❓ A WA parliamentary question scrutinises the procurement reform process, focusing on potential conflicts of interest, savings calculations, and impacts on agencies and local businesses. The Treasurer's response defends the reforms, citing real savings and extensive consultation.
AnsweredQoN 772Legislative Assembly
QuestionView source ↗
Given the potential conflict of interest in Deloitte’s preparation of the
2004-2005 Procurement Reform Benefits Realisation Report, August 2005
, due to Deloitte’s involvement with the Department of Treasury and Finance in developing the strategy, proving advice and day-to-day assistance relating to the Government’s procurement reform agenda, I ask -
(1) Will the Treasurer approach the Auditor General to undertake a full and comprehensive review of the procurement reform process and particularly the claims of savings resulting from the reforms?
(2) Can the Treasurer confirm that these savings have only been gained through harvesting the savings through two reductions in agency appropriations/budgets and claiming these as savings arising from the procurement reforms?
(3) How does the Treasurer justify these “savings” given that the accounting convention that savings need to actually be realised to be claimed as savings, seems to have been overlooked in this exercise, as on one hand savings are being claimed, on the other the savings are offset by further funding which does not seem to be taken into account?
(4) Can the Treasurer confirm that these savings have only been gained by agencies paying more now for goods and services under whole-of-government CUAs due to delays, premium costs for expedited delivery, additional costs related to transportation?
(5) Can the Treasurer confirm that the marginal savings from CUAs has been off-set by additional costs incurred in the agency resulting from CUA use?
(6) Can the Treasurer confirm that with many of the CUAs the volume of consumption of larger agencies was not balanced across the whole-of-government and as a result high volume users are often paying more and in effect subsidising the low-volume users that previously may have paid more?
(7) Can the Treasurer confirm that mandating the use of CUAs has resulted in agencies not being able to seek competitive quotations in the local market and obtaining a better value for money outcome, and in many instances, a better price?
(8) Can the Treasurer confirm that there has been an almost total lack of meaningful consultation with agencies and local industries?
(9) Will the Treasurer confirm that the Department of Treasury and Finance has imposed a bureaucratic super-structure above agencies and is employing considerably more people, even allowing for ‘rebadging’ of agency personnel, which has considerably increased both the overhead costs involved and the timeframes, which mitigates against the savings claimed for procurement reform?
(10) Can the Treasurer confirm that the socio-economic cost to Western Australian small businesses no longer gaining income from Government procurement does not seem to have been adequately assessed and some businesses are suffering as a result?
(11) Can the Treasurer confirm that Treasury has reviewed and concurred that the procurement savings postulated are being achieved, or will be achieved as sustainable on-going savings?
(12) If Treasury has not reviewed and verified the savings, why not?
2004-2005 Procurement Reform Benefits Realisation Report, August 2005
, due to Deloitte’s involvement with the Department of Treasury and Finance in developing the strategy, proving advice and day-to-day assistance relating to the Government’s procurement reform agenda, I ask -
(1) Will the Treasurer approach the Auditor General to undertake a full and comprehensive review of the procurement reform process and particularly the claims of savings resulting from the reforms?
(2) Can the Treasurer confirm that these savings have only been gained through harvesting the savings through two reductions in agency appropriations/budgets and claiming these as savings arising from the procurement reforms?
(3) How does the Treasurer justify these “savings” given that the accounting convention that savings need to actually be realised to be claimed as savings, seems to have been overlooked in this exercise, as on one hand savings are being claimed, on the other the savings are offset by further funding which does not seem to be taken into account?
(4) Can the Treasurer confirm that these savings have only been gained by agencies paying more now for goods and services under whole-of-government CUAs due to delays, premium costs for expedited delivery, additional costs related to transportation?
(5) Can the Treasurer confirm that the marginal savings from CUAs has been off-set by additional costs incurred in the agency resulting from CUA use?
