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Compliance

Monitoring compliance with VGPB policies

Monitoring compliance with VGPB policies

Under the Financial Management Act 1994, mandated organisations must comply with VGPB supply policies when procuring goods and services.

The VGPB monitors compliance of mandated and accredited organisations through six mechanisms. These organisations include the eight Victorian Government departments, Cenitex and Victoria Police.

Compliance mechanisms include:

  • annual supply reports
  • performance measures
  • audits
  • engagement
  • complaints
  • procurement activity plans 

Annual supply report

Organisations submit an annual supply report to the VGPB at the end of each financial year summarising their procurement activity, performance measure results and compliance with the VGPB supply policy framework. 

Audit program    

Organisations audit compliance with VGPB policies and submit an audit report to the VGPB every three years.

Performance measures    

Organisations monitor performance against five performance measures and report results in their ASR.

Engagement     

The VGPB’s engagement model has replaced the former oversight process. Chief procurement officers are encouraged to meet with the VGPB every year to discuss their procurement strategy, individual strategic procurements or any other procurement matters.

Complaints management    

Organisations maintain a complaints management system for supplier complaints related to the process and probity applied during a procurement activity. Organisations list complaints in their ASR.

Review of procurement activity plans    

Organisations submit procurement activity plans every year for review by the VGPB.

Compliance reported in annual supply reports

Organisations complete an annual supply report (ASR) at the end of each financial year.

In the ASR, organisations self-assess whether they complied with all required components of the VGPB supply policy framework. Unlike the VGPB audit process, it does not assess how well organisations comply with the components, but gives the VGPB a high-level overview of how organisations view their own compliance.

Compliance and machinery of government changes

If machinery of government changes result in significant changes to an organisation’s procurement function, they may need to be re-accredited by the VGPB. Both the Department of Transport and the Department of Jobs, Precincts and Regions are currently going through the accreditation process, after being established on 1 January 2019 from machinery of government changes.

Both departments have been setting up their procurement functions and developing all the necessary components to be accredited by the VGPB. The Department of Transport submitted its accreditation to the VGPB in May 2020. This is being reviewed and the department is expected to be accredited early in 2020–21.

In July 2020, the Department of Jobs, Precincts and Regions requested an extension and is now expected to finalise its accreditation by December 2020. The department indicated to the VGPB that it is currently operating under the procurement framework of the former Department of Economic Development, Jobs, Transport and Regions.

Overall compliance

In 2019–20, organisations reported a high level of compliance with the VGPB supply policy framework.

Areas of non-compliance related to:

  • the time needed to set up new procurement functions after machinery of government changes
  • lack of system functionality to measure compliance
  • contract management practices
  • oversights in publishing contracts valued over $100,000 within 60 days on the Buying for Victoria Supplier Portal website

Download this document for compliance with VGPB policies in 2019-20, including:

  • compliance against the 5 goods and services supply policies
  • other mandatory requirements
  • overall compliance

Compliance by policy area

Policy 1: Governance

Eight out of ten organisations reported full compliance with the requirements of this policy in 2019–20.

Non-compliance related to the time needed to establish new governance frameworks after machinery of government changes.

The Department of Jobs, Precincts and Regions has set up most components of its governance framework but has not transitioned to its new internal procurement unit. The terms of reference and proposed structure have been developed and it will be implemented in 2020–21.

VicRoads and Public Transport Victoria (PTV) transitioned to sit under the Department of Transport on 1 July 2019. The department needed to merge the three procurement areas, including their forward procurement planning. The three organisations each had a forward procurement activity plan for 2019, but not a merged plan incorporating procurement from all three organisations. This combined plan will be published in 2020–21.

The following table describes compliance with governance requirements in 2019-20:

Policy requirement Organisations complying
Did the organisation have a CPO throughout the year? 10 out of 10
Does the CPO have appropriate procurement qualifications and/or experience? 10 out of 10
Does the organisation have an internal procurement unit?  9 out of 10
Is the procurement strategy in place? This includes a:
  • procurement activity plan covering the next 12–24 months of planned procurements
  • contract management planning strategy
  • supplier engagement plan
  • capability development plan
9 out of 10
Did the organisation review its procurement activity plan in 2019–20? 9 out of 10
Is a high-level version of your procurement activity plan published on your website? 9 out of 10
Is your complaints management system in place? 10 out of 10

Policy 2: Complexity and capability assessment

All organisations reported compliance with the requirements of this policy.

