Contact Us  |  Search 

Goods and Services Procurement - Process Map

1 Service demand identification

"Communities expect that government at its various levels will provide for their security, for education of their children and the workforce, for transport of people and goods and for community health and so on. In addition, section interests within the community harbour hopes that their particular concerns, whether social or economic will be catered for. These needs, expectations, hopes and aspirations are the driving force behind the supply of government services.” Page 2, Demand Management guideline, Total Asset Management Manual.

Demand for a service can arise for example from an increase in the size of a community, driving greater need for education, transport and health services. Alternatively a service need may arise from current solutions not meeting demand (eg old equipment).

When it arises the need for service must be clearly defined, with the outcomes required established. In doing this, agencies need to be mindful that they are defining an actual need, rather than expressing it in the form of a solution, as this may limit innovation in determining a delivery option. (For example the need for education services is often identified as the need for a new school. It may be possible however to meet this need in other ways.)

Demand should also be quantified, using tools such as demographic studies, surveys etc. As well as confirming the projects objectives, it may assist the agency to prioritise any procurement requirement.

The Demand Management Guideline of the Total Asset Management Manual provides a structured process that can assist agencies in identifying genuine “needs” and in ensuring the public sector’s limited resources are applied to services that will be delivered with the best value for money.

top

2 Service delivery options

This Stage involves exploring options to meet the defined need. Often a number of broad options exist to meet a service demand. These may include an agency:

  • Providing new or additional services within its current structure and resources.
  • Managing the demand for a service through education, pricing or process reengineering .[Further information: Demand Management guideline, TAM]
  • Purchasing a good and/or service to support service delivery.

Collaborating with other agencies to deliver a service may also be an option for consideration. [Further information: Guidelines for Collaboration and Integrated Services Premiers Circular 99–31]

In developing options to meet the service demand identified, agencies may wish to consider undertaking preliminary stakeholder consultation and risk identification [Further information: Risk Management guideline]. Stakeholder consultation will assist with fleshing out the needs and expectations of the community in developing a solution. It may also highlight outcomes that may be seen as unacceptable. Tools such as Value Management may be useful in obtaining high level input and buy-in at this early stage. [Further information: Value Management guidelines] Similarly, Treasury's Guidelines for Economic Appraisal provides guidance in identifying options.

Service Competition Policy, Premier's Memorandum 97–24 should be referred to regarding the contracting out of services.

top

3 Justification of proposed options

The service delivery options will need to be evaluated and a preferred option determined to meet the identified need.

Government guidelines available to assist in evaluating options and selecting a preferred option are:

The deliverables from this stage of the procurement process will be major inputs to the development of a business case under the next stage.
Agencies should ensure the preferred option is linked to their Asset Strategy and Annual Procurement Plan.
Under the Gateway Review Process a Strategic Review can be undertaken at the completion of this stage to test whether the procurement solution is the optimum means for providing the service outcomes sought. Strategic Gateway Reviews are required for ICT projects over $1m and other projects over $10m proposed for inclusion in the State Infrastructure Strategy.

4 Project Definition

By this stage, a decision has been made to use procurement to meet some or all of the identified service need. The project is now to be defined sufficiently for funding approval to be obtained.

Specific guides exist for particular types of goods and services procurement. These are:

  • Simple Procurement Guidelines – information on how to conduct the procurement process for low risk/value goods and services;
  • Disposal Guidelines – information on how to conduct the disposal process for surplus or unserviceable goods;
  • Motor Vehicle Policy – outlines requirements that must be addressed in the management of motor vehicles;
  • Guidelines for the Engagement and Use of Consultants – information about the Government’s expectations about the use of consultants;
  • Guidelines for Government Advertising – outlines requirements for advertising activities including approval requirements

    4.1Appoint the project officer or team
    The skills and experience of the person or team needs to reflect the importance of what you are buying. If necessary, draw upon other specialist expertise from within your agency or from outside. When establishing the project, your project team needs to have appropriate authority and approval to act and make decisions.

    4.2 Engage stakeholders
    At each stage during the process, identify stakeholders, including appropriate approval authorities. This will assist you to recognise and take action on any obstacles at an early stage and to maintain stakeholder support. Managing stakeholder demands, including unrealistic expectations, from the beginning of a project will help to keep it on time and budget.

