A guide to procurement planning - nt.gov.au · Web viewProbity is the process of having strong moral principles, including conducting business ethically and fairly. In procurement,

A guide to procurement planning

DEPARTMENT OF TRADE, BUSINESS AND INNOVATION

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Document detailsDocument title A guide to procurement planningContact details [email protected] and version 26 September 2017

Version 0.5, DraftApproved by Director, Procurement Strategy and CapabilityDate approved 16 October 2017Document review Every four months

Change historyVersion

Date Author Change details

0.1 24 March 2017 Procurement Policy Initial version – table of contents only0.2 6 June 2017 Procurement Policy Second version with text added0.3 16 June 2017 Procurement Policy Incorporation of feedback received 0.4 27 July 2017 Procurement Policy Further development for consultation0.5 26 September 2017 Procurement Policy Final changes to enable publishing

AcronymsThe following acronyms are used in this documentAcronyms Full formAPMP Agency procurement management planNT Northern TerritoryNTG Northern Territory GovernmentTDO Tenders document online

DEPARTMENT OF TRADE, BUSINESS AND INNOVATION Page 2 of 5026 September 2017, Version 0.5, Draft

Disclaimer

DisclaimerThis guide is a draft only and is still under development. Feedback on this guide can be emailed to [email protected] by Friday, 12 January 2018 for inclusion in version 1.0.

Specifically, feedback is sought on:

usefulness of the guide and templates

ordering and placement of each section

areas where additional guidance is required or missing

suggestions for templates and factsheets.

Staff must ensure that all procurement activities undertaken comply with the procurement rules and procurement governance policy1 found on nt.gov.au.

1 https://nt.gov.au/industry/government/procurement-conditions-framework/procurement-directions


https://nt.gov.au/industry/government/procurement-conditions-framework/procurement-directions

mailto:[email protected]

Table of Contents

ContentsDisclaimer.........................................................................................................................................31 About this guide........................................................................................................................62 What is planning?......................................................................................................................73 Governance................................................................................................................................9

3.1.......Accountabilities................................................................................................................93.1.1........Procurement and financial delegations.....................................................................9

3.2.......Probity..............................................................................................................................93.3.......Defensible decision making...........................................................................................103.4.......Risk management..........................................................................................................103.5.......Internal audit..................................................................................................................10

4 Roles and responsibilities......................................................................................................125 Step 1: Agency planning........................................................................................................14

5.1.......Agency procurement management plan........................................................................145.2.......Procurement management approach............................................................................15

5.2.1........Category management...........................................................................................155.2.2........Demand management............................................................................................15

5.3.......Relationship management.............................................................................................165.4.......Engagement of stakeholders.........................................................................................165.5.......Procurement processes by tier......................................................................................175.6.......Monitoring expiring contracts.........................................................................................17

6 Step 2: Define our need..........................................................................................................186.1.......Determine business need..............................................................................................18

6.1.1........Procurement methods............................................................................................186.1.2........Objectives of the procurement activity....................................................................196.1.3........Procurement activity budget...................................................................................196.1.4........Stakeholder consultation........................................................................................196.1.5........Business case (as needed)....................................................................................20

6.2.......Existing contracts...........................................................................................................206.2.1........Across government contracts.................................................................................216.2.2........Agency specific contracts.......................................................................................21

6.3.......Project specific governance...........................................................................................216.3.1........Project steering committee.....................................................................................216.3.2........Project team............................................................................................................216.3.3........Probity team............................................................................................................226.3.4........Conflict of interest declaration................................................................................22

6.4.......Project specific risk management..................................................................................226.4.1........Value and risk segmentation..................................................................................23

6.5.......Market engagement and analysis..................................................................................246.5.1........Undertake industry briefings...................................................................................256.5.2........Supply positioning model........................................................................................256.5.3........Supplier preferencing model...................................................................................276.5.4........Supply chain analysis.............................................................................................296.5.5........Analyse market conditions......................................................................................30

6.6.......Prepare scope of requirement.......................................................................................316.6.1........Structure of a scope of requirement.......................................................................326.6.2........Scope of requirement types....................................................................................32


Table of Contents

6.6.3........Performance standards and measures...................................................................336.6.4........Consultation on the scope......................................................................................346.6.5........Endorsement and approval of the scope of requirement........................................34

6.7.......Future tender opportunities............................................................................................34

7 Step 3: Plan the procurement approach...............................................................................357.1.......Existing contracts – extension vs renewal.....................................................................357.2.......Open and competitive approach....................................................................................367.3.......Determine procurement method....................................................................................37

7.3.1........Alternative procurement methods...........................................................................377.3.1.1........Direct purchasing...............................................................................................387.3.1.2........Direct contracting...............................................................................................387.3.1.3........Select processes................................................................................................387.3.1.4........Multi-stage procurement method.......................................................................39

7.4.......Consideration of local content.......................................................................................407.5.......Consideration of Aboriginal opportunities......................................................................407.6.......Develop a project specific procurement plan.................................................................41

7.6.1........Determine process plan and timetable...................................................................427.6.2........Determine budget considerations...........................................................................427.6.3........Determine period of contract..................................................................................427.6.4........Determine insurance requirements.........................................................................437.6.5........Determine limitation of liability................................................................................447.6.6........Identify contract type...............................................................................................44

7.7.......Develop an assessment plan.........................................................................................457.7.1........Assessment criteria................................................................................................457.7.2........Assessment weightings..........................................................................................46

7.7.2.1........Paired criteria analysis.......................................................................................467.7.3........Assessment panel membership..............................................................................467.7.4........Scoring methodology..............................................................................................46

7.8.......Consider advertising period...........................................................................................467.9.......Develop the request for quotation (tiers 1 to 2).............................................................477.10.....Develop the request for tender (tiers 3 to 5)..................................................................477.11.....Next steps......................................................................................................................48

8 Appendix A...............................................................................................................................49



1 About this guideThis guide to procurement planning provides recommended procurement planning practices for NTG agencies to effectively undertake the planning stage of the procurement lifecycle (Figure 1).

The guide provides:

1. an understanding of the benefits of effective procurement planning

2. an overview of procurement planning practices

3. guidance on recommended activities to be performed in the planning stage

4. templates and factsheets to assist with the planning stage.

The guide must be read in conjunction with the procurement governance policy, procurement rules and procurement circulars. In addition, agencies must ensure that activities comply with any internal processes in place. This will enable agencies and its personnel to adopt compliant procurement practices that strive to deliver value for Territory.

The various templates and factsheets supporting this guide are listed in Appendix A and are referenced throughout the guide with the prefix P1, P2, P3 etc.

Figure 1



2 What is planning?Planning is an integral part of any procurement process. It comprises of whole-of-agency planning and project-specific planning. This can include consultation with key stakeholders, analysis of the market, determining the best procurement approach and measuring and managing risks.

Within the NTG, planning comprises the following three steps:

5. agency planning (refer section 5)

6. define our need (refer section 6)

7. plan the procurement approach (refer section 7).

Each step of planning is further explained in sections 5 to 7 of the guide as noted above.

Good planning considers the risk and complexity of the activity and sets the course for subsequent activities within the procurement lifecycle. It ensures the most appropriate procurement strategy is selected to meet the objectives of the agency and results in:

best value for Territory outcomes

improved management of procurement

improved strategic alignment

enhanced quality of project delivery

improved risk identification and management

improved relationships with business and industry.

The importance of planning is further outlined in the table below:

Importance of planning

Why is planning important? enables procurement activities to be aligned with agency strategic objectives

to improve the quality of preparation and analysis, to facilitate an optimum course of action

enables early detection of risks and potential mitigating strategies

to maximise the opportunity for projects to be delivered on time and within budget.

What are the risks if planning is not performed?

inconsistent procurement practices

lower quality purchases and increased procurement costs

inadequate responses from business and industry

flow on implications in each stage of the procurement lifecycle

failure to deliver value for Territory.



The benefits of proper planning are outlined in the following table:

Benefits of proper planning

Achieve efficiencies across projects

prior to commencing a procurement, consider and identify any related projects to determine if efficiencies can be achieved

Achieve value for Territory outcomes

improved value for Territory outcomes can be achieved through a properly planned procurement activity, which may include joint agency or business unit approaches

Transparency and accountability

there is a clear definition of roles and responsibilities as well as a consistent and transparent processes.



3 GovernanceTo ensure the success of the NTG’s procurement processes, there is reliance on a number of structures already in place in agencies, in particular:

project planning and management

a sound financial management framework based on the Financial Management Act

audit and fraud prevention programs and frameworks

good standards in governance

professional conduct and capabilities of staff, based on Office of the Commissioner for Public Employment requirements

maintenance of appropriate records of procurement activities in accordance with NTG records management standards and guidelines.

Due to the varying agency organisational structures, recognition can only be given to generic project and contract management structures. Some interpretation will be needed in agencies to accommodate this approach. Staff undertaking procurement activities must ensure consideration of their agency structures and processes.

3.1 AccountabilitiesThe chief executive (however described) is the designated accountable officer in relation to the Procurement Act and the Financial Management Act. The accountable officer and all employees are bound by the provisions of the Procurement Act, procurement governance policy, procurement rules, and procurement circulars.

