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Harnessing the buying power of government

Understand how combining demand harnesses greater economies of scale for Government when negotiating with suppliers.

Harnessing the buying power of government

By combining demand for commonly used goods and services, government can harness greater economies of scale when negotiating with suppliers.

Aggregated purchasing is grouping together demand for commonly purchased goods and services to make the most of greater economies of scale when procuring from the marketplace.

Aggregating purchasing power allows organisations to negotiate lower prices and better terms and conditions and reduces risk and the administrative burden on buyers and suppliers.

The Victorian Government has a number of state purchase contracts (SPCs) and registers for commonly purchased goods and services.

More than 200 organisations benefit from the time and cost savings offered by SPCs. Total annual spend under SPCs is estimated to be about $1.7 billion (not including spend under the Legal Services Panel).

Who can access SPCs?

All government organisations and agencies can access SPCs provided they commit to the rules of use. For organisations bound by VGPB policies, the individual rules of use for the SPC apply.

SPCs can be sole or multiple (panel) supplier arrangements or register arrangements. Panels can be open or closed. Open panels can accept new suppliers at set or other times during the contract period. Closed panels are restricted to the suppliers engaged at the start of the contract.
Registers consist of prequalified suppliers, compliant where required with the eligibility criteria to provide goods and services to Victorian Government.

Other organisations that can access SPCs, on application to the relevant lead agency, include local and federal government organisations and not-for-profit organisations.

Who manages SPCs?

The Department of Treasury and Finance manages almost all non-ICT goods and services SPCs. The only exception is the Legal Services Panel, which is managed by the Department of Justice and Community Safety.

The Department of Premier and Cabinet is responsible for ICT SPCs, apart from Rosetta, which is managed by Cenitex.

Looking for new opportunities

Throughout 2019–20, the VGPB continued to review organisations’ forward-looking procurement activity plans. This helps the VGPB to continue to support the departments of Treasury and Finance and Premier and Cabinet in identifying additional opportunities for aggregation to drive greater value-for-money outcomes.

The Department of Treasury and Finance has:

  • been leading a program of data analytics designed to deliver improvements to existing SPCs and identify opportunities for new SPCs
  • developed a strategy and market approach document to lay the foundation for a modern and flexible banking and financial services SPC

Victoria is also joining with New South Wales, Queensland and the Australian Capital Territory in a joint Fuel and Associated Products procurement to drive better value for money.

The Department of Premier and Cabinet is exploring options for:

  • Amazon Web Services agreement
  • ServiceNow agreement
  • Google agreement

The Department of Premier and Cabinet is also looking at introducing virtualised buying for all ICT SPCs through the eServices program.

About the data in this section

The contract values in the tables are estimates. Expenditure occurs as organisations order and consume goods and services under the SPC. This takes place over the contract term. Total estimated value includes the initial contract term, and any options to extend the contract (although these may or may not be exercised).

State purchase contracts approved in 2019–20

In 2019–20, six SPCs were approved with an estimated total value of $295.5 million. This compares to nine SPCs approved in 2018–19, with an estimated total value of $885.8 million.

Four SPCs were extended under a contract variation in 2019–20: 

  • The Department of Premier and Cabinet varied three SPCs during the year – Telecommunication (TPAMS 2025) Services, Intra-Government Secured Network and Victorian Office Telephony Services – to ensure these contracts end when the new Victorian Telecommunications Service contract starts.
  • The Department of Treasury and Finance varied one SPC during the year after market analysis showed no competitors in the market offering the same or similar service.

Download this document for the list of state purchase contracts approved in 2019–20:

The benefits of ICT SPCs

ICT is an obvious contender for combining purchasing power, given the prevalence of technology in our working lives. In 2019–20, ICT SPCs continued to offer benefits and value-for-money outcomes across government:

The End User Computing Agreement played an important role during COVID-19 as new devices were ordered to support work-from-home arrangements. Through this agreement, Victorian Government device orders were prioritised with suppliers, with any backlog carefully managed and customers kept informed throughout.

The Microsoft Enterprise Agreement was renegotiated for a further three years in March 2020. This SPC is used by all inner budget departments (except the Department of Education and Training), as well as 29 outer budget sector agencies. Consolidating government spend has led to significant savings benefits for Office 365 (both cloud and perpetual licences), Dynamics 365 (cloud licences) and Azure cloud services.

The Multifunctional Printing Device SPC was refreshed this year. Negotiations resulted in better value for the state with simplified purchasing processes, streamlined reporting, social procurement provisions and enhanced service level agreements. For many of the devices available under the contract, higher discounts were achieved and more flexibility for customers with a range of devices to better meet their business requirements.

The SPC team developed a strategic sourcing operations manual for ICT procurement to be used when sourcing all ICT SPCs. It includes detailed RASCI guidelines (Responsible, Accountable, Supporting, Consulted and Informed).

Sole entity purchase contracts approved in 2019–20

In 2019–20, 44 SEPCs were approved with an estimated total value of $98.8 million.

This compares to 32 SEPCs approved in 2018–19, with an estimated total value of $441.9 million.

The following table lists the sole entity purchase contracts approved in 2019-20:

Organisation Number Value ($m)
Environment, Land, Water and Planning 15 $15.1
Health and Human Services 1 $3.5
Justice and Community Safety 1 $0.2
CenITex 3 $3.7
Victoria Police 24 $76.3
Total 44 $98.8

Appendix - Sole entity purchase contract data

Download this document for a breakdown of SEPCs approved in 2019–20.

Reviewed 13 October 2020

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