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Harnessing the buying power of government

Learn about goods and services aggregated buying power in 2020-21.

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 $2 billion.

Under the VGPB’s expansion program, more organisations will be able to make greater use of SPCs (see Priority 2: Deliver the expansion program under VGPB Activities in 2020–21).

Types of SPC arrangements

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 the Victorian Government.

Who can access SPCs?

All government organisations and agencies can access SPCs.

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

Who manages SPCs?

DTF manages almost all non-ICT goods and services SPCs. The only exception is the Legal Services Panel, which is managed by DJCS.

DPC is responsible for ICT SPCs, apart from Rosetta, which is managed by Cenitex.

The role of the VGPB

The VGPB plays a role in endorsing new SPC business cases and is consulted on SPC renewals, replacements and extensions (not including exercising contractual options). In 2020–21, several SPC strategies, proposals and draft business cases were submitted to the VGPB for feedback. This included SPCs such as banking and financial services, fuel, print management and associated services, stationery and workplace consumables, and travel management services.

About the data in this section

The contract values in the tables are estimates. Expenditure occurs as organisations order and consume goods and services over the contract term of the SPC. 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 2020–21

In 2020–21, four SPCs were approved with an estimated total value of $984.8 million. This compares to six SPCs approved in 2019–20, with an estimated total value of $295.5 million.

Download this document for the list of state purchase contracts approved in 2020–21:

Variations to SPCs

Ten variations to SPCs were reported in 2020–21. Most variations related to extending contracts to provide service continuity during COVID-19.

Download this document for a list of variations to state purchase contracts approved in 2020-21:

Case study: Smoothing the transition to a new media agency services SPC

On 30 May 2021, OMD Australia was appointed as the new supplier for the Master Media Agency Services SPC with a three-year initial term and two one-year options to extend.

The Department of Treasury and Finance (DTF) managed a smooth transition from the previous provider to OMD to provide continuous service to government. This is a best-in-class media contract that focuses on a partnership approach between the buyer and supplier and operates as an open-cost pricing model. The full financial costs of any advertising campaign are visible to Victorian Government agencies. All third-party media outlet charges attract no additional margin via OMD.

In addition to delivering excellent value for the Victorian Government’s media needs, the partnership with OMD will deliver additional benefits in priority areas aligned with the state’s Social Procurement Framework. This includes employment opportunities for those most impacted by the COVID-19 pandemic – OMD has committed to hiring 12 young people to work on the Victorian Government account and employ an additional 15 young people each year across the agency.

Other social benefits of the contract include a commitment to employ a person with a disability to work on the government account, internship opportunities for Aboriginal people, and purchasing from Victorian social enterprises and Aboriginal businesses.

Looking for new SPC opportunities

DPC

DPC is exploring options to aggregate, improve and drive stronger value proposition for:

  • Human Capital Management SAP
  • Zycus procurement as a cloud platform
  • ServiceNow agreement
  • Google agreement.

DPC is also leading an ICT procurement reform that will simplify the way government and industry engage. The program will focus on elevating local, social and small to medium enterprise entities in support of Victoria’s economic and business recovery.

DTF

DTF has developed a procurement analytics capability that will deliver improvements to existing SPCs and identify opportunities for new SPCs.

DTF will harness the procurement analytics capabilities to identify new opportunities for aggregation to drive greater value-for-money outcomes. These mechanisms will also enable DTF to provide ongoing improvements to existing SPCs and management of new SPCs to ensure the benefits provided by these contracts are maximised. Refer to VGPB activities in 2020–21 for more information.

In 2020–21, DTF worked on finalising two SPCs related to banking and financial services and an interjurisdictional fuel and associated products contract with New South Wales and Queensland that will deliver considerable financial savings and social procurement outcomes for Victoria while maintaining excellent state-wide coverage. These SPCs will be finalised in early 2021–22.

Sole entity purchase contracts approved in 2020–21

In 2020–21, 26 SEPCs were approved with an estimated total value of $121.7 million.

This compares to 44 SEPCs with an estimated total value of $98.8 million approved in 2019–20.

The following table lists the sole entity purchase contracts approved in 2020-21:

Organisation Number Value ($m)
Department of Environment, Land, Water and Planning 10 54.6
Department of Justice and Community Safety 2 7.2
Department of Transport 1 20.0
Cenitex 1 6.0
MTIA 1 4.8
Victoria Police 11 29.1
Total 26 121.7

Appendix: Sole entity purchase contract data

Download this document for a breakdown of SEPCs approved in 2020–21.

Reviewed 26 October 2021

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