3.1.1 Procurement and financial delegations

All agencies require procurement and financial delegations to govern procurement activities. All procurement activities must be carried out in accordance with those delegations. It is recommended that delegations are assigned to position levels, as opposed to individuals. In developing delegations, agencies should note those functions that cannot be delegated by the accountable officer in the procurement rules (e.g. negotiation on price).

Each agency should also have clearly established processes for endorsements and approvals to be obtained.

3.2 ProbityProbity is the process of having strong moral principles, including conducting business ethically and fairly. In procurement, it is important to ensure that all businesses and industries have a fair opportunity, and that the process is transparent, accountable, impartial, and equitable. All procurement activity should be clear, open, well understood and applied equally to all parties who are engaged in the process.

The broad objectives of probity in procurement are to:

provide accountability

maintain integrity

ensure compliance with processes

ensure that all offers will be assessed against the same criteria



minimise potential conflicts and the potential for litigation

ensure the procurement activity provides the best outcome

avoid the potential for misconduct, fraud and corruption.

When conducting a procurement activity, it is important to ensure:

fair and impartial behaviour

accountability and transparency

lawful behaviour

adequate management of conflicts of interest

security of commercially sensitive and confidential information.

It is important to ensure that all procurement activities are always conducted with adequate probity in mind.

3.3 Defensible decision makingThe agency and its personnel must ensure that all procurement recommendations, decisions and actions are defensible. Defensible means that the decision is based on proper consideration of the situation and information available at the time (including information that is reasonable to obtain), free from real or perceived bias and procedurally fair. This applies throughout the entire procurement lifecycle.

Further guidance on defensible decision making is provided at P1: Defensible decision making.

3.4 Risk managementRisk management is the process of systemically reviewing the environment in which the agency operates, identifying the likelihood of potential threats and rating the consequence of those risks. The agency then takes action based on the risk ratings (risk management) to mitigate the impact the potential threat will have on operations or minimise the likelihood of the threat occurring.

There are three fundamental risks inherent in government procurement. These are:

the government doesn’t get what it wanted

the government pays too much

the government suffers reputational damage.

Agencies should have a risk management framework in place that can be used to analyse strategic risks associated with the management of its procurement function, as well as project specific procurement risks.

3.5 Internal auditEach agency requires an internal audit framework and capacity to manage the audit function of that agency. Procurement activities should be periodically reviewed by an independent function of the agency. Procurement should feature in the agency assurance framework, particularly within the strategic or annual audit plan(s).

In accordance with the procurement rules, the accountable officer must establish an internal audit program for their agency that incorporates the requirements of the value for Territory assurance



program. The value for Territory assurance program is an overarching program of audit and assurance activities that evaluates:

internal NT Government and externally industry compliance with the buy local plan

the effectiveness of the buy local plan, and

the impact of the buy local plan (including unintended impacts).

Evaluation of these criteria is achieved through the direct and indirect activities of the buy local industry advocate, with the assistance of the buy local subcommittee of the Procurement Review Board. These activities are to be designed to measure the effectiveness of and compliance with the buy local plan.

Agencies contribute to this through their internal audit programs which must incorporate evaluation of the three points mentioned above.



4 Roles and responsibilitiesThe table below defines the key roles and responsibilities associated with the planning stage. The roles identified in the table may have alternative naming conventions within each agency. Agencies should interpret roles and responsibilities to align with terminology relevant to their agency.

Clarity of roles and responsibilities is critical in achieving efficient and effective planning. It is recommended that roles be allocated early in the procurement lifecycle, ideally in the planning stage to provide personnel with the opportunity to be aware of, and provide input into, the planning and sourcing stages.

Where necessary, the same employee can be assigned to more than one role. However, agencies should ensure appropriate segregation of duties. For example, the project manager should not be the delegate and members of the assessment panel should not be approving assessment outcomes.

Agencies should provide all staff with the support and training necessary to obtain the procurement skills required to perform their roles effectively.

Roles Responsibilities

Project manager manages a specific project for which procurement activities are undertaken

determines if a given procurement has been captured on the APMP

establishes the business need prior to commencing the procurement

considers and identifies any related projects to determine if efficiencies can be achieved

coordinates the preparation of project-specific procurement plan, project risk register, offer and contractual documents and any other associated pre-offer documentation

coordinates the development of a scope of requirement

undertakes an analysis of market conditions

identifies and manages agency, project and procurement risks, at all stages of the procurement lifecycle

provides input into the assessment strategy for a project-specific procurement

reports to the project sponsor.

Project sponsor a senior agency executive responsible for ensuring the overall objectives of the specific procurement activity are delivered and the proposed benefits realised.



Roles Responsibilities

Steering committee group formed from stakeholders to guide the development and progress of a project (as applicable)

the chairperson of a steering committee for a government project is generally a senior executive of the agency with responsibility for the project

oversees the general progression and direction of the specific project, ensuring risks are identified and managed appropriately, and decisions are made when required.

Accountable officer the Chief Executive (however described) of the agency or a person who the Treasurer declares in writing to be the accountable officer for the purposes of the Financial Management Act

provides strategic leadership, direction and oversight of the procurement lifecycle and associated governance in their agency

approves the annual five-year APMP each financial year.

Delegate officer in an agency who holds the appropriate delegated authority to approve the scope, program, quality, budget cost or other key parameters of a specific procurement activity.

Procurement Services administration of procurement policy and processes within the agency

provide advice to agency personnel, on the application of procurement policies, practices and guidelines

ensure agency procurement practices are aligned to NTG policy, rules, and guidelines.

Procurement Review Board provide strategic procurement advice to government

review APMPs to identify opportunities for collaboration

review agency procurement procedures or practices to assure compliance with the Procurement Framework

monitor procurement trend diagnostics at an agency and whole of government level

approve obtaining supplies available to the NTG under an existing contract between a supplier and the Commonwealth, a State or another Territory of the Commonwealth

oversees agency and industry compliance with the buy local plan

monitors the overall effectiveness and impact of the buy local plan, including monitoring for unintended consequences.



5 Step 1: Agency planningThe focus of this step is on agencies incorporating procurement requirements and processes into its strategic and operational planning at the corporate level.

Agency planning is essential so that project-specific related procurement decisions are not made in isolation, and so consideration can be given to the overall picture, to enable coordination of approaches leading to economies of scale and value for Territory outcomes.

The importance of this step is outlined in the following table:

Importance of agency planningWhy is agency planning important?

to maximise the opportunities for economies of scale and the delivery of value for Territory outcomes through coordinated processes

enables procurement activities to be aligned with strategic objectives

to facilitate transparency and accountability in procurement decision-making

to promote integrity, impartiality, and ethical behaviour

to encourage agencies to allocate sufficient resources to build the capability of staff involved in procurement processes.

What are the risks if agency planning is not performed effectively?

an inadequate procurement plan put in place that does not address agency objectives

ineffective allocation of agency planning resources, without proper consideration of value and risk

failure to deliver value for Territory outcomes

reputational risk due to a lack of transparency and accountability in the procurement planning process

competing objectives being pursued.

5.1 Agency procurement management planProcurement planning will be incorporated into the agency’s planning cycle in a coordinated manner similar to other corporate plans, as each area of planning influences the other. Agencies will produce, on an annual basis, a five-year APMP that is approved by the accountable officer.

The APMP sets out the agency’s strategies for improving their procurement procedures and for ensuring the agency’s procurement related expenditure is well managed. As part of this process, Agencies need to develop a good understanding of their procurement expenditure profiles, key supply markets, local supply markets and the position of the agency within these markets, the agency’s procurement organisation, systems, procedures and staff capabilities.

Further guidance and templates to assist with preparing the APMP is provided at P2: APMP guide and template.



5.2 Procurement management approachAs part of procurement planning, agencies should consider the following approaches in the management of their procurement activities. Each approach will have different implications in relation to agency procurement planning activities.

5.2.1 Category management

Category management is the process of organising procurement resources to focus externally on the supply markets of an organisation (as opposed to having a focus on the internal customers or functions) in order to fully leverage purchasing decisions. It takes into account the requirements, opportunities and risks of both the supply side and buy side, and involves moving away from a contract-focused approach, to one focused on the category of supplies as a whole. Category management involves grouping the same or similar supplies into categories and managing each category holistically. Spend on a defined groups of similar supplies is cohesively managed on a lifecycle basis.

Categories defined as whole-of-government should typically have category plans, procurement strategy and sourcing, contract management and supplier relationship development led centrally with collaborative support from agencies. Elements of contracting (such as making commitments to suppliers under panel agreements or standing offer arrangements) reside with agencies.

5.2.2 Demand management

Demand management encourages agencies to understand the rationale behind their purchases, focusing on volume and consumption. It involves challenging what the agency buys through actions which review an activity to determine whether it meets the needs and objectives of the agency and questions the need to spend money in the first place.

The process is employed by government where demand cannot be met and additional resources either within government or the private sector are not available. It involves managing the service delivery cycle to influence demand for services and the economic, financial, and human resources required for effective delivery of those services.

Demand management embodies the following:

identifying community expectations, needs and priorities

identifying strategies to match demand with the relevant agency’s capacity to meet it

staging the provision of resources to match forecasts of service demand over time

using available resources to the best effect

stabilising variations in service demand over time.

