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APPENDIX C : Procurement Practices and Outcomes

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This appendix focuses the department's procurement practices and outcomes, with attention to:

  • procurement policies and practices
  • competitive tendering and contracting arrangements
  • use of consultancies, and
  • payments of market research and advertising.

Procurement Policies and Practices

New Commonwealth Procurement Guidelines (CPGs) came into force from 1 January 2005. In response the department set up a Procurement Advisory Unit to develop and advise staff on procurement policies and guidelines and to provide advice on specific procurement issues.

Our procurement policies and practices continue to reflect the principles set out in the CPGs and associated Financial Management Guidance:

  • value for money
  • encouraging competition
  • efficient, effective and ethical use of government resources
  • accountability and transparency, and
  • compliance with other Australian Government policies.

Our Chief Executive Instructions on procurement reflect these principles and the need for compliance by all staff when choosing procurement methods, sourcing potential supplies or entering into contracts. As part of these arrangements, in 2004-05 we published:

  • a procurement plan providing details of anticipated procurements for 2005-06 and listed details of publicly available procurement opportunities with a value of $10 000 or more on AusTender www.tenders.gov.au
  • details of all contracts or standing offers awarded above a certain value¹ in the Purchasing and Disposals Gazette www.contracts.gov.au, and
  • details of all contracts with a value of $100 000 or more on our website www.dotars.gov.au as required by Senate Order 192.

Requests for access to contracts are considered in line with the Freedom of Information (FOI) Act 1982. For more information about FOI issues, see Appendix F (page 206).

Note: While some contracts involve a fixed price, the value of others depends on the level of demand for the goods or services involved. In these cases, we report the best available estimate of the value of the contract based on expenditure to date and likely demand over the remainder of the contract. All values shown include goods and services tax (GST) unless annotated to the contrary.

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Competitive Tendering and Contracting Arrangements

Competitive tendering and contracting (CTC) is the process by which responsibility for services previously performed in-house is transferred to an outside body². We have contracted:

  • certain services delivered on behalf of the Australian Government, and
  • a range of corporate services.

More information on contracts valued at $100 000 or more follows. All such contracts routinely include a requirement for Australian National Audit Office access to contractor premises.

Services delivered on behalf of the Australian government

The department delivers a number of services on behalf of the Australian Government. Services that have been contracted out relate to:

  • transport safety research and information services
  • management of leased airports
  • management of properties at the Sydney West airport site
  • air services to remote communities
  • the Australian Government Regional Information Service (AGRIS), and
  • services to non self-governing territories.

Transport safety research and information services

A small number of contracts continued in 2004-05 relating to road safety data collection, analysis and research, and for the distribution of transport safety information. A new contract was let relating to road safety vehicle crash testing research.

Management of leased airports

Airport building control and parking control services at federal airports are provided by private contractors. Following an open tender process in 2004-05, eight contracts for building control services were let for an initial term of four years from 1 July 2005. Twelve airport environment officers were appointed commencing 1 July 2005.

Parking control services are contracted out to airport lessee companies (ALCs) annually for parking at eight airports (for details see page 103). Contracts cannot be offered to bodies other than ALCs under the Airports (Control of On-airport Activities) Regulations 1997.

Management of properties at Sydney West airport site

Management of properties owned on and around the proposed Sydney West Airport site (Badgerys Creek) has been contracted out to Zeckendorf Holdings Pty Ltd following an open tender process. This contract was signed on 1 January 2003 for an initial term of three years with an option to extend for two years.

Air services to remote communities

A national mail out and advertising campaign in 2003 invited remote and isolated communities with no regular access to transport services to apply for weekly air services under in the Remote Air Services Subsidy Scheme.

Once the communities were identified, the department used an open tender process to identify air operators able to service these communities, engaging six operators to provide weekly air services for two years from December 2005. For more information on the scheme, see page 125.

AGRIS

Call centre services were contracted out to Cooma Monaro Technology Centre Ltd following a select tender process. This contract was signed on 20 August 2001. It had an initial term of six months and now operates on a month-to-month basis. Market research and advertising associated with the service is also contracted out. A total of $2.5m was spent on market research and advertising in 2004-05, as detailed in table 6.2 (page 191). For more information on AGRIS, see page 114.