The following table describes compliance with complexity and capability assessment requirements in 2019–20:

Policy requirement Organisations complying
Does the organisation have a complexity assessment methodology? Is the complexity assessment methodology being applied to all procurement activity?  10 out of 10
Is the complexity assessment methodology being applied to all procurement activity?  10 out of 10
Does the organisation have a procurement capability assessment methodology? 10 out of 10
Does the organisation have an appropriate level of procurement expertise, resources, systems and processes that enable procurement activities to be completed successfully? 10 out of 10

Policy 3: Market analysis and review

All organisations reported compliance with the requirements of this policy.

The following table describes compliance with market analysis and review requirements in 2019–20:

Policy requirements Organisations complying
Does the organisation have a market analysis methodology? 10 out of 10
Does the organisation have a process to identify aggregated purchasing opportunities (state purchase contracts and/or sole entity purchase contracts) 10 out of 10
Does the organisation have an asset disposal process? 10 out of 10

Policy 4: Market approach

Nine out of ten organisations reported compliance with the requirements of this policy.

The Department of Jobs, Precincts and Regions identified instances of non-compliance related to contracts and variations being entered into without obtaining appropriate approvals. The department is working on improving compliance and procurement capability through activities such as an external review of its procurement operating model, introducing Oracle Cloud contract module with mandatory training, and rolling out online procurement training sessions.

The following table describes compliance with market approach requirements in 2019–20:

Policy requirements Organisations complying
Does the organisation have a market approach strategy? 10 out of 10
Does the organisation have critical incidents protocols and processes? 10 out of 10
Were all critical incidents managed in accordance with the market approach policy? 10 out of 10
Does the organisation have an evaluation plan, supplier negotiation and selection process? 10 out of 10
Were all market submissions managed in compliance with the market approach policy?  9 out of 10

Policy 5: Contract management and contract disclosure

Three organisations did not fully comply with the requirements of this policy.

The Department of Environment, Land, Water and Planning had several instances of non-compliance breaches related to contract management. As a result, contract management training is now mandatory for contract managers in some business units.

The department is planning to roll out a new sourcing and contract management tool (Zycus) in late 2020, which will provide greater visibility and structure over contract management. Zycus is being implemented as part of a fully integrated solution which includes SAP, Oracle and a number of other technologies. Implementation was originally planned for 2019–20, but took longer to test than anticipated due to the complexity of the system.

The department also published a few contracts after 60 days on the Buying for Victoria Supplier Portal website. The department regularly reconciles its contracts database with the contracts publishing system and follows up any instances of non-disclosure with the appropriate contract managers to arrange publishing as soon as possible. However, this occasionally results in publishing after the 60-day period. The Zycus procurement system implementation will improve this process.

After machinery of government changes, the Department of Transport needed to merge three procurement systems and could not confirm that all contracts were managed in compliance with the contract management policy, due to a lack of visibility in these systems. This is being addressed by implementing Zycus.

The department also failed to disclose all contracts within 60 days. It is working through a backlog of contracts and will ensure all contracts are published by 31 July 2020.

The Department of Education and Training identified active contracts that did not have valid insurance certificates of currency on file. The department has mandated contract management training for contract managers of high-value/complexity engagements and updated procurement document templates to highlight the need for valid insurance certificates to be held on file by contract managers.

The Department of Jobs, Precincts and Regions disclosed all contracts as required, but some contracts were published outside the 60-day period due to resourcing changes and operational constraints.

The following table described compliance with contract management and disclosure requirements in 2019–20:

Policy requirement Organisations complying
Does the organisation have a contract management framework? 10 out of 10
Were all contracts managed in compliance with the contract management policy? 7 out of 10
Does the organisation have a contract disclosure process? 10 out of 10
Did the organisation disclose all contracts valued over $100 000 (incl. GST) within 60 days on the Buying for Victoria Supplier Portal website? 7 out of 10

Other mandatory requirements – Supplier Code of Conduct

All organisations included a requirement to sign a supplier code of conduct commitment letter in their market approaches.