Key agency stakeholders should be involved in the demand management procedure to identify strategies, assess risk and make decisions. This involvement will enable a clear understanding of the impact changes in the availability of resources and services will have. In particular, other agencies that may be affected should be included in the process to ensure that demand is not simply shifted from one agency to another.

The elements of demand management include:

identifying, defining and measuring current and future service demand

measuring current and future service capacity

measuring the gap between projected demand and capacity



identifying strategies to influence demand, including an assessment of the potential impact of those strategies

performing a risk analysis

selecting a demand management strategy

implementing the strategy

monitoring its impact

reviewing its process and success.

5.3 Relationship managementGood relationship management establishes clear lines of communication and responsibilities between the agency and business and industry. Having a programme for managing and developing relationships with business and industry, structured with appropriate governance and senior ownership, will contribute to enhanced procurement outcomes.

Agencies should put a benefits realisation plan in place for relationship management, so there is a clear sense of what value is to be generated for both parties. Furthermore, there should be a focus on capturing innovation from business and industry where necessary or valuable.

Key aspects of relationship management include:

building strategic relationships between the key stakeholders in the organisation and business and industry

identifying and building on mutual benefits

establishing operational relationships between the agency and business and industry.

5.4 Engagement of stakeholdersEarly engagement with stakeholders is designed to gain an understanding of market dynamics and whether there is potential to improve the delivery of desired procurement outcomes.

Similar categories of supplies across multiple divisions or agencies offer further opportunities for market-based solutions and establishing whole of government contracts.

One way to systematically review developments and trends in particular market sectors is to carry out regular strategic market sector scanning. This process can assist in:

refining procurement requirements within a category of supplies

providing a better understanding of the capability of market sectors relevant to the category

assessing the capacity of the market and structure of the relevant market sector

assessing the scope for small and medium enterprise participation

identifying issues and risks

clarifying optimal path to market strategies (critical path links).

Ideally, strategic market scanning will inform the market engagement strategies when preparing a procurement activity plan.



5.5 Procurement processes by tierThe procurement rules establish the minimum requirements for each tier. Agencies must ensure that they have the required systems, processes and resources in place to effectively manage their procurement function to enable compliance with the procurement rules. For example, this may include consideration of how procurement services are delivered to agency staff (e.g. dedicated procurement unit, centralised service etc.).

The procurement tiers are as follows:

tier 1: less than $15 000

tier 2: $15 000 to less than $100 000

tier 3: $100 000 to less than $500 000

tier 4: $500 000 to less than $5 000 000

tier 5: $5 000 000 and over.

Refer Appendix A for a list of flowcharts and checklists for each tier. Agencies may adapt these to suit their internal processes but must ensure overall compliance with the procurement framework (for editable copies of the flowcharts, please contact Procurement Policy).

5.6 Monitoring expiring contractsIn establishing their procurement functions, agencies need to consider how they will manage and monitoring expiring period contracts. These contracts must be renewed or extended prior to their expiry in order to remain valid. This not only ensures continuity of service delivery, but also ensures that the services are governed by current and valid conditions of contract.

Period contracts should be recorded in a register upon award and updated as necessary. It is recommended that this function is performed by the agency’s procurement unit to ensure a consistent approach, with one or two individuals responsible for monitoring expiration dates.

An example register is provided at P14: Period contract register. Other options include using contract management systems such as Contrax (once available to all agencies).

It is important that agencies consider the amount of time that will be required to renew or extend a contract to avoid a lapse in services. The time required will largely depend on the nature of the contract and whether it is being renewed or extended. For example, an extension of a cleaning contract may only require a few weeks, whereas the renewal of a large panel contract will likely require a minimum of six months.



6 Step 2: Define our needThe focus of this step is on agencies clearly and effectively articulating the desired supply requirements and associated outcomes in preparation for planning the procurement approach.


Importance of defining our needWhy is defining our need important?

enables a clear and consistent understanding amongst stakeholders of the business need to be met by the procurement activity

enables procurement activities to be aligned with agency strategic objectives

enables the objectives of the procurement activity to be clearly defined and understood

to maximise the opportunity to undertake consultation prior to undertaking the procurement activity.

What are the risks if defining our need is not performed effectively?

poor identification of needs may lead to incorrect supplies being sought or offered, resulting in additional time, effort and cost

a procurement outcome that does not meet the business need or agency’s strategic objectives

a lack of buy-in from affected stakeholders due to a lack of consultation throughout the procurement process

procurement decisions made without an evidence-base.

6.1 Determine business needProcurement is a means to satisfy a business requirement, and establishing a business need is one of the key drivers of the entire procurement process. This is started by clearly defining the business need for the purchase and specifying what is to be purchased.

A clear and justifiable business need linked to the agency’s strategic objectives or procurement strategy needs to be established. Options to satisfy this business need (including non-procurement alternatives) are to be explored to determine whether procurement is the best means to deliver a value for Territory outcome. There may be an existing contract that can meet the identified need (including across government contracts).

In the absence of clearly established business needs, the project manager should undertake the process prior to commencing the procurement activity on behalf of the agency.

6.1.1 Procurement methods

Agencies should consider the range of procurement methods available and the potential source of supply. Poor identification of business needs may lead to incorrect supplies being sought or offered, resulting in additional time, effort and cost.

Activities that can assist in establishing the business need include:

undertaking research to identify purchase and potential suppliers



identifying/agreeing on the outcome and determining best purchasing options in terms of policy requirements, risk, cost and other management issues

preliminary cost-benefit analysis.

For all significant procurements (particularly those identified as high risk and/or high value), a business case should be prepared.

6.1.2 Objectives of the procurement activity

Before proceeding with a procurement activity, agencies should clarify the context, background and key objectives for the procurement. Procurement objectives should be based upon a clear understanding of the business needs, and the inclusion of a market approach which reconciles the business needs with the character of the supply market. Specific procurement objectives are likely to relate to quality, service, cost, risk, social, and environmental factors. Objectives need to be realistic, measurable and capable of being achieved in light of the specific procurement strategy proposed.

6.1.3 Procurement activity budget

Agencies must estimate the value of the supplies prior to commencing a procurement activity. Prior to commencing a procurement activity, the accountable officer or delegate will verify the availability of sufficient funds to procure the supplies.

The estimated value of the supplies is not published as standard practice. However, as part of some procurement processes (particularly where the supply is complex and/or difficult to define) it may be appropriate to include an estimated value, benchmark or comparator to assist respondents with preparing their offer.

Unless there are exceptional circumstances, agencies should not use budget limitations to terminate a procurement process once the request has been put to the market. Agencies should first explore other options, such as negotiation to reduce the scope of requirement.

6.1.4 Stakeholder consultation

Stakeholder consultation involves the development of a constructive, productive relationship with key individuals, groups or organisations involved or influenced by the current procurement activity. Stakeholder consultation may result in a relationship of mutual benefit, and help identify trends and emerging challenges which may make an impact on the procurement activity. Stakeholder feedback and information is valuable in improving outcomes and may help identify and control external risks.

Efficient stakeholder consultation will assist in:

identifying and tracking needs and expectations

identifying and tracking perceptions and attitudes

providing feedback on specific planned developments

evaluating implementations and actions.

Stakeholder consultation results in the following benefits:

more informative decision-making

greater satisfaction from stakeholders and the agency

increased chance of a successful implementation



best practice, demonstrating a desire to engage.

It is important to identify key stakeholders, both internal and external, and consult to determine their needs. Consultation with key stakeholders should consider the purpose of the procurement, those parties impacted by the procurement, the key stakeholders and their expectations, as well as the needs of any major external users or recipients of the supplies.

6.1.5 Business case (as needed)

The business case sets out the policy, business and contract objectives and the issues that affect the decision and the investment. It should seek to establish that the proposed contract will meet the need, that it is achievable and affordable, and it should address the following:

identify the business need and desired outcome(s) of the contract

identify critical success factors

detail possible alternatives, including existing contracts

highlight critical risks and potential mitigating strategies

identify any contingent needs and ramifications of proceeding

details of an indicative timescale

identify funding sources.

The business case should be prepared with the involvement of key stakeholders, including where and if possible, the end users. It should be approved in line with the agency’s policies, procedures and delegations.

The business case is a working document and should form the basis of the post-implementation review and be used as a management tool to ensure that the original outcomes and benefits have been achieved.

Business cases come in all shapes and sizes. They should, however, all have the same purpose, which is to:

justify the resources and investment or funding necessary to undertake procurement over the whole-of-life

provide a vehicle for approving funding which supports transparency and probity

assist the agency to prioritise the project against other public policy/business initiatives.

Not all procurement activities require the development of a business case. Agencies are encouraged to check their agency policy to determine when a business case is required.

6.2 Existing contractsPrior to planning the procurement approach and proceeding to market, agencies should determine whether there is an existing contract under which the supplies must or may be obtained from. This may include:

across government contracts

agency specific contracts.



6.2.1 Across government contracts

If the supplies are available under an existing across government contract, the supplies must be obtained under that contract unless otherwise stated in the contract. Information on across government contracts2, including the process obtained supplies, is available on NTG Central.

