In 2020–21, the VGPB collected procurement data from 12 organisations – the nine Victorian Government departments, Cenitex, MTIA and Victoria Police.
On 31 January 2021, the Department of Health and Human Services was split into two new departments: the Department of Health (DH) and the Department of Families, Fairness and Housing (DFFH) under machinery of government changes. DFFH and DH are reporting the same financial data (including procurement) in 2020–21.
This is the first year that MTIA has reported separately to the VGPB as it progresses towards accreditation in 2020–21. Last year MTIA reported through its portfolio department, DoT.
Snapshot of contract approval data
For contracts valued greater than $100 000:
- 1,231 total contract approvals in 2020–21 (number)
- $2,753.6 million total contract approvals in 2020–21 (value)
Number of contracts (by type of contract) and value
The following table describes the number of contracts (by type of contract) and value:
| Type of contract | Total contract approvals (number) | Total value of contracts ($ million) |
|---|---|---|
| One-off supplies (standard procurement process) | 964 | $919.6 |
| One-off supplies (critical incident procurement process) | 237 | $727.6 |
| Sole entity purchase contracts (SEPC) | 26 | $121.7 |
| State Purchase Contracts (SPC) | 4 | $984.8 |
Complexity profile across government contracts
The following table describes the complexity profile of contracts by number of contracts and value:
| Complexity profile | Number of contracts (number) | Value of contracts ($ million) |
|---|---|---|
| Transactional | 645 | $491.4 |
| Leveraged | 165 | $286.5 |
| Focused | 188 | $375.4 |
| Strategic | 233 | $1,600.4 |
About contract approval data
The VGPB collects data on contract approvals of all (non-construction) goods and services contracts valued at $100,000 or more, including GST. This reflects the total estimated value of contracts approved during the financial year. It does not reflect actual spend under contracts, particularly for longer term procurement arrangements such as state purchase contracts (SPCs) and sole entity purchase contracts (SEPCs).
Organisations report on three types of contracts:
One-off supply contracts
A single purchase of a specific quantity of goods or services.
One-off supply contracts are usually procured following standard procurement processes. However, during a critical incident, contracts may be procured under critical procurement protocols, which are designed to enable government to quickly respond to any emergency, crisis or disaster by adopting streamlined and flexible procurement processes.
One-off supply contracts can be established under SPCs and SEPCs, but these are not reported in contract approvals, because the contact value has already been captured under reporting of the head SPC/SEPC agreement.
Sole entity purchase contracts (SEPC)
A standing offer agreement for goods and services commonly used within an organisation. SEPCs are mandatory for the organisation establishing the arrangement.
State purchase contracts (SPC)
A standing offer agreement for goods and services commonly used across the Victorian Government, such as stationery, print management and ICT services.
Contracts approved in 2020–21
In 2020–21, the 12 organisations reported 1 231 procurement contract approvals (with an approved contract value greater than $100,000) with a total combined value of $2,753.6 million, as shown in the document below.
Consistent with previous years, the highest number and value of contract approvals relate to one-off supply contracts.
Organisations continued to procure significantly more goods and services under the critical incident protocol than in previous years due to the procurement response needed to keep Victorians safe during COVID-19.
The number of critical incident contracts approvals valued above $100,000 made up 19.7% of all one-off supply contracts, which is similar to last year (18.9%).
To read more about the critical incident procurement protocol and contracts approved under this policy in 2020–21, refer to One-off supply approvals (critical incidents) later in this section.
Download this document for the number and value of contract approvals in 2020–21 by goods and services:
Trends in contract approvals
The document 'Table trends in one off supply, SEPC and SPC contract approvals from 2018-19 to 2020-21' shows the number and value of contracts approved over the last three years. The increase in value this year can be attributed to two high-value SPCs renewed in 2020–21: the Master Agency Media Services SPC valued at $400 million and the Professional Advisory Services SPC valued at $500 million. These contracts both include a three-year contract term and two options to extend. The total estimated contract value encompasses this five-year period.
