MAKING WATER WORK

APPROVALS Gorporate Procurement Plan 2010-2011

RECOMMENDED BY:
Janet Porchun

Manager Procurement

DATE
RECOMMENDED BY:
rate

J; ,ctt r 2otl

APPROVED BY:

./
DATEJI I O/ I2OII

SunWater Gorporate Procurement Plan 2010 -2011

MAKING WATER WORK

Gorporate Procurement Plan

2010-2011

l. I

- State Procurement Policy objectives 1.2 - Objectives of the procurement function L3 - Benehts

I I
1

Parl2
2.1 2.2

Performance

Review....

....................2
2
3

Procurement activity profile - SunWater from 2007 to Supply positioning makix - SunWater for

2010 2009110 Matrix)

2009-2010

(Based on QP&S SUPREM - Supply Positioning and Risk Evaluation Historical Analysis Chart 2009 12010
2.3 2.4

Organisation and Management of the Procurement function

Achievements

4
7

2009-20 10

....................9 Part 3 - Procurement Capabilities 2010-2011 9 3.1 - Procurement practice profile - improvement development opportunities 3.2 - Procurement improvement capability development - Action Plan Recommendations 11

..........

SunWater Gorporate Procurement Plan 2010 -

2011

CPP

Part 1 - Functional alignment

SunWater's Corporate Procurement Plan (CPP) for 2010-2011 provides the strategic direction

for SunWater's procurement activities in 2010

and2}Il.

The CPP meets the requirements of State Procurement Policy 2010 (SPP) and the SunWater Corporate Plan for 2010 - 2015. Specifically, the CPP for 2010-2011 contains a balance of strategic and operational information in the following areas:

o o o o
1

The objectives to be achieved through SunWater's procurement activities; Review of SunWater's 2009/10 procurement achievements including organisation and management of the procurement function; SunWater's procurement capabilities for 2010 - 11 address various areas such as procurement systems, processes, practices including management and resourcing arrangements and mechanisms by which SunWater's procurement activities will be undertaken and measured; and Recommendations and strategies that will enable SunWater to comply with the SPP in meeting its specified procurement obj ectives.

.1

Safe Procurement

Policy objectives

The SPP's objectives are:

o o .
1.2

advance the priorities of the Government achieve value for money; and ensure probity and accountability for outcomes.

- Objectives of the procurement function

In supporting SunWater's operational objectives the procurement function will:

o . .

develop flexible procurement models which will permit procurement staff to achieve cost effective pro curement ; support the objectives of the SPP; and support the Key Reporting Activities defined in the SunWater Corporate Plan.

The strategies that will address these objectives

will

be focussed on two main areas, in line

with SunWater's Smarter Lighter Faster Initiative (SLFI):

o o

planning for the cost-effective purchase ofgoods and services; and planning for a more flexible and efficient procurement function.

1.3

- Benefits

The benefits to SunWater when implementing these procurement strategies are: o reduced risk; o greater security ofsupply; o lower costs; o improved quality; o greater efficiencies; and . new innovations.

SunWater Gorporate Procurement Plan 2010 -

2011

CPP 2

Part 2 - Performance Review

2,1

Procurement activity profile - SunWater from 2007 to 2010

Procurement Activity Profile
2OO7

40
35

to 2010

30 25

t E

t
r

20

t x
(,

15

10

^ \9'
cP'
"P

cPtts cPC
Actual Expenditure
2007-2008

sPend

cargorlcc
Actual Expenditure
2009-2010 $s,985,85s
54,7 s8,4s4

Actual Expenditure
200E-2009

Budgeted

Expenditure 20lo-2011
$r

Consultants Insurance

$3,892,101 $11,03r,391 $4,803, 34 $3,99 104

l,
r

,688,213

$5, I 58,562

Materials

Projects

$3,401,183
ss,4s3,742 s19,523,623

57,022,006
$

$7,383,074 s37,709,102

$38,982,0s3

Comm. Contractors (Prqiects) Comm. Contractors (Routine)

