Why is supply market analysis required?

Focusing on intelligence gathered from the marketplace about the supply market, current price structure, and industry and economic conditions, helps provide information to assist in making the best decisions on an appropriate market approach. Analysis can include:

  • Supplier capacity, dynamics and dependencies in the supply market
  • Supply market perception of your agency's position and influence in the marketplace
  • Research and identification of supply market options
  • Assessment of risks and sensitivities in the marketplace
  • Potential to influence supply market development

How does a public authority buy from a sole supplier without going to tender?

Public authorities have an overarching objective to achieve value for money whilst meeting their needs – but this can often be achieved without tendering. The determination of the appropriate market approach is a procurement strategy decision (commensurate with the complexity and value of the subject procurement) made in consideration of the business case and the supply market conditions.

Whilst the various State Procurement Board documents provide reference to market approach options in many places, there is no document that details when to approach the market openly or when to use selective tendering. Irrespective of the market approach selected, the rationale needs to be detailed clearly within the acquisition plan.

There are many instances (particularly for procurements of lower value) where the cost to conduct an open procurement process and the effort involved are not going to provide you with a better result. But you need to know the market to make your decision, and to be able to identify best value for money you need to understand the market players, capability and conditions.

A limited tender or direct negotiation may be appropriate in some situations, allowing a public authority to purchase from a sole supplier (or a limited number of suppliers) without approaching the public market. The reasons for a limited tender process or direct negotiation with a sole supplier may include:

  • where the pressures of time are such that an open call is not feasible, such as where a Government policy decision had not been anticipated
  • where recent competitive processes have provided an option for additional purchases and/or indicate that an alternate result would be extremely unlikely if a further competitive process was to be undertaken
  • where a small, stable and well documented supply market exists and the agency can ensure that all potential suppliers are invited to participate
  • where there may be significant public risk if the procurement is delayed by process requirements, such as emergency situations threatening life and property
  • where the goods or services can be supplied only by a particular supplier and no reasonable alternative or substitute exists (eg for works of art; protection of patents, copyrights, or proprietary information), or due to an absence of competition for technical reasons

Public authorities should be aware that there are strict requirements for undertaking "Limited Tendering" processes under the applicable free trade agreements.
Poor management or lack of planning do not represent a sound rationale for claiming insufficient time to publicly tender - particularly where the procurement is a replacement or continuation of a need currently being met in some manner.

Click here to view the SPB Policy - International Obligations Policy.

Purchasing and procurement is new to me – I don't know where to start. Can you point me in the right direction?

It doesn’t matter which public authority you work within – the best place for you to start is by finding the procurement area within your own public authority. They may also have an intranet with valuable policies, tools and resources to start you on your way.

Public authorities vary in the way they undertake procurement. Some larger public authorities have a dedicated "procurement unit", which the Principal Officer has delegated authority for undertaking and approving procurements. Some of the smaller public authorities may have only one or two people undertaking procurement as a small part of their scope of work. There are also web-based resources that are available to assist government employees:

  • The State Procurement Board (the Board) is the entity responsible for procurement undertaken across the State Government. The legislation it operates under is the State Procurement Act 2004.
    Click here to view the State Procurement Act 2004.
  • The Board website provides a number of policies, guidelines and useful links.

Other resources include:

  • Procurement Policy and Governance (within the Department of Treasury and Finance - Government Accounting, Reporting and Procurement Branch) provides operational support to the Board and is the centre of development for policies and guidelines.
  • Procurement Policy and Governance can provide assistance to public authorities in developing procurement strategies, in addition to a wide range of advice across all aspects of procurement.

Contact details for further assistance:
Phone: 8226 5001 or email the State Procurement Board

Under the Simple Procurement Guideline, how do I deal with a situation where obtaining three quotes is not possible?

The Simple Procurement Guideline recognises that it isn’t always possible to get three quotes. Planning for procurement at any level should recognise the context and relevant issues associated with a particular procurement, which limit sourcing options.

In seeking quotations, ensure adequate records are kept of the approach to the market, the rationale supporting the market approach and the basis for the procurement outcome/decision.

The rationale for seeking less than three quotes in the event of a limited supply market should be recorded as part of the process documentation.

Lack of time is not considered a sound rationale for obtaining less than three quotes.

Is the Simple Procurement Guideline applicable to general purchasing functions that are currently undertaken using only a purchase order?

