Monitoring compliance with VGPB policies
Under the Financial Management Act (FMA), the VGPB is responsible for monitoring compliance by departments and specified entities with its supply policies (refer to Scope of VGPB policies under About the VGPB to see which organisations come under the remit of the VGPB).
The VGPB monitors compliance through the seven main mechanisms. This section covers accreditation, compliance reported in annual supply reports, audit results, performance measures and complaints. The VGPB’s engagement activities are covered earlier under Priority 3: Improve visibility and support for good procurement.
Use of the term ‘organisation’ in this section, refers only to organisations (departments and specified entities) mandated to comply with VGPB policies under the FMA.
Compliance mechanisms
Compliance mechanisms include:
- Annual supply reports
- Performance measures
- Audits
- Engagement
- Complaints
- Procurement activity plans
- Accreditation
Accreditation process
Organisations are required to seek VGPB accreditation of their compliance with the goods and services supply policies.
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 conduct an internal audit of compliance with VGPB policies and submit the audit report to the VGPB every three years. From 2021–22, the audit approach will change, with organisations required to undertake two procurement-related audits every three years. Progress on actions to address findings are monitored by the VGPB.
Performance measures
Organisations monitor performance against five performance measures and report results in their annual supply report. For one measure (supplier satisfaction), the VGPB has commissioned a market research company to manage an ongoing survey of suppliers to assess satisfaction levels and identify areas for improvement in procurement.
Engagement
The VGPB’s engagement model has replaced the former oversight process. CPOs may be invited to VGPB meetings to discuss compliance issues, and are encouraged to discuss procurement strategies, strategic procurements or any other procurement matters with the VGPB at scheduled VGPB meetings or at other relevant forums with VGPB members.
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 annual supply report. Suppliers dissatisfied with complaint outcomes may escalate these with the VGPB for investigation.
Review of procurement activity plans
Organisations publish forward procurement activity plans on their website to give the supplier marketplace forward notice of procurement activity planned in the coming 12 to 18 months. These plans are submitted every year for review by the VGPB.
Accreditation
Departments and some specified entities need to apply for and obtain VGPB accreditation under the goods and services supply policies.
Accreditation involves a department or specified entity preparing a detailed submission for the VGPB with evidence demonstrating compliance with the goods and services supply policies.
Agencies subject to the VGPB expansion do not go through accreditation. However, they will need to align their policies and processes with the VGPB's goods and services supply policies.
If machinery of government changes result in the creation of new departments or significant changes to an existing organisation’s procurement function, the newly formed organisations are required to submit a new accreditation application.
Two departments were accredited in 2020–21 after machinery of government changes in 2019 (see case study below).
On 31 January 2021, the Department of Health (DH) and the Department of Families, Fairness and Housing (DFFH) were formed from a machinery of government change in the former Department of Health and Human Services.
Both departments will undertake VGPB accreditation in 2022, given the substantial changes to their procurement profiles.
Last year, MTIA’s procurement activity was reported under Department of Transport (DoT), in line with the usual practice for administrative offices. MTIA has a substantial goods and services budget and governs and operates its procurement function separate from DoT. MTIA has opted to seek independent accreditation in 2021–22. The VGPB welcomes MTIA’s decision to seek accreditation.
Case study: Two departments successfully accredited in 2020–21
In 2020–21, the Department of Transport (DoT) and the Department of Jobs, Precincts and Regions (DJPR) were accredited after being created from the former Department of Economic Development, Jobs, Transport and Resources (DEDJTR) from 1 January 2019.
The newly formed DoT brought Victoria’s transport system under one umbrella with the merger of Public Transport Victoria, VicRoads and the previous transport portfolio in DEDJTR.
While COVID-19 made it challenging to pull together a new procurement strategy, DoT submitted its application in May 2020 and was accredited in September 2020.
‘Having a united procurement framework in DoT helped us to form an integrated department approach. It gives suppliers and internal stakeholders a ‘one way, same way’ approach to strategic procurement,’ said DoT’s CPO, Lisa Williams.
DJPR submitted its application for VGPB accreditation in October 2020 and was accredited in April 2021.
‘Accreditation gives the VGPB confidence that a department has all the necessary governance, strategic planning, roles and processes in place to comply with our policy framework,’ explained Nadine Lennie, VGPB Chair.
‘We appreciate the substantial time and effort that both departments put into the accreditation process, especially under such challenging circumstances,’ added Nadine.
Compliance reported in annual supply reports
Organisations submit an annual supply report (ASR) to the VGPB 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.
Overall compliance
In 2020–21, organisations reported high levels of compliance with the VGPB supply policy framework.
Download this document for compliance with VGPB policies in 2020–21, including:
- compliance against the 5 goods and services supply policies
- other mandatory requirements
- overall compliance
Compliance by policy area
Policy 1: Governance
All but one organisation reported full compliance with the requirements of this policy in 2020–21.
Victoria Police reported that two components of its procurement strategy (contract management planning strategy and capability development plan) are not complete, however work is under way to address this.
