procurement planning to further explore the nature of the market15 for the relevant property or services and the suitability of alternate procurement arrangements.

20. A purchase made under a panel arrangement is a procurement activity subject to the procurement policy framework and accordingly must, in itself, achieve value for money.16 Obtaining multiple quotes is one way in which competition can be used to promote value for money when procuring from a panel. In this respect, the agencies should have more often sought multiple quotes when selecting a supplier to support the achievement of value for money, particularly for higher value procurements. For procurements over $100 000 two of the agencies only sought multiple quotes in around one-third of their procurements included in the audit sample. Further, the three agencies did not sufficiently document how individual procurements represented value for money for between 41 per cent and 71 per cent of the procurements examined. These results highlight the need for greater emphasis to be given by agencies to clearly demonstrating the basis for supplier selection when procurements are made under a panel arrangement. In this context, the Joint Committee of Public Accounts and Audit recently reinforced the need to document value for money considerations for individual procurements.17

21. As panels are established to enable agencies to better meet their procurement needs, it is important for agencies to evaluate whether this outcome has been achieved. Such evaluation activity could consider the volume, nature and relative cost of procurements under the panel arrangement; the spread of panel work between suppliers; the performance of suppliers; and whether the agency was realising the anticipated efficiencies identified when planning the establishment of the panel. In this regard, none of the audited agencies evaluated the efficiency, effectiveness or value for money provided by their panel arrangements.

22. In response to the substantial amount of separate but related procurement activity undertaken by agencies, the Australian Government has in recent years pursued greater use of coordinated and cooperative procurement arrangements in order to improve efficiency and support the achievement of value for money. This approach is gaining momentum through whole-of-government procurement panels and increasing awareness by agencies of cooperative procurement opportunities (in particular, piggybacking). With these developments there are, however, associated risks; particularly the potential for the pool of suppliers to government to be reduced and in the ability of SMEs to compete with larger organisations when panels are formed. In light of these risks, there would be benefit in Finance monitoring developments to help ensure SMEs have appropriate opportunities to compete given the prospect of a smaller number of panels servicing many agencies. Additionally, Finance and agencies should work towards capturing more complete panel procurement data on AusTender. This would enable ongoing monitoring of procurement trends, including the situation in respect of SMEs.

23. ANAO has made two recommendations aimed at strengthening the accountability and transparency of panel procurement. A third recommendation is directed towards improving the design and effectiveness of panel arrangements.

Key findings

Procurement management and support

24. The audited agencies’ procurement policies and available guidance broadly addressed key legislative and policy requirements pertaining to procurement. To assist staff and delegates, agencies could strengthen procurement practice by issuing succinct internal guidance to better address the need for, and how to, obtain value for money, and the importance of documenting procurement decisions. There is also scope for Finance to strengthen its advice on these matters in the guidance material provided for agencies.

25. ANAO has previously acknowledged the benefits of agencies maintaining a central procurement unit (CPU) to provide specialist advice and support when procurement responsibilities are devolved within the agency.18 All three of the audited agencies maintained such a CPU and approvers in the agencies provided positive feedback on the quality of CPU assistance when required or sought. CPUs are also generally well placed to identify and pursue more efficient purchasing arrangements and support procurement practices that encourage competition and enhance value for money.

26. In addition to maintaining a CPU, each audited agency had a procurement Intranet-site which described available panels and provided some procedural guidance on their use. This was a sound approach to communicating the existence of panels and supporting efficient agency-wide procurement practices.

Establishing and participating in panels

27. Procurement panels are generally established to operate for several years and may involve substantial expenditure. As a consequence, agencies should thoughtfully develop the design and operation of panels to achieve value and maximise benefits. The planning approaches of the agencies for procurement panels varied. ASIC prepared a business case prior to forming each panel, whereas planning by DBCDE and DFAT was more limited. For all three agencies, planning documentation generally did not include explicit consideration of: the nature of the market for the property or services; other procurement options, including cooperative procurement opportunities; and administrative implications of establishing and managing the panel, including where piggybacking is allowed.

