The Australian National Audit Office (ANAO) has taken an in depth look at whether Federal procurement panels are delivering on their promise to deliver value for money and efficiency to Government.
Its findings have reaffirmed the double-edged nature of the procurement model, whose benefits do not come risk-free, especially when it comes to the expanding field of whole-of-government procurement and agency piggybacking.
At 31 December 2008, the ANAO identified 588 panel arrangements in place across the Federal Government, 21 per cent of which allowed multi‐agency access or piggybacking. In December 2011, this had increased to 602 panels with more than double the proportion, or 44 per cent, reported as allowing multi‐agency access.
The ANAO attributed this increase in cooperative procurement to a greater visibility of other agency panels via AusTender as well as active advocacy on the part of the Department of Finance and Deregulation.
It advised that an expansion of agency piggybacking and whole-of-government procurement was a logical next step in a market where a high level of duplication exists.
“As at 31 December 2011, there were 47 panels for management advisory services, 34 relating to education and training services, 26 for legal services, and 17 for human resource services,” said the Report. “Some suppliers consulted by ANAO also commented on the large number of similar panels they were on. This imposed an administrative burden and associated costs on the suppliers which ultimately affect prices offered to government.”
The ANAO’s comments could also be applied the Federal IT Services market, where between 120 and 150 panels are currently in operation. In December Special Minister for State, Gary Gray, launched the Portfolio Panels for IT Services policy, which aims to halve this figure by capping the number of panels per portfolio to three, and making piggybacking clauses mandatory as each new panel is established.
However the Audit Report also expressed some trepidation at the risks that consolidated panel arrangements carried, including narrowing the pool of suppliers to the Federal Government at the expense of SMEs. The Government has committed to sourcing 10 per cent of its $32.6 billion annual procurement from competitive SMEs, a target which, according to Finance, has been overwhelmingly achieved, with 33.5 per cent of all procurement channelled to smaller suppliers in 2010-11.
The Audit’s findings also suggested that panels may have facilitated sloppy procurement practices, especially when it came to the three agencies at the centre of the Audit, the Department of Foreign Affairs and Trade (DFAT); the Department of Broadband Communications and the Digital Economy (DBCDE); and the Australian Securities and Investments Commission (ASIC).
Whilst it was acknowledged that “the audited agencies generally established panels through sound open tender processes, providing for efficient procurement from the panels in order meet their business needs,” there were a number of shortcomings identified that are less likely to have been overlooked under a direct procurement model.
For example, the ANAO found that across the 139 procurements assessed, ASIC sought one or zero quotes from panellists in 74 per cent of cases, DBCDE in 71 per cent of cases and DFAT and 66 per cent of cases, despite Commonwealth Procurement Guidelines advice that at least three are to be collected.
It also found that the agencies could not provide sufficient value for money documentation for between 41 per cent and 71 per cent of the same procurements, and failed to re-evaluate multi-year panel arrangements along their lifetimes.
“None of the audited agencies evaluated the efficiency, effectiveness or value for money provided by their panel arrangements,” it said.
The Report said that the benefits raised by panel arrangements such as procurement efficiency, economies of scale, and relationship-building, needed to be balanced against the risks, including:
- A Inflexibility to respond to new value-for-money options on the market;
- Onerous initial tendering process;
- Management costs;
- Shutting some suppliers out of the market for several years; and
- The potential to mislead supplier expectations.
Many of these same risks were cited by the Australian Government Information Management Office (AGIMO) when it proposed to pursue an open Multi-Use List rather than a whole-of-government panel arrangement as the basis of a Data Centre-as-a-Service supply in April.
The Audit covered both ICT and non-ICT panels.