6.2.2 Agency specific contracts

Agency specific contracts are contracts arranged for a single government agency. The agency, for which the contract is arranged, is mandated to use the contract. In some cases, it may only be mandated for a specific division, business unit or program of works. It is recommended that agencies clearly communicate with their staff any contracts that are mandated for use and provide instructions on how to access the contract.

Agencies may utilise period contracts established by other agencies with approval from the delegates of both agencies and the supplier. Accessing contracts established by other governments (i.e. federal, another state or territory) require approval from the Procurement Review Board.

The agency must be able to demonstrate that accessing another agency/government’s contract will deliver best value for Territory over other the preferred procurement method for the relevant tier.

6.3 Project specific governancePrior to undertaking a procurement activity, a number of governance groups may be established to ensure the smooth functioning of the procurement process throughout the procurement lifecycle.

6.3.1 Project steering committee

This is a group formed from stakeholders to guide the development and progress of a project (as applicable). The chairperson of a steering committee for a government project is generally a senior executive of the agency with responsibility for the project.

The project steering committee oversees the general progression and direction of the specific project, ensuring risks are identified and managed appropriately, and decisions are made when required.

6.3.2 Project team

During the initial stages of the procurement activity it is important to establish a project team. The size and composition of the project team will depend on the nature, scope, value and level of complexity and risk of the procurement activity. It is important to assemble and facilitate a team of stakeholder representatives who can devote time and think openly and constructively about solutions.

The project team should possess a mix of relevant skills and experiences to enhance on knowledge and requirements, the team composition may include:

policy officer/business owner/project sponsor

business user/recipient of services

subject matter technical expert

procurement specialist

commercial/financial expert

2 http://ntgcentral.nt.gov.au/ntg-tools-services/procurement-and-contracts/contracts/across-government-contracts


http://ntgcentral.nt.gov.au/ntg-tools-services/procurement-and-contracts/contracts/across-government-contracts


legal advisor

probity advisor.

It is advantageous, if possible, to retain some or all of the original project team members, or at least the core team throughout the procurement. In this way, the project team will be responsible for assessing the needs, defining the specification of requirements, designing an appropriate assessment methodology, assessing offers, inputting into performance standards, measures and developing contractual requirements. Such continuity is likely to strengthen the procurement process and outcome.

Where stages in procurement are done by separate individuals or other groups it can compromise the quality of the outcomes.

6.3.3 Probity team

Probity aims to maintain the integrity of the public sector by adopting and following well-considered procedures and processes to ensure that procurement decisions are fair, transparent and defensible.

Procurement must be conducted with probity in mind, to ensure purchasers and business and industry interact on the basis of mutual trust and respect, and ensure integrity. Probity should be integrated into all procurement planning.

It may be beneficial in relevant procurement activities to establish a team of individuals to undertake probity activities to ensure ethical processes. The team may vary in size depending on the procurement activity but should involve individuals with relevant probity and procurement skills.

6.3.4 Conflict of interest declaration

Each person involved in a procurement activity on behalf an agency, whether part of the project team, or separately involved in providing financial approvals or accepting an assessment panel recommendation, must declare any actual, potential, or perceived conflicts to the delegate throughout the procurement lifecycle.

A conflict of interest declaration form should be signed as soon as the person is appointed to the team. For those making financial approvals or other key decisions the declaration can be provided at the relevant time of making the decision during the procurement lifecycle.

If a declaration is made, the delegate must make a decision about that person’s participation in the procurement activity. Declarations should be updated at regular intervals as appropriate (i.e. when offers close).

Templates are provided at:

P15: Declaration of interest and confidentiality (NTG staff), and

P16: Declaration of interest and confidentiality (non-NTG staff)

6.4 Project specific risk managementAs part of the planning process, specific project risks should be identified and assessed in accordance with the agency’s risk management framework. A thorough project risk register will consider risks across all stages of the procurement lifecycle. The register would, at a minimum, include identified risks, strategies, actions, owners and resolution dates.

The basic principle is that management of a particular risk should be allocated to the party best placed to manage it. Project managers should be prudent when transferring the responsibility for the management of risks between parties. Clear communication and acceptance of risk transfers are required.



The risk register should consider risks in all stages of the procurement lifecycle. It is an active document which should be added to, updated, corrected and completed as required throughout the lifecycle. The creation of a risk register is particularly important for high risk contracts.

A template risk register is provided at P17: Procurement risk register.

6.4.1 Value and risk segmentation

In addition to establishing a risk register, it is recommended that project staff undertake a value risk segmentation (VRS) to guide the procurement approach. Segmenting contracts based on value and risk in the planning process is required to effectively identify the key activities and resources required to plan, source and manage a specific contract.

Below is a classification framework that categorises contracts into one of four types, segmenting contracts on the basis of value and risk, resulting in the following classifications:

routine contracts (low risk, low value)

leveraged contracts (low risk, high value)

focused contracts (high risk, low value)

strategic contracts (high risk, high value).

A copy of the VRS should be kept with the procurement records. The VRS tool is provided at P18: Value risk segmentation tool.

The table below outlines the recommended planning approach for each contract classification as determined by the VRS. Procurement activities identified as high risk and high value require experienced project managers and greater rigour than those identified as low risk. As a result, the approach to each planning step can vary.



Type Risk Value ApproachRoutine Low Low These contracts are generally transactional in

nature and will not require significant planning effort.

Leveraged Low High With low risk and high value contracts, the focus will be on how to leverage value from the resultant contract. This may include planning for how spend monitoring, minimising the cost per unit and management efficiencies can be achieved.

Focused High Low These contracts warrant a higher level of planning with a strong focus on risk mitigation.

Strategic High High High risk, high value contracts require a significant amount of effort and attention in order to safeguard the organisation and ensure the effective delivery of agreed outcomes and services. It is recommended that a suitably qualified project manager with procurement experience is appointed to lead the planning stage, with suitable advisors included (i.e. probity, legal, procurement).

6.5 Market engagement and analysisThe objective of market engagement and analysis is to develop a thorough understanding of the current nature of the market and how it may impact on procurement activities and the approach to market. Having a thorough understanding will ensure that informed and value adding procurement decisions are made.

There are various avenues available to obtain information about the market, including:

own knowledge

previous experience

internet research

existing business and industries

other buyers

market analysis consultant

professional bodies

industry bodies (include Contractor Accreditation Limited)

the Industry Capability Network NT.

In addition, market engagement ensures agencies gain an understanding of the changing aspects of the market and identify where improvements can be made to enhance desired procurement outcomes. Engaging with the market can help:

refine procurement requirements

provide a better understanding of the capability of market sectors



assess the capacity and structure of the market

assess the scope for participation

identify potential issues and risks

clarify ideal pathways to market strategies.

6.5.1 Undertake industry briefings

Briefings are integral to an agency’s ongoing business and industry engagement strategy to keep the market informed of core government policy directions and departmental processes. An agency may provide prospective suppliers an opportunity to attend a briefing to discuss the agency’s requirements for a specific procurement activity.

Project teams must carefully consider the timing of industry briefings, particularly when a procurement activity is out to market. It is important to allow sufficient time for industry to see the briefing opportunity and subsequently prepare their offer following the briefing.

Under the procurement rules, all agencies are required to consider opportunities to provide industry briefings as part of their APMP preparations.

6.5.2 Supply positioning model

Identifying the importance of a procurement activity to an agency, through an assessment of business risk/exposure and relative costs is referred to as the supply positioning model. This assessment will help inform the approach agencies may take to the market, as well as the amount of time and resources used in the procurement activity.

The following graphic highlights the supply positioning model:

The level of risk/exposure will be determined by various factors including (but not limited to) the following:

supply availability – risk/exposure is less where there are many businesses and industry and supply is plentiful, however shortages or market limitations will position the procurement higher on this scale

quality requirements – risk/exposure is less where there are commonly accepted industry standards and greater where there are strict unique specifications to be met and where there is little tolerance for error



safety/environmental reliability – risk/exposure is greater where there are significant safety or environmental considerations associated with the procurement activity.

These factors will vary for each agency and will determine where each procurement activity is positioned on the risk/exposure axis of the supply positioning model. This will help inform the procurement planning strategy, and the amount of time and effort required in undertaking the procurement process.

The following table identifies and describes each of the supply positioning quadrants and the procurement planning considerations that need to be assessed.

Quadrant Description Planning considerationsStrategic security low annual cost supplies

strategically important

limited number of reliable businesses and industry.

Strategy focus:

security of supply

Considerations:

risk management

panel contract/ preferred suppliers

longer term contracts

inventory, reserve of stock

consider alternative supplies.

Strategic critical high annual cost specialist supplies

limited number of businesses and industry with capability and capacity.

Strategy focus:

security of supply

Considerations:

performance measures (risk, value)

shared values, common goals

medium/long term contracts

contingency planning.



Quadrant Description Planning considerationsTactical acquisition routine purchases

low cost/low risk supplies

many potential businesses and industry.

Strategy focus:

purchase efficiently and reduce transaction costs

Considerations:

one-off contracts/purchase orders

simplify acquisitions process

minimise time and effort

purchase cards

automatic systems.

Tactical profit high cost/low risk supplies

many potential businesses and industry.