Services to non-self-governing territories

A range of services are delivered to Australia's non self-governing territories in the absence of a state government (page 128). While the department continues to provide some of these services directly, others are provided through contracts with the private sector or under service delivery arrangements/contracts with state and territory governments such as the West Australian Government in the case of the Indian Ocean Territories (IOTs) and ACT/NSW in the case of Jervis Bay Territory (JBT).

In 2004-05, a number of new arrangements were put in place, some existing arrangements expired and we made several other changes. We:

  • entered into an agreement with the NSW Illawarra Health Service for the delivery of health services to the JBT community
  • renegotiated an agreement with the NSW Rural Fire Service for bush fire protection services for the JBT community
  • engaged Emerald Oak Pty Ltd to manage airports in the IOTs following an open tender process-these contracts have an initial term to 30 June 2007 with options to extend for one year then one year.

In addition, as disclosed in our last annual report, an agreement was reached with National Jet Systems to provide regular air services between Perth and the IOTs following an open tender process. This arrangement commenced in April 2004 for a term of five years.

For more information on services to territories, including services we provide directly, see page 128.

Corporate activities

The department has carried out detailed analysis of our corporate activities in line with government requirements for market testing of these activities. Corporate activities that have been contracted fall into three broad areas:

  • information and communication technology (ICT) services
  • professional services, and
  • property and office services.

Like most organisations, the department has a range of contracts and standing offers in place for the supply of professional services, energy, office equipment, and other consumables.

ICT services

Desktop, help desk and related information technology services were contracted to Ipex ITG Pty Ltd (now part of Volante Pty Ltd) following an open tender process. The contract took effect from 1 July 2005 and has an initial term of four years.

Wide area network, data communication and voice communication services were contracted to Optus Networks Pty Ltd following a select tender process. These contracts were also signed in late 2003. They have an initial term of two to three years.

A panel of ICT service providers was set up in 2004-05 following an open tender process and will continue for at least three years. This provides the department with access to specialist project management, software development and IT security services as needed.

Professional services

Several panels of professional services providers have been set up and are used where sufficient capacity or specialist expertise is not available in-house. These panels are subject to regular review and several are to put to market during 2005-06. Panels cover:

  • communications services
  • legal services
  • accounting services, and
  • SAP services.

Internal audit services were contracted to KPMG following a select tender process. The contract was signed on 6 December 2002 and had an initial term of two and a half years. The department recently exercised an option to extend the contract for a further two year period.

Other services

Property and security services were contracted to United KFPW Ltd following a select tender process. This contract was signed on 11 December 2002. It has an initial term of five years, with an option to extend for two years and then two years.

Office services were contracted to Pickfords Pty Ltd following a select tender process. This contract was signed on 4 April 2003. It has an initial term of five years, with an option to extend for two years and then two years.

Travel services were contracted to American Express following a select tender process. The contract was signed after the collapse of the Ansett group of companies and was extended in early 2004 until
31 December 2006.

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Consultancies

The department generally engages consultants to carry out research or provide professional or technical advice that cannot be provided by departmental staff. We select consultants in the same way we procure other goods and services.

In 2004-05 the department engaged 159 new consultancies involving expenditure of $5.6 million, and continued to use 46 consultancies that were engaged in prior years, involving expenditure of
$2.0 million. More was spent on consultants than in previous years due to increased activities particularly in the Office of Transport Security. Details of consultancy contracts valued at $10 000 or more let in
2004-05 are available on our website www.dotars.gov.au