Two organisations were not able to report compliance with the requirement to exclude suppliers that failed to return a signed letter for the following reasons:

  • The Department of Transport could not confirm compliance due to a lack of system functionality to measure this requirement. The implementation of Zycus will rectify this shortfall.
  • The Department of Justice and Community Safety noted one instance where a supplier was engaged despite them not having returned a signed letter.

The following table described compliance with other mandatory requirements in 2019–20:

Policy requirement Organisations complying
Did you include a requirement to sign a supplier code of conduct commitment letter in all your market approaches? 10 out of 10
Did you exclude suppliers that failed to return a signed letter? 8 out of 10

Audits

Our audit program:

  • verifies compliance with VGPB supply policies
  • minimises risks
  • improves processes to drive better procurement outcomes

The audit measures how well organisations are delivering benefits, efficiencies and better service delivery as a result of improved supplier engagement, increased market engagement and greater rigour in driving value from contracts.

Download this document for the audit program schedule and results at 30 June 2020:

Audit findings in 2019–20

Department of Premier and Cabinet

The VGPB identified several areas for improvement for the Department of Premier and Cabinet. The department has completed 90 per cent of the audit recommendations, making the following improvements:

  • creating new recordkeeping rules for the business and storing all procurement documents in a shared, central depository
  • developing contract management plans for all contracts
  • updating the contract management policy and guide to include document retention requirements
  • communicating contract management requirements to all relevant staff
  • setting up the internal procurement unit (the procurement governance committee) and updating the department’s procurement policy
  • checking the complaints management process
  • publishing a procurement activity plan with all required details
  • aligning the department’s procurement guide with the VGPB’s market approach policy
  • checking contract disclosure processes are in place and correctly implemented

The department still needs to train contract managers. This is due to be completed in early 2020–21.

Department of Education and Training

The Department of Education and Training had a positive audit result with only two recommendations. In response to recommendations, the department:

  • mandated contract management training for contract managers of high-value/complexity engagements
  • updated procurement document templates to highlight that contract managers must keep valid insurance certificates on file

Performance measures

Organisations track their procurement performance each year using the following performance measures and methodology.

Organisations applied new measures in 2019–20, after measures were revised in consultation with chief procurement officers in 2018–19.

Value created as a consequence of department procurement activity

Value of direct expenditure savings (and potential expenditure avoided) of the organisation’s procurements conducted during the financial year, as a percentage of total value of the organisation’s contracted spend during the financial year.

Managed spend

The proportion of goods and services procurement spend reviewed or undertaken by an organisation’s central procurement governance unit.

Increase in procurement capability

Annual assessment of change in organisational procurement capability year-on-year, measured by the VGPB capability assessment tool.

Supplier satisfaction assessment

Satisfaction with the procurement process and service provided by the organisation’s procurement function, based on a survey of supplier experience of individual procurement activities. The survey is conducted with successful and unsuccessful suppliers.

Planned procurement activity as a percentage of actual procurement activity

Number of planned procurements documented in the organisation’s internal forward activity plan against the number of market approaches actually undertaken during the financial year.

The supplier satisfaction survey moved from an annual data collection to an event-based survey sent out by organisations at the end of each procurement process. This has resulted in a higher response rate (15 per cent) and has given organisations more meaningful results to guide their supplier engagement.

More information on organisational performance, including a comparison with the previous two years, can be found under each organisation’s profile in the Procurement profiles.

Download this document for the summary of performance measures results in 2019-20, including:

  • value created through procurement
  • managed spend
  • increase in procurement capability
  • successful and unsuccessful suppliers
  • planned procurement activity

Engagement

In 2018–19, the VGPB moved from an organisational oversight model focused on risk and complexity to an engagement model. Under the new model, organisations engage with the VGPB on a broader range of procurement activities, providing the opportunity for the VGPB to monitor compliance more widely, engage and interact with procurement personnel across government and give strategic advice.