Strategy focus:

cost savings, drive value

Considerations:

short term contracts (for example one or two years)

ongoing active sourcing (e.g. reverse auctions)

promote competition

seek value adds and discounts

negotiate post offer

detailed specifications.

6.5.3 Supplier preferencing model

Identifying the willingness or reluctance of business and industry to meet the agency’s procurement requirements, through an assessment of attractiveness of the account and the relative cost (relative to their total sales) is referred to as the supplier preferencing model. This model evaluates the level of effort a supplier will put into a procurement activity, for example a supplier will put in less effort when they perceive a customer as unimportant.

The following graphic highlights the supplier preferencing model.



The attractiveness of an agency procurement activity to business and industry is determined by various factors including (but not limited to) the following:

level of expenditure

scale of customer demand compared to others

profitability of the customer

reputation of the agency

potential for the business and industry to grow the account

ease of managing the account.

By understanding these factors from the business and industry perspective, more effective procurement planning strategies can be developed by agencies to either make the procurement activity more attractive to business and industry or to maximise the opportunity for value for Territory outcomes.

The following table outlines the key aspects of each quadrant from the potential supplier point of view and describes what agencies might consider in developing an appropriate acquisition strategy and framing a market approach.



Quadrant Description Actions Planning considerations

Development Opportunity:

low relative cost

still attractive.

nurture customer

expand business

seek new opportunities.

capitalise on the opportunity to maximise value

improve the capability and performance of the supplier

develop good business relationship.

Core Key customer:

high relative cost

highly attractive

core business.

retain customer

defend rigorously

high service and response.

Nuisance Indifferent:

low relative cost

minimal profit.

low interest

low attention

lose without pain.

encourage participation by involving business and industry early in the process via market sounding and promoting awareness of the procurement opportunity

reduce the cost of participation in the procurement process via streamlined/ simplified procurement process

increase the value of the procurement by consolidating/ packaging like businesses

ensure a fair allocation of risk between the parties.

Exploitable Interested:

high relative cost

but not attractive.

maximise profits

drive premium price

short term advantage

risk losing customer.

6.5.4 Supply chain analysis

A supply chain consists of the organisations that participate in the flow of supplies from their original source to the final end-user. These organisations share linkages of being both a customer and a business and industry to some of the other organisations.

The types of organisations that comprise a supply chain will depend on the nature and complexity of the supplies. Organisations may include primary producers, manufacturers, traders,



transporters, importers, wholesalers, distributors, contractors, information systems providers and retailers.

Supply chain analysis seeks to promote a more integrated, seamless, cooperative and low risk arrangement between the key players as the success of the procurement will ultimately depend on the performance of each link in the supply chain.

Supply chain analysis identifies where the greatest risks are and identifies how each organisation adds value to the procurement. Supply chain analysis enables the public authority to consider strategies to influence the nature of the supply chain (if possible) or to undertake the procurement at a different stage in the supply chain (for example, by sourcing the supplies directly from the wholesaler instead of the retailer).

For example, consideration of the supply chain enables government to consider sustainability risks such as only purchasing office furniture made from sustainable forest timber.

Governments can analyse the supply chain by commencing with the first-tier business and industry and working backwards to identify:

1. the value that the participant adds

2. where in the supply chain the procurement is currently located and where the best value in the supply chain lies

3. ways to add value and improve the current approach (for example, using technology to better integrate with key businesses and industry)

4. any non-value adding activities in the supply chain that can be removed (for example, dealing with fewer businesses and industry through consolidating spend)

5. any key risks in the supply chain (for example, suppliers that are overly dependent upon a single supplier, the use of child labour, unsafe work practices or non-sustainable new materials.

6.5.5 Analyse market conditions

Market conditions are the characteristics and features of a business and industry sector. Analysing the market enables procurement practitioners to understand how the supply market is working, the direction in which the market is going and the key businesses and industries currently in the market.

Market analysis is specific research undertaken to identify and describe the factors, conditions, and characteristics of the market for a procurement activity. The results of a market analysis can help improve the strategy and procurement process to help achieve better value and reduced costs.

A market analysis is normally undertaken prior to a market approach, to help facilitate the achievement of procurement objectives appropriate management of risks.

Prior to undertaking a market analysis, it is important to do the follow:

define the objects and elements of the market analysis (e.g. number of businesses and industry and their capacity and capability)

determine the local capacity and capability

identify potential information sources and analysis methods

identify the resources required to undertake a market analysis

define the key activities and timelines.



6.6 Prepare scope of requirementA scope of requirement (i.e. specification) is the statement of a need or requirement to be procured which clearly and accurately describes the essential requirements for supplies. Once a contract has been awarded, this becomes a key document in the contract management stage of the procurement lifecycle.

It is important that the scope of requirement provides information on the following:

the quantities required

any technical details that will meet the specific needs

the performance standards that the resulting supplies will need to address.

It is important to ensure that the scope of requirement clearly describes the following:

why the supplier is required to do it

what the supplier is required to do

when the supplier is required to do it.

The following points may assist in developing the scope of requirement:

detail why the agency is undertaking the activity and the term of contract

outline what results will need to be achieved

explain how the supplies will be delivered

outline what quality and standards apply

outline the quantity or volume required

detail where the supplies will be delivered

detail when the supplies be delivered

explain who will be involved in the delivery: supplier / contract manager etc.

The following table details key characteristics of a good scope of requirement:

Characteristics ExplanationComplete The scope of document is contained in one document with no missing

information. If the nature of the procurement requires more than one document, the documents should be clearly structured and linked with no repetition or overlap.

Unambiguous Each requirement is concisely stated without recourse to technical jargon, acronyms (unless defined elsewhere in the document). It expresses objective facts, not subjective opinions. Vague language is avoided. Negative statements and compound statements are discouraged.

Consistent Each requirement is consistent with all others and any external documents that are referenced.

Current Each requirement is current and can, in some cases, be future focused to meet planned or predicted future needs.



Characteristics ExplanationFeasible Each requirement can be implemented within the constraints of the

project including the budget.

Traceable Each requirement can be tracked back to a stated public policy/business/stakeholder need and is authoritatively documented.

Verifiable The implementation of the requirement can be determined through one of four possible methods: inspection, demonstration, test or analysis.

6.6.1 Structure of a scope of requirement

The success of the procurement activity relies on the scope of requirement being a true and accurate statement of the agency’s requirements. Apart from being a means of identifying the supplies required, a scope of requirement may form part of any future contract.

A scope of requirement should:

state the requirement clearly, concisely and logically in functional and performance terms

state what the supplies will be used for

include enough information for suppliers to decide what level of quality is required

state the criteria and scope

provide equal opportunity for all potential businesses and industry

assist in forming the fundamental basis of the contract between buyer and seller.

The scope of requirement should not specify brand names for supplies without clearly stating that equivalents are allowed unless there is a clearly defensible and demonstrable benefit to government.

6.6.2 Scope of requirement types

Functional

Functional specifications define the task or desired result by focusing on what is to be achieved rather than how it is to be done. They do not describe the method of achieving the intended result. This enables suppliers to provide solutions to defined problems.

There is often great scope for variation in this approach, so it is necessary to think carefully about how to assess the offers received. There may be a wide variance so a structured method of determining which is the most appropriate is needed.

Performance

Performance specifications define the purpose of the supplies in terms of how effectively it will be required to perform. Performance is a logical extension of function: performance specifications define the outcome or desired result by focussing on what is to be achieved, not the method of achieving it. Performance specifications are usually used in conjunction with functional specifications. This enables suppliers to provide solutions to defined problems.

There is great scope for variation in this approach, but it encourages innovation. As with functional specifications, it is necessary to think carefully about how offers are to be assessed.

Technical



Technical based scopes define the technical and physical characteristics and aspects of a product as well as design details, material properties, maintenance requirements and operational requirements. Technical based requirements are used when functional and performance characteristics are not sufficient to accurately define a requirement.

Outcome

Outcome based scopes are encouraged and have the advantage over technical based scopes by allowing suppliers to offer innovative and technologically advanced solutions that can offer improved value for Territory.

6.6.3 Performance standards and measures

Performance standards are quantifiable units of measurement used to assess the extent to which the contractual outputs have been achieved. When applied to the supplies they allow the buyer to clearly set the parameters for success.

Outputs should be evaluated using the following performance measures:

quantity: how much or how many?

quality: how well?

timeliness: the frequency and promptness - this might include turnaround times, waiting times or response times

cost: unit cost, or total cost

user satisfaction: the level of customer satisfaction regarding any of the above, as well as their specific requirements

continuous improvement: rates of improvement in any of the above measures over time.

Agencies should select key performance indicator’s (KPIs) and performance measures that are relevant and which can be measured. Potential examples include:

delivery or response times within agreed timeframe (e.g. 1 hour response time)

timeframes or completion dates, e.g.

o percentage or proportion of milestones met on time

o completion of performance by due date

complaint resolution

prompt advice of any problems and resolution

acceptance of deliverables (e.g. recommendation report)

customer satisfaction with the services delivered (e.g. satisfaction surveys)

cost tracking (e.g. percentage or proportion of costs that have been invoiced benchmarked against the agreed contract costs)

delivery accuracy (e.g. percentage of deliveries that match orders)

service resolution (e.g. percentage or proportion of issues resolved first time without follow up/escalation).

