3. Market analysis and review: Goods and services policy

Context

This policy outlines the requirements for market analysis and review.

In meeting the mandatory requirements, the level of detail in the agency's procurement policies and processes will be determined by the Chief Procurement Officer or equivalent and will be commensurate with the agency's procurement profile.

3.1 Market analysis

Market analysis and review provides an understanding of market dynamics to determine the optimal market approach. It can also determine the viability of a procurement requirement.

When undertaking individual procurement activity, the market analysis and review policy applies to the following stages of a procurement:

• Review procurement requirements
• Conduct market analysis

Market analysis and review follows the assessment of complexity of the procurement activity either at the category level or at the individual procurement level where the procurement activity falls outside of a category or is critical or high risk.

3.1.1 Mandatory requirements

An agency must:

• consider the outcome of the complexity assessment to determine if the assessment at the category level establishes the basis for being able to approach the market
• undertake further complexity analysis at the level of the individual procurement activity where the category assessment provides insufficient detail to determine the optimal approach to market
• conduct market analysis to identify the capability and capacity of the market to supply and identify opportunities for market based solutions
• reassess the procurement requirement with regard to the market analysis
• prepare a statement of grounds, or business case, which supports the decision to proceed with the procurement and identify the optimal market engagement strategy

Agencies are not required to undertake a sourcing process when using a standing offer that is a sole supplier arrangement.

3.2 Collaborative procurement

Collaborative procurement is an important mechanism to improve value for money when procuring goods or services.

Collaborative procurement involves multiple agencies working together to improve value for money for goods and services.

Agencies typically collaborate by aggregating demand for commonly procured goods and services.

Types of collaborative procurement include:

• state purchase contracts (SPCs)
• multi-agency arrangements
• procuring with other agencies
• procuring for other agencies

3.2.1 Mandatory requirements

3.2.1.1 State purchase contracts

Establishing an SPC

An SPC is a whole-of-government procurement arrangement established for repeated use by all agencies to procure common goods or services. This includes standing offers and registers.

To establish an SPC, one agency (the lead agency) must:

• if the lead agency is not the department responsible for the goods and services procurement policies, seek advice from that department on the proposed arrangement, and consult with the Minister responsible for goods and services policies
• consult a representative cross-section of agencies that will use the SPC
• ensure that it has the capability to establish and manage the proposed arrangement
• have an SPC business case endorsed by the department responsible for the goods and services policies, then approved by the lead agency's relevant Minister
• obtain authorisation from its relevant Minister to enter an SPC agreement on behelf of the Victorian Government
• establish appropriate governance and reporting requirements for the arrangement, including a contract management framework and approach to measure, monitor and report on financial and non-financial benefits
• establish rules of use that apply to buyers using the arrangement

SPCs may be established as a mandatory or non-mandatory arrangement.

Replacing or varying an SPC

To replace or materially vary an SPC, the lead agency must:

• consult with the department responsible for the goods and services procurement policies
• consult with the agencies using the SPC
• obtain approval from its relevant Minister
• obtain authorisation from its relevant Minister to implement on behalf of the Victorian Government

Reporting on an SPC

The lead agency must:

• monitor and report on the ongoing use of an SPC and the achievement of value for money, including financial and non-financial benefits
• provide information on the management and use of an SPC to agencies using the SPC

Agencies using an SPC must provide information to the lead agency as requested.

Using an SPC

Agencies must use a mandatory SPC. They should use a non-mandatory SPC if it demonstrates value for money for the agency.

When using an SPC, buyers must follow the rules of use for the arrangement.

An agency must transition to using a mandatory SPC:

• when the SPC commences, subject to any transition period determined by the lead agency
• when the term of a contract covered by the scope of the SPC expires
• when an exemption relating to the SPC no longer applies

Other Victorian public bodies and some non-government entities may apply to the lead agency to use an SPC.

SPC exemptions

An agency may apply for an exemption from using a mandatory SPC.

An exemption may cover:

• a specified period or one-off supply
• the whole or part of an agency
• the whole or part of the SPC

To apply for an exemption, an organisation must submit an exemption request form to the lead agency. The lead agency may grant an exemption if special circumstances exist in relation to using the SPC.

When establishing a mandatory SPC, the lead agency may recommend in the SPC business case that an agency is exempted from the proposed arrangement and demonstrate how it would be unable to achieve value for money.

