Goods and Services Procurement

Policy Framework

GOODS AND SERVICES

PROCUREMENT

POLICY FRAMEWORK

FOR NSW GOVERNMENT AGENCIES

ISSUED BY THE NSW PROCUREMENT BOARD

1 July 2013

Version 2

CONTENTS

IMPORTANT MESSAGE FOR AGENCY HEADS:

INTRODUCTION

LEGAL, ADMINISTRATIVE, AND GOVERNANCE FRAMEWORKS

PROCUREMENT PRACTICE REQUIREMENTS

Procuring for an agency or for whole of government

Authority to procure

Value for money

Promotion of competition

Innovation

Inclusion of small and medium enterprises

Effective internal engagement

Fairness and probity

Market engagement

Contract period

Commercial approaches in contracts

Standard contract templates

Contract disclosure

Incidents and emergencies

Disposal of goods

Additional policy requirements

COMPLIANCE AND MONITORING

IMPORTANT INFORMATION FOR SUPPLIERS TO GOVERNMENT

MANAGING COMPLAINTS

Appendix A Glossary of terms

Appendix B Existing policies

Appendix C Procurement practice checklist

Document Control

This version of the Procurement Policy Framework isissued by the NSW Procurement Board to take effect from1 July 2013. It replaces the interim version which applied from 1 January 2013 to 30 June 2013.

IMPORTANT MESSAGE FOR AGENCY HEADS:

What is changing?

The NSW Government hasreformed its system for procurementof goods and services.

The procurement of goods and services is regulated by the Public Sector Employment and Management Act 2002, which has the key objectives of:

  • driving value for money
  • delivering quality government goods and services
  • aligning procurement with business (ie agency and community) needs.

The NSW Procurement Board is responsible for overseeing the government procurement system, setting policy and ensuring compliance. It has the statutory power to issue policy and directions to agencies, and monitor the progress of agency compliance. It accredits agencies to undertake their own procurement of goods and services.

More information about these reforms and the Board is available from the NSW Procurement Board’s Strategic Directions Statement 2013-2014.

The current situation summarised

Agency heads, agencies and officers have statutory obligations arising in relation to procurement, financial management, tender and contract disclosure, and probity.

All procurement of goods and services by government agencies is governed by the requirements set out in section 149 of the Public Sector Employment and Management Act 2002, which states:

149Obligations of government agencies

(1) A government agency is to exercise its functions in relation to the procurement of goods and services in accordance with:

(a)any policies and directions of the Board that apply to the agency, and

(b)the terms of its accreditation (if any) by the Board, and

(c)the principles of probity and fairness.

(2) A government agency is also to ensure that it obtains value for money in the exercise of its functions in relation to the procurement of goods and services.

(3) A government agency is, at the request of the Board, to provide information to the Board about its activities in relation to the procurement of goods and services.

An over-arching summary of government procurement is:

  • agencies are responsible for their own procurement and for compliance with procurement law and the Procurement Policy Framework
  • accreditation is a key element in the devolution of responsibility
  • less red tape and prescriptive rules apply to procurement, and the requirements that do apply to procurement are principle-based
  • there is greater competition for supply to government, with small and medium enterprises in particular encouraged to participate in procurement processes
  • the default open tender model has been replaced with the option of using a broader range of procurement methods
  • the default long term, panel contracts, which lock out suppliers and innovation, is replaced with more flexible supplier arrangements such as prequalified schemes and lists
  • government contracts for the procurement of goods and services are being brought in line with commercial and private sector standards
  • there is more effective planning for procurement through category management approaches and principles
  • probity and fairness are highly significant and essential elements of a procurement, however they should not be used as a shield to stifle competition, value for money, or innovation outcomes.

This Policy Framework brings together into a cohesive framework the requirements for goods and services procurement with the NSW Government.

As part of the devolved model for procurement, it is intended that the rules applying to procurement be less prescriptive. To this end, mandatory requirements within this Policy Framework have been kept to a minimum. Additional mandatory requirements may be imposed.

Additional material is provided as guidance. It represents the NSW public sector’s better practice for procurement and agencies are therefore encouraged to adopt those requirements.

The following ‘mandatory requirements’ box summarises the core responsibilities for agency heads. These requirements are repeated elsewhere in this Policy Framework.

Mandatory requirements for agency heads
All procurement of goods and services by government agencies is to be conducted in accordance with the overarching requirements set out in section 149 of the Public Sector Employment and Management Act 2002.
Procurement must also be in accordance with any policy, direction or requirement issued by Government or the NSW Procurement Board. The current Board Directions are available onthe ProcurePoint website at
Officer(s) must be appointed to exercise the functions of a chief procurement officer.
Agencies are required to apply the Value for Money Statement. A government agency is required to ensure it obtains value for money in relation to the procurement of goods and services.
Agencies are required to test, on a regular basis, compliance with the Goods and Services Procurement Policy Framework.