The chosen measures must be clearly outlined in the scope of requirement to enable reporting in the contract management stage of the procurement lifecycle.



6.6.4 Consultation on the scope

It is important to include consultation into the development of the scope of requirement. Valuable information and advice relating to the procurement activity can be obtained through interaction from users of a similar supply and other procurement practitioners

Other helpful sources of information and advice include:

consulting with other departments or agencies

consulting with industry associations or particular companies

consulting with other users of the supply.

6.6.5 Endorsement and approval of the scope of requirement

It is critical to ensure that all relevant endorsements and approvals for the scope of requirement are obtained in line with the agency’s policies, procedures and delegations.

6.7 Future tender opportunitiesA future tender opportunity is the advance publication of proposed procurement activity. It is the process through which government will bring industry attention to specific procurement activity that will take place.

Agencies must advertise a future tender opportunity at least one month prior to the release of tier 4 and above procurement activities. This linked to requirements for government procurement under free trade agreements.



7 Step 3: Plan the procurement approachThe focus of this step is on identifying the most appropriate way to approach the market to facilitate the achievement of best value for Territory. It is the last step in planning before the sourcing stage commences.


Importance of planning the procurement approachWhy is planning the procurement approach important?

to elicit offers from suppliers that meet agency needs

enables the most appropriate procurement approach is undertaken based on findings from market engagement and analysis

to facilitate the achievement of value for territory outcomes.

What are the risks if planning the procurement approach is not performed effectively?

an inappropriate approach to the market may result in a poor or ineffective responses from the market, resulting in additional time, effort and cost

confusion from suppliers as to the requirements of the agency, resulting in supplies being offered that do not meet agency needs

responses from the market that do not provide Value to Territory.

7.1 Existing contracts – extension vs renewalFor contracts with available extension options, the agency should first consider offering the extension to the contractor, particularly if the supplies remain unchanged and the contractor has been performing well.

The contract management guide3 (available on NTG Central) includes a contract extension review template that can assist with making the decision to extend a contract.

The process for extending a contract is generally as follows:

1. obtain delegated approval to extend the contract

2. send the contractor an invitation to extend letter

a. where applicable, this must include an opportunity for contract rates to be reviewed

3. if the contractor increases their rates, seek delegated approval to accept the new rates

4. issue a notice of amendment letter confirming the extension.

Note: if using the CAPS contract management service, they will issue the letters for tiers 4 and 5.

For contracts without extension options, the agency should go back to the market. Agencies should avoid varying in extension options wherever possible. Varying in extension can be indicative of poor planning and may be subject to criticism in an audit or review.

3 http://ntgcentral.nt.gov.au/ntg-tools-services/procurement-and-contracts/procurement/procurement-documents


http://ntgcentral.nt.gov.au/ntg-tools-services/procurement-and-contracts/procurement/procurement-documents


Any decision to vary in an extension option instead of going back to the market must be defensible. An example of where this may be defensible is a short-term extension to see out the completion of a program of works where going back to at market would not result in better value for Territory being achieved.

It is vital that agencies have processes in place to monitor and renew their expiring contracts in order to avoid varying in extra extensions.

7.2 Open and competitive approachProcurement processes that are open, transparent, competitive and non-discriminatory ensure that all potential businesses and industries with capacity to deliver the requirement can submit an offer and can competitively bid for government contracts.

Key benefits of an open and competitive market approach are that all potential suppliers are subject to the same terms, conditions and requirements; and procurement procedures and processes are consistent and transparent to agencies, potential suppliers and the public.

Such an approach enables the procurement process to be conducted in an open and transparent manner, in accordance with the NTG policy and legislation. An open and competitive market approach avoids processes that only favour the lowest price or are biased towards a business or industry.

As outlined in the table below, the preferred market approach differs according to the tier:

Tier (GST inclusive) Preferred approach Other considerationsTier 1Less than $15 000

Quotation (via select invitation)

requires minimum of one written quotation, including from a Territory enterprise

direct purchasing available for freely available supplies that are low risk and can be purchased locally.

Tier 2$15 000 to less than $100 000

Quotation (via select invitation)

requires minimum of three written quotations, including one from a Territory enterprise

direct purchasing available for freely available supplies that are low risk and can be purchased locally.

Tier 3$100 000 to less than $500 000

Public offer alternative and restricted procurement methods available where approved by the accountable officer or delegate (must be defensible).



Tier (GST inclusive) Preferred approach Other considerationsTier 4$500 000 to less than $5 000 000


Tier 5$5 000 000 or more


7.3 Determine procurement methodAgencies will need to identify the procurement method (e.g. public, alternative, restricted) most appropriate to facilitate the delivery of best value for Territory based on an assessment of complexity, scope, opportunities and risks associated with the procurement objectives, as well as the level of competition in the supply market.

A range of factors can influence the type of procurement method used, including:

cost and price requirements or restrictions

complexity and size of the required supplies

timeframes/implementation

availability

skill requirements

market trends

risk factors

Value for Territory factors.

Regardless of the procurement method chosen, the decision must be defensible.

7.3.1 Alternative procurement methods

Agencies must only use an alternative procurement method with the appropriate approvals and where it can be demonstrated that it will result in improved value for Territory or is in the best interests of government and industry as outlined in section 6 of the procurement rules (exceptions and exemptions).

Processes within each tier may not be appropriate for procuring supplies where the risks to the government are such that simplified conditions may not adequately protect the government’s interests. As standard processes for each tier have been established to reduce the direct costs to potential businesses and industries, agencies need to justify departures from the use of the standard process for the given tier. Agencies may only use a method of procurement other than the standard process for the tier when demonstrable risks associated with use of this process can be identified and an alternative process can be justified.

The alternative procurement methods available are presented below:



7.3.1.1 Direct purchasing

Direct purchasing is a single source procurement method. It involves being directly in contact with one supplier. Agencies may only use direct purchasing for freely available supplies that are low risk and can be purchased locally.

7.3.1.2 Direct contracting

Direct contracting involves directly approaching and negotiating with one supplier in the absence of a competitive tendering process. Direct contracting can only be used with the approval of the accountable officer where there is a single supplier capable of meeting the requirements and:

there is evidence that it is the most effective manner to deliver best value for Territory, or

it is impractical or impossible to use an open procurement process.

and the contract awarded will be:

in the form of a lease, licence agreement or substantially non-standard contract, or

an extension or renewal of an existing contract, or

or the support or maintenance of existing software, systems.

Direct contracting does not follow a conventional tender process (i.e. development and release of a tender document) but still requires appropriate approvals and an assessment to ensure best value for Territory will be achieved.

7.3.1.3 Select processes

Select processes may be used where it can be demonstrated to have significant benefit to government and potential suppliers. Undertaking a select process involves inviting a limited and select number of potential businesses and industries to respond to an offer. In certain cases, it may be that only a sole supplier is invited to submit an offer.

Justification for a select process may include:

the supplies are required urgently (e.g. where life, property or equipment are at immediate risk or standards of public health, welfare, security or safety must be re-established without delay), or where there is an urgent request from a minister

the nature of the supplies necessitates confidentiality

the required supplies are available from a limited or single source (e.g. standardised supplies, compatibility with existing supplies, availability restrictions, warranty stipulation or restricted access, patent or copyright restrictions or specific accreditation, certification or qualifications are required to undertake the supply)

standardisation of supplies, where it can be demonstrated that a similar product will not operate within the current system or that standardisation will lead to significant cost benefits and efficiencies in operation

where a public procurement process has resulted in no admissible offers being received

there are warranty, patent or copyright considerations that limit the number of businesses or industries

supplies are required within a regional council area and it has been established that the regional council is capable of undertaking the work with a minimum of thirty percent (30%) aboriginal employment.



With regard to select processes, all approval documents are to be held with the procurement papers as part of the procurement audit trail.

Where a select process is used, agencies will ensure that the process is competitive. Whilst there is no minimum number of suppliers who can be invited to participate in a select process, the number of available businesses and industries should be considered. Furthermore, seeking responses from a broad range of business and industries will assist in ensuring that the procurement process remains competitive, and demonstrate commitment to the government procurement principles of open and effective competition and best value for territory.

Agencies may contact the Industry Capability Network NT to ensure that potential businesses and industries are not overlooked.

7.3.1.4 Multi-stage procurement method

Multi-stage procurement is generally characterised by a two-stage process. In stage one, potential suppliers are publicly invited to pre-qualify and are assessed in terms of their technical, financial and managerial capacity and capability in relation to the project concerned. In stage two, only those that are pre-qualified are invited to submit a detailed offer.

The decision as to whether this method is appropriate will depend on the nature, scope, value, level of risk and complexity of the procurement. A pre-qualification process is appropriate where government requirements are complex and responding to detailed assessment criteria may be costly and resource intensive. Although potentially a lengthier process, the pre-qualification process could be more efficient as suppliers do not need to expend significant resources preparing a stage one submission.