A purchase order instructs a supplier to provide goods and is frequently used by public authorities to provide a simplified approval, ordering and receipt process for routine purchases. Depending on the value of the procurement, a purchase up to $22,000 (GST inclusive) may be satisfied through the completion of a purchase order detailing who the purchase and contract is with (the purchase order recipient), the specification (what is being ordered – which may be a part number or similar description), and the agreed value. Generally, a purchase order has a number of terms and/or conditions – eg the payment terms and the delivery terms which form part of the 'contract'.

The Simple Procurement Guideline requires a summary report for simple procurements valued over $22,000 (GST inclusive). The summary should describe the acquisition process undertaken and the recommended supplier(s), to a level of detail commensurate with the complexity of the transaction. The guideline provides information on the detail which should be included in a summary report.

The purchase order should not be confused with a summary report – it is an instruction to suppliers - whereas the summary report documents the acquisition process.

What is the difference in approach between service/goods/works and consultancies?

Acquisition procedures are very similar across all categories but there are differences in the approvals process and reporting required.

Construction procurement is excluded by Regulation from the responsibility of the State Procurement Board and therefore does not progress through the Board approval process. However, sound procurement practices must still apply to construction procurement processes and contracts.

Administratively, public authorities may have their own consultancy approval requirements and other processes that depend on what is being purchased. The market strategy should assess and reflect the risks and market conditions for all categories.

Each category may have differences in the types of risks present. A service specification may not be as easy to detail as a goods specification (which may be an "off the shelf" or standard solution), so ensure the detail is sufficient.

Service contracts often require a greater degree of "people management" – provisions for such management requirements should be included in the contractual arrangements. From a Contract Disclosure perspective, Premier and Cabinet Circular 27 - PC027 details specific requirements for consultancies.

What does the Board consider in reviewing an acquisition plan or purchase recommendation for approval?

The State Procurement Board considers the documentation provided by public authorities to determine if the Board’s policies and guidelines have been addressed in the procurement planning phase.

The Procurement Policy and Governance review team assesses submissions on behalf of the Board and provide a report for Board consideration, which includes an opinion on any significant residual risk in the procurement. A check is undertaken to ensure that the appropriate approvals, timelines, legislative requirements and processes in general will provide a transparent, fair and equitable process capable of meeting the procurement objectives.

Each submission is reviewed based upon the complexity/value quadrant that the agency has determined is applicable, taking into consideration the risks that have been identified both within the agency and by the review team. The review considers the identified strategy and whether the risks and opportunities are sufficiently addressed.

With purchase recommendations, evidence is sought to ensure that the process has been conducted as planned, and where deviations are identified, that appropriate justification/approvals have been provided.

For further detail, the Acquisition Planning Guideline outlines the requirements and expectations for each quadrant. Appendix 1 of the guideline outlines the key elements of a detailed acquisition plan.

Is it appropriate for Public Authorities to develop templates for acquisition planning based on the SPB Acquisition Planning Policy?

One of the opportunities in improving efficiency is for public authorities to develop their own templates, taking into account their specific requirements and the types of procurement undertaken.

The Acquisition Planning Guideline (Appendix 1), contains a detailed listing of the key elements of an acquisition plan, which forms a useful checklist to ensure everything is covered.

If you have any queries regarding acquisition plans, please speak to your internal procurement team in the first instance. The Procurement Policy and Governance review team are available to provide advice in the event that you do not have access to procurement personnel within your public authority.

Is there a specific risk management template?

The  State Procurement Board has developed a Risk Management Plan template for procurements that are high in complexity and/or value although there is no "one size fits all" model. The Government of South Australia Risk Management Policy Statement aligns to the principles of the Australian / New Zealand Standard AS/NZS ISO 31000 which identifies risk assessment and analysis – and all procurement should be undertaken in line with this determination.

The State Procurement Board Risk Management Guideline will assist you in undertaking a risk assessment.

Public authorities are able to develop their own templates, taking into account the specific needs of each authority.

Click here to view the State Procurement Board - Policies.

What is a "comprehensive risk management plan"?

A comprehensive risk management plan documents a thorough assessment of potential risks and opportunities, and the strategies to manage risks. It is a requirement for all procurements that are identified as Quadrant 2 or 4 (high complexity) in the Acquisition Planning Guideline.