The following table describes compliance with governance requirements in 2020–21.
| Policy requirement | Organisations complying |
|---|---|
| Did you have a CPO throughout the year? | 12 of 12 |
| Does the CPO have appropriate procurement qualifications and/or experience? | 12 of 12 |
| Do you have an internal procurement unit? | 12 of 12 |
Is the procurement strategy in place? This includes a:
| 11 of 12 |
| Did you review your procurement activity plan in 2020–21? | 12 of 12 |
| Is a high-level version of your procurement activity plan published on your website? | 12 of 12 |
| Is your complaints management system in place? | 12 of 12 |
Policy 2: Complexity and capability assessment
All but one organisation reported compliance with the requirements of this policy.
DELWP did not review its procurement capability development plan in 2020–21. The plan will be reviewed in 2021–22.
The following table describes complexity and capability assessment requirements in 2020–21.
| Policy requirement | Organisations complying |
|---|---|
| Do you have a complexity assessment methodology? | 12 of 12 |
| Is the complexity assessment methodology being applied to all procurement activity? | 12 of 12 |
| Do you have a procurement capability assessment methodology? | 11 of 12 |
| Does your organisation have an appropriate level of procurement expertise, resources, systems and processes that enable procurement activities to be completed successfully? | 12 of 12 |
Policy 3: Market analysis and review
All organisations reported compliance with the requirements of this policy.
The following table describes market analysis and review requirements in 2020–21.
| Policy requirements | Organisations complying |
|---|---|
| Do you have a market analysis methodology? | 12 of 12 |
| Do you have a process to identify aggregated purchasing opportunities (SPC and/or SEPC) | 12 of 12 |
| Do you have an asset disposal process? | 12 of 12 |
Policy 4: Market approach
All organisations reported compliance with the requirements of this policy.
The following table describes market approach requirements in 2020–21.
| Policy requirement | Organisations complying |
|---|---|
| Do you have a market approach strategy to satisfy probity standards? | 12 of 12 |
| Do you have an established process for the secure lodgment of tender submissions? | 12 of 12 |
| Do you have critical incidents protocols and processes? | 12 of 12 |
| Were all critical incidents managed in accordance with the market approach policy? | 8 of 8* |
| Do you have an evaluation plan, supplier negotiation and selection process? | 12 of 12 |
| Were all market submissions managed in compliance with the market approach policy? | 12 of 12 |
* Four organisations did not purchase any goods and services under the critical incident procurement protocol in 2020–21.
Policy 5: Contract management and contract disclosure
Two organisations did not fully comply with the requirements of this policy.
DoT disclosed all contracts over $100 000 in 2020–21, but not all contracts over $10 million due to COVID-19 restrictions and staff being unable to attend the office to redact commercial-in-confidence material before publishing. Contracts are being reviewed and will be placed on the Tenders Vic website as soon as possible.
Management of insurance certificates was flagged as an area for improvement for Cenitex in their VGPB compliance audit. Cenitex developed a risk-based classification methodology to support its insurance certification review requirements. More than half of its contracts (62%) and half of all vendors have now been reviewed with this work continuing into 2021–22.
The following table describes contract management and disclosure requirements in 2020–21.
| Policy requirements | Organisations complying |
|---|---|
| Do you have a contract management framework? | 12 of 12 |
| Were all contracts managed in compliance with the contract management policy? | 12 of 12 |
| Do you have a contract register in place? | 12 of 12 |
| Do you have a process to ensure currency of all relevant insurance certificates? | 11 of 12 |
| Do you have a contract disclosure process? | 12 of 12 |
| Did you meet all contract disclosure requirements for all contracts valued over ≥$100 000 / ≥$10 million including GST? | 11 of 12 |
Other mandatory requirements – Supplier Code of Conduct
All organisations complied with these requirements in 2020–21.
The following table describes Supplier Code of Conduct requirements in 2020–21.
| Requirement | Organisations complying |
|---|---|
| Did you include a requirement to sign a supplier code of conduct commitment letter in all your market approaches? | 12 of 12 |
| Did you exclude suppliers that failed to return a signed letter? | 12 of 12 |
Case study: A hybrid market approach delivers the three-year-old kindergarten toolkit on time
Victoria is the first state or territory in Australia to introduce funded three-year-old kindergarten for all children. To support early childhood teaching teams to roll out this initiative, the Department of Education and (DET) produced a three-year-old kindergarten teaching toolkit.
The procurement team needed to source the toolkit container and contents and send it to 2 904 early childhood centres in a staged rollout across the state.
The toolkit had many different components, needing a hybrid market approach to source the contents. Books were sourced directly from publishers, whereas printed items, the toolkit container and warehouse storage and packing could all be procured from state purchase contracts.
It was critical for the goods to be supplied in two shipments to minimise the risk of the department holding excess stock for long periods, and to maximise the potential for bulk discount pricing. DET also needed to give suppliers enough lead time to deliver large quantities of goods to the warehouse (especially the smaller book publishers/suppliers) in time for the rollout to services.
DET’s sourcing team used a streamlined approach to fast-track the procurement. The team negotiated upfront volume discounts with suppliers to avoid protracted pricing negotiations and successfully secured discounted pricing offers at the outset. The toolkits are currently being delivered across the state for the staged rollout with final kits to be delivered by January 2022.