28. The agencies conducted open tender processes to form all the panels that were included in the ANAO’s sample. This approach reflected the expectation that spending utilising the panels would exceed the covered procurement threshold of $80 000.19 Request documentation for the sample of panels complied with relevant mandatory requirements of the CPGs for covered procurements, including publication on AusTender.20 With the exception of one panel21 included in ANAO’s sample, the agencies evidenced a soundly based value for money assessment indicating that tenders had been assessed against the evaluation criteria outlined in the request documentation.22

29. Under the FMA Regulations, standing offer arrangements must not be entered into with panel suppliers unless a spending proposal has been approved under FMA Regulation 9. It is important to obtain this approval prior to entering into an arrangement with the suppliers, as there is usually no subsequent opportunity for future decision makers to alter the terms and conditions relating to individual purchases made under the standing offer arrangement. In this regard, for seven of the 13 agency panels examined by ANAO, there was an approval which specifically referred to FMA Regulation 9 prior to entry into standing offer arrangements.23 Given the level of non compliance with this requirement, ANAO considers there would be merit in Finance reinforcing and further clarifying the requirement for agencies to approve a spending proposal prior to entering into a standing offer. Additionally, agencies would benefit from reviewing their own guidance and practices, including the most appropriate time in the business process to seek approval under Regulation 9.24

30. An agency wishing to access another agency’s panel needs to make their own assessment as to whether the property or services available under the panel, and the terms and conditions in place, sufficiently meet their needs and provide for a value for money outcome. In this respect, for three panels utilised by DBCDE or DFAT, there was scope to adopt more robust approaches to assessing the value for money provided by those panels prior to becoming a participant agency.

Procurement from panels

31. Finance guidance advises agencies that one of the ways to enhance value for money in government procurement is by using competitive procurement processes. Seeking more than one quote or allowing for the quoting of firm prices for work segments can allow for competitive tension, and should be allowed under panel arrangements25 where appropriate.26 However, for around two-thirds of the audit sample of procurements in each agency, the agency either did not seek any quotes, or sought only one quote, when procuring property or services from the panels.27 Of particular note, ASIC and DFAT only sought multiple quotes for around one-third of procurements valued in excess of $100 000.28 Having regard to the types of property and services provided under the panels, there was considerable scope for the agencies to employ more competitive arrangements when procuring from panels through quotation practices, particularly for higher value procurements.

32. Documentation of value for money considerations for each procurement provides for accountability and transparency in procurement decision-making. For the sample of procurements from panels, ASIC, DBCDE and DFAT did not sufficiently document how individual purchases represented value for money, for 41 per cent, 64 per cent and 71 per cent of procurements, respectively. Issues included documentation not adequately outlining why the particular supplier was selected, demonstrating consideration of the supplier’s experience or performance history, or providing details of any comparative analysis of suppliers.

33. In addition to obtaining FMA Regulation 9 approval prior to entering into a standing offer, approval is also required for each procurement made under the panel. DBCDE was able to provide evidence of FMA Regulation 9 approval for 93 per cent of its procurements from panels in the audit sample. For ASIC and DFAT the percentage of documented spending proposal approvals was lower at 76 per cent and 70 per cent respectively.

34. As an official order under a panel arrangement constitutes a formal contract with the supplier, it is important that it contain all the requisite details of the purchase. The agencies were able to provide evidence of an official order or contract for 76 per cent (DBCDE), 80 per cent (ASIC) and 86 per cent (DFAT) of the sample respectively. While most of the official orders clearly documented the details of the procurement, where there was an absence of an order that clearly articulated the property or services to be provided it was not possible to determine whether the procurement was within the scope of the standing offer. For many of the procurements it was also difficult to ascertain whether pricing was at or below rates assessed as providing value for money when the panel was formed. In some cases this situation reflected missing, poorly maintained or incomplete documentation, therefore providing insufficient evidence that the criterion had been met. In other cases the official order simply mirrored the value and format provided in a quote, with the rates quoted not aligning with the rates in standing offer.

Procurement strategy, monitoring and review

35. The use of coordinated and cooperative procurement arrangements is growing, particularly through use of mandatory whole-of-government procurement arrangements for provision of certain property and services, and as agencies increasingly utilise other agencies’ panels (piggyback). A number of factors have contributed to the take-up of piggybacking opportunities by agencies, including promotion by Finance of cooperative procurement arrangements, availability of AusTender data on other agencies’ standing offer arrangements allowing multi agency access, and the drive for administrative efficiencies. Nonetheless, there remain a large number of agency panels providing similar property and services, and further purchasing efficiencies may be possible. In particular, suppliers commented on the large number of similar panels they were on, and the potential for agencies to approach the market together (cluster) when forming new panels.

36. As previously mentioned, the Australian Government is committed to providing SMEs appropriate opportunities to compete for business. There are, however, tensions between the ability of SMEs to compete for work and the prospect of fewer panels servicing many agencies. In response to these tensions, there is merit in Finance monitoring developments to ensure a balance between competition in the marketplace and the benefits of more efficient panel arrangements.