    4.3 Consider the potential environmental, economic development and social benefits and impacts
    Procurement should not occur in isolation of the Government’s broader environmental, social and economic development goals. The potential for benefits or adverse impacts needs to be identified at an early stage and managed throughout the procurement process. [Further information: Economic Development Guidelines, Occupational Health Safety and Rehabilitation Guidelines, Environmental Management Guidelines] Note that price preference schemes no longer apply to large enterprises, see Treasury Circular 07-18

    4.4 Establish potential service providers
    Research of the marketplace needs to be done. This should include potential suppliers, relevant industry standards, an industry association that could provide useful information, existing SCCB/agency arrangements you could tap into and the experience of other agencies buying similar goods and services.

    4.5 Undertake a risk assessment
    Before deciding to proceed with the project, a risk assessment needs to be done. This should include the consequences of the project failing on service delivery, stakeholder considerations, financial implications, and the wider business and government context. Plans to monitor and manage the risks identified should be developed and updated during the project. [Further information: Risk Management guideline].

    4.6 Submission for Funding Approval
    The Government’s Strategic Management Framework provides a guide to the budgetary process.
    If project-specific funding is required through the State Budget, a detailed business case will be required. A business case typically includes the context for action, preferred and alternative options, a cost benefit analysis, funding, project resources and timeframe, stakeholder and change management plans, and how the success of the project will be judged and how this will be measured. [Further information: Business Case Guidelines, (Premier's Circular 00-79).
    For purchases over $5 million agencies are required to prepare an Industry Impact Statement. [Further Information Economic Development Guidelines]
    If the estimated cost of the project is in excess of $10 million or the project is assessed as high risk using the Gateway Project Profile Risk Assessment Tool, a Gateway Business Case Review will need to be completed.

top

Further references
The Independent Commission Against Corruption has published guides to assist NSW Government agencies in understanding and managing probity issues. Particular references are:

top

5 Procurement strategy

5.1 Public Service Procurement
The procurement of goods and services by public service agencies (as defined in Schedule 1 of the Public Sector Employment and Management Act 2002) must be through the State Contracts Control Board (SCCB).
Where the SCCB has arranged a period contract, a Schedule 1 agency must use the contract for that good or service.
Where there is no SCCB period contract, Schedule 1 agencies can undertake their own purchasing within the delegations established by the SCCB. For purchases in excess of the delegations, agencies are required to submit the details of the requirement to State Procurement, for the invitation of tenders.
Non Schedule 1 agencies may access the facilities and services of the SCCB.
Refer to the Goods and Services Procurement Flowchart for a diagrammatic of the inter-relationship of SCCB contracts, SCCB delegations and procurement by Government agencies.

5.2 Selecting the procurement strategy
It is important, when choosing the procurement method, that the way you choose to buy is fair, encourages competition and satisfies government procurement requirements and your agency's procedures and delegations. Depending on the nature of the project, you may wish to have a single or multi-staged process.
Tender methods may include:

Open tenders Request for tenders (RFT) and anyone may submit a tender.
Selective tenders A limited number of pre-qualified suppliers are invited to submit a tender.
Pre-registered tenders After an earlier expression of interest (EOI) or request for proposal (RFP), a limited number of suppliers are invited to submit a tender.
Invited tenders Generally used in emergency situations or for specialist goods and services where there are a limited number of suppliers known to exist.
Direct negotiations No tender is issued and a supplier is approached directly.

When deciding which method consider the value, complexity and timing of the project and the extent to which an innovative approach is required. You should also take into consideration the impact the method will have on both you and potential suppliers in issuing, responding to and evaluating the process.

The most common method used for goods and services contracts is an open tender process. If you are uncertain about what your agency needs or what is available, an EOI or RFP might be a good option. As a rule, try to avoid direct negotiation, as it removes competition and makes value for money more difficult to demonstrate. [Refer to ICAC’s publication Direct Negotiations in Procurement and Disposals]
Whichever method you choose document the reasons why.

5.3 Prepare a procurement plan and determine the evaluation criteria
A procurement plan is a comprehensive document that outlines the stages of the project and how it will be managed. This should build upon any business case that has already been developed.

When preparing their tenders, service providers will need to address the evaluation criteria, which is the basis for evaluating tenders. The evaluation criteria, and possibly their key weightings, are to be finalised before tenders are called, and described in the tender documents. Collectively, evaluation criteria represent how value for money will be assessed and are likely to include technical merit, whole-of-life costs, foreseeable variations such as exchange rates/price increases, the tenderer’s experience, capacity, past performance and skill, and mandatory requirements such as licences, and compliance with Government and/or agency policy. Refer to NSW Government Code of Practice for Procurement.