In a pre-qualified tender process, all potential suppliers are notified in writing of the outcome of each stage of the sourcing process, prior to an agency proceeding to the next stage of the sourcing process. Advice of the outcome of each stage of the sourcing process ensures suppliers are aware of whether or not there is a prospect that they will be successful in the procurement process. This provides some certainty to suppliers in terms of planning their workflow and staffing requirements.



7.4 Consideration of local contentAll agencies must consider opportunities to maximise local content throughout the procurement lifecycle for all procurement activities. This may include:

conducting rigorous market research to identify Territory enterprises with relevant capability and capacity, particularly for tier 1 and 2 procurement activities

addressing the risks of excluding Territory enterprises by avoiding procurement activities that:

o are overly-complex

o are of a scale that exceeds the capacity of Territory enterprises

o contain unnecessary mandatory requirements

o contain incomplete or ambiguous information

structuring procurement activities that align to local workforce skills identified in market research, making it easier for suppliers to plan for local content in their offers

considering the potential for disaggregation of a large procurement scope into smaller contracts to give Territory enterprises with limited capacity the opportunity to win contracts

o this would require an examination of the benefits vs the loss of economies of scale to ensure that value for Territory will still be achieved.

When selecting local content assessment questions, agencies may seek responses in relation to:

enhancement of industry and business capability in the NT (i.e. the extent to which the offer will improve the NT business environment and subsequent benefits to NT consumers)

improved capacity and quality in supply and service response (e.g. improved practices and training or a local presence)

accredited training programs supported by the business

proposed level of usage of apprentices and trainees

proposed number of jobs for Territorians

regional development opportunities

Northern Territory research and development being undertaken or proposed.

Agencies must ensure that the local content assessment criteria questions are designed to elicit local benefit commitments from suppliers for all tier 3 to 5 activities. These commitments will form part of the successful respondent’s contract and be subject to audit as part of the contract management stage of the procurement lifecycle.

A minimum 30% weighting must be allocated to local content for all tiers.

Further information on how to consider local content, including example questions, are provided at P19: Local content factsheet.

7.5 Consideration of Aboriginal opportunitiesAll agencies must consider opportunities to maximise Aboriginal participation and employment throughout the entire procurement lifecycle for all procurement activities. In addition to the considerations outlined in 4.3.3, this may also include:



consulting with Aboriginal stakeholders on procurement activities undertaking in their communities to obtain their buy-in

utilising the public procurement exemption where the supplies are to be delivered in a remote area from a legal entity which has a minimum of 30% of its full-time staff who are Aboriginal.

Assessment questions relating to Aboriginal participation and employment are generally a sub-set of local content but can also be used as a standalone category. When selecting assessment questions, agencies may seek responses in relation to:

number of jobs for Aboriginal Territorians, including apprentices and trainees

proposed level of usage of local Aboriginal enterprises

training programs or other initiatives to be delivered that are aimed at increasing Aboriginal skills and participation.

7.6 Develop a project specific procurement planProject specific procurement plans are mandated for tier 3 to 5 procurement activities. The plan provides the background for the procurement activity and outlines how the approach to market will be carried out. The plan is also used to obtain relevant approvals for the procurement activity.

The plan must include:

the capability and capacity of local industry and businesses to meet supply requirements

consideration of opportunities to maximise local content

consideration of opportunities to maximise Aboriginal participation

the procurement method to be used in consideration of the value and risk

assessment criteria and associated weightings

negotiation protocol or plan where negotiations are anticipated or planned.

Other considerations include:

a background and a definition of the procurement objective and how it will be achieved

the problem that the procurement aims to resolve

clear definition of the supplies being sought

what is known about the market and the demand for the supplies

the strategy for stakeholder engagement

timeframe for the procurement activity

budget considerations

insurance requirements

the roles and responsibilities across the procurement team

due diligence requirements

risks and relevant strategies

probity management.



Though not required, agencies may consider using a project specific procurement plan in the lower tiers to outline the procurement approach and obtain relevant approvals.

The following templates are available:

P20: Project specific procurement plan – tiers 1 and 2

P21: Project specific procurement plan – tiers 3 to 5.

It is important to note that your agency may have different templates in place. You should always consult with your procurement team early in the planning stage to ensure that the correct templates are being used in the planning stage.

All relevant approvals must be obtained from the relevant delegate prior to the procurement plan coming into action and prior to progressing to the sourcing stage.

7.6.1 Determine process plan and timetable

Determining an efficient process and following a timetable and schedule of progression will assist in improving and streamlining methods while enhancing productivity as well as:

defining outputs and identifying inputs needed

defining goals and specific measures

identifying agendas and time constraints

ensuring documentation, record keeping and efficient consultancy is undertaken.

Plans need to include a realistic timetable for processes. This involves identifying each step in the process, assigning responsibilities, ensuring sign-offs and approvals are built in and plenty of time is allowed.

7.6.2 Determine budget considerations

It is important to factor in financial considerations when undertaking procurement activities. Budget constraints can limit, restrict or otherwise impacts on the procurement objectives; therefore it is important to outline projected financial implications to ensure an accurate determination of the required budget is established. In order to be useful, a budget should be outlined for a specific time period, showing expected costs and benefits.

Determining budget considerations will assist in:

accurate forecasting

identifying goals

identifying limitations

timely and accurate information

identifying required delegate approvals.

7.6.3 Determine period of contract

Period contracts are contracts spanning a period of time which have been arranged for convenience and economic considerations, giving contractors a reasonably assured, or in some circumstances guaranteed, volume of business during the contract period.



Period contracts are appropriate for supplies which are regularly required and conform closely to commercial standards. Where a period contract is to be established, the request for offer is to clearly set out the term of the period contract and any extension options available to government.

Period contracts may be established as a:

Standing offer: these are continuing offers to provide supplies as needed (e.g. stationery). Although estimated quantities are generally provided, government does not bind itself to any specific quantity. The period contract establishes the prices/rates and conditions under which supplies will be provided, if required, over the contract period.

Fixed scheduled service: these are where government binds the contractor to provide set requirements (e.g. daily cleaning services). The period contract establishes the prices/rates and conditions under which supplies will be provided, over the period of the contract.

Combination of both: these have elements of both of the above. Government will require set requirements to be provided and also allow for requirements to be obtained as and when required.

7.6.4 Determine insurance requirements

It is important to factor in any relevant insurance requirements during the planning stage. The types of insurance required will depend on the procurement activity. The table below outlines four standard types:

Insurance type DescriptionWorkers compensation insurance

Contractors that will be employing workers (as defined in the Act) the amount of cover shall comply with the Return to Work Act 2015 (NT) and policies shall be purchased from Northern Territory approved insurers. There is no requirement to have workers compensation insurance where the contractor will not be employing workers nor intending to employ workers on the contract.

Public liability Public liability insurance covers the contractor’s liabilities to third parties arising out the contract. Public liability insurance protects the government against the financial risk of being found liable to a third party for death or injury, loss or damage of property or “pure economic” loss resulting from the contractor’s negligence.

Product liability Product liability covers the contractor’s liabilities arising out of the goods supplied under the contract. Product liability insurance protects the government in the event that a contractor sells, supplies or delivers goods in the form of repair or service that causes injury, death or damage.

Professional indemnity Professional indemnity covers the contractor’s liabilities arising out of the services provided under the contract. Professional indemnity insurance protects the government from legal action taken for losses incurred as a result of the contractor’s professional advice. It provides indemnity cover if someone suffers a loss – material, financial or physical – directly attributed to negligent acts of the contractor.

All NT Government arranged contracts require the contractor to carry public liability and workers compensation insurance. In addition to those listed above consideration should also be given to



other types of insurances that may be applicable to the supplies (e.g. carrier’s liability insurance, works insurance etc.).

Agencies should not issue a request for offer without the mandatory insurance requirements. If a respondent seeks to exclude a mandatory insurance, the agency will need to consider the risks of granting such a request as part of the assessment. This must include consideration as to whether or not the agency would effectively be providing the respondent with an indemnity, in which case the appropriate approval is required under the Treasurer’s Directions. Agencies should consider seeking legal advice in these circumstances.

Refer to the P22: Insurance provisions for further information on minimum monetary values for each insurance category, and supplies that allow for reduced public liability insurance.

7.6.5 Determine limitation of liability

A liability is a legal obligation to pay or otherwise compensate another party. Each party’s liabilities exist at law or under legislation and may be documented under the contractual agreement between the parties.

A liability cap limits the liability of the contractor to the maximum amount specified in the cap. If a liability event occurs and the loss or damages exceed the value of the cap, the NTG bears the responsibility for the amounts above the capped value.

Although capping contractor liability exposes the NTG to the risk of a loss or damage above the capped amount which may not be recovered from the contractor, there are key benefits to capping liability.

These include:

encouraging competitive pricing and reduced supply prices in exchange for capping the contractor’s liability

encouraging the parties to manage the risks within their control

facilitating small business involvement in the government procurement.

While an uncapped liability allows the agency to claim their entire costs from the contractor, contractors may not have the financial resources meet the unlimited liability and the existence of such liabilities may impact on the validity of their insurance policies. Accordingly, an unlimited liability may not result in an agency receiving all monies claimed.