The State Procurement Board Risk Management Guideline provides information on the determination of risk and the appropriate treatment to align with the requirements of the Australian / New Zealand Risk Management Standard AS/NZS ISO 31000.

Is the complexity/value quadrant proposed in the guidelines meant to replace supply positioning?

Complexity/value quadrants and supply positioning are two very different things. The quadrant model is used in a number of areas of procurement and business strategies in general and for this reason can be confusing.

Supply positioning and supplier preferencing analysis are extremely useful quadrant tools to assist strategy development and should continue to be used where cost and complexity warrant.

The complexity/value quadrant is designed as a guide to help you determine the level of planning effort and detail required for particular procurements.

What is the approximate timeframe for completion of a public authority procurement?

Government, and the State Procurement Board, are continually exploring ways to "reduce red tape" and seek to identify where greater efficiencies can be found. One area of perceived need is around the time taken to undertake procurements. To help explain that, there are a number of significant key milestones that have been identified to gain an insight into acceptable benchmarks:

Individual procurement processes will vary greatly depending on the complexity and the public authority’s resourcing capabilities. The following across government timeline target averages relate to public authorities undertaking acquisitions valued above $110,000. It is expected that a high proportion of procurements will be successfully completed well within these timeframes.

From a public authority perspective, the key to smooth procurement processes lies in the acquisition planning which will assist in identifying effective timelines and minimise excessive timeline increases during the process.

How long do tenders need to be open?

Undertaking appropriate procurement planning prior to a tender being released to the public will give an indication as to the market maturity and the complexity of a tender. This will help you to determine the appropriate tender call period which will enable the optimal level and quality of responses from the market.

In most instances, a tender will remain open for a month to enable responses, although there are times where a greater (or lesser) period may be appropriate. In all cases, the tender close date must be advised in the tender advertisement/notification and tender documentation.

There are specific requirements under the Government Procurement Chapter of the Australia United States Free Trade Agreement (Chapter 15) and the Australia Chile Free Trade Agreement which relate to the minimum period a tender must remain open. Tender call periods may be reduced by issuing a “notice of Intended Procurement” – refer article 15.4.

Click here to view the State Procurement Board International Obligations Policy.
Click here to view the AUSFTA Chapter 15 – Government Procurement.
Click here to view the ACIFTA.

The approval process seems to have a lot of different options for approval. Who approves what?

The State Procurement Board has provided public authorities with a “procurement authority” that enables procurement to be undertaken up to a specified dollar value without the need for Board approval. A procurement authority may range from $220,000 up to $11 million, depending on the business need of the public authority.

The Approvals Process Policy requires Board approval for procurement in excess of a public authority’s procurement authority. To assist the Board to focus more on strategic matters, authority has been delegated for some procurement transaction approvals:

Up to $1.1 million
State Procurement Board
All transactions above $1.1 million
excluding high complexity
transactions (complexity/value quadrant 4)
greater than $11 million
Procurement Approvals Committee
High complexity, sensitive transactions above $11 million or across Government contracts
in the name of the Board
State Procurement Board

Within a public authority it is the Principal Officer’s responsibility to determine the procurement approval structure. Most public authorities will have some form of dedicated procurement unit to assist practitioners in undertaking sound procurement projects. However, even with the procurement authority in place, there are occasions where different approval approaches may be appropriate (usually in the event of high complexity or politically sensitive submissions):

  • the Board reserves the right to see any acquisition plan or purchase recommendation irrespective of value;
  • the Procurement Approvals Committee may pass on a submission to the full Board for determination.

A public authority can decide to refer a submission to the Board even if it is within its procurement authority.

Note: the procurement authority is separate from, and does not have any effect on, the financial/contracting approvals identified in Treasurer's Instruction 8.

Is there a formal supplier complaint process?

The State Procurement Board Supplier Complaints Policy provides guidance as to how best to manage complaints from suppliers.

The complaint should first be investigated and resolved in a timely manner, where possible, using the public authority’s established procedures. If a resolution cannot be reached, an independent auditor / arbitrator shall be appointed to strive for resolution.

If no agreement can be reached between the supplier and the public authority, then the Board can be requested to undertake a formal investigation. It should be noted that the Board is unable to overturn a contract once it is signed. Crown law advice should be sought in these instances.

Click here to view the State Procurement Board Supplier Complaints Policy.