17,089,4s3

$51,410,1l6
s6,340,448
$

$5,787,263

$3,780,321 $355,151

Temporary

Contractors S7,500,865 54,784,075

$8,967,219 56,253,287

10r,399

Materials Routine
Plant and

$2,821,680 54,966,251 $18,078,840

s2,398,721 s4,897,962 $21,954,887 s3,028,446 s8,227,124 $144,187,930

Equipment

Electricity
Plant Hire Miscellaneous

$13,sss,157 $14,13s,928
$2,599,38s $4,395,460 sr9,657,213 $18,995,517 $84,358,448 $98,480,658

$6,217,t36
$15,s67,056 5107,622,920

TOTAL

SunWater Corporate Procurement Plan 2010 - 2011

CPP 3

2.2

Supply positioning matrix - SunWater for 2009/10

Historical Analysis Ghart 200912010 (Based on QP&S SUPREM - Supply Positioning and Risk Evaluation Matrix)
Lowcr 9096 of cetrgory expenditure Top 1096 outlirrs

oIsurnce
otqlecomm DtLine5 Electric
Mangemcf

uConsultnts Commrcil
C

'4,
5 f J

a 5

ostfr

.Prii
owetr tSminars

Min Costs

st
M

'Meterils rino lcle onfcrrnces t fecs lRecr

Plnt

NonContestblr Elacticitt/' re.Mintenance & Licence p < 1000 nt and Equip > t 000

'Legel

fees

Rcgistition
ion F

ce

es -

Insurncr

offct
I

ftwr < I
nd nd

'tJniform n d Contributions lGrnt lEntenhmentNon - FBT lTreuel (Airfarus -domestic) to -Fuls nd oils roe 'Fuels nd (Jils tGround Mintnnce ' lProfessiotral
nd

Audit ccounting linnc. QA oFreiohtnd Post lTelephone nd Fax 'Rentl & Hr MV nd Frotectiv Clothing

Mterils

Non

InuentoryJ

sehold Fes 'elephonr

Lnd

trtn Non

*i

S,G
I

'oth"r d
'Printing

Non tOfrceCo,,..,,,..,-lFares Oo lFres Oomestic Dontions lseruice Costs - CSA ; )

Expenses
s

tt**,..,11

!MV Repair.ind Mrlnten ri;;;J'i nd Mntnnce

Membership rBuildnq Mintennce 'Buildino Mril

Rentl & Hirg ( & Ef offce HouseVen Renl 'MV operting Lasrs

.-ininnce)

&Plnt

cri pti ons

!guldng and Improvements rTraining

Erudifuic

Distribution by Quadrnt Expenditure - 2009110

Categories - 2009/10

Quadrant) Specialised 5474,044 0.4% Box 2 (Bottom LH Quadrant) Routine $5,964,555 5.5% Critical 552,943,486 49.2% Box 3 (Top RH Quadrant)
Box 1 (Top LH
Box 4 (Bottom RH

3 l8 4
39

4.7% 28.1% 6.3%

60.9% 100.0%

Quadrant)

High

Value

TOTAL

$5,964,555 44.8% s107,622,920 100.0%

64

SunWater Corporate Procurement Plan 2010 - 2011

CPP 4

2.3

- Organisation and Management of the Procurement function I - Current Procurement Practice Profile Analysis

2009-2010

Table

Procurement attribute
Policies, procedures nd purc hsing delegatons

Current practice level [self-assessment rating]

.
a

SunWater's Procurement Policy is in accordance with the Queensland Government's SPP which was released by Queensland Government Chief Procurement Ofltce (QGCPO) on I September 2010. SunWater's Procurement Policy is available on the SunWater revised intranet platform - SIMON. SunWater's Purchasing Guide outlines the purchasing procedures, relating to purchases of goods, services and related works is continuously being updated to ensure that SunVy'ater's purchasing procedures are current and in line with the SPP. The Purchasing Guide is available on the SunWater intranet.
Sun\Mater has a precedent database of standard terms and conditions available for both routine-and significant procurements. SunWater uses the Australian Standards and SunWater Special Conditions of Contract, where necessary. Contractual terms and conditions are specifically tailored to the type of goods, services and works undertaken by Sun'Water's business groups including

Contract terms nd

conditions .
a a

regional offices. The contractual terms and conditions are regularly reviewed to ensure that they are compliant with tegislative changes and SunVy'ater's Procurement

Policy changes.