Under this new engagement model, the VGPB received eight submissions from organisations in 2019–20. The VGPB gave strategic advice to chief procurement officers, procurement practitioners and stakeholders on a range of procurement matters. VGPB members also attended and presented at meetings with several departments’ internal procurement units and procurement boards to discuss a range of procurement-related matters and priorities during the year.

VGPB members supported and attended procurement reform subcommittee meetings, providing strategic procurement advice.. Relevant VGPB members also provided oversight and advice on developing business cases and market engagement strategies for the renewal of four state purchase contracts (SPCs) and the establishment of two new SPCs during 2019–20.

Three board members reviewed the VGPB’s audit compliance program and engaged with chief procurement officers and audit practitioners to develop options for establishing a more comprehensive audit program. These options will be reviewed by the VGPB in August 2020 in anticipation of transitioning to the new audit program in 2020–21. Two VGPB members are also helping the Department of Premier and Cabinet with a program of work to lift procurement capability across government in regard to cybersecurity and information technology procurement.

Complaints

A complaint is defined as an issue or concern expressed by a supplier in relation to the process and probity applied by an organisation when carrying out a procurement activity.

Organisations must have a complaints management system which sets out the process for addressing complaints by suppliers. Chief procurement officers (CPOs) are responsible for the complaints management process. In 2019–20, all organisations had a complaints management system in place.
Organisations reported four complaints related to procurement activity, as shown in Table 13. This compares to 10 complaints in 2018–19, nine in 2017–18 and five in 2016–17.

Organisations reported four complaints related to procurement activity. This compares to 10 complaints in 2018–19, nine in 2017–18 and five in 2016–17.

Department of Treasury and Finance

Number of complaints: 1

Nature of complaint:

Late submission to an SPC tender, and an assertion that the process for informing stakeholders was deficient.

Action taken:

The CPO investigated and found that the integrity of the tender process had not been compromised. The CPO noted that the independent probity adviser engaged by the department had also found that the late submission should not be accepted. The matter was referred to the VGPB when the complainant was dissatisfied with the outcome of the investigation by the CPO.

Status:

Referred to VGPB.

Environment, Land, Water and Planning

Number of complaints: 2

Nature of complaint:

Poor administration of procurement process.

Action taken:

CPO investigated and found the process to be fair and reasonable. The complainant wanted to escalate the matter and was advised how to do so (in November 2019). To date, the VGPB has not received a complaint, so this is considered as resolved.

Status:

Resolved.

Nature of complaint:

Conduct of the risk evaluation process and awarding the contract to a ‘non-conforming’ bid.

Action taken:

The CPO reviewed the tender process and the report compiled by the independent probity advisor. The CPO was satisfied that the process was fair and reasonable and informed the complainant in writing.

Status:

Resolved.

Victoria Police

Number of complaints: 1

Nature of complaint:

Tenderers were not treated in a fair and equitable manner, the evaluation process was flawed, and feedback given to unsuccessful suppliers was not timely or transparent

Action taken:

Victoria Police investigated the complaint and found no adverse findings. It did identify some improvement opportunities. The complainant escalated the complaint to the VGPB. The VGPB investigated and based on their response, Victoria Police committed to make several improvements, including reviewing and consolidating procurement practitioner skills, focusing on education and capability and improving sourcing and contract management systems.

Status:

Resolved.

Resolution of complaints from 2018–19

Victoria Police had one complaint in 2018–19 that was still under investigation at the end of that financial year. The complaint related to the wording of a response to a clarification question which allegedly implied a preconceived outcome. Victoria Police met with the supplier to respond to the complaint and the matter was resolved in September 2019.

Towards the end of 2018–19, a complainant to the Department of Health and Human Services escalated their complaint to the VGPB. The complaint related to two procurement processes. One was found to be outside the jurisdiction of the VGPB. The second was investigated and no non-compliance found. The VGPB did recommend the department make two minor improvements to its complaints management process. The complainant was advised of the outcome in July 2019.

Reviewed 13 October 2020

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