Table 6.2 - Trends in procurement

2000-01
2001-02
2002-03
2003-04
2004-05
Purchasing outcomes
Invoices paid within 30 days
not reported
not reported
91.8%
95.1%
96.7%a
Consultancies
All consultancies including consultancies let in previous years
Total expenditure
$10.7m
not reported
$6.0m
$4.0m
$7.6m
New consultancies valued at $10,000 or more
Number let
88
49
62
54
129
Total value over the life of these contracts
$10.4m
$5.3m
$3.8m
$3.7m
$8.5m
Market research and advertising payments - not including payments less than $1500 b
Creative advertising
-
$0.8m
$0.0m
$0.4m
$0.6m
Market research/polling
$0.3m
$0.3m
$0.5m
$0.4m
$0.2m
Direct mail
$0.1m
-
$0.5m
$0.0m
$0.4m
Media advertising
$0.5m
$0.4m
$3.4m
$0.8m
$3.1m
Total payments
$0.9m
$1.5m
$4.4m
$1.7m
$4.3m

a The figure represents the status as at 31 December 2004 as per the department's response to the Small Business Survey coordinated by the Department of Industry, Tourism and Resources.
b Payments have been rounded to $0.0m where payments were less than $50 000. Discrepancies in table between totals and sums of components are due to rounding.

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Payments of Market Research and Advertising

In 2004-05, the department paid $3.9 million for market research and advertising (see table 6.2 above). Our main focus was on AGRIS and the Green Vehicle Guide.

A list of payments of $1500 or more made during the financial year follows, as required by section 311A of the Commonwealth Electoral Act 1918.

Table 6.3 - Detail of advertising and market research payments of $1500 or more

Firm
Service provided
Payment made in 2004-05
Creative advertising agencies
Colmar Brunton Social ResearchConduct exploratory and benchmarking research for the Green Vehicle Guide
$77 534
Colmar Brunton Social ResearchMarket test creative material for the Green Vehicle Guide
$36 907
Curriculum CorporationProduce an education plan and make recommendations regarding appropriate materials for use in Australian secondary schools
$30 424
Singleton, Ogilvy and MatheraDevelop and produce the AGRIS advertising campaign
$248 197
Singleton Ogilvy & MatherDevelop AusLink advertising campaignb
$87 175
The Social Research CentreConduct a national survey of community attitudes to road safety
$85 370
All creative advertising
$565 607
Market research/polling organisations
Quantum Market ResearchMarket research and test the AusLink campaign
$72 380
Quantum Market ResearchaConduct further development research for AGRIS
$57 200
Quantum Market ResearchbMarket test revised advertising, print and direct mail book for AGRIS advertising campaign
$20 900
All market research/ polling
$150 480
Direct mail organisations
Australia PostDistribute the Australian Government Regional Information Booklet
$431 309
All direct mail
$431 309
Media advertising organisations
Australian Farmers Information and Buyers Guide Pty LtdAdvertise AGRIS in Farm Business Magazine
$1 999
Executive Media Pty LtdAdvertise AGRIS in Australian Local Government Environment Year Book
$2 200
FairfaxAdvertise Green Vehicle Guide in Eco Supplement (October 2004)
$1 891
HMA Blaze Pty LtdAdvertise National Disaster Mitigation Programme/ Regional Flood Mitigation Programme through State/ Territory newspapersc
$26 825
HMA Blaze Pty LtdAdvertise for expressions of interest in the Maritime Emergency Towage Programme (May 2005)
$23 718
HMA Blaze Pty LtdAdvertise AGRIS in NFF Bulletin and State Farm Guide
$14 193
HMA Blaze Pty LtdPrepare and lodge advertisement for expressions of interest for a resort on Cocos (Keeling) Islands in the IOTs
$6 104
HMA Blaze Pty LtdPrepare and lodge advertisement for expressions of interest in providing health services in the IOTs
$4 138
HMA Blaze Pty LtdPrepare and lodge advertisements for job vacanciesc
$448 487
Universal McCanncAdvertise AGRIS
$1 746 224
Universal McCannAdvertise Green Vehicle Guide in newspapers, magazines and online (May-June 2005)
$591 942
Universal McCannAdvertise Green Vehicle Guide in newspapers (August-November 2004)
$227 855
Walsh Media Pty LtdAdvertise AGRIS in NFF Annual Review
$2 139
All media advertising
$3 097 715

a contract also listed as a new consultancy with a value of $10 000 or more
b contract previously listed as a consultancy with a value of $10 000 or more
c may include payments under $1500


¹ The value was $2000 for the period up to 1 January 2005 and then $10 000 in line with the changes in the CPGs.
² This defi nition is in the Requirements for Annual Reports issued by the Joint Committee for Public Accounts and Audit.

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