Agency C case studies of procurements under $80,000

Project Analysis and Review of Commonwealth Client Department of Finance and Deregulation
Procurement Processes for procurements
under $80,000
Date 3 June 2011 ThinkPlace Raffaella Recupero
Version FINAL V1.0 Team Mark Thompson

AUSTRALIA  NEW ZEALAND

LEVEL 1 UNIT 3 GREEN SQUARE KINGSTON 2604 P +61 6282 8852 F +61 2 6282 8832 WWW.THINKPLACE.COM.AU
About this document
This document contains an analysis of three procurement case
studies provided by Agency C. Each case study was analysed
against a high level process model to understand actual
procurement processes employed and to identify areas of good
practice, unnecessary and / or duplicated processes, and
convoluted processes (inefficient / ineffective).
Methodology
1. Agency C provided three procurement case studies that
describe actual procurement processes
2. ThinkPlace reviewed the case studies validating them
against processes mandated by the agency CEIs and
relevant policies.

ThinkPlace has worked with a small group of people in Agency 3. ThinkPlace worked with Agency C staff who are directly
C to develop this document. involved in the case study to identify areas of good
practice, unnecessary and/or duplicated processes, or
convoluted processes.

Contents
Procurement case studies
Procurement narrative - case study 1 4
Procurement narrative - case study 2 5
Procurement narrative - case study 3 6

High Level Analysis of Case Studies 7

Summary of process issues and insights

Good practice, unnecessary and convoluted processes 14

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PROCESESS UNDER $80,000 – AGENCY C CASE STUDIES
Procurement case studies
In this section, three procurements under $80,000 that best represent typical procurements, examples of good practice and examples of
convoluted processes are explored.
These case studies describe the facts, processes and experiences of the procurement.

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Case Study 1
Selling agent for a cottage in South Australia.
Questions
What was procured?
What was the value of the procurement?
How was the procurement valued?
Was documentation developed (e.g. file notes,
risk assessment, statement of work)?
If so, what type and why?
How was the market approached (e.g. direct,
select)?
How long did the process take, from beginning
to end?
Who was involved in the process (e.g. central
procurement area, delegate, line area, etc.)?
What was their role?
What did the approval process involve?
Was there a reporting process?
Questions referred to the procurement area (if
any)
Comments
Selling agent for a cottage in South Australia.
Approximately $10,000 as the contract is still being performed
Market analysis of previous selling agents % fee and disbursements along with
independent valuation of the property .
I was requested to seek EOIs from market, do a Procurement Plan and Evaluation Plan.
I considered this to be over-engineering a simple, low risk/low value procurement.
After rationalising processes, I utilised file notes, did a Project Disposal Plan (as I had a
number of procurements to coordinate), a thorough RFQ, and thorough Evaluation
Report (including self assessment probity review, simple procurement risk analysis).
Other documents include advice to Department of SEWPAC on Commonwealth Property Disposal
Policy requirements and a full due diligence process on the property
Select procurement from licensed agents on the Real Estate Institute of South Australia
register – Phoned 5 reputable agents in the area to determine interest, approached 4
agents electronically with RFQ.
• RFQ sent 16 March 2011 closing 31 March 2011
• EC report signed 11 April 2011
• Unsuccessful letters sent 18 April 2011
• Debrief unsuccessful respondent 27 April 2011
Conducted within Property Branch.
Two Property Officers and an Assistant Director on the Evaluation Committee
Tender opening witness from within Property Branch
Director , Divestment Team was the delegate
• Simple process - delegate approval of the Project Plan, the Evaluation Committee Report
• and Reg 9.
No
Initially, I wanted to reduce the red tape so approached PAT regarding need to do an
EOI. Informal discussions with PAT generally on the need for procurement/evaluation
plans for simple procurements.
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PROCESESS UNDER $80,000 – AGENCY C CASE STUDIES
Case Study 2
Consultant services for conduct of pricing review
Questions
What was procured?
What was the value of the procurement?
How was the procurement valued?
Was documentation developed (e.g. file notes,
risk assessment, statement of work)?
If so, what type and why?
How was the market approached (e.g. direct,
select)?
How long did the process take, from beginning
to end?
Who was involved in the process (e.g. central
procurement area, delegate, line area, etc.)?
What was their role?
What did the approval process involve?
Was there a reporting process?
Questions referred to the procurement area (if
any).
Comments
Consultant services for conduct of pricing review
$40k estimate
$16.5k actual
Estimated @ 25 days of consultancy time
Procurement Plan incl. risk assessment and outline of requirement
Evaluation Plan incl. Reg 9
Request for Quotation
Emails – clarification of procurement process and timing (probity)
Evaluation report incl. risk assessment and Reg 9 approval – value for money assessment and summary of process
Select approach from an existing panel
3 weeks for consultation on business requirements
3 weeks from release of RFQ
Total 6 weeks
Delivery of services – est. 6 weeks – contract delivery has been est. 16 weeks
Line areas – confirm business requirements
Procurement Advice Team – probity
Delegate – approve approach t market and spending proposal
Admin – original contract and purchase order data entry
FSB – report contract
Line area – oversight of service delivery – contract management
2 stages – sign off if Business Procurement Plan and Evaluation Report
Yes – automated through data entry (SAP)
Yes – probity questions
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PROCESESS UNDER $80,000 – AGENCY C CASE STUDIES
Case Study 3
Purchase of 6 x GigaBit modules
Questions
What was procured?
What was the value of the procurement?
How was the procurement valued?
Was documentation developed (e.g. file notes,
risk assessment, statement of work)?
If so, what type and why?
How was the market approached (e.g. direct,
select)?
How long did the process take, from beginning
to end?
Who was involved in the process (e.g. central
procurement area, delegate, line area, etc.)?
What was their role?
What did the approval process involve?
Was there a reporting process?
Questions referred to the procurement area (if
any).
Comments
6 x GigaBit modules – interface converters
$18,249.99
Cost of equipment
• Purchase request – summary of the procurement process including rationale, what was required and reason for
selecting vendor/ approach
• Risk assessment
Direct source + approach to existing panel
1 day for approval
5 days – contract/ purchase order
9 days – delivery
Total 15 days
Line area – business requirement, risk assessment, approach to existing market, evaluation
Delegate – approval of purchase request
Admin – data entry of contract/ purchase order
FSB – report contract
Line are – certify goods received
Purchase request submitted to delegate
Yes
No
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PROCESESS UNDER $80,000 – AGENCY C CASE STUDIES
High level analysis of case studies
In this section, case studies are validated against processes mandated by the agency CEIs and relevant policies