(6) Can the Treasurer confirm that with many of the CUAs the volume of consumption of larger agencies was not balanced across the whole-of-government and as a result high volume users are often paying more and in effect subsidising the low-volume users that previously may have paid more?
(7) Can the Treasurer confirm that mandating the use of CUAs has resulted in agencies not being able to seek competitive quotations in the local market and obtaining a better value for money outcome, and in many instances, a better price?
(8) Can the Treasurer confirm that there has been an almost total lack of meaningful consultation with agencies and local industries?
(9) Will the Treasurer confirm that the Department of Treasury and Finance has imposed a bureaucratic super-structure above agencies and is employing considerably more people, even allowing for ‘rebadging’ of agency personnel, which has considerably increased both the overhead costs involved and the timeframes, which mitigates against the savings claimed for procurement reform?
(10) Can the Treasurer confirm that the socio-economic cost to Western Australian small businesses no longer gaining income from Government procurement does not seem to have been adequately assessed and some businesses are suffering as a result?
(11) Can the Treasurer confirm that Treasury has reviewed and concurred that the procurement savings postulated are being achieved, or will be achieved as sustainable on-going savings?
(12) If Treasury has not reviewed and verified the savings, why not?
AnswerView source ↗
Answered
11 April 2006
Response time
14 days
There is no conflict in Deloitte's involvement in the preparation of the 2004 - 2005 Procurement Reform Benefits Realisation Report. The Procurement Reform Benefits Realisation Report is a Department of Treasury and Finance (DTF) document, which outlines the achievements across Government in the first 18 months of the 4-year procurement reform implementation program. The report contains information collected by DTF from a wide range of sources. The majority of this data has been derived from independently conducted interviews (surveys as well as benchmark studies on CUAs). Deloitte's input into the report was to develop the framework (using its Balanced Scorecard Methodology), and then to amalgamate the information provided by DTF.
(1) The Office of the Auditor General commenced a performance examination in February 2006 to assess the implementation of the procurement reforms, particularly common use arrangements (CUAs), and the savings arising from them.
(2) Savings achieved from the Procurement Reform program are real and demonstrable.
(3) Government agency budgets have been adjusted in line with the projected savings from the Procurement Reform program. The savings have been reinvested in the core service delivery areas of health, education and law and order.
(4) No. As the Report notes, estimated procurement savings of $25.4 million were achieved from new and redesigned CUAs in 2004-05. Recently awarded CUAs continue to deliver significant savings. For example, the new Basic Telecommunications Carriage Services CUA, which commenced on 1 March 2006, will achieve savings of at least $14 million a year, representing a saving of approximately 19% on the previous CUA.
(5) No. New and redesigned CUAs have delivered both savings and buying efficiencies to agencies. New streamlined CUA pick and buy and quotation processes have been acknowledged by agency Directors General and Chief Executive Officers as delivering significant buying efficiencies to their agencies.
(6) No. Significant savings have been achieved by all agencies, large and small.
(7) No. CUAs are mandatory buying arrangements for purchases in the Perth Region. The DTF undertakes significant research during the development of new CUAs to identify the best prices being obtained by agencies under existing buying arrangements. New CUAs are only awarded on the basis that they will deliver demonstrably better value for money outcomes, and better prices, than alternate buying arrangements. Most CUAs are non mandatory in regional Western Australia, where the regional buying discretion under the Buy Local policy continues to apply. Government buyers in the regions are encouraged to seek quotations from local suppliers. The DTF has established Regional Buying Centres in the Mid West (Geraldton), Goldfields/Esperance (Kalgoorlie) and South West (Bunbury) regions to promote local buying and assist agencies purchase from local suppliers.
(8) No. Local industry and agencies are extensively consulted in the development of new CUAs. Industry consultation generally includes discussion with industry associations, open industry forums and an industry comment period on draft tender documents. Agency input into the development of CUAs is obtained through Client Agency Reference Groups, a Procurement Leaders Council and agency representation on tender evaluation panels.