5.4 Obtain the Approval for the Procurement Plan
Approval should be sought for the Procurement Plan prior to proceeding. This will include confirming the availability of resources for managing the procurement process and the sufficiency of funding to complete the project.

Further consideration
Under the Gateway Review Process a Procurement Strategy Review can be undertaken at the completion of this stage to confirm that the optimum procurement strategy is selected to deliver the project within its budget and time constraints. The review can also assess whether the project is ready to proceed to the tender stage.

top

6 Specification

6.1 Request For Tender (RFT) documents
The RFT outlines the tender and contract objectives and requirements, with details of the roles and responsibilities of all parties. It needs to be a logical, clear and precise document and include all necessary information for the tenderer to understand the proposed tender process and contract and how the evaluation panel will select the tenderer offering best value for money.

The standard key elements of an RFT are:

6.2 Preparing the specifications of the requirements
There are three main types of specifications: function, performance and technical. Whichever you choose there should be a clear description of the nature of the asset sought, and the outcomes expected by you (as the client). When preparing specifications, include enough information to allow tenderers to assess whether they have the capability and capacity to satisfy the requirement. Specifications need to be prepared in such a way as to encourage and promote competition, and not be limited to commercial or brand-specific attributes.

In addition, when preparing specifications:

  • make the distinction between specified requirements that are mandatory and those that are desirable;
  • be cautious when seeking advice from the private sector in the framing of specification requirements. Avoid bias by making sure private sector consultation and input is balanced against later interests of a potential tenderer; and
  • include other requirements such as warranty, maintenance,delivery or packaging, performance standards and performance measures.

6.3 Prepare a tender evaluation plan
The evaluation plan sets the rules on how tenders will be evaluated, the role, composition and functions of the evaluation team, and the governance of the evaluation process. While the level of detail will reflect the nature of the project, the plan should include information such as the evaluation objective, process timeframes, the evaluation criteria with weightings, information to be used to evaluate tenders, any procedures for clarifying or checking information with tenderers, the process for decision making, an outline of the evaluation report and recommendation to be written, and information about awarding the contract and notifying tenderers.
Refer in this regard to the NSW Government Code of Practice for Procurement and Premier’s Memorandum PM98-12 regarding the use of probity auditors.

The evaluation plan should be prepared as early as possible, but at the latest before tenders close.

Appropriate approval should be obtained for the evaluation plan

6.4 Review of the RFT
Seeking unnecessary information can add to the cost to service providers preparing and submitting tenders. Prior to the release of the RFT, it should be independently reviewed to:

  • check for content, clarity and consistency; and
  • confirm it only requests the information necessary to evaluate the tenders against the evaluation criteria.
    Once the RFT has been reviewed and settled, confirm the availability of funds to proceed with procurement action and obtain formal agency approval to release the RFT.

top

7 Service provider selection

The invitation and receipt of tenders should be conducted using ethical behaviour and with probity. The process is to be transparent, with fair competition that achieves and identifies the best value for money for Government and clients. The NSW Government Code of Practice for Procurement encourages the highest ethical standard in tendering practice by all participants. The Tendering Guidelines outline the procedures to be followed through the tender process. Refer also to publications of the Independent Commission Against Corruption for further information on probity in Government procurement.

7.1 e-Tendering
The NSW Government Electronic Procurement Implementation Strategy (Premier's Memo 2001-16) has established goals and targets for moving government procurement online, and is encouraging industry to adopt corresponding electronic procurement practices.

Key features of the strategy include:

  • an electronic tendering system and single NSW Government entry point which enables tenderers to electronically access tender documents and information and lodge tenders (see tenders.nsw.gov.au);
  • technology for the sharing and management of project information online (see asset.gov.com.au);
  • agencies reviewing and re-engineering their procurement processes and instruments; and
  • performance monitoring and reporting.


7.2 Tender Invitation
Refer to Guidelines for Government Advertising for requirements when advertising for tenders.
The tender period needs to be sufficient to encourage service providers to submit a tender and for the tender to be a competitive response. When setting the timeframe consider the value, complexity or strategic nature of the tender. As a guide, a common period is four weeks, with two weeks considered the minimum.


