Insight,

We need to talk … about commitment (in procurement)

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This alert is the latest in our series of alerts to our Commonwealth and public sector clients about procurement matters, reflecting our recognition of the critical significance of procurement activities to the Commonwealth public sector.

It covers the hot-off-the-press Joint Committee of Public Accounts and Audit’s Report 498: ‘Commitment issues’ - An inquiry into Commonwealth procurement.

While the recommendations are significant for all Commonwealth entities, one recommendation in particular should catch the eye of Commonwealth corporate entities, as the committee recommends that the CPRs should now apply to them by default.

The report is the product of an inquiry that started in September 2022. It focusses on a number of Auditor-General reports into specific procurements, but makes recommendations that will apply generally. We contributed a detailed submission [click here to view] to the inquiry.

To be armed and ready with the key recommendations of the Report, read on!

Professionalism counts: improving procurement professionalism across the Commonwealth

The Report recommends an increased emphasis on professionalising the procurement function with the Commonwealth.

The Committee recommends that the Department of Finance work to advance public sector procurement capability and professionalisation by:

  • prioritising the development and rollout of a procurement professional stream within the Australian Public Service, to facilitate the creation of procurement and contracting specialists

Dig into supply chains: extending “procurement” to supply markets and supply chains

The Report recommends expanding the current definition of “procurement” in the Commonwealth Procurement Rules to include “more active management of supply markets and supply chains”.

Supporting this, the Committee commented:

…the Committee considers there is merit in considering procurement as more than just process and instead is attracted to considering procurement as ‘an holistic endeavour to minimise transaction costs across the supply chain whilst maximising overall value for money’ in alignment with the rules.

This would require more active lifecycle management of supply markets especially in areas such as technology, health and categories where government is a large and sometimes even monopoly procurer. In many respects Defence already appears to operate in this way.

Interestingly, the 2017 and previous versions of the Commonwealth Procurement Rules extended the concept of “procurement” beyond the mere acquisition of supplies or services. They said:

Procurement … begins when a need has been identified and a decision has been made on the procurement requirement. Procurement continues through the processes of risk assessment, seeking and evaluating alternative solutions, the awarding of a contract, the delivery of and payment for the goods and services and, where relevant, the ongoing management of the contract and consideration of disposal of goods.

A return to the good old days?

Everyone in the tent: applying CPRs to corporate Commonwealth entities

At present, the CPRs don’t apply to officials of corporate Commonwealth entities (CCEs) unless they are specifically applied by section 30 of the Public Governance, Performance and Accountability Rule 2014. [1]

The Report recommends that this be reversed: the CPRs should apply to CCEs by default, unless a legislative instrument (presumably disallowable?) specifically exempts them. This will bring almost all CCEs into the CPR tent. Specifically, government business enterprises are included. That might mean a big change to a CCE’s procurement practices.

VFM all the way: tweaking CPR 2.6

CPR 2.6 allows accountable authorities to determine

measures … to be necessary for the maintenance or restoration of international peace and security, to protect human health, for the protection of essential security interests, or to protect national treasures of artistic, historic or archaeological value.

The CPRs do not apply to the extent of their inconsistency with such a determination (commonly called an exemption).

The Report recommends that CPR 2.6 be amended to make it clear that it’s not possible to exempt entities from the core requirements to achieve value for money and conducting procurements in a fair, transparent and accountable manner.

Panels are not a panacea for VFM: panel reforms

As we noted in an earlier alert:

When using a panel for a purchase, officials must assess value for money. The establishment of a panel does not in itself demonstrate value for money for purchases made from the panel. Using a competitive process (such as obtaining multiple quotes) is one way to demonstrate that value for money was achieved when using a panel, although benchmarking, market research or considering the costs of not proceeding with a procurement may also establish value for money.

The Report reinforces this point, recommending that Finance amend its guidance on the use of panels to make it explicit that:

  • a separate value for money assessment must still be undertaken when conducting a procurement from a panel, even though value for money has been considered when forming the panel, and
  • panel procurement should involve multiple competing tenders from panel members, with sole-sourcing from a panel generally considered inadequate to demonstrate value for money

and that panels be refreshed at regular intervals.

What’s next?

We expect that the Government will adopt most if not all of these recommendations, and apply an increased focus on the procurement activities of all Commonwealth agencies and entities.

Watch this space …[2]

There are special rules for some corporate Commonwealth entities: see CPR 3.7, 3.8.

See also our most recent alerts which deal with panel arrangementscomplaints handling and a success story: the DSS procurement and transition of 1800RESPECT.

Reference

  • [1]

    There are special rules for some corporate Commonwealth entities: see CPR 3.7, 3.8.

  • [2]

    See also our most recent alerts which deal with panel arrangementscomplaints handling and a success story: the DSS procurement and transition of 1800RESPECT.

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