Name and date of act or regulation

State Procurement Act 2004

23—Annual report

(1)        The Board must, on or before 30 September in each year, deliver to the Minister a report on the administration of this Act and the work of the Board during the financial year ending on the preceding 30 June.

(2)        The report must incorporate the audited accounts of the Board for the relevant financial year.

ADMINISTRATION OF THE ACT AND THE WORK OF THE BOARD

Background

The State Procurement Board (Board) provides the Government of South Australia with independent oversight of public sector procurement. The following report details the Board’s activities undertaken during 2016/17 in key functional areas relating to its legislative and policy framework.

Procurement Reform

The Board supported the delivery of a major procurement reform strategy to:

• send a strong signal that Government will be a better customer by reducing red tape and finalising procurements expeditiously
• deliver a less complex, more agile procurement framework, including simplifying procurement to a higher value and standardising procurement practices and documents across government
• increase the commercial acumen available to agencies.

Many of the required outcomes are also reflected in the Board’s three-year Strategic Plan 2016-18, which recognises the legislative and governance framework that underpins the Board’s role and aligns Board activities with broader government objectives including achieving value for money and building procurement capability across government. There has been strong achievement in procurement reform and many of the initiatives are now embedded and subject to regular review and improvement.

The five strategic outcomes of the plan are:

• procurement underpins State objectives
• public authorities achieve value for money
• the South Australian public sector is recognised as leading practice
• suppliers proactively engage with government and offer innovation and savings
• procurement is a key enabler for effective government business operations.

The Board’s achievements in 2016-17 include:

• increasing the simple procurement threshold to $550,000, to reduce effort, cost and time required by suppliers and agencies to undertake simple procurements
• simplifying the procurement process for procurements up to and including $550,000, with public authorities now able to seek:
  • a minimum of one quote up to $33,000
  • a minimum of three written quotes to be sought from $33,000 to $220,000
  • a minimum of five written quotes to be sought from $220,000 to $550,000
  • removing red tape and contracting costs for suppliers through reduced indemnity, liability and insurance requirements for suppliers under low to medium risk procurements. Suppliers are no longer required to provide indemnities, and the State is not required to be named on insurance policies, or be provided with a copy of the insurance certificate
  • the introduction of a default liability cap for low to medium risk contracts, set between one and five times the value of the contract, reduces insurance costs and barriers to participation for small businesses, and costs previously associated with negotiation of liability clauses
  • simplification of the Board’s suite of standard bid and contract documentation, to better standardise procurement practices and documents across government, improving the market approach process for public authorities and suppliers
  • a new Invitation to Supply template which includes provision for alternative offers to encourage innovation
  • a system to monitor whether agencies are achieving the objectives of their original acquisition plans and contracts has been implemented
  • lowering the dollar threshold at which forward procurement plans are published to $220,000, providing greater visibility and opportunities for business to participate in government procurement
  • updating the Job Description Matrix as part of the Capability Development Framework which advocates a holistic approach to the capability development of procurement staff across government.

The Board has introduced the Procurement Governance Policy, which requires that major agency procurement governance committees include at least one external commercial advisory representative with relevant experience, and the Industry Participation Advocate (or delegate).

As part of the procurement reform agenda, the Department of Premier and Cabinet (DPC) has appointed an across-Government Chief Procurement Officer (CPO), reporting to the Chief Executive, DPC. The CPO has been appointed to the Board, to ensure alignment in across government procurement governance and reform co-ordination. The Board has commenced delegation of some of its operational functions to the CPO. The CPO has begun working closely with agencies to improve productivity and efficiency through performance monitoring, benchmarking and the use of data analytics. Under the procurement reform strategy, the CPO will also increase oversight of agency procurement savings targets.

Accreditation Program

The Board undertakes an Accreditation Program designed to assess the quality and appropriateness of the goods and services procurement operations of public authorities.

Public authorities are required to demonstrate clearly defined and implemented procurement strategies, governance, processes and systems in order for the Board to provide a procurement authority to the public authority’s principal officer. This authority allows the public authority to undertake and approve procurements, up to a designated dollar value, without reference to the Board.

The Accreditation Program applies to all public authorities with a procurement authority greater than $220,000 and has a focus on the following performance categories:

• Leadership and Strategy
• Organisation and People
• Governance and Performance Management
• Processes and Systems
• Relationships – Internal and External.

All public authorities with a procurement authority greater than $220,000 have been reviewed by an independent lead reviewer between 2013 and 2016.

In 2016/17, two additional reviews of public authorities were completed due to significant organisational changes in their procurement functions. These reviews were for the Department of Planning, Transport and Infrastructure, which has recently undergone significant changes in its procurement function, and the Department of the Premier and Cabinet, which consolidated its three procurement functions (ICT procurement, across-government contracts and DPC specific procurement) into one procurement function.

Findings from the Accreditation Reviews have assisted the Board to identify common issues across public authorities and provide additional policy guidance and training, such as improved contract management guidance as well as developing a range of Better Practice Guides to assist public authorities with their procurement operations.

The current program is now complete. A review of the program is under way, with a view to commencing the next four year cycle in 2018.

Assurance Review Program

The Assurance Review Program enables the Board to meet its statutory obligations under section 12, (1)(e) of the Act, that is “to investigate and keep under review levels of compliance with the Board’s procurement policies, principles, guidelines, standards and directions”.

