Agency A Procurement Process Business Process Map (future state)

1. Agency A Procurement Process Business Process Map (future state)

2. Agency A Proposed Procurement ProcessAbout this document This document contains a business process map for procurements under $80,000, which specifies the requirements set out in Agency A’s Chief Executive Instructions (CEIs), operational guidelines and other internal guidance, as well as the overarching requirements of the Commonwealth Procurement Framework. A current state map was not workshopped since Agency A has already developed this documentation. Rather, this document reflects the process as it is proposed to be conducted in approximately 6 months time ThinkPlace has worked with a small group of people in Agency A to develop this document. Contents Intent Statement 3 Process analysis 4 Agency A CEI snapshot – current state 5 Summary changes to process 7 Process improvements 8 Business process maps 9 Role statements 10 Map Levelling 12 Level 0 map 13 Level 1 map 14

3. Agency A Proposed Procurement Process A standardised, simple and safe process for all FMA agencies conducting procurements that fall under the $80,000 threshold Intent CURRENT STATE FUTURE STATE SYSTEM IN FOCUS • The FMA Act and Regulations set the framework for the proper management of public money and public property in the custody and control of the Commonwealth. • The Commonwealth Procurement • Guidelines (CPGs) articulate the • Government’s expectations for all • department and agencies conducting • procurement. • Agencies have evolved their procurement policies and practices within the context of the agency’s organisational structure, delegations, approval processes etc. • Agency specific policies and procedures are • contained with large and complex volumes of • CEIs, departmental policy documents and • protocols. • Under the FMA Act, 104 FMA agency CEOs have devolved authority to manage public money within their agency. APPROACH FOR BRIDGING THE GAP • Where are we now? • Analysis of ‘2008-09 AUSTENDER statistics indicate 85,000 contracts (over $10,000) were awarded. The total value of these contracts approx. $35bn. • Of those contracts, about 65,000 contracts falling under the $80,000 threshold were awarded. The total value of these contracts was about $12.6bn. • Over 80% of the total number of contracts correspond to about 4% total value. An APS 5/6 can spend up to 80% their time on low value contracts • Low value contracts translate to a high administrative burden • Agencies have tailored procurement approaches reflect organisational structure, authority and delegations, approval processes, risk appetite, level of IT maturity, and resourcing, reporting processes and systems • Procurement functions differ in agencies – some functions are centralised, some are decentralised • Participating agencies have undertaken work to review CEIs, processes and protocols • Whole of Government CEIs are under development • Work has also been undertaken to simplify the standard short form contract, reducing the number of pages from 80 to 6 • What would success look like? • A better practice model for procurements under the threshold that: • Standardises the processacross FMA agencies • Makes it easier for staff to know what to do and how to conduct procurements • Reduces administrative burden • Finance will be able to use the project findings and recommendations as a basis for presenting a better practice model to FMA agencies, where appropriate. • The project will influence agency CEIs and processes • How do we get there? • Analyse and review Commonwealth procurement practices currently employed by selected agencies when conducting procurements under $80,000, identifying issues, pressure points and opportunities for improvement, and on that basis making recommendations for simplifying and streamlining processes. • What do we need to do? • Who do we need to involve? • Finance’s Procurement Policy Branch • Procurement Policy Areas and representatives from line areas DRIVERS FOR CHANGE • Out of scope • The project will not to assess how well agencies implement the CPGs and relevant FMA legislation when undertaking procurements • The project will not redesign policy • What do we need to consider? • Avoid over-engineering or over prescribing • Aim to set a benchmark • Impact on behavioural change • What is the problem/ opportunity? • Agency procurement processes are complex, confusing, and onerous for staff • Requirements vary from agency to agency – processes are not standardised across government • Suppliers are frustrated • Timing • Focussing question • How can we standardise and streamline the process for procurements under the $80,000 threshold, making it less onerous FMA agencies, while also maintaining the integrity of the FMA Act? April May June • Intent, planning and agency engagement • CPG process modelling • Agency CEI process mapping • Case study development by agencies • Case study analysis • Synthesis • Design ‘better practice model’