3.2.1.2 Multi-agency arrangements

A multi-agency arrangement is a procurement arrangement established for repeated use by some agencies to procure common goods or services. This includes standing offers and registers.

A multi-agency arrangement must specify which agencies can use the arrangement. These arrangements must not permit use by:

• all agencies
• agencies that were not specified when the arrangement was established

An agency may consider establishing a multi-agency arrangement if it identifies an opportunity to aggregate demand across multiple agencies.

To establish a multi-agency arrangement, one agency (the lead agency) must:

• determine which agencies can use the proposed arrangement and their respective needs
• confirm there are no plans to establish an SPC covering the goods or services
• confirm it has the capability to establish and manage the proposed arrangement
• notify the department responsible for the goods and services procurement policies of the proposed arrangement
• have a business case for the proposed arrangement approved by its accountable officer or delegate
• establish appropriate governance for the arrangement, including a contract management framework
• establish rules of use that apply to buyers using the arrangement

To replace or materially vary a multi-agency arrangement, the lead agency must:

• consult with the agencies using the arrangement
• obtain approval from its accountable officer or delegate

When using a multi-agency arrangement, buyers must follow the rules of use for the arrangement.

3.2.1.3 Other collaborative procurement activities

Multiple agencies may collaborate in relation to a one-off supply of goods or services.

Unlike SPCs and multi-agency arrangements, these collaborative procurement activities do not:

• establish a procurement arrangement for repeated use by multiple organisations
• require a lead agency

To undertake these activities, each participating agency must follow its procurement governance framework and agree on appropriate governance for the activity.

These activities include:

Procuring with other organisations

An agency may procure goods or services with one or more other agencies by:

• approaching the market together using one invitation to supply
• entering a single contract or separate contracts with the selected supplier(s)

Procuring for other organisations

An agency may procure goods or services on behalf of one or more other agencies by:

• undertaking a procurement process as their agent or representative, with the other agency(s) contracting with the selected supplier(s)
• undertaking a procurement process and contracting with the selected supplier(s), then distributing the goods or services to the other agency(s)

3.2.1.4 Agency-specific arrangements

An agency-specific arrangement is a procurement arrangement established by one agency for its own repeated use. This includes standing offers and registers.

An agency must follow its procurement governance framework to establish an agency-specific arrangement.

3.3 Disposal of assets

As part of market analysis and review, an agency will develop a whole-of-life appraisal and consider the best process for disposal of assets.

3.3.1 What is disposal of assets?

Disposal of assets should be considered when the asset is identified as being:

• an unacceptable (e.g. security) risk to service delivery
• obsolete due to changed procedures, functions or usage patterns
• no longer complying with occupational health and safety standards
• reaching its optimum selling time to maximise returns
• beyond repair
• surplus to requirements

Disposal of assets can present the agency with opportunities to optimise the use of an asset, including:

• extending the life of an asset by transferring it to another business unit or organisation
• recovering material for recycling prior to sending the asset to landfill
• transferring assets to not-for-profit organisations

3.3.2 Mandatory requirements

The disposal of assets is a key consideration in the forward planning of any procurement activity. Assets of (or belonging to, or in the care, custody, or control of) an agency are to be disposed of in a way that takes into account probity, security, sustainability and transparency, as well as environmental and social factors. An agency must develop and apply an asset disposal process that details:

• the protection of public sector data and information assets
• the parties or business unit responsible for managing the process
• disposal options appropriate to the nature of the asset and broader government objectives
• management of issues of risk, liability, safety and security
• the process for keeping the organisation’s assets register up-to-date
• issues of risk, liability, safety and security associated with the use of the asset by other parties when transferring an asset to another location or entity

If the evaluation of disposal options does not warrant modification to extend the life of the asset or transferring it to another party or recycling, the asset must ordinarily be disposed of by way of public auction or public tender. An alternative approach must be sought where cost of disposal process exceeds residual value of the asset.

Using this policy

There are 4 other goods and services policies, this is policy 3 of 5.

For a complete policy list, see goods and services policies.

Tools and support

Access a document version of this guide in the Toolkit and library.

There are a number of guides to support this policy, for more information, see Market analysis and review: Goods and services policy and guides.

For more information about the Market analysis and review - goods and services policy, please contact the goods and services policy team.