The number and value of SEPC and SPC approvals varies from year to year based on the specific procurement projects that need to be carried out in any given year, and/or the expiry and need for renewal of SEPCs and SPCs.
Download this document for the number and value of contracts approved over the last three years:
Case study: Covid-flexible professional learning for new primary school teachers
Transforming the First Years of the Teaching is an initiative for primary schools which aims to improve the quality and experience of graduate teachers as they are inducted into the profession. Graduate development is one of four key reform areas within the Department of Education and Training’s (DET) Excellence in Teacher Education reforms.
In support of this initiative, DET sought a supplier to design and deliver a two-year blended professional learning program for up to 350 graduate teachers a year.
DET’s procurement team assessed the complexity of the procurement to ensure it had the right resources to run the procurement process. The team conducted market analysis to understand the supplier market and develop a strategy for the market approach to maximise the probability of receiving high-quality proposals and generating a value-for-money outcome. The procurement team ran an open market tender approach to maximise competition and led the negotiation, best and final offer, internal approvals and contract execution processes.
Throughout the process, the procurement team worked in close partnership with subject matter experts to ensure key requirements for a high-quality learning program were embedded in the process, including appropriate measures to ensure business continuity during COVID-19 restrictions.
As a result of this partnering approach, DET was able to gain the benefits of its expertise in teacher professional development and its sophisticated procurement capability, to achieve a high-quality and value-for-money outcome. DET identified and contracted a supplier which began delivering this important program in Term 1 of this year, providing quality professional learning while remaining responsive to government and departmental responses to COVID-19, including social distancing, remote learning and school closures.
One-off supply contract approvals (standard process)
In 2020–21, organisations reported 964 one-off supply contract approvals valued at $919.6 million, excluding critical incident procurement contract approvals (see Table 17).
This compares to 1,036 one-off supply contract approvals in 2019–20, valued at $1,272 million.
Download this document for the number and value of one-off supply contract approvals by organisation and by goods and services in 2020-21:
Case study: Negotiating better outcomes for Victoria’s arterial road network
In June 2020, the Victorian Government invested $340 million to transform the real-time management of the arterial road network in three initial zones of metropolitan Melbourne.
To do this, the Department of (DoT) needed to find a dynamic system that could monitor the road network and give a real-time picture of congestion and road use.
DoT started with an innovative pay-to-learn approach identified through a separate procurement process, which put DoT in a more informed purchasing position.
DoT’s procurement team then lead the formal tender process to meet probity requirements, ensure maximum value from the market, reduce the time taken to gain the necessary outcomes and minimise risk to the department.
The team worked closely with the business and legal functions to drive an efficient procurement process – establishing timelines, market approach, negotiation strategies, KPIs and communication channels with the tenderers.
The tender included an initial round and a best and final offer. DoT’s procurement team led multiple further clarification rounds and negotiations to calibrate delivery expectations, clarify pricing and mitigate risks before finalising the process.
The negotiation process achieved a 25% value add with a combination of cost reductions and further solution enhancements.
The tender was completed in June 2021 and a single vendor chosen to manage a complex solution using a number of third parties. The solution is both modular and futureproof enabling the solution to grow and adapt with DoT’s future needs.
One-off supply approvals (critical incident process)
The VGPB’s market approach policy allows organisations to adopt streamlined and flexible procurement processes to facilitate an immediate response to an emergency, crisis or disaster (referred to in the policy as a critical incident). This policy applies to all Victorian Government departments and any public bodies that are subject to VGPB supply policies.
Critical incident protocols and processes are invoked when a relevant minister, accountable officer or CPO declares a critical incident to exist in relation to the operation of procurement processes by reason of:
- An emergency within the meaning of the Emergency Management Act
- An incident that causes an organisation's business continuity plan to be activated
- An incident that represents a serious and urgent threat to the health, safety or security of a person or property, or
- A situation that represents a serious or urgent disruption to services provided by an organisation.
