Government of Western Australia Department of Treasury and Finance Procurement The Procurement Reform Toolkit An Overview November 2005

Government of Western Australia Department of Treasury and Finance Procurement 2 Procurement Reform Toolkit is… a collection of resource materials constructed around eight smarter buying principles recommends various strategies and techniques that agencies can use to: –implement an on-going program of procurement reform –identify potential cost saving opportunities

Government of Western Australia Department of Treasury and Finance Procurement 3 Procurement Reform Toolkit Contains 1.Introduction –Toolkit Overview –8 Principles of Smarter Buying 2.Reform Strategies –Spend Analysis Methodology –Overview –User Guide –Agency Forward Procurement Planning –Buyer Awareness 3.Self Assessment Template 4.Fact Sheets –Buying What You Need –Optimising Use of CUAs –Standardisation –Minimising Piecemeal Buying –Consistent Policies & Processes –Contract Management Practices

Government of Western Australia Department of Treasury and Finance Procurement 4 Self Assessment Template Purpose A tool to assist agencies assess and monitor their progress in implementing reform strategies and achieving savings targets Features structured around the eight smarter buying principles poses a series of questions under each principle collectively, the questions provide agencies with: –an indication of areas requiring attention –suggestions on where to look for savings –a means of recording progress and achievements

Government of Western Australia Department of Treasury and Finance Procurement 5 Procurement Reform Toolkit Overview

Government of Western Australia Department of Treasury and Finance Procurement 6 Reform Strategies/Guidelines There are three inter-related strategies that are central to an agency’s efforts to reform its procurement practices and achieve genuine savings Spend Analysis Procurement Planning Buyer Awareness These form the basis of the Toolkit logo

Government of Western Australia Department of Treasury and Finance Procurement 7 Reform Strategies – Spend Analysis Analyse past procurement and gain a detailed picture of the agency’s spend profile so as to identify savings opportunities and areas requiring process improvement For example, research indicates that 80% (by $ value) of most agencies’ purchasing is conducted with less than 20% of their total suppliers list. Focus on this group to find significant contract opportunities and look to the remaining 80% of suppliers to find efficiency improvements and reduced piecemeal buying 80% of purchasing with 20% of suppliers Look for contract opportunities 20% of purchasing with 80% of suppliers Look for efficiency improvements Total Purchasing

Government of Western Australia Department of Treasury and Finance Procurement 8 Reform Strategies – Procurement Planning Analyse future procurement (at the branch or cost centre level) so as to adopt a better planned, coordinated and aggregated approach to intended future procurement. This planning should extend across the entire agency and potentially include other agencies with similar contracting intentions. Many Purchasers, Many SuppliersMany Purchasers, One Supplier

Government of Western Australia Department of Treasury and Finance Procurement 9 Reform Strategies – Buyer Awareness Educate agency staff about approved procurement policies, standards and processes as well as how to implement procurement plans and actions stemming from the Spend Analysis and Procurement Planning Buyer Awareness DTF Training Sessions & Seminars In-house Training Smarter Buying Guides Buying Behaviour Reports Published Guidelines & Fact Sheets

Government of Western Australia Department of Treasury and Finance Procurement 10 Continual Cycle Procurement Reform is not a once-off exercise but rather a continual rotation of analysis, planning and awareness and benchmarking your agency’s progress with the Self Assessment Template

Government of Western Australia Department of Treasury and Finance Procurement 11 Procurement Reform Steering Committee Agencies are strongly advised to establish a Procurement Reform Steering Committee to oversee the implementation of reform initiatives and to monitor progress against agreed milestones and targets. A member of the Corporate Executive or Senior Officer should be appointed to lead this group. It is critical that the agency’s senior management champion the reform process and actively reinforce the importance of a consistent, well coordinated and strategic approach to procurement.