4. Process analysis

5. . Agency A Proposed Procurement Process Agency A snapshot – current state • POLICY STATEMENT • All spending decisions must make efficient, effective and ethical use of all Commonwealth resources and aim to deliver value for money. • All spending decisions must be in accordance with the law and not inconsistent with the policies of the Commonwealth. • PRINCIPLES/ OUTCOMES • All proposals to spend public money must be approved by an Approver. • The Commissioner is responsible for implementing and maintaining the legal requirements for spending public money in Agency A. • The Commissioner has delegated the power to approve spending proposals to certain officials only. • Only those officials who have been delegated the power to approve (Approvers) may approve spending proposals. • Delegated Approvers are responsible and accountable for the decisions they make in approving spending proposals.. • Approvers must not approve spending proposals, thereby committing the Commonwealth to make payments, unless they know there are funds available to meet that commitment. • Approvers have to follow the principles, rules and instructions in Agency A’s CEI and all related CEIs, Corporate Management Practice Statements (CMPS) and Corporate Management Procedures and Instructions (CMPI). • Section 14 of the FMA Act contains a specific penalty for misapplication or improper disposal, or the improper use, of public money. • The benefits of dealing with small and medium enterprises should be considered when assessing value for money. • All potential suppliers should be given the same opportunity to compete for Agency A’s business, be treated equitably and not discriminated against on the basis of ownership, foreign affiliation, location or size. • ROLES & RESPONSIBLITIES • Responsibilities are specified for the following roles: • Chief Executive OfficerThe Chief Executive Officer is responsible for implementing and maintaining the legal requirements for spending of public money in Agency A. • Chief Finance OfficerThe Chief Executive Officer has given the Chief Finance Officer responsibility for managing the financial affairs and reporting requirements of Agency A. • Agency A Finance (Financial Framework Team)Responsible for developing the financial management framework, the assurance of the financial control environment and the interpretation and application of financial legislation to Agency A business activities. • SES Band 1 (Corporate Procurement)The SES Band 1 (Corporate Procurement) is also Agency A’s Head of Procurement and is responsible for formulating directions and policies, and providing probity advice regarding procurement. Corporate Procurement supports the SES Band 1 and is staffed by personnel required to meet formal procurement competency standards. • Consultancy gatekeeperAssesses proposals for consultancy services against the Department of Finance and Deregulation guidelines. • Business line clientUndertakes the client role in the procurement process. • ApproverDelegated power to approve procurements.FMA Regulation 3 defines an Approver as a person (including a Minister or the Commissioner of Taxation) who is authorised to exercise the function of approving proposals to spend public money. The power to approve proposals to spend public money comes from various legislative sources. Approvers are therefore required to identify and record the particular legislative source of their delegation at all times when exercising their spending power. • Corporate Procurement Corporate Procurement within Agency A Finance area is responsible for procurement activity and Agency A procurement policies and procedures. Simple procurement functions are devolved to the business lines. Corporate Procurement manages complex procurement (over $30,000 in value) in addition to any Information and Communications Technology (ICT) goods and services and consultancy services including individual contractors. • Procurement officerProvides advice or direction on all aspects of the procurement cycle and the interaction of the procurement function with Agency A project management life cycle. • RULES FOR APPROVERS • A spending approver must not approve a proposal to spend Agency A money unless they are satisfied that the proposal: • will make efficient and effective use of Agency A’s money • is in accordance with the policies of the Commonwealth • is within their delegation limits and within their own line unless they have a special delegation for the whole Agency A, and • will not have the effect of exceeding Agency A’s approved budget. • The approver must make their decision free of coercion and accept full responsibility for the decision they make. • Agency A’s Procurement policy and practice requires spending approvers to follow all procurement policies, and, if an item is on a Agency A contract, to use Agency A’s contracted supplier. • Approvers need to ensure funds are available before giving their approval to any spending proposal. This means that: • for departmental items, the approver must ensure departmental funds are available from an internal budget allocation • for administered items, the approver must ensure funds are available from a special appropriation for that purpose • if the proposal is one to spend special public money, the approver must ensure it is consistent with the terms under which the money is held by the Commonwealth, and • Approvers must not approve spending from a special account unless it is for a purpose permitted by the determination of that special account. • Approvers are not to exceed the limitations put on their spending power in the delegation schedules, and must follow any directions to delegates included in those schedules. • If approval of a proposal to spend public money is not given in writing, the approver needs to record the terms of the approval in a document, or in a suitable electronic record, as soon as practical after giving the approval. • Approvers need to also ensure that sufficient records, including complying tax invoices, are kept to allow Agency A to meet its obligations as a model taxpayer. Direct sourcing is only permitted under the Conditions of Direct Sourcing listed in Division 2 "Mandatory Procurement Procedures" of the Commonwealth Procurement Guidelines. Direct sourcing requires approval by either the Chief Finance Officer, the SES Band 1 Corporate Procurement or an authorised officer. The authorising officer must have written authorisation from the Chief Financial Officer or the SES Band 1 of Corporate Procurement.