INTRODUCTION

Purpose of this document

The purpose of this Policy Framework is to set out the policy and operating framework for the NSW public sector procurement system.

This Policy Framework provides agencies with a single source of guidance and rules on the procurement of goods and services. It provides links to other relevant policies and material and to standard form documentation where applicable and available.

The Policy Framework has been developed by NSW government agencies, for use by agencies and suppliers to government. It aims to be continuously improved so feedback on the useability of the Policy Framework is welcomed. Contact details are provided at the end of this document.

How to use this document

Agencies are responsible for their own procurement and for compliance with procurement law and this Policy Framework.

This Policy Framework sets out both the mandatory requirements and better practice guidance material for agencies in conducting procurement. For convenience, mandatory requirements are set out at the beginning of each section as follows:

Mandatory requirement

This sets out the requirement that must be followed by all agencies. It may be mandatory because either it is the law[1], or it has been mandated at a policy level by government, the NSW Procurement Board, or other administrators within government (for example, The Treasury). This Policy Framework also sets out the source of, or authority for, the requirement so that agencies requiring more specific information may refer to this source.

For abundant clarity, the mandatory sections of this Policy Framework are ’policy’ for the purposes of section 149 of the Public Sector Employment and Management Act 2002.

The remainder of the information under each heading provides guidance material for agencies to assist in complying with the mandatory requirement and conducting that aspect of the purchase or procurement.

In summary, agencies must comply with the mandatory requirements only. For other requirements, this Policy Frameworkprovides better practice guidance. Further information on compliance can be found at the ‘Compliance and Monitoring’section in this Policy Framework.

In accordance with section 149 of the Public Sector Employment and Management Act 2002, agencies are required by law to exercise functions in relation to the procurement of goods and services in accordance with:

  • any policies and directions of the Board
  • the terms of its accreditation
  • the principles of probity and fairness.

Agencies are also required to:

  • ensure that the agency achieves value for money in the exercise of its functions
  • provide information to the Board at its request
  • monitor compliance with this Procurement Policy Framework.

Further, agencies should conduct procurement activities in a manner that they consider achieves the following objectives:

  • business alignment
  • service improvement.

Government agencies will need to ensure this Policy Framework is:

  • supplemented by policy, guidance or systems at the government agency level, to ensure it is implemented effectively within the agency (for example, by ensuring the requirements cascade into policies and procedures on purchasing)
  • integrated with the government agency’s total operating environment, such as:
  • financial management obligations
  • systems of internal control
  • related policies and strategies, for example a fraud and corruption control strategy.

To make this Policy Framework user-friendly, at the beginning of most sectionsthere is a summary of key actions and key issues. The summary appears like this:

Key activities and issues

A section is also included to set out related documents and templates.

Documents and templates

Advice and discussion on departures from this Policy Framework may be sought from the Department of Finance and Services (DFS) and an agency should consider whether other specialist advice is required, such as probity or legal advice.

Explaining some basic terms used in this Policy Framework

‘Procurement’ refers to a process that begins with the basic 'make or buy' decision and then spans the 'whole life' ofsupplier arrangements, which includes definition of business needs, designing and implementing arrangements, monitoring and managing performance and reviewing outcomes to assess the effectiveness of the arrangements. ‘Purchasing’ is the process of buying or purchasing from those supplier arrangements.

‘Supplier arrangements’ or ‘arrangements’ is a short-hand way of describing agreements between suppliers and government agencies to supply goods. Across the sector there are various models of supplier arrangements in place, including:

  • contracts between an agency and a supplier
  • standing offer agreements between an agency or agencies and suppliers which establish the legal arrangements under which agencies then enter into contracts for the purchase of goods or services
  • registration lists and prequalification schemes which place suppliers on lists and under which agencies then enter into contracts.

Whilst these models create different legal relationships between agencies and suppliers, for simplicity this Policy Framework refers to these as ‘arrangements’.

Appendix A contains a glossary of commonly-used terms in this Policy Framework.

Who and what does this Policy Framework apply to?

This Policy Framework applies to:

  • government agencies, within the meaning of Chapter 7 of the Public Sector Employment and Management Act 2002
  • for procurement of all goods and services
  • including disposal of goods that are unserviceable or no longer required
  • including procurement of a statutory nature (that is, procurement undertaken pursuant to a statutory function to procure, and procurement to exercise statutory functions).

Who and what does this Policy Framework not apply to?