37. The publication of contract details on AusTender provides for accountability and transparency of Australian Government procurement. However, current AusTender data does not provide a complete picture of the extent of procurement undertaken under panel arrangements, including use of other agencies’ panels. This partly reflects Finance’s guidance encouraging, but not mandating, reporting of the relevant standing offer for each procurement made under a panel arrangement. Greater transparency of panel procurement would assist Finance and agencies to improve their oversight of changing supply patterns and respond to any implications.

38. Effective monitoring and review of procurement activity at the agency level helps agencies to comply with the CPGs, and to increase the efficiency and effectiveness of their procurement processes. In this respect, the agencies’ CPUs did not undertake routine monitoring of agency-wide procurement activity, and none of the agencies produced any regular or periodic procurement-related internal management reports.

39. Evaluation activity at an appropriate time during the lifecycle of a panel enables agencies to understand the extent to which the initial business rationale for establishing the panel is being met. Evaluation also helps shape the design of any future panel or alternate procurement arrangement. For example, analysis of the utilisation of suppliers under the panel arrangement may result in the agency selecting fewer suppliers for any subsequent panels with a focus on building stronger relationships to enhance value for money and efficiency. As mentioned in paragraph 21 above, none of the audited agencies evaluated the efficiency, effectiveness and value for money provided by their panel arrangements.

Summary of agencies’ responses

40. The audited agencies’ and Finance’s summary responses to the audit report are provided below. The agencies responses to the recommendations are contained in the body of the report following the relevant recommendation. ASIC also provided other formal comments and these are provided at Appendix 1: Additional Formal Comments from ASIC.

Australian Securities Investments Commission

41. Overall ASIC accepts the ANAO's findings and agrees with the key recommendations contained in the report. ASIC notes that the panels and many of the sampled panel procurements that were subject to the audit were completed prior to the development of ASIC's current procurement policies, processes and delivery of procurement training in 2010 and is pleased to advise that we believe a number of the issues identified by the ANAO have already been addressed through our procurement reforms. Notwithstanding this, the audit has identified a number of areas in our guidance that can be improved and ASIC will continue working to address these issues.

42. ASIC agrees that seeking multiple quotes from panels can assist in promoting value for money and currently recommends the use of multiple or competitive quotes for high value procurements from panels. However, ASIC is of the view that there are some circumstances where competitive quotes may not be appropriate or practical regardless of the value.

43. ASIC agrees that explicit market and needs analysis should be conducted to better inform decisions and strategies when establishing panels particularly where the industries are not well known to the agency. ASIC supports the use of cooperative procurement arrangements as an alternative strategy to developing its own panels. Most new panels developed by ASIC (where no other cooperative arrangements exist) are made available for use by other agencies.

44. ASIC agrees there is scope to provide better guidance on documenting procurement decisions and value for money and agrees there is a need to monitor whether panels deliver the expected efficiency, effectiveness and value for money.

Department of Broadband, Communications and the Digital Economy

45. The Department of Broadband, Communications and the Digital Economy acknowledges the findings of the audit and supports the recommendations in the report. The Department found this audit process to be a valuable exercise and considers the report to be a fair representation of its experience with panel procurements. It is pleasing to note that the Department was recognised as having quality practices in many areas covered by the audit.

46. The Department recognises the effectiveness of using panel arrangements in procurement and has already implemented a number of changes to internal procurement procedures, including enhancing processes to assist with the accurate monitoring of panel performance and updating intranet guidance appropriately. The Department will continuously review its procurement policies and practices to further improve its performance in the areas identified by the ANAO.

Department of Foreign Affairs and Trade

47. DFAT considers that this report is well targeted and contains sound recommendations which the Department supports.

48. As indicated in the report, DFAT already had in train a number of initiatives, including an updated procurement framework, which addresses issues raised in the audit. The audit was undertaken at a time when DFAT was in the process of updating its financial management and procurement policies and procedures to better comply with the Commonwealth Procurement Guidelines. The findings in relation to DFAT, while they will be instrumental in ongoing review and improvements, reflect past practices rather than the new framework which is now being bedded down.

Department of Finance and Deregulation

49. Panels form an important part of agency procurement practices and where used appropriately, improve the value for money achieved by agencies and reduce the cost to business when engaging with the Australian Government. Transparent, accurate and timely information is critical in understanding and improving the value for money achieved. AusTender plays an important role in this and, as the Australian Government's key procurement information system, agencies are expected to continually improve the accuracy and timeliness of their procurement information on AusTender.