Audits
Departments and agencies are accountable for ensuring good procurement practice in line with VGPB policies. Under the VGPB’s audit program, departments and accredited agencies internally audit their compliance with VGPB policies every three years.
The VGPB 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.
From 1 July 2021, the VGPB will put in place a new process of two targeted audits over a three-year period. The focus of the audits will shift from broad compliance to focus more directly on managing and reducing the most important risks for the organisation and looking for process improvements which align with departments’ broader strategies.
A summary of the audits conducted in the second three-year cycle of the VGPB audit program from 2018–19 to 2020–21 is presented in the downloadable document Table Audit program schedule and results at 30 June 2021.
Two further audits (DoT and DJPR) were also completed in this period and reports provided as part of the requirements for their accreditation applications.
DJCS is due to complete its audit in Quarter 4 of 2021.
Download this document for the audit program schedule and results at 30 June 2021:
Audit findings in 2020–21
Department of Health and Human Services
DHHS (now DH and DFFH) completed its audit in August 2020. The overall audit rating was ‘Acceptable Controls’ – the second highest of four ratings. The audit identified three findings, including gaps in documentation to support completion of procurement/contract management activities (risk rating –medium), limited recording and reporting of SPC usage (risk rating – low-), and gaps in the capture of asset disposal information.
In response to the audit, DHHS reviewed and updated its procurement documentation management, strengthened its communications on procurement requirements with business units and its monitoring of use of SPCs, and updated its asset disposal policy and introduced an online asset disposal management register.
Cenitex
Cenitex completed its audit in August 2020. The audit concluded that Cenitex’s procurement processes and controls were continuing to build in maturity. The audit identified five findings related to:
- Finalising procurement governance strategies and plans
- Strengthening record-keeping and controls to clearly demonstrate that probity, impartiality and transparency during the performance of procurement activities and ‘best value’ procurement outcomes are achieved and captured
- Monitoring currency of supplier insurance certificates
- Opportunities for management to uplift Cenitex’s Procurement Transformation project.
The external auditors attended the VGPB meeting in December 2020 to discuss the audit findings and management actions. Cenitex has subsequently updated four key governance documents, investigated and remediated a small number of complexity assessments and signed contracts not provided to the auditor during the audit, updated induction and records management processes, and started a review of insurance certificate expiry dates to be completed in 2021–22.
Department of Environment, Land, Water and Planning
DELWP completed its audit in December 2020. The overall audit rating in relation to consistency of approach was ‘Inconsistent’ and in relation to maturity of design was ‘Evolving’– both of these ratings were the second lowest of four ratings on their respective scales.
The audit identified three findings:
- DELWP’s current approach to managing and overseeing procurement activity did not support full compliance with VGPB policy requirements (risk rating – significant)
- Processes and controls relating to asset disposal need improvement (risk rating – medium)
- Processes and controls relating to management of procurement complaints need improvement (risk rating – low)
In response to these issues, DELWP has implemented a hub-and-spoke operating model with improved oversight and support from the central procurement unit. It has implemented new procurement systems, strengthened its monitoring of asset disposal, and updated policies and procedures to ensure compliance with VGPB policy requirements by business units undertaking goods and services procurement. A complaints register has also been established to monitor the progress of complaints in line with documented timeframes.
Performance measures in 2020–21
Organisations track their procurement performance each year using the performance measures and methodology listed in Table 11.
The supplier satisfaction assessment is based on a survey sent to suppliers. Results from 2020–21 are listed in Table 12. 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 section.
Performance measure methodology
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/decrease 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.
Download this document for the summary of performance measures results in 2020–21, including:
- Value created through procurement
- Managed spend
- Increase in procurement capability
- Successful and unsuccessful suppliers
- Planned procurement activity
Complaints
Organisations must have a complaints management system which sets out the process for addressing complaints by suppliers related to process or probity concerns for a particular procurement. CPOs are responsible for the complaints management process. In 2020–21, all organisations had a complaints management system in place.
Eight complaints related to procurement activity were reported in 2020–21. This compares to four complaints in 2019–20 and 10 complaints in 2018–19.
Organisations investigate and resolve complaints in line with their complaints procedure. If the complainant is dissatisfied with the outcome, they may escalate their complaint for further review to the VGPB.
Download this document for the summary of complaints received in 2020–21:
Resolution of complaints from 2019–20
In 2019–20, DTF reported one complaint related to a late submission to an SPC tender, and an assertion that the process for informing stakeholders was deficient.
The CPO’s investigation found that the integrity of the tender process had not been compromised. The independent probity adviser engaged by DTF also found that the late submission should not be accepted.
The complainant was dissatisfied with the outcome of the investigation and referred the matter in June 2020 to the VGPB for review. The VGPB found no breaches of VGPB policy requirements in how DTF had communicated with the market before release of the tender, nor in how DTF had responded to the complaint. The complainant was advised of the outcome of the complaint in September 2020.
Reviewed 05 July 2023