The New Challenges Facing Local Government Procurement · The New Challenges Facing Local Government Procurement 08 August 2016 Chris Newman –Director [email protected]

The New Challenges Facing

Local Government Procurement

08 August 2016

Chris Newman – Director

[email protected]

0412 318 384

The Global Procurement Network © ArcBlue Consulting 2016

Value

The value curve of procurement

Need StrategyMarket

engagementNegotiate contract

Manage contract

Stages of Procurement

Time

Spent

The Global Procurement Network © ArcBlue Consulting 2016 3

Becoming Strategic in approach

Moving: from Reactive...through....Proactive….to....Deterministic

Key Features:

• Collaborative cross business team based approach

• Explicit department involvement: commitment by all stakeholders

• Inclusive workshop approach that encourages ownership, commitment and knowledge transfer

• Deep understanding of the category, supply market, suppliers, and business needs

• Using market knowledge and innovation as a source of leverage

• Striving to have a deterministic influence on the supply markets

• With short, medium and long term SMART goals

• Bringing real value to the organisation

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5

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“The process that ensures both parties to a contract fully meet

their respective obligations to deliver both the business and

operational objectives required from the contract.”

“The process by which a contractor is motivated, enabled and

empowered to successfully meet expected outcomes, and

achieve extra value beyond the requirements of the original

contract.”

“The active management of the relationship between the

client and the contractor over the term of the contract for the

provision of goods, services and infrastructure.”

Managing Contracts - definitions

The Global Procurement Network © ArcBlue Consulting 2016

Supplier’s Motivation

Value or Performance

Sourcing TimeContract Management

Well-Aligned and

Managed, Performing

Well

Poorly-Aligned and

Managed,

Performance Drifting

Misaligned, Under-

managed and Non

Performing

Effective management of suppliers is critical to ensuring that

value and performance objectives are achieved

From a good deal to a good supplier

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– Contract Management Framework


• Oversight of organisation-wide contract management has

been established and clearly assigned

• Good contract management practice is widely recognised as

a priority across all levels of the organisation

• Contract management practice is integrated and aligned

with Procurement/ Risk/ WHS Policies and Guidelines

• Executive and management accountability for good contract

management practice is established and acted on

consistently

– Leadership and Culture

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• A mandatory Contract Management Induction and Training

Program is operating;

• Roles and responsibilities are clearly understood;

• Appropriate resourcing is in place (centrally and in Business

Areas)

• Skills and Expertise

• Personnel and time

• Contract management responsibilities are included in PDs

and in staff performance management processes.

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– People


• A clear and well-understood organisational framework is in place

• Good practice contract management guidance, procedures and

templates are approved, maintained and adhered to

• Contract management processes are being followed appropriately

across all areas of the organisation

• Well understood records management processes are followed for all

contract documentation

• A contract management system is in place for recording all agreed

contract information, including performance and milestone

information

• Regular individual and aggregated reporting is in place

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– Framework and Systems


Risk model to ‘Tier’ contracts:

1. Answer a series of risk related questions to grade

the total risk for the contract

2. Determine value of the contract

3. Use these factors to categorise contracts to

represent the contract grouping

4. Each grouping is then designated into a ‘Tier’

5. The selected ‘Tier’ represents the level of

contract management process required to

effectively manage the contract

Contract Risk Model - Overview


Risks (H/L) - Are any of these risks in the high range?

• Political, Media/Reputation

• Community

• Operational

• Work Health Safety

• Environment

• Technical skill/ expertise

• Legal/ regulatory

• Relationship complexity

Value – Link with delegations/ thresholds

• E.g. 4 levels: 25,000/ <$200,000/ <$1,000,000/ >$1,000,000

Contract Risk and Value Assessment


Contract Risk Assessment Model


Tier 1 – Major construction and civil works/ major IT

projects/ Waste collection

Tier 2 – Medium-sized ICT Projects/ Larger maintenance

and service contract/ Minor infrastructure Projects

Tier 3 – Plant purchasers/ Minor works/ Non-critical

consultancy

Tier 4 – Catering/ one-off purchases

Tiers of Contracts - examples


Capability

Experience (in years) – Technical expertise (qualification) – Contract management capability (benchmarked assessment)

KPIs

Level – quantity – how often assessed

Supplier Meetings

How often – operation and/or strategic – with who

Documentation

Contract Form – Contract Management Plan –Approvals

System Requirements and Reporting

Impact of Contract Risk Assessment

The LEAP Program?

Ongoing spend & opportunity analysis | Dashboards | Capability and maturity assessments | Workshops | LEAP Development Plan

Workshops | Benchmarking | Collaboration | Regional LEAP Development Plan

Category events & communities of practice | Annual Procurement Conference | Targeted training | Guidelines, Tools and Tips Development | Sector-wide contracts | Advocacy support

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Local

Regional

Sector-wide

Dashboards & Data

Updates

The New Challenges Facing Local Government Procurement · The New Challenges Facing Local Government Procurement 08 August 2016 Chris Newman –Director [email protected]

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