50. Small and Medium Enterprises (SMEs) also play a significant role in agency procurements. In 2010–11, SMEs represented 33.5 per cent (almost $11 billion) of the $32.6 billion worth of procurement contracts reported on AusTender. Enabling the access to the Australian Government marketplace for competitive SMEs is important. In establishing and sourcing from panels, agencies should consider as part of their value for money considerations, the benefits of doing business with competitive SMEs.

Footnotes

[1]   Department of Finance and Deregulation (Finance), Statistics on Australian Government Contracts, [Internet], Finance, available from <http://www.finance.gov.au/publications/statistics-on-commonwealth-purchasing-contracts/index.html> [accessed March 2012]. Data includes: contracts and standing offers valued at more than $10 000 for agencies subject to the Financial Management and Accountability Act 1997 (FMA Act); and certain contracts and standing offers of Commonwealth Authorities and Companies Act 1997 (CAC Act) entities subject to the Finance Minister’s (CAC Act Procurement) Directions.

[2]   Finance, Commonwealth Procurement Guidelines (CPGs), p. 32, paragraphs 8.35 and 8.36; and, Finance, Procurement Policy and Guidance, Buying for Government [Internet]. Finance, available from <http://www.finance.gov.au/procurement/procurement-policy-and-guidance/index.asp> [accessed March 2012].

[3]   Based on AusTender standing offer data provided by Finance. Standing offers with more than one supplier are representative of panel arrangements.

[4]   A standing offer arrangement can have one or more participating agencies. The agency that establishes and manages the standing offer arrangement is known as the lead agency. Other agencies that access the standing offer arrangement are known as participant agencies.

[5]   Proper use of Commonwealth resources means efficient, effective, economical and ethical use that is not inconsistent with the policies of the Commonwealth. FMA Act, section 44(3).

[6]   FMA Regulation 7 requires officials to act in accordance with the CPGs.

[7]   The CPGs may also apply, following a direction by the Minister for Finance, to Commonwealth entities subject to the CAC Act listed in Schedule 1 of the Commonwealth Authorities and Companies Regulations 1997 as being subject to Section 47A of the CAC Act. The audit did not include an examination of entities subject to the CAC Act.

[8]   Finance, CPGs, 2008, p. 11, paragraphs, 5.3–5.6, [Internet]. Finance, 2008, available from <http://www.finance.gov.au/procurement/procurement-policy-and-guidance/CPG/docs/CPGs-2008.pdf> [accessed March 2012]. In aggregate for 2010–11, Australian Government agencies purchased almost $11 billion in property and services from SMEs (33.5 per cent of the value of all procurement). See Finance, Statistics on Australian Government Contracts [Internet]. Finance, available from <http://www.finance.gov.au/publications/statistics-on-commonwealth-purchasing-contracts/index.html> [accessed March 2012]. Data includes: contracts and standing offers valued at more than $10 000 for agencies subject to the FMA Act; and certain contracts and standing offers of CAC Act entities subject to the Finance Minister’s (CAC Act Procurement) Directions.

[9]   All guidance material can be found on the Finance website available from <http://www.finance.gov.au/procurement/procurement-policy-and-guidance/index.html>.

[10]   Thirteen of the panels were established by the audited agencies. Three were established by other agencies. DBCDE utilised two of the panels established by other agencies and DFAT utilised the other panel.

[11]   ANAO initially selected a sample of 180 contracts (60 from each agency) for examination. However, approximately 23 per cent of the audit sample involved reporting errors and anomalies. This included incorrect reporting of contract and purchase order variations as separate contracts; duplication of contract entries; and reporting of contracts against the wrong panel.

[12]   ANAO selected procurements under panel arrangements from contract notices published on AusTender that included a Standing Offer Notice Identification Number (SONID). In determining which procurements to include in the sample ANAO had regard to ensuring: a mix of higher and lower value procurements; a spread of suppliers within a panel; and some coverage of coordinated and cooperative procurement.

[13]   The contract reporting criteria are that: the instrument to be reported is a Commonwealth contract, agency agreement or standing offer arrangement or amendment and, the instrument meets the relevant contract reporting value. For  FMA Act agencies the reporting value is $10 000 or above. Refer to Finance, CPGs, December 2008, p. 21, paragraph 7.25, available from <http://www.finance.gov.au/procurement/procurement-policy-and-guidance/CPG/docs/CPGs-2008.pdf> [accessed March 2012].