(9) No. An additional bureaucratic structure above agencies has not been put in place. Agencies have in fact been given increased autonomy to make procurement decisions.
The rebadging of agency based (and they continue to be agency based) procurement practitioners as DTF personnel has been positively received by agency Directors General and Chief Executive Officers. The rebadging initiative has delivered a consistently higher standard of procurement practice across the sector, and given procurement practitioners the opportunity to improve their knowledge and skills and develop their careers.
The Procurement Reform program continues to operate within a $26 million budget spread over 5 years. The return on this investment will be an estimated $376 million in savings over that period, which has been built into the forward estimates.
(10) No. The vast majority of government contracts are won by local businesses - big, medium and small. Competitive small local businesses continue to win a significant share of those contracts. For example, small businesses make up more than a third of the suppliers on CUAs.
(11) Yes.
(12) Not Applicable.
(1) The Office of the Auditor General commenced a performance examination in February 2006 to assess the implementation of the procurement reforms, particularly common use arrangements (CUAs), and the savings arising from them.
(2) Savings achieved from the Procurement Reform program are real and demonstrable.
(3) Government agency budgets have been adjusted in line with the projected savings from the Procurement Reform program. The savings have been reinvested in the core service delivery areas of health, education and law and order.
(4) No. As the Report notes, estimated procurement savings of $25.4 million were achieved from new and redesigned CUAs in 2004-05. Recently awarded CUAs continue to deliver significant savings. For example, the new Basic Telecommunications Carriage Services CUA, which commenced on 1 March 2006, will achieve savings of at least $14 million a year, representing a saving of approximately 19% on the previous CUA.
(5) No. New and redesigned CUAs have delivered both savings and buying efficiencies to agencies. New streamlined CUA pick and buy and quotation processes have been acknowledged by agency Directors General and Chief Executive Officers as delivering significant buying efficiencies to their agencies.
(6) No. Significant savings have been achieved by all agencies, large and small.
(7) No. CUAs are mandatory buying arrangements for purchases in the Perth Region. The DTF undertakes significant research during the development of new CUAs to identify the best prices being obtained by agencies under existing buying arrangements. New CUAs are only awarded on the basis that they will deliver demonstrably better value for money outcomes, and better prices, than alternate buying arrangements. Most CUAs are non mandatory in regional Western Australia, where the regional buying discretion under the Buy Local policy continues to apply. Government buyers in the regions are encouraged to seek quotations from local suppliers. The DTF has established Regional Buying Centres in the Mid West (Geraldton), Goldfields/Esperance (Kalgoorlie) and South West (Bunbury) regions to promote local buying and assist agencies purchase from local suppliers.
(8) No. Local industry and agencies are extensively consulted in the development of new CUAs. Industry consultation generally includes discussion with industry associations, open industry forums and an industry comment period on draft tender documents. Agency input into the development of CUAs is obtained through Client Agency Reference Groups, a Procurement Leaders Council and agency representation on tender evaluation panels.
(9) No. An additional bureaucratic structure above agencies has not been put in place. Agencies have in fact been given increased autonomy to make procurement decisions.
The rebadging of agency based (and they continue to be agency based) procurement practitioners as DTF personnel has been positively received by agency Directors General and Chief Executive Officers. The rebadging initiative has delivered a consistently higher standard of procurement practice across the sector, and given procurement practitioners the opportunity to improve their knowledge and skills and develop their careers.
The Procurement Reform program continues to operate within a $26 million budget spread over 5 years. The return on this investment will be an estimated $376 million in savings over that period, which has been built into the forward estimates.
(10) No. The vast majority of government contracts are won by local businesses - big, medium and small. Competitive small local businesses continue to win a significant share of those contracts. For example, small businesses make up more than a third of the suppliers on CUAs.
(11) Yes.
(12) Not Applicable.
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