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In December 1996 the State Supply Board completed a review of whole-of-government procurement practices. The review concluded that the government could achieve multi-million dollar savings through implementation of a range of procurement reform initiatives.

The progressive implementation of reform to the procurement arrangements of public sector agencies commenced in 1998-99. The reform process has involved changes to the responsibilities of the State Supply Board and public sector agencies in respect of both ‘goods’ and ‘services’ acquisition processes.

A review of the legal, administrative and policy framework underpinning the reform process was finalised in August 2000 and was the subject of comment in last year’s Report (ie1999-2000). The Report stated that as a result of the Audit review, certain issues had been referred to the State Supply Board for clarification to ensure the soundness of the overall implementation framework.

During the year the State Supply Board informed Audit of the outcome of its consideration of the issues that had been referred to it by Audit in August 2000. In addition, Audit has completed a review of another critical aspect of the procurement strategy. The review centred on the major area of detailed policy and procedural guidance for good procurement process and practice by agencies of government. Several matters for improvement were identified from that review and raised with the Board. The Board has now responded.

This section of the Report comments on the Board’s response to issues arising from the 1999-2000 Audit review, discusses the outcome of the 2000-01 review, and indicates the direction being taken by Audit concerning other areas of audit examination.


Features of Procurement Reform

Last year’s Report outlined the salient features of the procurement reform strategy. In brief these included:

Audit Issues Referred to the Board — August 2000

The previous Report included comment on the issues arising from the 1999-2000 review and forwarded to the State Supply Board for examination and clarification.

In essence, Audit raised doubts concerning the lawfulness of the steps that were taken to confer upon the Board functions in relation to the procurement of ‘services’ as distinct from ‘goods’. The procurement reform strategy (involving the Unified Supply Policy) was implemented principally through policy/administrative changes. No amendments were made to the State Supply Act 1985. Other issues were also raised for consideration and clarification, including the role and responsibility relationship associated with APUs in dealing with procurement matters involving more than one agency.

State Supply Board Response to Audit Issues

The Board, in consultation with the Crown Solicitor, considered the issues raised by Audit. The Crown Solicitor is of the view that the current legal basis for implementation of the Unified Supply Policy is not appropriate and that the State Supply Act 1985 should be amended.

In recognition of this position, in early July 2001, Cabinet approved the drafting of a legislative amendment to the State Supply Act 1985 to:

The review of the Cabinet submission indicates that the Board may best deal with some other issues (for example, matters relating to APUs) by way of Board policy, once the Board’s responsibilities in services procurement has been ratified through amending legislation to the State Supply Act 1985.

The Board advised Audit in September 2001 that it expected the amending legislation to be introduced into the forthcoming Spring session of Parliament.



The issues arising out of last year’s review are significant to the overall soundness of the framework that underpins the strategic and operational procurement arrangements of government and its agencies. In recognition of this, and that certain issues were of a policy nature, Audit turned its attention in 2000-01 to the review of the related major area of policy and procedural guidance for agencies.

The nature and extent of prescribed policy and procedure that is available to agencies is seen as a critical foundation component for good procurement process and practice within agencies.

In reviewing the policy and procedural aspects, Audit was mindful of the government endorsed policy framework document of May 1998 ‘Purchasing Strategically’ and the various policy documents published by the State Supply Board since that date. Audit also undertook an overview of policy and procedural related documentation at the agency level. Further, Audit also examined the position regarding this matter as it has been applied by the Victorian Government.

Responsibility for Policy and Procedural Formulation and Documentation

The responsibility for policy and appropriate procedural arrangements rests with both the State Supply Board and public sector agencies. However, the Government endorsed ‘Purchasing Strategically’ document communicated a clear expectation that the State Supply Board would take a lead role in this area. It was anticipated that as the procurement reform proceeded the Board would issue detailed procurement policies and guidelines to assist agency Chief Executives to develop and implement ‘best procurement practices’ (systems, structures, procedures).

In reference to the term ‘best procurement practices’ it was envisaged that such practices would accord with certain guiding principles to be applied by agencies to all procurement decision making strategies and practices. These principles include value for money, open and fair competition, professional integrity and probity, client service, management of risk and accountability.

Status of Detailed Instructive Guidance

South Australia

As mentioned, the endorsed policy document of May 1998 ‘Purchasing Strategically’, has been followed by the publication of a number of Board developed and released policy documents relating to specific important interest items. Collectively these policy documents reflect a high level policy framework. The Board has not to date formally issued detailed instructive guidance to agencies concerning best practice procurement policies and procedures, nor has it issued formal instructive advice to agencies as to what those policies and procedures might comprise.

At the public sector agency level, Audit’s overview assessment has revealed that policy and procedural development has (and is) occurring. Notwithstanding, to date, no comprehensive whole-of-government policies and procedures (as to the conduct of procurement processes, structured and focused on each step in the procurement cycle process) have been developed at the government agency level. It can be said that in most cases agencies have only advanced marginally beyond the high level policy framework material published by the Board.