[14]   Request documentation is documentation provided to potential suppliers to enable them to understand and assess the requirements of the procuring agency and to prepare appropriate and responsive submissions. The CPGs include a number of mandatory requirements for request documentation for certain higher value procurements. This includes a complete description of the procurement, any requirements to be fulfilled, conditions for participation, and all evaluation criteria to be considered in assessing submissions. Finance, CPGs, 2008, pp. 34 and 35, paragraphs 8.42 and 8.44.

[15]   This includes the size of the market, the likely suppliers and their customers, where the suppliers are located and whether the market is undergoing change.

[16]   Finance, Good Procurement Practice No.4 Establishing and Using Panels [Internet], Finance, 2007. This guidance was archived during the audit but was applicable at the time the majority of panels examined were created. Current Finance guidance is available at http://www.finance.gov.au/procurement/index.html.

[17]   Joint Committee of Public Accounts and Audit, Report 423: Review of Auditor-General’s Reports Nos 39 2009-10 to 15 2010-11, Chapter 4, paragraph 4.99, which stated in relation to documenting value for money for individual procurements: ‘the Committee considers that undocumented processes should be viewed with high levels of suspicion. In these circumstances, the Committee is of the opinion that the default assumption should be that ‘if it’s not documented, it’s not done’, hence value for money is unlikely to have been achieved’.

[18]   For example, in ANAO Audit Report No.11 2010–11, Direct Source Procurement, ANAO found greater levels of compliance with the CPGs where an agency required CPU involvement in decisions to direct source higher value procurements, pp. 121–122.

[19]   Covered procurement is a term used in the CPGs to describe a procurement that exceeds certain procurement thresholds and is not exempt under Appendix A of the CPGs. Generally for FMA Act agencies, procurements that have a maximum anticipated value of more than $80 000 are covered procurements. The exception to this rule is procurement of construction services, where a value of more than $9 million applies. Division 2 of the CPGs establishes the Mandatory Procurement Procedures (MPPs) and emphasises that higher value procurement opportunities be offered to the full market, known as an open approach, except in certain circumstances.

[20]   Other mandatory requirements include: the nature, scope and, where known, the quantity of the property or services to be procured; and all evaluation criteria to be considered in assessing submissions.

[21]   DFAT did not evidence a soundly based value for money assessment for one of the panels examined by ANAO. Refer paragraph 3.39.

[22]   The agencies’ evaluation criteria were generally phrased in terms of compliance, capability, capacity, price and risk.

[23]   Of the remaining six panels: one had approval that referred to Section 44 of the FMA Act, three had other evidence of approval that did not meet Regulation 9 requirements and DFAT was unable to provide an approval for two of its four panels examined by ANAO. Refer Paragraph 3.46 for details.

[24]   Approval of a spending proposal can be done at any stage prior to entering the DoSO. For example, agencies may obtain FMA Regulation 9 approval in the planning phase of the procurement, prior to the RFT being issued, or at the completion of the evaluation stage. Obtaining Regulation 9 approval at the commencement of the procurement process will often result in a very broad approval addressing issues such as the scope and purpose of the standing offer arrangement. Obtaining approval later in the process, for example, after the development of a draft DoSO or after the evaluation stage, allows the delegate to consider the specific terms and conditions that will apply under the standing offer arrangement.

[25]   Finance, Buying for the Australian Government; [Internet]. Finance, available from <http://www.finance.gov.au/procurement/procurement-policy-and-guidance/buying/procurement-practice/panel-and-mul/traps.html> [accessed March 2012].

[26]   Under the Commonwealth’s Legal Services Directions 2005 an agency may seek a competitive quote from a legal services provider that is a party to a DoSO only if the agency considers that: the value of the services to be provided is likely to exceed $80 000; or the expertise of the panel should be tested for a new area of work. The Directions are binding rules issued by the Attorney-General to cover the performance of legal work for the Commonwealth. The Chief Executive of an FMA Act agency is responsible for ensuring that their agency adopts appropriate management strategies and practices so as to achieve compliance with the Directions. The Attorney-General maintains standard documentation for use by all Commonwealth agencies when approaching the market for legal services. Deed of standing offer guidance for the provision of legal services is available on the Attorney‑General’s website <at http://www.ag.gov.au/LegalservicestoGovernment/Pages/CommonFormTenderPackage.aspx> [accessed March 2012].

[27]   The results of sample testing have been adjusted in order to not misrepresent instances where quotations were not sought in accordance with these requirements.

[28]   ANAO recognises there are some standing offer arrangements where the property or services are clearly defined at a set rate and there may be less scope to alter prices.

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