AUSTRALIA  NEW ZEALAND

LEVEL 1 UNIT 3 GREEN SQUARE KINGSTON 2604 P +61 6282 8852 F +61 2 6282 8832 WWW.THINKPLACE.COM.AU
Agency C Procurement Processes
Good practice, unnecessary and convoluted processes Actual process

Issues

Improvements

 procurement
Initiate
 Approach  Establish Receive  Pay for
market contract goods and services goods and services
process

Case Study 1 Case Study 2 Case Study 3

What actually happened What actually happened What actually happened
• Market analysis was undertaken to value the price of a • Procurement was valued at approx. 25 days consultancy • Procurement officer approached market without planning
cottage – from that the percentage of agent’s fees could be time.
calculated • Procurement estimated at $40k What were the issues
• Procurement Officer developed: • Procurement actual was $16.5k • No issues
• Procurement plan • Business requirements were distributed to Branch staff for
• Project Plan consultation, taking 3 weeks
• Evaluation Plan; • Procurement Officer developed What are some improvement ideas?
• EOI for 5 agents and RFQ to 4 agents; • Procurement Plan • None
• Advice to SEWPAC regarding sale • Evaluation Plan
• Due diligence process • draft RFQ documentation (using a select
• Procurement Officer obtained delegate pre-approval based approach from existing panel)
on Project Plan and Ministerial Brief
• Sought advice from PAT regarding procurement activities – What were the issues
was advised not to undertake EOI and to proceed with • The clearer the business need the better the assessment
RFQ one can make about whether procurement approach will
What were the issues meet the procurement principles/ outcome
• Process over-engineered for a simple low risk/ low value
procurement; requirement of management was conflicting What are some improvement ideas?
with advice given by PAT regarding EOI process • Standard templates for Procurement Plan and Evaluation
• Agency CEIs were confusing to an officer new to Plan (already in use by business area)
procurement resulting in excessive paperwork • Procurement Plan and Evaluation Plan form the basis for
• Agency C culture is very risk averse which result in Delegate Reg 9 pre-approval
management requiring excessive paperwork
• Current process is driven by experience of Procurement
Officer and risk appetite of management
What are some improvement ideas?
• Provide education at all levels
• Culture change required to increase level of risk tolerance
• Considerations checklist to guide staff new to procurement
• A single template for procurement plans
• Toolset available in a central place accessible by ANALYSIS & REVIEW OF COMMONWEALTH PROCUREMENT
procurement officers, delegates, etc. PAGE 8
PROCESESS UNDER $80,000 – AGENCY C CASE STUDIES
Agency C Procurement Processes
Good practice, unnecessary and convoluted processes Actual process

Issues

Improvements

 procurement
Initiate
 Approach  Establish Receive  Pay for
market contract goods and services goods and services
process