2. Procurement Function
Role qnd influence within

organisation

the . .

The key roles and responsibilities for Procurement, containing the responsibilities matrix is available on the SunWater intranet. The Manager Procurement is responsible for the overall management of SunWater's procurement function, development, and approval of SunWater's Procurement Policies. The centralised Corporate Procurement Group undertakes all procuroment activities over the value of $25,000 (excl GST) in addition to providing specialist procurement advice, guidance and assistance to other SunWater business groups, including regional offices. The Corporate Procurement Group is involved in activities such as strategic procurement for major projects, consultancies, period contracts, standing offer arrangements, cleaning and maintenance contracts. All Standing Offer Arrangements are established by the Corporate Procurement Group and are managed in conjunction with the Standing Offer Arrangement Proj ect Manager. The procurement group sits within the Corporate Group and is headed by the Manager Procurement. The Business Procurement Manager and the Project Procurement Manager report directly to the Manager Procurement. Signihcant, major andy'or complex procurements are undertaken under the direction of the Project Procurement Manager. Low cost and low risk procurements being (commonly procured goods and services) are purchased under the direction of the Business Procurement Manager.

Structure of procurement

function

.
a

SunWater Gorporate Procurement Plan 2010 - 2011

CPP 5

Procurement attribute

Cu

rrent practice level [self-assess ment ratin g]

The Corporate Procurement Group has legal specialists available for assistance when undertaking significant and./or more complex procurement activities and draws on specialist resources from business areas within SunWater, when required.

Trining and development

All purchasing staff exercising procurement delegations

are required to attain a certain level of training depending on the level of thei delegation. This training ranges from internal purchasing training packages through to QGCPO Level 4 certifrcation.

3. People
Knowledge and skills
a a a

Procurement personnel involved in SunWater's signihcant procurement projects are required to have appropriate qualifications or experience equivalent to QGCPO Certification Level3/4, and/or at least 5 years experience. Junior purchasing staff receive on-the-job training, mentoring and are supervised in the performance of their duties. Procurement persorurel receive training utilising SunWater's internal and external training courses. A list of procurement certiltcation off,rcers is maintained on the SunWater intranet site.

4. Systems
Informtion, document and
knowledge management
Pro c ure m e nt m an age m ent
a a a a o

Sun'Water uses a file management system "Hummingbird", SAP Financial, Mterials Management modules and the Procurement Access database to capture and track contracts, financial documentation, transactions, securities, insurances, practical and final completion dates.

SAP determines the requisition order payment workflow. Vendor details are stored in the finance system. Procedures are in place to guide the use ofCorporate Cards. Financial and procurement delegations are established. Procurement methods employed include open and select tenders, sole supply, and standing offer arrangements. Signed contracts are hled using SunWater file management system. (Hummingbird). SAP determines the requisition-order pa5rment workflow as per SunWater financial and procurement delegations matrixes. Purchase orders are raised in SAP Procurement module then sent electronically to vendors. Invoices are matched to purchase orders and processed in the accounts payable module. Payments are recorded against invoices and purchase orders.

Purchase order, invoce nd

psyment

SunWater Gorporate Procurement Plan 2010 - 2011

CPP 6

Procurement attribute
5. Planning
Signftc ant procureme

Current practice level [self-assessment rating]

a a

nt

Significant Procurement Plans are developed in-house for high value (> $500,000), and/or a high degree ofbusiness risk projects. Plans for significant purchases are drafted for significant one-off procurements or a number of smaller projects, which when combined, are considered significant. Risk management is a consideration in all Significant Prourement Plans. Specihc Risk Management Plans are prepared for complex and critically important procurement activities.

Risk mangement

6. lmplementing

Strategies
Supplier selecton Supplier selection for all signifrcant procurement projects have been managed in accordance with SunWater's Purchasing Guide.
o a

Negotiation

Procurement undertakes all pre-contract negotiations as required, using a formal structured approach. The outcomes from this negotiation process are documented, reviewed and used for continuous improvement purposes.