7.3 Tender briefings and clarification
A briefing for potential tenderers can be held to provide them with an overview of the tender documents and what is being sought. The briefing also provides an opportunity for tenderers to clarify issues before the tender closes. If it is compulsory for tenderers to attend a briefing session, this should be clearly referred to in the invitation to tender and stated as a condition of tender.
Where tenderers seek clarification of the tender specifications, requirements or other matters, this process should be managed in such a way as to not give one tenderer an unfair advantage over others. This can be achieved by providing any clarifying information to all tenderers.

top

7.4 Evaluating the tenders
The procedures for the receipt, opening and registration of tenders must safeguard the security and confidentiality of the tenders. Be mindful of probity issues associated with late tenders and the subsequent risk to the integrity of the evaluation process. Late tenders should not be considered, except where the client is satisfied that the integrity and competitiveness of the tendering process has not been compromised. Tests of integrity and competitiveness might include:

  • Was the late tender received prior to the completion of the tender opening and recording process?
  • Was it clear that the cause of the lateness was beyond the tenderers’ control?
  • Is the late tender significantly different so that no information from other tenderers could have assisted in framing the late tender?
  • Is the late tender the only conforming tender received?


7.5 Evaluating the tenders
As noted in Stage 6, clear tender evaluation procedures must be established prior to the close of tenders. Tender evaluation criteria are used to help identify the best value for money tender and are linked to the information required from the tenderers in the tender documents.

The evaluation is to involve a fair comparison of tenders, using the same evaluation method and criteria for each tender. The process is to be conducted by personnel with sufficient skills and knowledge in matters appropriate to the nature, value and importance of the procurement. Any conflict of interest with evaluators must be declared and resolved.

For complex procurement with a high value, or high risk, an evaluation team should be established. Team members will contribute a mix of skills to the evaluation process, appropriate to the various aspects of the tender being evaluated.

Refer to Premiers Memorandum 98-12 concerning the use of probity auditors by Government agencies.
When evaluating tenders from other Government agencies, evaluating officers should refer to Treasury’s Policy Statement on the Application of Competitive Neutrality (Treasury Circular TC 02-01 refers).
Any tender that does not comply with the tender requirements may be passed over. When a tender is passed over or rejected, or a non-conforming tender is recommended, the reasons must be clearly documented by the evaluators.

Agencies must ensure the confidentiality of tenders is maintained.
If it is necessary to enter negotiations to achieve sufficient value for money, these negotiations should commence with the tenderer that submitted the most acceptable tender. Tender negotiations must not involve trading-off one tenderer’s price against other tenderers’ prices. This practice, referred to as ‘bid-shopping’, is prohibited under the NSW Government Code of Practice for Procurement.


7.6 The Evaluation and Recommendation Report
Following completion of the tender evaluation process and selection of a preferred tenderer, prepare an evaluation and recommendation report recording the reasons for the evaluation team’s recommendation and submit it to the agency’s delegated authority for approval to accept the recommended tender. Reasons for the recommendation, and for the passing over of any lower priced tenders, must be clearly documented and supported. The report should be a complete account of the evaluation and must be able to stand up to independent scrutiny.


7.7 Awarding the contract
Under the Gateway Review Process a Tender Evaluation Review can be undertaken before the contract is entered into to confirm that the recommended decision appears appropriate. The review also aims to provide agency decision makers with confidence that the process used to select the proposed service provider is robust.
The officer or committee with the appropriate delegation approves the evaluation and recommendation report to accept the successful tender(s). Approving officers must be satisfied that the best offer, as measured against the evaluation criteria, is being accepted.

When the selection is completed agencies advise the successful tenderer with formal notification of acceptance of its tender or award of contract.
Unsuccessful tenderers are to be advised as soon as possible after contract award of the decision. Upon request, a debriefing should be given to unsuccessful tenderers. The unsuccessful tender would be discussed in terms of how well it met the tender requirements and evaluation criteria. Direct comparisons should not be made with the successful tender response.

The NSW Government has introduced requirements for Disclosure of Information on Government Contracts with the Private Sector (Premier's Memorandum 2000-11). Unless otherwise authorised by the tenderer or required by legislation, information included in unsuccessful tenders is to be treated as commercial-in-confidence.

top

8 Implementation

8.1 Contract Management
The client’s contract manager should be appropriately experienced and skilled, and should understand the overall scope and nature of the contract, its primary objectives, and the risks involved. Appropriate contract management systems and procedures should be established commensurate with the size, risk and complexity of the contract.
The contract manager must have the necessary authority to administer contractual matters. Effective contract management will ensure the parties meet their contractual obligations and the contract provides value for money.