During a critical incident, all other supply policies do not apply to the extent that the critical incident makes it impractical to apply them. Regardless, an organisation must:
- Take into account value for money, accountability, information asset security and probity to the extent that they can be applied given the severity and urgency of the incident
- Adopt minimum record-keeping processes
- Adhere to contract disclosure requirements.
Organisations must develop a plan or adopt a format that allows for minimum recording of certain information in relation to procurement decisions during a critical incident.
The accountable officer or CPO is to define a date at which procedures under critical incidents cease, after which organisations resume operating under standard VGPB procurement policies and processes.
This section includes all CIPs approved in 2020–21, including those valued at less than $100,000. Nine of the 12 reporting organisations conducted critical incident procurements in 2020–21, one less than last year. Cenitex reported four critical incident contract approvals in 2019–20, but none this year.
In 2020–21, organisations reported 466 critical incident contract approvals valued at $870.8 million, as listed in the document below.
Most of these contract approvals (95.5%) were for COVID-19 related goods and services, such as:
- Personal protective equipment and deep cleaning
- Testing and contract tracing services
- Supporting frontline and other COVID-19 workers
- Managing quarantine arrangements.
Contract approvals under the ‘Other’ category related to bushfire response (1), avian influenza (17) and state memorials (3).
DH/DFFH and DJCS reported the highest value of critical incident procurements in 2020–21, which is to be expected given that they are lead agencies in Victoria’s COVID-19 response.
Download this document for the number and value of critical incident procurement by organisation in 2020-21:
Case study: Supporting emergency services with agile procurement in a pandemic
Since the start of the pandemic, the Victoria procurement function has been challenged by the need to urgently procure goods and services to support frontline operations, often with very little notice.
The start of the pandemic required urgent supplies of personal protective equipment (PPE) such as nitrile gloves, surgical masks, hand sanitisers and antibacterial wipes.
Victoria Police was able to support its frontline members by procuring PPE under the VGPB’s critical incident procurement policy, while also preparing to supply these items under longer term arrangements following standard procurement policies.
More recent purchases included goods and services needed to support police members working at border crossings, the outer metropolitan sites (‘the Ring of Steel’) and the hotel quarantine program. Requests often came with a short one to two-day delivery timeframe.
Rarely used before the current pandemic, the critical incident procurement policy has shown its effectiveness in ensuring critical emergency services can continue to be delivered while adhering to VGPB policy.
Variations
Most variations reported in 2020–21 related to one-off supply contracts. The following table lists the number of contract variations by value range in 2020-21:
| Variation (value range) | One-off supply contracts | SEPCs | SPCs |
|---|---|---|---|
| $0 – $9,999 | 36 | Nil | Nil |
| $10,000 – $99,999 | 199 | Nil | Nil |
| $100,000 – $999,999 | 308 | 5 | Nil |
| > $1 million | 86 | 10 | 10 |
| Total | 629 | 15 | 10 |
An organisation may vary a contract for numerous reasons:
- The project scope or timeframe may change during the contract lifespan, requiring a variation to the original contract
- A lack of suitable suppliers may make it more economical to vary a contract than launch a full tender process
- Organisations may need to extend contracts to provide service continuity after machinery of government changes or while they prioritise their response to emergency events such as bushfires or COVID-19
- A variation can cover a transition period while an organisation prepares for a full tender process.
The following table shows the number of variations reported by organisations in 2020–21:
| Organisation | Number |
|---|---|
| Education and Training (DET) (note 1) | Nil |
| Environment, Land, Water and Planning (DELWP) (note 2) | 87 |
| Health/Families, Fairness and Housing | 98 |
| Jobs, Precincts and Regions | 110 |
| Justice and Community Safety (DJCS) (note 3) | 152 |
| Department of Premier and Cabinet | 91 |
| Transport | 3 |
| Treasury and Finance | 14 |
| Cenitex | 25 |
| MTIA | 14 |
| Victoria Police | 60 |
| Total | 654 |
Note 1: DET keeps full records of all variations but cannot extract number and value from its current procurement system. A new system will be implemented soon to enable this data capture.