6. Agency A Proposed Procurement Process Agency A snapshot – current state cont… • CONDITIONS • Agency A employees must not approve expenditure of public money or engage in procurement activities unless they have the appropriate delegations or authority. • Delegates must comply with the terms of their financial delegation and not exceed the limitations put on their spending power in the delegations schedules. • All complex procurements (those over $30,000, all consultancies, all ICT and any engagement of an individual contractor) must be arranged through Corporate Procurement • Consultancy services require Gatekeeper approval in writing before an arrangement to engage a consultant is agreed. Corporate Procurement must be contacted to gain this approval. • Confirmation of available funds and budget holder approval must be sought prior to placing an order or entering into any contract, agreement or arrangement. It is possible for the budget holder to also be the spending approver for a particular transaction. • When the goods or services are received, or other conditions are met, which require the payment to be made, Agency A must account for that liability in Agency A’s corporate accounting system. • A Commonwealth credit cardholder who is a delegated spending approver may use the credit card to purchase goods and services for business use only. • Adequate documentation providing a record of procurement action and contract management activities must be maintained. There must be sufficient documentation to provide reasons for the procurement, a record of the approval process and justification of decisions taken • Payment is made on satisfactory delivery and in accordance with the contracted terms of trade. It is Commonwealth policy that agencies use payment terms ‘not exceeding 30 days from the date of receipt of the specified property and services and a correctly rendered invoice’. Shorter terms can be negotiated, but should be in the interests of the Commonwealth. • The estimated value of procurements should include GST and any extensions, options or other fees or expenses. • PROCESS RULES – workflow • Regulation 9 states that an approver must not approve a spending proposal without being satisfied that the expenditure accords with Commonwealth policies and is efficient and effective. • The procurement process includes but is not limited to: • the identification of need • committing funds for the requirement • choosing and planning the appropriate method of procurement • using the correct request and contractual documentation • the selection of suppliers • entering into contracts and placing purchase orders • ensuring delivery of property1 and services, and • making payments and managing contractual aspects for the term of the arrangement • All spending proposals must be approved by the Delegate under section 44 of the FMA Act before a contract is entered into. • Approval by the Delegate of the proposal must be in writing, or details must be recorded as soon as possible after giving the approval. • Commitments are captured in SAP when recorded against a Purchase Order. • Commitments via Credit Card are to be captured using iCMS (integrated creditor management system) where ever possible. • Other small value ad hoc purchases are, for practical purposes, captured at the payment processing stage. • TOOLS • Corporate Accounting System (SAP) • Integrated Creditor Management System • Spending Delegations Database • Procedural instructions support Approvers • Purchase Orders • delegation schedules • Spending record • Agency A procurement database (TOPR) • AusTender • COMPLEX PROCUREMENT • All complex procurements must be undertaken through Corporate Procurement. Corporate Procurement will assist staff to develop business cases, undertake market research, prepare documents, perform evaluation and contract negotiation, and process purchase orders. • Business Lines will be required to participate in the procurement process and are responsible for a number of elements within it. • It is essential that Corporate Procurement be consulted as early in the process as possible. Time must be factored in for document preparation, evaluation and negotiation since mandatory time limits apply, as described in the CPGs. • SIMPLE PROCUREMENT • A large number of commonly used goods and services can be ordered through existing arrangements without the need to conduct a procurement process as outlined above. • In conducting simple procurement, lines should: • clearly identify the need • seek approval from the Delegate for the proposed expenditure • ensure that funds are available • seek offers - the number of quotations to obtain will depend on risks, type of goods or services and the nature of the market (at least two should be recorded for requirements of $5,000 or more) • select the offer that represents the best value for money • place the order and record the details on SAP • ensure that a goods receipt is done on SAP when goods are received, and • ensure that invoices are processed correctly within the agreed terms of trade. • The Simple Procurement Cell can assist with the procurement process, including assisting with raising purchase orders.