As soon as possible after the award of a contract, the contract manager should convene a contract review meeting with the successful tenderer (now called the supplier), agency representatives and other stakeholders as appropriate. At this meeting, discuss all aspects relating to the performance of the contract to ensure all parties have a common and clear understanding of their responsibilities and obligations. This meeting is important to establish a good working relationship with the supplier, particularly if the contract is to last a few years and to identify any misunderstandings early. Hold contract review meetings during the contract at intervals appropriate to the nature of the contract, and the contracting parties.

Contract payments should be made strictly in accordance with the terms of the contract. Be aware of the client’s obligations under Treasury Circular TC06-26: Annual Reports Legislation - Reporting on Payment of Accounts.
Under the Gateway Review Process a Pre-commissioning Review can held after a deliverable has been produced but prior to its use by the agency. It would take place after all testing has been completed but prior to rollout of the solution, with the purpose of assessing the state of readiness to commission the project and to implement the change management required.


8.2 Keeping records
Actions and decisions need to be accounted for and, in particular, good record keeping of decisions is imperative for auditing and accountability purposes. Records are to be kept in accordance with Government or agency requirements. Refer to Premier’s Memorandum PM98-16: Records Management Standards and Practices.


8.3 Resolving issues
Any misunderstandings or disagreements should be resolved as quickly as possible. Good contract management and regular clear communication between the parties should solve problems as they arise throughout the term of the contract and minimise the prospect of disputes. For less routine and potentially serious problems the contract should specify a mechanism for resolving issues. It is government policy that, wherever appropriate, alternative dispute resolution techniques are used rather than litigation (see Premier's Memorandum 94-25).


8.4 Service Provider Performance
The performance of the service provider should be monitored, evaluated and measured against the contract requirements. To help manage the performance of service providers Government agencies should acquire, maintain and exchange appropriate information about the performance of service providers on contract. The Service Provider Performance Management Guideline details the objectives, application and benefits of supplier performance management and exchanging information with other agencies.

The benefits of effective performance management for service providers and agencies are significant in terms of obtaining better outcomes, rewarding superior performance, encouraging continuous improvement, assisting in the future design of contracts, and ensuring the terms and spirit of the contract are adhered to, including the commitment to better service delivery.

top

9 Operation

The operation phase covers the use and in some cases maintenance of the good and or service procured. During this phase, monitoring commensurate with the value of the purchase, should be undertaken to ensure the outcomes required for the procurement are met.
In cases where service contracts are used, ongoing monitoring of the service provided will need to be undertaken. This should be undertaken in a manner consistent with the procedures outlined in Stage 8 of the procurement process (Implementation).

Operating costs must be controlled, risks managed and flexibility enhanced through maintenance planning. To do so successfully, an agency needs to pursue initiatives that:

  • Enhance the link between service outcomes delivered to the community and the maintenance of the assets involved in the delivery;
  • Establish clear links between maintenance objectives and asset performance;
  • Resolve uncertainty regarding the disposal of assets; and
  • Gain the commitment of operational maintenance managers and staff to Maintenance Planning.

    The Asset Information guideline and Asset Maintenance Strategic Plan included within the Total Asset Management Manual offer guidance in maintenance planning. The benefits to agencies and Government are:
  • Assets perform at optimum levels, reducing service disruptions and losses due to asset failure;
  • Risks to the agency can be identified and ameliorated;
  • The costs of asset maintenance can be quantified and budgeted with confidence;
  • The performance of the asset can be reviewed to suit service delivery needs;
  • The maintenance plan provides a foundation for continuous process improvement;
  • The plan provides a feedback to improve future application of the maintenance process; and
  • Reduced environmental impact by controlling resource usage.

An agency’s practices in operating its assets should also be consistent with:

top

10 Evaluation

Procurement evaluation involves collecting and using the knowledge gained throughout a project to ascertain whether customer needs and expectations have been fulfilled and to determine whether a value for money outcome has been achieved. The procurement evaluation stage should elicit ideas for improving and optimising user / stakeholder satisfaction in the delivery and outputs of projects in the future.
The Post Implementation Review guideline of the Total Asset Management Manual will assist agencies conducting a procurement evaluation.
The Gateway Review Process has provision for a Post Implementation Review that agencies may choose to undertake on their project.