In the alternative, an agency may decide to cap a contractor’s liability to reflect the actual value of the loss the agency expects to claim under the contract. This in turn will reduce a contractor’s cost of tendering which can then be passed on to the agency through reduced pricing and may increase the level of competition for the procurement activity.

It is for these reasons that liability capping should be considered for all tier 4 and 5 procurement activities during the planning phase. In determining whether the contractor’s liability should be capped, agencies should undertake a risk assessment and identify all sources of liability and the likely costs of potential liability. If a cap is deemed appropriate, it is included in the official tender documents released to market.

Further information on liability capping is provided at P23: Limiting liability in procurement contracts.

7.6.6 Identify contract type

Generally, agencies will establish a contract for supplies based on the applicable conditions of offer and conditions of contract. However, there may be instances where the procurement activities



require alternative contractual terms and conditions. In these instances it is important to seek legal advice on how to proceed.

Where an agency determines that the standard conditions of offer or conditions of contract are inappropriate or insufficient for a specific procurement activity, approval must be obtained from the agency responsible for NTG procurement policy to use alternative or additional clauses.

Further information on this process is provided at P24: Non-standard conditions process.

7.7 Develop an assessment planAs part of the planning process, the agency should develop an assessment plan. This outlines the assessment criteria, weightings and scoring methodology to be used, as well as panel membership. The assessment plan should be included as part of the procurement plan for approval by the delegate.

A template is provided at P25: Assessment plan.

7.7.1 Assessment criteria

Assessment criteria will need to be evident in all request for offer documentation and form a basis on which these offers will be assessed. Weightings are given to selected assessment criteria and to form a basis on which calculations will determine the offer that represents best value for Territory.

The types of assessment criteria which may be applied to offers include the following:

Past performance: includes consideration of previous standard of work and product quality, performance history, previous disputes and claims, references, safe and fair workplace records, past performance in delivering local benefits.

Local content: includes consideration of local presence, proposed number of jobs for Territorians or Aboriginal Territorians, enhancement of local business capability, training programs supported by the supplier, regional development opportunities, research and development being undertaken in the NT.

Timeliness: includes consideration of the completion/delivery time offered, length or vulnerability of the supply chain, compliance with timeframes set by the agency.

Capacity: includes consideration of the supplier’s ability to carry out the works, perform services or supply products, knowledge and expertise of staff, number of contracts currently in progress, financial capacity, risk management and quality assurance.

Innovation: includes consideration of new technology and alternative solutions.

Scope specific: includes consideration of technical requirements, environmental requirements and specific expertise and experience.

Price: includes consideration of upfront costs, whole-of-life costs and any other facts that may impact the monetary cost to government.

Assessment criteria cannot be changed once a request for offer has closed. It is therefore vital to ensure that the right criteria is selected prior to approaching the market. It is recommended that generic questions are adapted to suit each procurement activity and ensure that the right information is sought from potential suppliers.

7.7.2 Assessment weightings

Assessment is to be carried out using a comparative analysis of the scores given to each offer against each weighted criterion. The percentage weighting allocated to each assessment criterion



will differ between procurement activities depending on the agency’s specific requirements (for example importance, complexity or risk).

The following rules apply to assessment weightings:

Local content must be weighted at a minimum of 30%.

Price cannot be weighted higher than 30%.

Percentage weightings will be disclosed for tier 3 to 5 procurement activities. Agencies may disclose weightings for tiers 1 and 2 at their discretion.

Percentage weightings cannot be changed after a request for offer has closed.

7.7.2.1 Paired criteria analysis

Paired analysis is a useful way to establish the weightings on your assessment criteria. In this approach all criteria are compared, two at a time, against each other. The total number of times a single criterion is preferred over its competitors determines its relative weighting.

Further information on how to undertake a paired criteria analysis is provided at P26: Paired criteria analysis.

7.7.3 Assessment panel membership

The chairperson of the assessment panel is the person responsible for managing and coordinating the assessment process. The chairperson nominates and appoints assessment panel members in consultation with senior agency managers. Ideally, the chairperson should have experience in conducting procurement assessments and, along with other panel members, either bring a technical or general understanding of the supplies being procured.

Panel members assess offers and make a recommendation on which offer provides best value for Territory. They need to be able to maintain probity and confidentiality, act in accordance with the assessment plan, and defend their decisions (including scoring outcomes) when subject to third party review.

The assessment panel should be established during the planning phase and be involved in reviewing the scope of requirement and assessment criteria questions.

Minimum assessment panel numbers are outlined in section 5.5 of the procurement rules.

7.7.4 Scoring methodology

The agency should identify in the assessment plan the scoring scale to be used. The recommended scoring scale is available in the sourcing guide.

7.8 Consider advertising periodDetermining the applicable advertising period is essential to ensure that the procurement activity is transparent, consistent and fair for all potential suppliers.

Agencies need to allow sufficient time for suppliers to prepare appropriate responses to any request for offers. Minimum timeframes have been given for each tier but longer response periods should be considered where the procurement activity is complex and/or of high value or risk. Agencies should be receptive to industry feedback if requests for extensions are requested.

The minimum invitation period for each tier is outlined in section 5.5 of the procurement rules.



Note: where it can be clearly determined that there is a sole provider for those classes of “supplies exempted from the public offer requirement”, there is no requirement for a future tender opportunity to be published. As a consequence, there is no requirement for a mandatory four-week period.

7.9 Develop the request for quotation (tiers 1 to 2)A Request for Quotation (RFQ) is a formal request to obtain offers from one or more potential suppliers for specified supplies. It is generally used in tiers 1 and 2.

The RFQ outlines the government’s requirements in terms of a specific procurement activity and includes the scope of supplies sought, the timeframes in which the quotation is to be submitted, the assessment criteria against which the quotation will be assessed, and the conditions of contract which are applicable to the specific procurement activity.

The requirements for an RFQ differ according to the tier, as outlined below:

Tier Type ConditionsTier 1 Simplified RFQ simplified conditions where a written

quotation is required.Tier 2 Simplified RFQ

RFQ response schedules must be framed in a logical, clearly articulated, comprehensive manner so as to receive information that will allow assessment against those criteria that are considered appropriate for the particular procurement activity.

The RFQ can be generated via TDO4 or your agency may have an alternative form available.

7.10Develop the request for tender (tiers 3 to 5)A request for tender (RFT) is the process of producing an official publicly advertised invitation to offer, which provides the market a clearly defined and specific statement of requirements outlining the scope and timeframe required for the delivery of specific supplies.

The RFT’s are typically used for tiers 3 to 5 or in the lower tiers where:

there is a broad competitive market and a public process is preferred

the risk of the contract is high and more stringent contractual conditions are required

establishment of period contract.

The RFT outlines the government’s requirements in terms of a specific procurement activity and includes the scope of requirement, the timeframes in which the offer is to be submitted, the assessment criteria and percentage weightings against which the offer will be assessed, and the conditions of offer and conditions of contract which are applicable to the specific procurement activity.

The requirements for an RFT are identical for tiers 3 to 5, as outlined below:

Tier Type Conditions

Tier 3 RFT standard conditions of offer and contract, unless otherwise approved by Procurement Policy.Tier 4 RFT

Tier 5 RFT

4 TDO link: http://ntgcentral.nt.gov.au/online-systems/tdo


http://ntgcentral.nt.gov.au/online-systems/tdo


Tier Type Conditions

The RFT can be generated via TDO.

7.11 Next stepsFollowing approval of the procurement plan, assessment plan, scope of requirement and other associated documentation, you can proceed to the second stage of the procurement lifecycle, sourcing.

Refer to the sourcing guide for information on this stage.


8 Appendix A

Prefix and template name Location of reference in guide

P1: Defensible decision making 3.3 – Defensible decision making

P2: APMP guide and template 5.1 – Agency procurement management plan

P3: Tier 1 flowchart (non-direct purchasing) 5.5 – Processes by tier

P4: Tier 1 flowchart (direct purchasing) 5.5 – Processes by tier

P5: Tier 1 checklist 5.5 – Processes by tier

P6: Tier 2 flowchart 5.5 – Processes by tier








P14: Period contract register 5.6 – Monitoring expiring contracts

P15: Declaration of interest and confidentiality (NTG staff) 6.3.4 – Conflict of interest declaration

P16: Declaration of interest and confidentiality (non-NTG) 6.3.4 – Conflict of interest declaration

P17: Procurement risk register 6.4 – Project specific risk management

P18: Value risk segmentation tool 6.4.1 – Value and risk segmentation


Prefix and template name Location of reference in guide

P19: Local content factsheet 7.4 – Consideration of local content

P20: Project specific procurement plan – tiers 1 and 2 7.6 – Develop a project specific procurement plan

P21: Project specific procurement plan – tiers 3 to 5 7.6 – Develop a project specific procurement plan

P22: Insurance provisions 7.6.4 – Determine insurance requirements

P23: Limiting liability in procurement contracts 7.6.5 – Determine limitation of liability

P24: Non-standard conditions process 7.6.6 – Identify contract type

P25: Assessment plan 7.7 – Develop an assessment plan

P26: Paired criteria analysis 7.7.2.1 – Paired criteria analysis


Documents

A guide to procurement planning - nt.gov.au · Web viewProbity is the process of having strong moral principles, including conducting business ethically and fairly. In procurement,