The ANAO has recently confirmed that purchasing from a panel is not a panacea for demonstrating value for money. Officials must still ensure that value for money is demonstrated in each engagement off a panel. This was the key message coming out of the Australian National Audit Office (ANAO) performance audit report into Home Affairs and Services Australia’s procurements of Office Furniture (the Audit).
The upshot? Officials must demonstrate that value for money is achieved in each engagement from a panel. While a competitive process (e.g. by obtaining multiple quotes from panellists) is one way of doing this, if there is no competitive process for a procurement off a panel, officials need to consider other methods of demonstrating value for money like benchmarking the procurement to similar procurements, conducting market research and assessing the costs of not proceeding with the procurement.
Background
As you’d expect, the Commonwealth needs a lot of office furniture. In fact, between 1 July 2017 and 30 June 2022 (Audit Period) the Australian Government spent more than $355 million on office furniture. Services Australia accounted for more than 50 percent of this amount.
During the Audit Period:
- Services Australia awarded 990 contracts for office furniture with a total value of $180 million, and
- Home Affairs awarded 28 contracts for office furniture with a total value of $1.7 million. Home Affairs also received office furniture under its property leases.
Both Home Affairs and Services Australia established procurement panels for purchasing office furniture and associated goods and engaged panel members for its purchases.
Key audit questions answered
Why were the audits undertaken?
The Audit was undertaken to provide independent assurance to Parliament as to whether the procurements demonstrated achievement of value for money and were consistent with the CPRs. Services Australia and Home Affairs were audited because they are two of the top five Australian Government entities for expected office furniture spend.
Did the procurement processes demonstrate value for money was achieved?
- Home Affairs sought multiple quotes from panel providers in 45% of cases. So, Home Affairs used competition as part of establishing value for money.
- Where Home Affairs did not seek multiple quotes, it used market research, benchmarking, and previous experience to demonstrate value for money.
- While Services Australia did not seek more than one quote for purchases from its panels it also didn’t have other methods in place to demonstrate value (so this was different to the Home Affairs approach). The value for money assessment for the establishment of some of its panels was based upon an expectation that officials would seek more than one quote from panel members, but this did not occur.
Under Rule 9.12 of the CPRs, procurement from an existing standing offer is not subject to the Rules in Division 2 of the CPRs but remains subject to the Rules in Division 1. This means that while a Commonwealth entity can use a panel without seeking multiple quotes, officials must demonstrate that value for money was achieved in each engagement. If a competitive process is not utilised, some ways that value for money could be demonstrated are through benchmarking a procurement to similar procurements, conducting market research and assessing the costs of not proceeding with the procurement.
What did the ANAO recommend?
The ANAO recommended to Services Australia that it:
- strengthen its planning processes for panel procurements
- implement processes to evaluate value for money for procurements in panel purchases
- implement guidelines to evaluate whether panels are achieving value for money, and
- consider whether alternative procurement arrangements are required before extending an existing panel or establishing a new panel.
Services Australia accepted each of these recommendations.
What the ANAO wants you to know
The ANAO emphasised the importance of competition in the procurement process, with the following key messages:
- Don’t use a panel just because there is one (unless it’s mandatory of course, which some Whole of Australian Government panels are). Commonwealth entities should consider whether another form of procurement method is more appropriate and will achieve better value for money.
- When using a panel for a purchase, officials must assess value for money. The establishment of a panel does not in itself demonstrate value for money for purchases made from the panel. Using a competitive process (such as obtaining multiple quotes) is one way to demonstrate that value for money was achieved when using a panel, although benchmarking, market research or considering the costs of not proceeding with a procurement may also establish value for money.
- Regularly review panel arrangements and do not extend an existing panel unless there is demonstrable value for money in doing so.
- Competition is enhanced when entities implement measures to level the playing field in instances where potential suppliers have gained a competitive advantage, including because of incumbency on a panel. Commonwealth entities should adopt processes to ensure that all panel providers invited to submit a proposal have a detailed understanding of the requirements for that purchase. This can be achieved by providing each with the opportunity to clarify the entity’s requirements through information sessions, the disclosure of all relevant information and the opportunity to ask questions and by providing as much notice in advance of the likelihood of an upcoming purchase as possible.
To read more about this performance audit report or to view other performance audits into Australian Government procurements visit the ANAO website.