This Policy Framework does not apply to:

  • procurement of construction and construction-related goods and services:

The decision as to whether a procurement relates to goods and services or construction is a matter for the agency head. However, as a guide, construction and construction-related goods and services may include[2]:

  • the construction, alteration, repair, restoration, maintenance, extension, demolition or dismantling of buildings, structures or works forming, or to form, part of land (whether permanent or not) and
  • construction-related goods and services includes:

(a)goods of the following kind:

(i)materials and components to form part of any building, structure or work arising from construction work

(ii)plant or materials (whether supplied by sale, hire or otherwise) for use in connection with the carrying out of construction work

(b)services of the following kind:

(i)the provision of labour to carry out construction work

(ii)architectural, design, surveying or quantity surveying services in relation to construction work

(iii)building, engineering, interior or exterior decoration or landscape advisory services in relation to construction work

  • procurement by State Owned Corporations (unless prescribed by regulation)
  • property (land) transactions
  • non-contractual agreements or any form of assistance including grants, subsidies, and sponsorship arrangements
  • local government authorities
  • any other arrangement as determined by the NSW Procurement Board, from time to time.

How do I procure?

Procurement practice requirements, including procuring for an agency or for whole of governmentand authority to procure are set out in following sections in this Policy Framework.Further advice is provided on the ProcurePoint website.

LEGAL, ADMINISTRATIVE, AND GOVERNANCE FRAMEWORKS

Mandatory requirement
Officer(s) must be appointed to exercise the functions of a chief procurement officer.

Goods and services procurement system design principles

The NSW public sector procurement system is built on an overarching governance structure and operating system that:

  • allows for contemporary means of sourcing government goods and services
  • brings the form and content of government contracts for the procurement of goods and services in line with modern practice
  • expands the ways that small and medium enterprises can effectively gain opportunities to supply goods and services to government
  • makes doing business with the NSW Government simpler, easier and more attractive
  • introduces greater innovation into government procurement to stimulate a more vibrant New South Wales economy
  • ensures that the integrity of eventual procurement decisions can be assured.

The procurement system is designed to implement the NSW Procurement Board’s Strategic Directions Statement 2013-2014, which has the following objectives:

  • driving value for money
  • delivering quality government goods and services
  • aligning procurement with business needs.

The objectives are supported by six strategic directions:

  • providing for strategic and agile procurement practice
  • reducing red tape and simplification
  • establishing procurement category management across government
  • devolving procurement responsibility to agencies
  • engaging with industry
  • encouraging innovation.

Each strategic direction is supported by a set of priority enabling actions.

These principles and strategies form the foundation of good purchasing and procurement practice in the NSW public sector. It is essential that agencies use these principles and strategic directions when planning andexecutingprocurement.

Procurement leadership and governance

Procurement governance is the processes by which an organisation holds itself accountable for its procurement activities.

Central governance of the procurement system arises from the operation of the NSW Procurement Board and its suite of policies and guidelines, the work of the Procurement Leadership Group and the Industry Advisory Group.

Within this procurement system, government agencies and chief executive officersare responsible for managing their own agency procurement and in some circumstances procurement for other agencies too. As it is a matter for agencies to design their own internal governance frameworks within the totality of the agency operations, agencies should ensure that they have appropriate governance in place to manage procurement.

Critical to this is the appointment of a cluster or agency Chief Procurement Officer, effective procurement planning, robust internal purchasing systems, and efficient approval processes and delegation suites.

Agencies are required to prepare procurement strategy and plans appropriate to the procurement activities of the agency. These should be consistent with Category Management Plans and relevantwhole of government strategies, such as the ICT Strategy.

The governance structure looks like this:

The legislative, administrative and policy framework for the procurement of goods and services can be conceptualised in the following way:


Legislative framework

Chapter 7 of the Public Sector Employment and Management Act 2002 (PSEM Act) establishes the legislative framework for the procurement of goods and services across the NSW public sector.

The PSEM Act creates the NSW Procurement Board which is the entity established to oversee procurement across the public sector. The Board can issue directions to agencies about the conduct of procurements or authorise them to carry out certain procurements. The Board does not have power to enter into contracts.

The Board has the statutory objectives set out in s144 of the PSEM Act:

(a)to develop and implement a government-wide strategic approach to procurement

(b)to ensure best value for money in the procurement of goods and services by and for government agencies

(c)to improve competition and facilitate access to government procurement business by the private sector, especially by small and medium enterprises and regional enterprises

(d)to reduce administrative costs for government agencies associated with procurement

(e)to simplify procurement processes while ensuring probity and fairness.

This Policy Framework is designed to assist the Board to achieve these objectives.

The Policy Framework allows agencies to manage and be responsible for their own procurement activities. It is in contrast to the system that was in place in NSW for many decades, which saw a centralised contracting authority (the former State Contracts Control Board) conduct whole of government procurement on behalf of agencies. Under the new schemein some cases agencies will also be able to carry out procurement for other agencies.

The legislative scheme applies to all goods and services procurement by all government agencies, excluding state owned corporations (unless prescribed). Procurement has a broad end-to-end definition from ‘need identification’ to ‘contracting and placing orders’. It also includes procurement of goods and services by or for a government agency to either exercise statutory functions or pursuant to statutory powers of procurement. Construction and infrastructure procurement is included in the legislative definition however it is not covered by this Procurement Policy Framework.