The NSW Coalition Government has released its much anticipated procurement policy, setting the State on a path towards the decentralisation of procurement authority, the rejection of whole-of-government panels and a redefinition of ‘value for money’ that emphasises quality and innovation over pinching pennies.
“This document...crystalises our vision for a better, stronger and more flexible NSW. The Statement is effectively the Government’s procurement charter, establishing how we plan to embed the principles of better industry engagement, innovation and a reduction in red tape,” said Minister for Finance and Services Greg Pearce, launching the NSW Procurement Reform Strategic Directions Statement at the NSW State Library on 30 November.
A key principle of the policy roadmap is a category management approach to goods and services procurement, with Information and Communication Technology (ICT) singled out as one of the first categories to be targeted for reform.
An ICT-specific category management plan will be drawn up by quarter two (calendar year) of 2013 to identify the best strategy and procurement methods for the NSW Government ICT market. The ICT Procurement and Standards Working Group, established under the State’s ICT governance reforms, has been charged with developing the plan.
Selected working groups will also write up category management plans for labour hire, office supplies, travel, and fleet procurement among others in the initial tranche of category-based reforms, which aim to tailor procurement strategy to the unique characteristics of each category of goods and services.
“In some cases, the strategies will recommend aggregation of demand across Government. In others, agencies may be left to put in place their own arrangements. What is critical is that the right strategy is developed for each category – procurement will no longer be driven by a one size fits all approach,” says the document.
The Strategic Directions Statement also reveals plans to audit all of the closed whole-of-government procurement panels and other State Contracts currently in place across the public sector, to identify which ones can be converted into pre-qualification schemes – a process that has already been applied to State Contract 2020 for IT services.
The audit is also due to take place in quarter two (calendar year) of 2013.
Submissions to a January discussion paper are reported to have described the current range of panel arrangements as “inconsistent, inflexible, and in some cases unworkable”.
According to the Department of Finance and Service’s (DFS) latest annual report, Government-wide State Contracts accounted for just under one third, or $3.87 billion of the approximately $13 billion that the NSW Government spent on goods and services in 2011-12.
However, the Government acknowledges that not all procurement categories will benefit from such changes, indicating that some commodity-based closed panels may remain.
“The use of pre-qualification schemes is not appropriate in all cases.
“Some categories of procurement expenditure are commoditised and standard with high volume transactions, while others require closer contract management or partnering in order to reduce risk or maintain commercial leverage,” says the document.
The Strategic Direction Statement also outlines the first steps in a gradual devolution in procurement authority away from DFS and towards a lead agency model, as originally suggested in a draft procurement paper made public in January this year.
It is anticipated that that representatives of agencies “closest to the business need” in particular categories of procurement will be appointed to chair category management working groups. Where whole-of-government panels are retained, agencies which dominate expenditure through those panels may be given responsibility for their management.
Other strategic directions in the policy include:
- Making forward procurement plans public to assist industry cooperation;
- Trailing outcome based procurements;
- Legislating to allow agency-to-agency piggybacking on signed contracts;
- Implementing staged tender processes which limit onerous information requirements to later phases; and
- Increasing the State Contract exemption threshold for agencies operating in rural areas to $5,000.
The Strategic Directions Statement makes it clear that cost-cutting is not key to the procurement agenda. This puts it into contrast with the 2012-13 Budget’s requirement that ‘procurement reform’ deliver savings of $1 billion in savings over the four years 2012-13 to 2015-16.
According to the Budget papers, the savings are to be achieved through existing reform measures, such as whole-of-government ICT state contracts, telecommunication and fleet (car) contracts.
The new procurement policy in that sense addresses the effectiveness of NSW procurement, in contrast to the Budget’s efficiency agenda.
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