7. Agency A Proposed Procurement ProcessSummary of proposed changes to process

8. Agency A Proposed Procurement ProcessProposed Process Improvements • What are the pain points that have been fixed by moving to this process – and how have we fixed them? • Agency A thresholds did not previously match CPG thresholds. This has been fixed by changing our thresholds for simple and complex (i.e. Simple moved from < $30,000 to < $80,000 and complex moved from > $30,000 to > $80,000) • Corporate Procurement staff have been freed up to focus on complex procurements (i.e. > $80,000) • Eliminated the need for endorsement from Corporate Procurement – This responsibility has been devolved to the Business Line, and providing additional supporting tools and documentation on the intranet to help Business Lines undertake procurement • Duplication in regards to reporting (e.g. AusTender) has been streamlined. This has been achieved by moving to the SAP system which captures information once • The process has been simplified and aligned with the requirements of the FMA Act, Regs and CPGs • Process is documented and available on the intranet along with tools and templates to aid Business Lines when undertaking procurement activities, ensuring a consistent and complete process • What pain points are yet to be fixed? What suggestions would fix these issues? • Work registers (spreadsheets that record the work of procurement officers) are disparate • Amalgamate work registers • Record in SAP (being looked at as part of Agency A’s Better Practices program) • Implement a better practice program • Requirement of Finance contracts for contractors to indemnify the Commonwealth – This almost always results in negotiations • The new Finance < $80K contract could be made more efficient be removing the indemnity clause and relying on common • Finance documentation focusses on dollars and not risk. A focus on managing risk will help us to simplify the process • Short form contract (that addresses the issues of unlimited liability, indemnities etc.) • Interaction and compliance with other policies • Multiple and frequent policy updates (e.g. open source software, fair work principles) • Client training is required with Line Finance Team engagement • Delegation thresholds and different appetites for risk will always mean people will do things differently • We need to clarify when a purchase order will suffice • CPGs contain mandatory requirements and are not just guidelines • Finance is working to simplify guidance • Three quotes are still required • The number of quotes can vary from procurement subject to risk, value and/ or market availability • Should it be quote/s instead? • Need complete, simple and easy support documentation to help clients through the process • Templates need to be suited to the level of complexity • Finance templates may still be too complex for the ‘simple’ process • We need to engage and consult during the development of the Finance templates • We need to develop guidance material and templates to support Business Lines in undertaking their procurements • At this stage we have not made a decision as to whether the requirement for ICT, consultancies and individual contractors procurement will have to come through Corporate Procurement. We will also need to consider other factors such as liabilities and indemnities and process for procurements which have these elements.