7. Managing Supply
Transcting purchses

o o o

Commonly purchased low value and risk transactions have been streamlined using the SunWater purchasing guide. Ways to minimise transaction costs have been considered. And the use of corporate card is promoted for low value, common commodity purchases.
Contract Management is currently being undertaken by Project Managers.

Contrct

mansgement

8. Reporting
Profiling procurement

ctivi o o o o o o

Procurement profiling based on product categories is undertaken annually, utilising Queensland Purchasing's SLIPREM. Planning for signihcant procurements are profiled within individual project's Signihcant Procurement Plans. Concentrated research and analysis for SunWater regional purchases are currently being investigated. Research and analysis is undertaken on significant categories of goods and services as required, and forms part of the Significant Procurement Plan.

Research nd nlysis

Perrmanc e mesare ment fr am ew or k of pr o c ur e m e nt

functon

Currently, there is no central performance measurement framework in place. Performance framework reporting is currently being investigated. Currently, there is no central reporting of contract performance. Contract management and administration is currently being undertaken by individual project managers.

SunWater Gorporate Procurement Plan 2010 - 2011

CPP 7

2.4

Achievements

2009-2010

Table 2 - Performance of Current Procurement Projects

Category of good/service
Degree of business

Procurement project

risk^
Review

Business Area Primarily responsible for procurement

How well was this activity carried out n terms of efficiency, access to and use of resources and expertise
SunWater Procurement Policy and Purchasing Guide have been updated. This will be an ongoing,

Were the intended outcomes achieved?

of

SunWater Purchasing Guide and Procurement

Policy

SunWater Procurement Policy has been Corporate updated in line with Queensland Purchasing Recommendations and SLFI recommendations (30 May 2010). This policy incorporates requirements for use ofopen and select contracts including that for sole supply.

continuously monitored.
Successfully updated.

SunVy'ater

Sun'Water Vendor Managed

Stationery

Corporate

Stationery
Standing Offer

Supplier Arrangement.

Procurement strategies developed, implemented and managed by procurement specialists before being handed over to Stationery Co-ordinators for day to day

Yes

Arrangement

implementation.
Successfully implemented.

SunWater

SunWater Whole of Queensland

Travel

Corporate

Travel
Standing Offer

Supplier Arrangement.

Procurement strategies developed, implemented and managed by procurement specialists before being handed over to Travel Co-ordinators for day to day

Yes

Arrangement

implementation. Successfully implemented.

Regional Procurement
Plans

Develop and implement regional

purchasing plans and processes for SunWater regional ofhces.

Infr astructure Management

Procurement strategies are being developed. Ongoing implementation and management is being undertaken in conjunction with Regional Managers in line with SLFI target projections.

In process

Ongoing - Progressing as per SLFI timeframes.

SunWater Gorporate Procurement Plan 2O1O -2011

CPP 8

Standing Offer Arrangements

Ongoing review of

SunWater's

All Areas

Ongoing project

On-going

Standing Offer Arrangements.

(soA)
Upcoming
Projects, Greater than

H
-'
H

Burdekin Pipeline

Project

Augmentation

Infrastructure Development Ongoing project

l

In process

$500,000

'

Chinchilla Pipeline Project

InfrastructureDvelopment Ongoingprojct

In process

Cornors to Mianbth Dam

and

Infrastructure

Development

Stage one completed

Completed

Pipeline

H
1

Feasibility study on the construction Moranbah Pipeiine to Alpha

i..

of
of

Infrastructure Development

In initial stages

In

process

Feasibility study on the construction

Bingegang- Middlemount pipeline

I Infrastucture Development

Business case

development

In process

M M

Implementation of Regional Plant Snding Offer Arrangements. r Implementation of Maintenance

and building maintenance.

Regional

Management
Regional

Infrastructure ---Near
i

CompteUon

Near Completion

Type

Infrastructure

I Ongoing project

-T

In

process

ContractsincludingSunWaterhouse Management

-.'

f Regional Contracts Regional Infrastructure r Ongoing Management including mowing, ground maintenance, office cleaning, and I recreational areas servicing.

i*ti"r;itin

project

In process

^ Degree of business

risk:

L:

Low;

M:

Moderale;

H-

High.

