Interviewee’s key - – Case studies just need to understand their high level responsibilities

Chapter 5 – Case studies just need to understand their high level responsibilities

5.1.1 Interviewee’s key

The structural position of all interviewees is recorded in Table 2.

Table 2 - Interviewee's key

Council Identifier Role Council Identifier Role

Alpha Alpha 1 Chief Financial Officer Delta Delta 1 Procurement Manager

Alpha 2 Procurement Manger Delta 2 Chief Financial Officer

Alpha 3 Procurement Admin. Echo Echo 1 Proc. & Legal Counsel Mgr.

Alpha 4 Business Unit user Echo 2 Procurement Officer

Bravo Bravo 1 Procurement Manager Foxtrot Foxtrot 1 Proc. & Legal Counsel Mgr. Bravo 2 Finance & Strategy Mgr. Foxtrot 2 Procurement Officer Charlie Charlie 1 Procurement Manager Golf Golf 1 Business Unit user

Charlie 2 Procurement Officer Golf 2 Business Unit user

Charlie 3 Chief Financial Officer Golf 3 Chief Financial Officer Charlie 4 Business Unit user

5.2 Council Alpha – service, cost, simplicity: a one-stop-shop

The procurement department has become a ‘one stop shop’: it is the centre of procurement professionalism for council Alpha. This centralised professionalism metaphor is enabled by the re-intermediation of traditional tender to e-Tender through the adoption and assimilation of two tender management portals (TMP). Procurement in council alpha revolves around a centre-led structure to provide policy, applications, compliance vetting and training; in some cases even doing the tender when

decentralisation to business level has not progressed. Some business units have

developed the capability to undertake all procurement in a decentralised state, others are reluctant to venture far into a decentralised position. The intention is for all procurement to occur at a decentralised level, fully supported by the procurement department through a project management framework. The centralised, centre-led and decentralised

metaphors are used as the delegation authority of the procurement process, in the words of the Alpha 3 (Chief Financial Officer) ‘we leave that – the how, to the procurement department … from the executive point of view, the policy as well’. The enabling factor for delegation is the professionalism of the procurement department.

Procurement within Alpha is seen as a corporate function, but not a corporate strategy subject. The functional goal is compliance and procurement through tender with the cost a matter of market competition. The procurement process is governed through policy and procedures: in the words of the Alpha 3, ‘if all is good then tick – go to tender’ and the centre-led guidance steps into gear. Alpha 3 was questioned on the omission of

procurement within corporate strategy and responded ‘(the executive is - sic) over 50, not electronic savvy …. look at the elected members and the executive group, I’d give 3 or 4 out of 10 for their IT competency … embarrass themselves’. When asked what influenced the establishment of a procurement department in its current and proposed structure, Alpha 3 replied ‘I read, otherwise the guys get complacent, insulated, particularly read what the eastern states are doing’.

Council Alpha up to 2005 had a traditional tender process inclusive of a tender box for hard copy submissions. In the ensuing years partial re-intermediation occurred using the government owned and operated SA Tenders & Contracts (SAT&C) providing a limited application supported by traditional advertising. In the words of Alpha 2 (Procurement

and Contracts Administration Officer) who joined Alpha during the SAT&C period ‘we issued SA Tenders and they gave us the hard copy. So I guess you could call it a little bit electronic’. This interim post adoption and pre assimilation of e-Tender was

supplemented by email as internet connectivity increased. In 2012, the Local Government Association Procurement (LGAP) section introduced the year of procurement with the purpose of building procurement awareness and introducing Vendor Panel as a TMP. LGAP were trialling Vendor Panel, sought pilot councils and Alpha volunteered. The pilot evolved into adoption, obtaining a licence, developing competency within the

procurement department level and assimilation into practice. This is confirmed by Alpha 3 ‘council Alpha is now seen as the number one Vendor Panel operator in SA and is regularly referred and consulted by other councils’. This was validated by Alpha 1 who confirmed ‘Alpha 2 has basically mastered it. She would be the champion of SA in use and

maintaining it’.

While a high degree of competence has been achieved with the TMP application, the wider e-Tender environment has no formal measurement. Considering the evaluation of overall procurement efficiency as relating to a measure of how the council’s TMP is

utilised, the partial delegation of e-Tender to business units and the referral of council as a high level user within the wider council environment, is a positive indicator. Effectiveness refers to the extent to which customer satisfaction is achieved and the measure is

indicated by Alpha 3 with the statement ‘haven’t got into trouble legally with ombudsman, ICAC and audit, as we go tick, tick, tick, tick’. Due to the lack of any form of data,

anecdotal support becomes the only measure.

Contemporary e-Tender is conducted through SAT&C with little operability outside state government requirements and Vendor panel, described by Alpha 3 as ‘tailored specific (to council usage – sic)’. Unlike other states, the SA Local Government Act 1999 (SA LGAct) does not require an upper limit monetary value threshold for compulsory open tender, therefore the upper limit is a value self-determined by individual SA councils. Alpha has a threshold policy (Table 3) of greater than $100k requiring an open or public tender with lower thresholds self-determined to tender, quotation and credit card levels.

Table 3 - Council Alpha thresholds

Thresholds Tender/Quotation

>$100k Open tender

$20-$100k Three quotations

$2k-$20k Purchase from one quotation

Up to $2k Council credit card

SAT&C uses a category product process requiring potential suppliers to register to one or more categories. Registering is not a form of qualification, it is solely a means for e- Notification of tender relating to the general product category.