9. Business process maps

10. Agency A Proposed Procurement ProcessRole statements

11. Agency A Proposed Procurement ProcessRole statements

12. Level 0 – Process phases This map provides an overview of the entire process end to end, including the process triggers, process phases, and main workflows. Level 1 – Process activities These maps drills down into each of the Level 0 process phases, detailing the activities that occur. Level 2 – Procedural tasks, support products and systems Level 2 is not generally documented as a map, but rather references guidelines, operational instructions, instruments and / or business systems such as databases. These things underpin the delivery of a process. Symbols Agency A Proposed Procurement ProcessMap Levelling Level 0 Level 1 Level 2 Decision Trigger End Activity Ongoing Activity Workflow Document Database/ Storage Off page connector

13. Agency A Proposed Procurement ProcessLevel 0 – Process Phases  Identify need    Plan procurement Undertake approach Evaluate responses Develop and finalise arrangement Provide advice regarding budget Provide in-principle approval Provide approval Provide advice (as req’d) Provide advice and support (as req’d) Provide advice and support (as req’d) Respond to RFQ Negotiate arrangement Enter into and fulfil arrangement

14. Agency A Proposed Procurement ProcessLevel 1 – Identify need Determine if budget is available Identify procurement need ❷ Considerations Procurement has been identified as the method to obtain the good(s)/ service(s) Confirm that budget is available

15. Agency A Proposed Procurement ProcessLevel 1 – Plan procurement Refer to relevant business process Credit Card Process  Note: RFQ contains Statement of Requirement. Guidance material available on intranet < $10,000 Create appropriate procurement file Develop procurement plan Seek in principle approval Seek advice and support (as req’d) Prepare RFQ / RFO ❶ ❸ > $10,000; < $80,000 No Procurement Plan Draft RFQ/ RFO >$80,000 Yes Provide advice regarding budget Electronic File TRIM File Complex Procurement Process Use existing arrangement CPG 7.10 Approve (in-principle) ? Value of procurement? Is there an existing arrangement ?  Refer to relevant business process Yes • Procurement plan contains: • Market research • Business Case • Identified procurement method • Conflict of interest • Risk assessment • Evaluation methodology (criteria/ process) • Draft statement of requirement No Provide advice regarding current arrangements Provide advice and support (as req’d) Note This includes providing information on roles and responsibilities and also tools and templates CPG 6.12

16. Agency A Proposed Procurement ProcessLevel 1 – Undertake approach Seek quotes Provide clarification (as req’d) Receive quotes ❷ ❹ RFQ/ RFO AusTender (as req’d) Provide clarification (as req’d) AusTender (as req’d) Response to RFQ/ RFO Become aware of RFQ/ RFO Seek clarification (as req’d) Provide quote

17. Agency A Proposed Procurement ProcessLevel 1 – Evaluate responses No Evaluate responses and develop evaluation report Recommend supplier Undertake negotiations Seek delegate approval Receive approval ❸ ❺ Yes Reg 9, 10 Evaluation report Note Theses documents form part of the evaluation report Negotiation strategy Negotiation report Approve procurement? Are negotiations req’d? Yes Electronic File TRIM File Reg 9, 10 No Provide advice to Business Line (as req’d) End • Advice regarding: • Indemnity • Capped liabilities • Company structure • Comcover • Intellectual property Provide advice to Business Line (as req’d) Undertake negotiations

18. Agency A Proposed Procurement ProcessLevel 1 – Develop and finalise arrangement Electronic File TRIM File SAP will be used to raise purchase orders and automatically generate reports for AusTender The Purchase Order on SAP is used as the means to record the arrangement and facilitate the recording of the goods receipt and payment of invoice. SAP Yes Notify suppliers of decision Draft contract Send contract to successful supplier Sign contract Gazette outcome of procurement Raise purchase order Receive good(s) / service(s) Receive invoice Confirm accuracy of good(s) / service(s) and invoice Pay invoice & record ❹ CPG 7.22, 7.23 CPG 7.17 CPG 7.10 SAP Short form contract No Is gazettal req’d? Template Unsuccessful tenderer Template: Successful tenderer Receive notification of decision Read contract Sign contract Supply good(s)/ service(s) Send invoice Receive payment

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