SunWater Corporate Procurement Plan 2010 - 2011

CPP 9

Part 3 - Procurement Gapabilities 2010-2011

3.1

Procurement practice profile

- improvement

development opportunities

This Table identifies opportunities for business improvement and outlines where procurement practices can become more efficient and effective in
controlling costs and delivering value for money procurement solutions.

Table

Procurement lmprovement Opportunities Identified for 2010-2011

Policies, procedures I and purchasing delegations

.
a

Purchasing delegations are based on a combination of dollar limit and purchase risk

profiles.
Procurement policies and procedures are accessible by all staff via the SunWater Intranet. Updates and one oftraining and advice is given to ensure staff maintain an up to date awareness of SunVy'ater procurement policy and procedures.

SunWater's Purchasing Policy and Guide have recently been reviewed and now form two documents. (Purchasing Guide and Purchasing Policy). Purchasing thesholds have been increased along with purchasing certification approval levels for low risk purchases. Basic purchasing certification haining is now incorporated into the new employee induction
package. SunWater specific level I purchasing certification will be available on SunWater intranet shortly.

Procurement policies and processes are continuously being reviewed and refined to

identifu opportunities for improving efficiencies within the procurement process.

Procurement Management

Procurement management by project/contract is tracked using an access database.

l.

Procurement projects are managed and tracked

using an access database.

Systems and processes are being investigated and implemented to allow greater procurement visibility and improved monitoring and tracking processes.

SunWater Gorporate Procurement PIan 2010 -2011 Contract

Management
Contract management is undertaken by Project Managers. Procurement is heading an investigation on Contract administration and Contract
management.

CPP 10
Contract details are monitored in the procurement access database wherein critical contract information such as insurances, security, practical completion dates, and defects liability dates are recorded and monitored. Procurement is investigating the level of Contract administration and Contract management currently being undertaken in SunWater.

Contract administration review is underway to improve mechanisms to track contract variations including retentions, progress payments, variations and extensions. A process to monitor performance tracking and supplier performance is being formulated. This information will be made accessible via the SunWater intranet.

Performance
measurement

Performance measurement and repofing

framework of
procurement

function

framework for SunVy'ater procurement functions, systems and procedures, needs to be implemented to achieve best practice and continuous improvement along with meeting the State Procurement Policy requirements.

Currently there is no system in place for procurement performance measurement and reporting.

Investigation is underway to develop and implement performance measurements and a reporting framework for the procurement function.

, i

Implementation and integration of sustainability into the procurement of goods

and services.

SunWater practices sustainable procurement by

considering value for money over the life of the acquisition.

Refine and develop procurement sustainability systems and associated

measurements in line State Procurement

Policy.

SunWater Corporate Procurement Plan 2010 - 2011

CPP

11

3.2

- Procurement

improvement capability development - Action PIan Recommendations

The following procurement improvement activities have become projects for SunV/ater to undertake and implement throughout 2010-11. Undertaking these activities will facilitate the implementation of procurement strategies and practices that will provide operational efficiencies and cost savings along with support and sustaining of existing best practice procurement management.

Table 2 - Procurement improvement projects recommended lor 2010-2011

Capability lmprovement project
Procurement management

Project Description

Responsible Business Unit

lmplementation Date
Ongoing

Investigation into the continuous development of internal and external , Corporate (Supplier) relationships, identiffing key requirements and new systems to be implemented to track and monitor procurement activities.

Performance measurement framework of the procurement function

lmptement forml procurement performance -"ur*.rn"rri and reporting frameworks in line with State Procurement Policy requirements. vy rlu uLolv r tvvulwtllwrt! r vtvJ rwy4uwurvut.

- Corporate

ny lO lune ZOI1-

Contract administration

Investi gation underway in relation to current Contract processes.

Administration i Corporate
I

By 30 June 201 1

APPENDIX 1 Corporate P roc u rement G ro u p Organi sation al Structu re

(1)Ed-EoFHin

t.Fr