John Arnold   |   15 Oct 2021   |   5 min read

Inquiry Claims Over 50% of Fed Gov Procurement Not Competitive

Blog inquiry

A recent inquiry has heard that more than half of the Australian government’s procurement is conducted via limited tender.

According to the Australian National Audit Office (ANAO) in a Government News report, up to 60 per cent of Australian government procurement has not been open tender since 2010.

“There could be as little as one entity being invited to apply for the procurement opportunity,” said Brian Boyd, executive director of ANAO performance audit services.

The “Misuse” of Emergency Procurement

One way the ANAO believes this is occurring is by people faking the need for emergency procurement in order to leverage exemptions to avoid open tender.

In these cases, entities would deliberately not plan in advance for procurement, then request to use these procurement rules.

The ANAO called this phenomenon “planned haste”.

Mr Boyd said the ANAO had identified “a lot of expertise” in government employees who keep to the letter of the law when it comes to procurement, but not the spirit. He said they used loopholes and exemptions to avoid having an open, ethical and competitive procurement process.

He also said ethical procurement was getting less attention than value for money, even though cutting corners in ethics could often ironically lead to getting a bad deal.

Open Tendering Not a Panacea: Industry Expert

But according to Paul Rogers (FCIPS), Consulting Director at PaulRogers.Pro, calls for more open tendering can be based on a “simplistic view of competition” and be “inconsistent with contemporary perspectives on good procurement practice and value for money.”

“’Limited tender’ does not mean ‘no competition’. It usually means that the client seeks to pre-qualify potential tenderers so that only selected firms are invited to bid.”

He said this was done for three reasons: not having to assess unknown bidders to see if they can actually perform the work, being able to target suppliers in particular markets (such as giving work to SMBs and regional businesses) and increasing participation in a tender.

“The use of limited or selected tendering may actually increase participation rates, as the recipients of the invitation to tender may believe that there is a genuine chance of them winning and may be more likely to invest the time and effort in submitting a response,” he said.

He said this was commonly used in the acquisition of infrastructure as the projects are so complex. This was important, as the inquiry in question was looking into and reporting on procurement practices for government-funded infrastructure and enhancing the industry.

“It might cost a tenderer upwards of $1m to develop and submit a tender response to design and construct a large hospital. The number of ’tier one’ construction companies who can manage such projects can be counted on the fingers of one hand,” he said.

“The challenge for the client is to persuade potential tenderers to participate. There are not dozens of potential contractors excluded from bidding due to inertia or indolence or poor ethical standards.”

“While open tendering may be relevant in a tiny number of situations, it is not appropriate for most infrastructure projects. It will come as a surprise to most procurement practitioners that 40% of government procurement is suitable for open tendering.”

The Tension of Outcomes Versus Process

According to Mr Rogers, public sector procurement was not easy, and professionals were often torn between a dedication to process and delivering results.

“The two are not mutually exclusive, but best practice in procurement seeks to optimise outcomes, consistent with maintaining public confidence in the transparency and integrity of the process,” he said.

“Few public sector officers adopt open tendering because of their commitment to deliver outcomes rather than appease auditors.”

When it came to “planned haste”, Mr Rogers called this an overall problem that is systematic in both public and private sectors.

“’Why weren’t we involved earlier?’ is the universal lament of procurement people globally. Perhaps the quality of forward procurement plans might be a leading indicator of the business planning capability of departments and agencies. The procurement process is a downstream phase.”

Solutions for Achieving Competitive, Ethical Procurement

There are many tools and techniques that can be used to make government procurement at every level more competitive, cost-effective, and ethical.

Making Sure Buyers Know How to Go to Market

One way to ensure proper practice is followed is to make sure buyers are presented with all the information they need at the very start of their procurement journey.

This stops any genuine confusion because they couldn’t find the right policy document or didn’t understand it.

For example, VendorPanel’s Policy Guide tool presents them with easy-to-follow steps tailored to an organisation’s policy rules and language. It can prompt a buyer to reach out to the procurement team if this is needed.

This interactive format is a lot easier for buyers to digest than a static document that covers every scenario.

Making Sure Buyers Know How to Go to Market

For your buyers, all your suppliers should be discoverable in a single supplier database. They should also be able to easily identify local, social, and compliant suppliers.

There are tools that offer badging of these sorts of suppliers, as well as enriched supplier data like whose insurances are current or meet your sustainability standards.

Another useful feature some procurement solutions have is a built-in marketplace for if you don’t have prequalified vendors. These offer access to registered ABN-verified businesses organised by category.

By reducing friction and providing compliance information upfront, it makes it easy for buyers to go to market and therefore foster competition.

Reduce Points of Friction

When a procurement journey feels onerous, this creates tension between the buyer and the existing process. This can occur when there are delays in things being signed off or an excess of manual handling. Therefore, business processes and systems need to be set up to make things as frictionless as possible.

One reason a process can be slow is because of the tools being used. Many organisations are relying on a combination of ERP systems, spreadsheets, emails, and tender portals. The resulting process is manual, inefficient, and lost in people’s inboxes.

The solution to this is to keep everything in a single system that handles and tracks correspondence, like VendorPanel. Managing end-to-end procurement processes in one place drives high rates of user adoption and ensures everything remains in a single “source-of-truth”, audit-ready and with data available to provide insights and continuous improvement.

“Where systems and processes can be circumvented, it’s unlikely that the tools are in place to measure the impact, even after the fact,” said VendorPanel CRO Matt Clyne.

“Having the right tools in place makes it less likely that these undesirable behaviours will occur, but also makes it easier to spot them in real time and to quantify their impact.”

Learn More About VendorPanel

VendorPanel is the procurement platform of choice for state governments, councils, and commercial businesses.

To learn why, and to find out how we can help you meet your procurement goals, book a demo with VendorPanel or learn more about the platform here.

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