Is Tender/Income ratio worthwhile?

It is not within the aim of this research project to analyse the financial performance of tender spend collectively or individual tender contracts for all or any of the seven councils. A number of financial experiences were provided by the interviewees, being another layer to the practice barriers preventing a relationship of tender with executive strategy (Table 43). Alpha 3, Charlie 3, and Golf 3 are all Chief Financial Officers with full knowledge of all financial reporting including tender within their respective councils.

Using Table 43 as a guide, financial accountability for tender spend is a far reaching problem, as Foxtrot 1 comments using words of ‘reactive to community requests, as opposed to being strategic, responsible with the public’. Table 43 are all indicators of the inertia within the seven councils, or more succinctly put, difficulties with financial

accountability. While analysis of the wastage is outside this research project, the

commencing position of procurement professionalism is to understand the value of tender spend and position this with a relationship to executive strategy.

The tender/income ratio is not a performance metric for the reason it has no continuity of variables. Income and tender spend can raise or fall on a wide spectrum of reasoning. It is an indicator with a sole function of bringing the value of tender spend into the reality of the executive with a flow on to the community. Visibility of this indicator would provide the opportunity for the community to question the value of tender spend, creating exposure to the executive, an action capable of commencing a journey to effectiveness.

This research project has determined there are four processes of spend within thresholds, council credit card, purchase order, RFQ and/or RFT. The lowest level threshold, in some councils being credit card transactions (Refer Table 36) remains vague and is not further detailed in this research project. A purchase order (also referred to as a RFQ), RFQ and RFT are all sealed bid offers and therefore meet the definition of tender (Refer 2.2.6). Open tender, pre-qualified panels, TMP categories and quotations are all mechanisms of

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tender. Shared services (also referred as collaborations), commercial aggregators and partnerships between councils are all sources of tender41_.

Table 43 - Financial examples through the eyes of procurement

Council Commentary on Finance

Alpha Alpha 3 - I know that bridge will cost 100 grand but if I put in 200 grand that will cover me for my mistakes. There's not a lot of analysis.

Bravo Bravo 1 - Another thing that I like to do is and it's started is linking purchasers to agreements assuming there's an agreement in place. So we actually know that if we raise the contract for a 100000 and we've spent one hundred fifty thousand.

Charlie Charlie 3 - We have a chart of account structure in general as a structure that just isn't able to analyze data appropriately. We do not have any good spend analysis that you would use from a procurement side.

Delta Delta 1 - The reason why I say that is the simplest way to pay for more staff if your revenue or your cost base is limited, is to attribute your procurement people who look after capital to the capital works bucketof money, because it’s off the OPEX. Your bottom line. That's the easiest way to pay for things. Echo Echo 1 - Capital works budget is 38 million. They never spend 38 million, they

only spend 19 million. Did you spend it wisely in affect? Now the answer to that question is absolutely not. The reason is because that 19 million doesn't represent 19 million of construction works. It represents something like 15 million with four million going on wastage. So the community is actually not getting 19 million, it is 15 million. Which is why the budget and the finances are useless.

Foxtrot Foxtrot 1 - I do not know how many times you have seen council officers being helpful, it’s a loaded term, or reactive to community requests, as opposed to being strategic, and responsible with public purse, happens all the time.

Golf A question on projected income. Golf 3 -I should know that. To be honest. I just don't know that right at the very moment.

No allocations or isolation of spend volume across thresholds is available from any of the seven councils. There is no literature basis for procurement or tender spend within the confines of this research project or the conceptualisation of e-Tender through a TMP. Visibility of the tender spend/income ratio is an important aspect of community value and therefore warrants inclusion in executive strategy.

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Table 44 – Outcome of tender spend

Tender spend Facilitation Barriers

Measurement Institutionalise reporting No penalty

Cost allocation Adoption of capable technology applications

Competency to know this contemporary management tool

Procurement strategy Convince the executive procurement has value

Avoid the difficult decisions Global influence Recognise the uniqueness of a single

council

Position procurement within the hierarchical structure

Tender spend allocated to expense lines in chart of accounts

Distribute to business partners and use this data

Avoiding the responsibility as no penalty applies for ineffective practice

Bold is the summarised outcome – the themes that fall naturally into explanation

6.7

Case studies of Australian council e-Tender through a TMP