LGAP’s Initiatives to Support Procurementin Local Government

Mary-Alice Paton

LGA Procurement

Procurement is a Strategic Activity

•Section 8(h) Local Government Act, 1999

• ‘fairly, efficiently, effectively’

Procurement in Local Government – the Current Landscape

• PMMS Report

• Section 49 has been beefed up, but essentially the same

• Introduction of the ICAC

• Procurement landscape still about fair, efficient and effective use of resources

• Well recognized that procurement is a vital strategic tool to reduce costs and

increase performance outcomes

Procurement in Local Government – the Commercial Environment and Community Expectations

• Sustainability issues

• Limited resources and increasing community expectations for service delivery

• Councils have huge infrastructure and asset management challenges

• Total rates growth has lagged behind CPI and revenue growth of other spheres

of government

Procurement in Local Government – the Commercial Environment and Community Expectations• Australian economy faces challenges, South Australian economy struggling

• Greater prescription and oversight of procurement activities likely –

amendments to section 49, introduction of the ICAC

• Plenty of scope within the current market and regulatory environment to achieve

more with less

• Remember that uncertainty drives cost, but certainty always drives competition

When We Distil the Objective…

What we are talking about is ensuring that the required deliverables are provided at the agreed time, for the agreed price at the agreed standard, while achieving identified outcomes and value, while all the time adhering to standards of good governance and appropriate standards of probity

PMMS Report• PMMS Report has validated what all of you will already know to be the case:

• Procurement is a critical strategic tool for Local Government

• Improvements in procurement practice will directly correlate to better

community outcomes

• Councils understand the importance of improving their procurement

function, are interested in doing so and have positive drive to do so

• Some Councils need leadership in this regard

• There is benefit in sector wide approaches to improvements in procurement

practice

• There are things we can do which naturally drive benefits

The Good News…..

• The LGA is committed to assisting Councils to achieve best

procurement practice

• What does this mean?

• That the LGA has made a significant investment in this key area of

Councils’ operations

• The sector now has best practice tools to support its procurement

function

LGA’s Objectives for 2012 The Year of Procurement• Providing the sector with appropriate tools to ensure that their procurement

processes:

• Achieve value for money, while delivering the desired outcome within

acceptable risk parameters

• Are accountable, transparent and robust

• Instil supplier confidence in Councils’ procurement operations

Observations From the PMMS Report• Councils need to understand their spend (ie do a spend analysis and act on it)

• Opportunities to achieve sustained improvements will come from a sector wide

approach

• Procurement practitioners need industry standard tools

• Targeted training program required

• Thorough planning and preparation of the procurement process and

documentation a critical success factor

• Contract management essential

• Supplier relationship issues

Strategies for Excellence

• Spend analysis and market understanding

• Analyse spend and regularly review

• Analyse market and regularly review

• Consolidate spend to get best value

• Drive efficiencies in procurement through a targeted and strategic approach

to the market

Strategies for Excellence (cont)

• Set the right framework – act on the spend analysis

• Review procurement policy, procedures and systems

• Refine as necessary to suit your needs within appropriate governance

regime

• Include flexibility with checks and balances

• Ensure that officers are using and following the policy – documenting and

auditing at key decision points

• Lead by example – culture of excellence

Strategies for Excellence (cont)

• Value for money achieved by flexibility with rigour

• Be flexible as appropriate to respond to the commercial environment and drive

value for money

• Seek a commercial outcome

• Follow policy, procedures and systems but exercise permitted flexibility as

appropriate

• Be accountable and transparent: document decisions and provide reasons

for them throughout the procurement cycle

Strategies for Excellence (cont)

• Negotiation

• Appropriately skilled staff

• Have a structure for negotiations

• Establish Council’s baseline position prior to commencing

• Must be conducted ethically and so that all participants are treated equally

• During negotiations avoid any suggestions that the preferred tenderer will

absolutely be selected as the contractor

Strategies for Excellence (cont)

• Maximise the value achieved through every dollar spent

• Planning

• Understand contribution procurement needs to make the relevant outcome

• Documentation of outcomes and reasons for relevant decisions

• Equality of opportunity for all participants

• Compare ‘apples with apples’

Strategies for Excellence (cont)

• Robust contract management• Identify and manage risks

• Identify and assign roles and responsibilities

• Identify and access the skills required

• Stakeholders

• Relationship issues

• Contract start up

• Administration

• Monitor and manage performance

• Variations

• Records

Access the LGAP Tools and Procurement Support

• Baseline procurement policies and documents to cover common

procurement scenarios

• Handbook

• Comprehensive training program

• Advisory service

• Invest in adapting these tools to suit your organisation

Access the LGAP Tools and Procurement Support (cont)• Use of these tools drives better confidence and understanding in the

commercial sector

• Drive industry access to templates to help minimise costs

• Suppliers will do better when they understand the context and ‘rules’

subject to which they are bidding

• Uncertainty drives cost, certainty drives competition

Impact of the ICAC• Critical questions are what does it mean and what does it mean for me?

•Appointment of Independent Commissioner Against Corruption

•Office of Public Integrity

•OPI to receive complaints, ICAC to investigate complaints

•‘Serious or systemic corruption’

Probity, Accountability and Transparency• The sector must ensure that its procurement processes are transparent

•Adherence to Codes of Conduct

• Generally speaking, a well planned, conducted and documented procurement is more likely to withstand external scrutiny or criticism and provide substantiation of a particular decision

•Adherence to highest standards of probity essential

Accountability and Transparency are Related Concepts• Accountability means being responsible for decisions and actions and for

resulting outcomes

• Transparency means being able to give reasons for the decisions they make

• Documentation is critical to accountability and transparency

•Identification of and acting on conflicts of interest

Managing Corruption Risks• Policies and procedures to regulate commercial activities

•Sanctions for breach

•Regular review of policy

•Reference to commercial activities in Code of Conduct

•Staff awareness through training

• Including commercial activities in the LGA’s internal audit process and corruption risk management process

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