The unique characteristic of Vendor Panel is the pre-qualified panel process whereby panels relating to individual disciplines are established and potential suppliers pre-qualify by providing all compliance documents, history, a pricing structure and operating process into the Vendor Panel data base. Panels are an exclusive product to Vendor Panel and differ from categories (SAT&C and other commercial TMP companies). For example, categories operate for engineering as a whole and not specific disciplines within

engineering, while Vendor Panel pre-qualified panels are established for the disciplines of engineering, for example structural engineers. These pre-qualified panels are

administered by the procurement department with the ability to add or delete suppliers as explained by Alpha 1:

“After two months they automatically get a reminder, you're probably got insurances going to run out. You need to do something about it. If they don't do anything about it they are taken off, we put another one on then”.

Alpha 2s perspective of Vendor Panel is summed up by the following:

“Service, cost, simplicity. Simplicity. Everything we're looking at is a One Stop Shop. Whereas I think previously we would issue some quotes by email, some basic tenders. We're trying to get everyone to use Vendor Panel for everything so everything's all neat and tidy together. We've bought a licence … for Vendor Panel because it maintains all our pre- qualified contractors all nice and tidy and we can put our own panels on there. So it saves a lot of a lot of time and maintaining them”.

In the decentralised process, a council Alpha business unit when searching for a supplier in a pre-qualified panel can select all or (optional) preferred suppliers to provide a

submission in response to the specification. This is very cost effective to both council Alpha and the supplier as pre-qualification is a requirement to be active on a panel. In addition to council Alpha panels, the business unit also has access to other council panels (holders of a Vendor Panel licence) and the LGAP who also holds a Vendor Panel licence and establishes panels of regional suppliers. Suppliers who pre-qualify for one panel, on request by a licence holder are automatically registered when other councils or LGAP establish or update panels, thereby widening the potential supplier list. Commenting on the LGAP, Alpha 2 stated ‘we could use LGAP panels, we can use those free which we used to do and then we realised that we could do this ourselves’. The pre-qualified panel process is steadily rolling out across council Alpha with the assimilation benefits described by Alpha 4 as ‘I think Vendor Panel makes us all take a bit more ownership of the

processes’. Business units who are not competent using a pre-qualified panel revert to the centralised procurement process to undertake the task.

Council Alpha is in a progressive assimilation stage of e-Tender through Vendor Panel where full assimilation could be adjudicated on usage of Vendor Panel applications. Responding to questions of performance measurement and use of Vendor Panel performance data, available free with their licence level, Alpha 1 stated:

“We don't use that. We've looked at it but it’s very basic, Vendor Panel has another specific reporting module that we haven't bought”.

Another Vendor Panel application is evaluation and Alpha 1 comments:

“It's basic because it only allows one person to evaluate, we have our own evaluation tool outside Vendor Panel which is basically a spreadsheet where we can sit and it’s basically the same where we put it up on the screen and we're in here with the evaluation panel and everybody agrees on a weighted score. We punch it into the spreadsheet. Some people do use the evaluation tool in Vendor Panel”.

Responding to a question on tender evaluation through Vendor Panel, Alpha 4 stated ‘we put together our evaluation criteria, yes, we can enter that into Vendor Panel’ and to the following question of using this application with all tenders, Alpha 4 stated ‘Yes, the ones that I’ve done’. The use of Vendor Panel evaluation is a step into full assimilation and strategic procurement. Summing up strategic procurement, Alpha 3 stated ‘….working collaboratively with the industry and your team to be able to get the best value for money’.

Both the council credit card and the panel process has participated in recent audits with the results in the words of the Alpha 1 ‘reported to council … thought it was excellent’ and Alpha 3 ‘survived legal tests’. The audit experience has a relationship to compliance of the policy and procedures. The SA LGAct has limited exposure to procurement and the LGAP has no regulatory power: self-compliance to council Alpha’s procurement policy and procedures is the driving force within the procurement environment.

The cost of procurement for Alpha across operational and infrastructure spend for 2016/2017 year was 63% of income13_{. While 63% is a reasonable guide, the accuracy} factor is distorted through income being a profit and loss item and infrastructure a balance sheet cash flow statement item. The indicator of 63% places the procurement process as an important element of the council structure, although it is not included in the council strategy. The question was asked relating to council Alpha strategy and discussion of the inclusion of tender and Alpha 3 responded ‘no discussion, no’.

Another form of procurement available to Alpha is shared services and/or aggregator of council volume into an open tender by LGAP as a commercial service and other

commercial TMPs. These services are provided as commercial contracts requiring a commission expressed as a percentage of individual council volume. A recent successful example of a shared service was an energy tender for the collective of SA councils, although not all councils participated. An unsuccessful example of shared services by LGAP was a telecommunications tender awarded to a supplier with limited wireless coverage in country areas. Council Alpha being a fringe metropolitan and inner country

13_{This performance metric is referred as the tender spend/income ratio and is analysed in Chapters 6 &} 7 and summarised as a finding in Chapter 8.

council, declined participation due to a high level of wireless coverage requirement and remained with their current supplier. There is an espoused theory relating to shared services that volume creates value in the form of lower costs, a theory supported by Alpha 1 who stated ‘run an in-house tender it will cost maybe $20k or $30k’.

Council Alpha are positioning e-Tender through a TMP as an integrated process across all levels of procurement above $2k. The degree of assimilation varies across the council and while no compliance questions exist, the process could be considered effective.

In document An examination of the relationship between Australian Council e-Tender spend and executive strategy: an institutional approach (Page 84-91)