Note 2: DELWP provided partial variations data in 2020–21 due to migrating to a new contract management system. This includes contract variation data for contracts above $150 000 from July to December 2020 and for contracts above $200 000 from January to June 2021.
Note 3: DJCS variations data does not include date variations.
Procurement complexity
A key feature of VGPB policies is a requirement for organisations to assess the complexity of a procurement or category of procurements before starting any procurement process, and ensuring that the organisation has the capability in place to match the complexity.
When buying goods and services, organisations complete a complexity assessment and categorise procurements into one of four complexity quadrants. The quadrant guides the sourcing strategy and how to manage risks and contractual arrangements.
Description of complexity quadrants:
Transactional
Low-value and low-risk transactions where approved suppliers (e.g. SPCs) are not available.
Leveraged
Frequently used goods and services in a competitive marketplace that are procured by an individual organisation or whole of government, where the organisation has the ability to drive value.
Focused
Goods and services where a limited number of suppliers are available or where novel commercial arrangements are in place. May include whole of government contracts.
Strategic
Goods and services in a competitive market that are high value, where business criticality is high, and/or where the good or service is of state significance. May include whole of government contracts.
Overview of complexity
VGPB policies require upfront planning, category management and detailed market analysis.
Organisations identify the best approach to market for any given category, while also identifying opportunities to aggregate demand for frequently used goods and services procured from a competitive marketplace, giving them more buying power to drive value for money.
The following table shows the number and value of contract approvals by complexity quadrant in 2020–21:
| Complexity quadrant | Number | Value ($m) | Average value per contract ($m) |
|---|---|---|---|
| Transactional | 645 | 491.4 | 0.8 |
| Leveraged | 165 | 286.5 | 1.7 |
| Focuses | 188 | 375.4 | 2.0 |
| Strategic | 233 | 1,600.4 | 6.9 |
| Total | 1,231 | 2,753.6 | 2.2 |
Most organisations had a predominantly transactional complexity profile in 2020–21. The exceptions were DH/DFFH – 83% of their procurements were assessed as being strategic – and DJCS which reported 36% of contract approvals under the leveraged quadrant, 29% as transactional, 24% as focused and 11% as strategic. Refer to the Procurement profiles section for a breakdown of complexity by department.
The highest average contract value was in the strategic quadrant. This is partly due to four high-value strategic SPCs valued at $984.8 million (see SPCs approved in 2020–21).
DH/DFFH also carried out a high number of strategic procurements due to its role as the lead agency in the response to the COVID-19 pandemic. It reported 152 strategic one-off supply contracts valued at $246.2 million.
Trends in procurement complexity
Download the trends in procurement complexity over three years. Complexity data for 2020–21 includes critical incident procurement, where the previous year does not, making it difficult to compare this year’s data with previous years.
Case study: Making it easier – a digital transformation to support better ways of working
In July 2020, the Department of Environment, Land, Water and (DELWP) implemented a systematic department-wide program – Making it easier: Our plan to adopt better ways of working – in response to the challenges of the 2020 bushfires and COVID-19 pandemic.
The program included a review of some corporate systems and processes to address workload pressure, protect staff wellbeing and ensure that working at DELWP is sustainable and rewarding.
The improved digital workflows enable greater visibility of the higher value procurements conducted in the business units and regional offices. This enables the central procurement team to provide oversight more efficiently and identify issues early on for those procurements that need CPO assistance or approval.
The program presented an opportunity to digitally transform existing procurement processes, clarify where necessary, and simplify the requirements for submission and approval of procurement documentation. For example, several paper-based forms were consolidated and replaced with online forms, improving existing procurement processes.
Staff across DELWP have seen several benefits from the digital transformation, which was achieved in November 2020, including:
- Streamlined procurement processes with built-in automated workflows
- Easy tracking of approval workflows for procurement submissions
- Improved timeframes for approvals
- Establishing an online portal to process procurement submissions and record approvals which has minimised the risk of misplacing paper forms and potential non-compliance associated with managing paper-based records.
Reviewed 26 October 2021