To coincide with the release of its 2019-20 Annual Report last month, the Victorian Government Purchasing Board (VGPB) has contacted 150 Victorian government organisations to inform them that from 1 July 2021 all agencies that are subject to the Standing Directions under the Financial Management Act 1994 (FMA) will become subject to VGPB requirements.

Those agencies that haven’t previously been required to do so, will have a year – until 30 June 2022 – to align their procurement policy and practices with VGPB policies. After that time, their annual compliance attestation required by FMA Standing Directions will need to confirm observance of VGPB requirements (in addition to the other matters covered such as compliance with the State’s construction procurement regime – see below).

Why is VGPB scope expanding?

This change is in response to a recommendation from the Whole of Government Procurement Review, endorsed by Cabinet in March 2018, to harmonise Victorian Government procurement frameworks. VGPB’s Annual Report suggests that the start date of the initiative has been deferred to the 2021 start date “due to impacts of COVID-19 on agencies and to allow procurement teams to focus on their pandemic response first and foremost.”

The Standing Directions already require Accountable Officers to attest that their organisation’s procurement processes for goods and services:

• establish, maintain and embed appropriate governance arrangements
• are efficient, effective and economical
• have appropriate processes in place covering the acquisition lifecycle
• have appropriate capability to manage the acquisition throughout the acquisition lifecycle
• are able to demonstrate that any financial commitment, obligation or expenditure delivers value for money for the Agency and/or the State; and
• undertakes investment planning and evaluation of performance when Agency planning has identified the need to acquire significant services, assets or infrastructure.

VGPB has indicated that it believes that organisations that already comply with the Standing Directions are likely to already comply with VGPB requirements, which are described in its five policies.

What are the VGPB policies?

VGPB has five policies that cover the procurement lifecycle. These are:

• Governance
• Complexity and capability assessment
• Market analysis and review
• Market approach
• Contract management and disclosure.

The policies are all available on the VGPB website. There are a range of guides, checklists, tools and templates that support specific requirements within each policy.

Will my organisation need to change anything?

It is likely that even the most compliant of organisations will need to make some changes. For example, it will be mandatory to use State Purchase Contracts (SPCs) – of which there are approximately 30 – unless an exemption is granted. It is understood, however, that this requirement will not kick in until existing contracts expire. It is also likely that some tools and templates will need to be updated and some procurement policies and purchasing procedures revised as well.

What other changes are expected?

The VGPB has indicated that the 2018 Review recommended aligning its policies with those that apply to Public Construction procurement (Ministerial Directions for public construction procurement) and the Social Procurement Framework. While VGPB mentions in its annual report that “buyers are adept at applying the two different policy frameworks, and there is little appetite for legislative or policy change at this time” it has indicated that it has “developed a draft integrated procurement framework to encourage agencies to harmonise their internal procurement arrangements for goods and services and construction, wherever the two frameworks overlap.” It is expected that VGPB will release further information about this in the lead up to 1 July 2021.

Construction Procurement Requirements

This news from the VGPB came as a shock to many agencies that are still grappling with changes to the State’s construction procurement regime that took effect from 1 July 2018 (LINK to our blog on that topic). Since 1 July 2019, the annual compliance attestation required from all agencies that are subject to the FMA Standing Directions has needed to address these new construction procurement regime requirements.

The regime imposes over 400 separate requirements, which presents as a very daunting task! However, it can be broken down into manageable elements. There are over 400 separate requirements, some applicable at a per project level and some that can be addressed globally for the organisation. Agency processes, checklists and templates need to be updated to comply with the regime and some new templates are also required. Associated evidence needs to be systematically retained to support the attestation. Reporting processes are needed for the multiple compliance requirements and ideally they can be automated in due course to reduce the resource burden of compliance. Training and change management have also been important for agencies to achieve an acceptable level of compliance. This has been a significant task. Of the 400 or so requirements in the Directions applying to public construction procurement in Victoria, approximately:

• 17 need to be addressed through an Agency level governance framework (accounting for 62 separate line items)
• 25 primary project-level requirements are applicable where standard procurement processes and templates are used, of which approximately 14 are a good starting point that well exceeds the 80:20 rule
• more than 100 subsidiary requirements can be picked up within the 25 primary requirements referred to above
• 92 other project-level requirements need only be considered where standard processes and templates are not used 
• 78 are relatively rare requirements, most likely to be applicable in non-typical situations if at all.

What should my organisation do now?

The VGPB has given a good amount of notice to organisations of the impending changes to goods and services procurement requirements. So, with this in mind, it is time to ‘get your house in order’ by reviewing your policies and practices to identify any gaps and areas that require improvement. It is also an opportunity to ensure that staff are trained and understand what is required of them when it comes to procurement and spending public money, and to identify the contracts that you might have for which you will be required to use SPCs in the future.

With many years of experience, CourtHeath are experts in the VGPB policies, the Public Construction procurement regime and the Social Procurement Framework. We have identified the key requirements that an agency should have reflected within its procurement policy and associated procedures, practices and templates. With careful planning and management, the annual attestation of compliance chore can be significantly simplified and in some cases reduced to:

• just over 20 essentials for VGPB compliance, and
• around 14 minimum essentials per project for compliance with the requirements of the construction procurement regime.

Our consultants will be happy to assist you to develop a roadmap to implement and ensure you will be able to demonstrate compliance with the applicable requirements.

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Image: CourtHeath

Written by Dr Julia Cornwell McKean and Pauline Bernard