The objective of the Assurance Program is to assess the performance of each public authority in complying with the Act and the Board’s procurement policies, principles, guidelines and directions, and applies to all public authorities.

The program focuses on how public authorities manage their procurement risks through reviewing and validating the following areas:

• that internal procurement policies, procedures and delegations comply with the Board’s policy framework and processes exist to facilitate timely approval, updating and promulgation
• compliance to the Board’s policies and guidelines through a review of transactions approved by the public authority

The 2012-2016 reviews undertaken conclude the cycle of the assurance program, in which 16 large public authorities and 26 base level public authorities (i.e public authorities with a procurement authority of $220,000) were reviewed. In late 2016, the Board conducted five base level public authority reviews and exempted four base level public authorities from an assurance review due to the low procurement spend profile of these entities.

Findings from the current Program have assisted the Board to identify issues across public authorities and provide additional policy guidance and training, such as developing a Contract Register policy to ensure all contracts are recorded by public authorities, improved guidance on when it is appropriate to enter a direct negotiation with a supplier, clearer guidance on sustainable procurement and additional contract management guidance.

The current Program is now complete. The program is currently being reviewed with a view to commencing the next four year cycle in 2018.

Development of Not for Profit Funding Guidelines

Section 6 of the State Procurement Regulations 2005 excluded community welfare funding arrangements with non-profit bodies from the definition of procurement operations in the Act, thereby enabling public authorities to undertake those operations without overview by the Board. This exemption was removed, effective 1 July 2017, following Cabinet approval in June 2017 to support the implementation of the South Australian Not-for-profit Funding reforms.

The South Australian Government approved DPC Circular 044 - South Australian Funding Policy for the Not-for-Profit Sector which comes into effect from 1 July 2017. This Circular aims to support and strengthen collaborative partnerships between government and the not-for-profit (NFP) sector. It provides a consistent approach to all aspects of South Australian Government funding, sets clear requirements for public authorities, reduces the administrative burden on NFPs and maintains their independence. Government funding for NFPs is either via procurement or grants.

The DPC Circular is based on best practice principles for government and NFP funding relationships including:

• Robust planning and design
• Collaboration and partnership
• Proportionality
• An outcomes orientation
• Achieving value with relevant money
• Governance and accountability
• Probity and transparency
• Community development principles

The State Procurement Board has consulted with key public authorities that contract with the NFP sector and representatives from the NFP sector and has updated the following policies to incorporate NFP principles identified in the DPC Circular:

• Procurement Policy Framework
• Acquisition Planning Policy
• Supplier Selection Policy
• Contract Management Policy
• Simple Procurement Policy

These policy updates will come into effect from 1 July 2017.

A standard not-for-profit funded services agreement is currently being developed to simplify the contracting process for NFP funded services.

Training and Capability Development

Under the Act, the Board is required “to assist in the development and delivery of training and development courses and activities relevant to the procurement operations of public authorities”.  This is facilitated in a number of ways within the Board’s Capability Development Program:

i.         Capability Assessment

An assessment of the capability of 270 procurement staff across government identified priority skills uplift opportunities in negotiation, contract implementation and contract management. Becoming more outcome focused and creating greater public value was also identified as an improvement opportunity. The data gathered has been used to recalibrate existing training workshops and will be used as a benchmark for future assessments. The report has been considered by the Board and the CPO and operational improvements and strategies to address skills gaps are being developed in conjunction with agency stakeholders.

ii.         Vocational Qualifications

The Board continued to facilitate opportunities for employees to gain vocational qualifications in procurement. 12 participants from across Government undertook study towards an Advanced Diploma of Government (Procurement & Contracting) during the reporting period.

iii.         Targeted Training Program

The Board’s Targeted Procurement Training Program hosted 378 attendees participating in 31 workshops during 2016-17.  The program included topics that focussed on increasing understanding of specific Board policies and guidelines as well as broader aspects of good procurement practice.

The suite of workshops is delivered by Registered Training Organisations and caters for those new to, or with an interest in, procurement right through to experienced practitioners seeking to refresh their knowledge. Adjustments were made to some workshops in the second half of the financial year in response to the capability review. Mapping of training inventory has been undertaken to determine any gaps, and priority will be given to offering niche training moving forward that aligns with the priority skills improvement opportunities.

The Board continued to monitor participant feedback including a sample of participant/manager follow-up on the application of knowledge in the workplace. The quantitative rating for overall participant satisfaction during 2016-17 was 80%.

Networking and Professional Development

The Board continued to host a regular forum for agency heads of procurement, facilitated by the Presiding Member of the Board in the first half of the financial year and subsequently by the Chief Procurement Officer. The forum is an important communication mechanism for sharing ideas and discussion on procurement topics of interest.

The Board’s staff continued to represent South Australia on the Australasian Procurement and Construction Council’s Procurement Capability Development Working Group, which met regularly to develop and progress strategies aimed at building government procurement capability and enhancing the growth of the procurement profession.

Supplier Survey

The supplier survey, designed to elicit the experiences of suppliers that have tendered for government procurements on the SA Tenders and Contracts website, continued to provide useful feedback for integration into the policy framework and the capability development program.

Supplier Complaints

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