Case Study 1 Case Study 2 Case Study 3

What actually happened
• Procurement Officer rang 5 real estates asking for their
expression of interest
• Procurement Officer released the RFQ to 4 interested
parties and received quotes
• Procurement officer assessed the quotes and developed
• Evaluation Report incl. probity review and
• Risk assessment
• Procurement officer sought sign off of Evaluation Report
• Procurement officer then sought Reg 9 sign off
What were the issues
• Procurement Officer was advised by a senior manager to
undertake an EOI process in addition to RFQ
• Multiple approvals were sought (EOI, RFQ, Procurement
Plan, Evaluation Report, Reg 9)
What actually happened
• RFQ was sent out to 3 parties on panel
• Quotes evaluated and documented in Evaluation Report
which also included risk assessment and value for money
statement
• Evaluation Report was the basis for Reg 9 approval
• The process took 3 weeks from release of RFQ to Reg 9
approval
What were the issues
• None
What are some improvement ideas?
• Evaluation Report is the basis for Reg 9 approval.
• Development of Evaluation Plan adds value only for
procurements that involve more than one quote
What actually happened
• A quote was obtained via existing panel
• To test value for money principle, another quote was
obtained via ringing supplier directly
• A purchase request was drafted after the procurement was
valued. The request included requirements and reason for
selecting vendor.
What were the issues
• This approach skips the planning process and checks for
available budget
What are some improvement ideas?
• This approach works for procurement of goods, but may
not work for services.

What are some improvement ideas?

• Consolidate approvals into pre-approval and Reg 9
approval

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PROCESESS UNDER $80,000 – AGENCY C CASE STUDIES
Agency C Procurement Processes
Good practice, unnecessary and convoluted processes Actual process

Issues

Improvements

 procurement
Initiate
 Approach  Establish Receive  Pay for
market contract goods and services goods and services
process

Case Study 1 Case Study 2 Case Study 3

What actually happened No change from process map What actually happened
• Procurement Officer advised unsuccessful applicants via • Purchase request raised including risk assessment and
letter and debrief if requested 1 month after RFQ was sent justification for using vendor
out • Purchase request approved by Delegate (obtaining Reg
9 approval)
What were the issues
• Paperwork for low value procurements is excessive What were the issues
• Documentary requirements placed on industry discourages • None
competition
What are some improvement ideas?
What are some improvement ideas? • None
• Streamline paperwork for procurement officers
• Streamline documentation requirements for industry

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PROCESESS UNDER $80,000 – AGENCY C CASE STUDIES
Agency C Procurement Processes
Good practice, unnecessary and convoluted processes Actual process

Issues

Improvements

 procurement
Initiate
 Approach  Establish
Receive
goods and
 Pay for
market contract goods and services
process services

Case Study 1 Case Study 2 Case Study 3

No change from process map No change from process map No change from process map

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PROCESESS UNDER $80,000 – AGENCY C CASE STUDIES
Agency C Procurement Processes
Good practice, unnecessary and convoluted processes Actual process

Issues

Improvements

 procurement
Initiate
 Approach  Establish Receive  goods
Pay for
and
market contract goods and services
process services

Case Study 1 Case Study 2 Case Study 3

What actually happened What actually happened What actually happened
• No AusTender reporting No change from process map No change from process map

What were the issues What were the issues What were the issues
• Business area not aware of AusTender reporting • None • None
requirement
What are some improvement ideas? What are some improvement ideas?
What are some improvement ideas? • Procurement reviews are not standard practice but would • None
• None inform better practice if they were made standard

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PROCESESS UNDER $80,000 – AGENCY C CASE STUDIES
Summary of process issues and insights
In this section, a summary of process issues and improvements are presented

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 Agency C Procurement Process
Good practice, unnecessary and convoluted processes
GOOD PRACTICE
Proven techniques, methods and processes
• Consolidate and implement a standard template
for planning and reporting (e.g. Procurement
Plan, Evaluation Plan and Evaluation Report)
• In circumstances where procurement approach is
direct source to one supplier, an Evaluation Plan
does not add value. For other circumstances, an
Evaluation Plan is considered good practice.
• Approach the Delegate for pre-approval with a
Procurement Plan including a plan for how to
evaluate the procurement.
• Approach the Delegate for Reg 9 approval with an
evaluation report.
• Periodic reviews of a sample of procurements to
determine whether the procurement outcome met
the business need, also informing better practice
UNNECESSARY OR CONVOLUTED PROCESSES
Redundant, inefficient, ineffective processes
• The lack of a minimum requirement and standard
documentation means that procurement officer is
unsure what is required
• Multiple approvals are sought throughout the
process, generally the result of interpretation of
guidance materials or inexperience on behalf of the
Procurement Officer
• Advice given by PAT is not always consistent with
line manager advice, resulting in confusion, excessive
paperwork and in turn driving risk-averse behaviour
• Lack of training at all levels to show staff how to
undertake a procurement
• The focus is on getting the procurement through
and approved – rather than the outcome and
achievement of procurement principles.
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PROCESESS UNDER $80,000 – AGENCY C CASE STUDIES
 AUSTRALIA  NEW ZEALAND
LEVEL 1 UNIT 3 GREEN SQUARE KINGSTON 2604 P +61 6282 8852 F +61 2 6282 8832 WWW.THINKPLACE.COM.AU