Government of Western Australia Department of Treasury and Finance Procurement 12 Where to From Here? In order to implement an effective and comprehensive Procurement Reform program, agencies should - Ensure their program covers all procurement – goods and services, corporate and operational, CUAs and agency specific contracts Form a steering or coordination group ‘with teeth’ that regularly reports progress to the Corporate Executive Undertake a detailed analysis of their spend profile and develop an action plan to address findings Proactively educate agency buyers, mandate desired buying behaviours in key areas of procurement, and acknowledge reform achievements Develop a whole of agency forward procurement plan Regularly monitor performance against savings and efficiency targets – use the Self Assessment Template to help with this

Government of Western Australia Department of Treasury and Finance Procurement 13 8 Principles of Smarter Buying 8 Smarter Buying Principles

Government of Western Australia Department of Treasury and Finance Procurement 14 8 Principles Analyse spend profile Procurement planning Policies and processes Optimise the use of CUAs Aggregate purchasing Standardise the range of items Staff awareness This toolkit is built around 8 guiding principles that have been identified as being central to a well coordinated reform strategy: Contract management practices

Government of Western Australia Department of Treasury and Finance Procurement 15 8 Principles - 1. Analyse Spend Profile 1.Analyse spend profile and patterns, compare these to sector best practice, and look for savings opportunities Apply procurement analysis techniques to financial (FMIS) data Make use of DTF’s Procurement Data Warehouse initiative Use DTF Buying Behaviour Reports to assess CUA spend Seek assistance from your DTF Cluster Manager

Government of Western Australia Department of Treasury and Finance Procurement 16 8 Principles - 2. Procurement Planning 2.Implement agency annual forward procurement planning (AFPP) For in-scope agencies, complete the AFPP return covering expenditure above the tender threshold of $100,000 – potential for both in-house and multi-agency aggregation Apply the principles and tools of AFPP to a wider range of purchasing than that captured by the official return

Government of Western Australia Department of Treasury and Finance Procurement 17 8 Principles - 3. Policies and Processes 3.Consistently apply whole-of-government policies, processes and documentation Ensure existing purchasing policies reflect the new SSC thresholds e.g. no need for multiple quotations for goods or services valued under $1,000 Use the standardised sector procurement templates available from DTF Adopt the new General Conditions of Contract (GCoC) documentation for all non-IT&T agency contracts Use waivers available to CEOs up to $100k A new standard request template for ICT goods contracting contracting will be available in early 2006

Government of Western Australia Department of Treasury and Finance Procurement 18 8 Principles - 4. Optimise the Use of CUAs 4.Optimise the use of CUAs and agency specific contracts Minimise leakage from mandatory CUAs and Agency Specific Contracts Use standing contracts for as much spend as possible Internally mandate and educate staff on the use of these contracts Promote easy access to CUA information via intranet links Utilise the new Government Contract Directory (CUA Guide) – available as an e-Book in early 2006

Government of Western Australia Department of Treasury and Finance Procurement 19 8 Principles - 5. Aggregate Purchasing 5.Minimise piecemeal buying and aggregate purchasing wherever possible Move as much spend as possible under the scope of standing contracts Look for in-house and multi-agency aggregation opportunities with higher value purchases Consolidate more regular purchases into larger, less frequent orders Use Purchasing Cards – to pay a single monthly account rather than numerous single invoices

Government of Western Australia Department of Treasury and Finance Procurement 20 8 Principles - 6. Standardise the Range of Items 6.Standardise the range of items available for purchase and apply demand management practices Adopt agency-wide standards Limit the range of choices or options available to staff for purchase Consider the ‘total cost of ownership’ when deciding on product options Only buy what is needed to do the job – particularly when purchasing products with numerous options or graduated modules

Government of Western Australia Department of Treasury and Finance Procurement 21 8 Principles - 7. Staff Awareness 7.Invest in raising staff awareness of better buying principles and behaviours Undertake training on internal procurement policies and procedures – make use of DTF agency based Procurement Practitioners Look for external training and awareness opportunities –DTF run programs such as Better Buying Sessions or Procuring Professional Advisory Services –SSC information sessions Encourage relevant staff to seek higher qualifications in procurement

Government of Western Australia Department of Treasury and Finance Procurement 22 8 Principles - 8. Contract Management Practices 8.Tighten contract management practices, particularly with service contracts Better scoping and performance measurement of service contracts Review procedures for contract extensions and variations Participation in available training courses focussing on service contracting A new whole-of-government Contract Development and Management System will be launched in mid 2006 to replace Gem Contracting and various agency systems

Government of Western Australia Department of Treasury and Finance Procurement 23 Further Information If you have any queries with regard to the Procurement Reform Toolkit, please either visit the website at or send an to