This position is different when compared to the Victorian Government where there is a strong similarity in the strategies adopted to procurement reform in that State and South Australia.

Victorian Government Arrangements

The Victorian Government Purchasing Board (the equivalent of this State’s State Supply Board) has published comprehensive policy and procedural material for agency adoption in that State. That material is deliberately structured around the five key steps in the typical procurement process, ie:

The Victorian material provides mandatory policies and recommended guidelines as to best practice at each step.

It is important to note that the Victorian Government in 2000 commissioned an external consulting firm to review government purchasing arrangements in that State (Victoria had in recent years implemented reform arrangements of a similar nature adopted in South Australia). The review concluded in relation to the area of policy and procedure that, although there was scope for improvement, the Government had struck an acceptable balance between devolution of authority and accountability on the one hand, and central quality assurance on the other.

Audit Observations and Comments

Comment in a General Context — Improvement in Policy and Procedure Formulation

Audit is of the opinion that there is substantial merit in the approach that has been (and is being) taken in Victoria to procurement policy and procedural guidance development and that it would be of advantage for South Australian authorities to review this material.

It is the view of Audit that in South Australia considerable improvement is required in the areas of direction and development concerning instructive procurement policy and procedural formulation. The development of a standard (or default) set of policies, procedures and best practice guidelines focused on the procurement process itself would be invaluable to agencies in the following respects:

· The policy and procedural material would reflect best practice standards and requirements.

· The material, in whole or part, may be quickly adopted by agencies where limited policy and procedural documented guidance has been produced.

· The material would facilitate formulation of customised policy and procedures by agencies, where appropriate.

It is suggested that a dedicated resource effort, lead by the Board with coordinated resource input from all Accredited Purchasing Units of the Portfolio mainline agencies, may represent an approach to efficiently and effectively achieve the marked improvement required in policy and procedural formulation. The coordinated approach would, in itself, reduce any administrative duplication and divergence in the formulation process.

Comment in a Specific Context — Consultancy/Contractor Policy Guidance

An illustrative example of the benefits to be derived from a coordinated approach to policy and procedural development relates to instructive guidance in regard to consultancy/contractor service acquisition.

Previous Reports have included comment on the importance of agencies of government ensuring the integrity of processes involved in the engagement of consultants and contractors in order to mitigate financial risks for themselves and government.

In making those comments, it was recommended that the Government revisit and then promulgate to all public authorities instructive guidance regarding service acquisition in accordance with principles that were developed by the Department of Treasury and Finance in 1995.

Although to-date that recommendation has not been taken up, Audit noted in reviewing the status of policy documentation activity at agency level, that the Strategic Purchasing Unit of the Department of Human Services has developed and issued detailed guidance on this topic during 2000-01.

Audit considers that the guidance implemented within Human Services could be used as a basis for development and promulgation of a government-wide (possibly a Board) endorsed policy guidance for this material area of service acquisition.

Referral of Audit Issues and Board Response — September 2001

Audit assessment in respect of the state of policy and procedural guidance, including the requirement for considerable improvement in the areas of direction and policy formulation processes, was referred in writing to the Chairperson of the State Supply Board in early September 2001.

The Chairperson of the Board has responded in a positive manner to the Audit communication. In responding the Chairperson has indicated the following:


By any measure, a key element of public sector procurement processes is the quality of the tendering and contracting processes undertaken by agencies. Audit has drawn attention in past Reports to concerns regarding the conduct of these important processes by agencies. Certain matters concerning the quality of the conduct by agencies of these processes and, of outcomes achieved, have also been raised in the Parliament.

As mentioned, the provision and availability of comprehensive policy and procedural guidance at agency level is a critical foundation component for good procurement process and practice within agencies. As the 2000-01 review outcome and the Board’s response suggests, much improvement is required and this process has commenced.

The existence of comprehensive policy and procedural guidance, by itself, will not ensure good procurement process and practice. Deficient conduct or execution of procurement processes, can cause government and agencies to fall short of the guiding principles that underpin procurement reform.

Audit is to direct attention in 2001-02 to the quality of execution of aspects of the tendering and contracting component of the procurement process cycle. This subject review area will also consider the nature and extent of waivers of competitive processes and the reporting accountability associated with this matter.

Audit will also look at the area of electronic procurement initiatives in development or operation. This area was seen as important to procurement reform in achieving economies.


The Government through its public sector agencies spends millions of dollars annually on the acquisition of goods and services.

The implementation of the procurement reform strategy, and its intended direction to achieve significant economies, has warranted this area of government operations receiving specific and continued Audit attention since 1999-2000.

1999-2000 Audit Review Outcome

The review identified issues relating to the legal and policy framework that underpins the soundness of the procurement reform strategy. In essence, Audit raised doubt concerning the lawfulness of the steps that were taken to confer upon the State Supply Board functions in relation to the procurement of ‘services’ as distinct from ‘goods’.

The Board advised Audit during 2000-01 that clarification regarding this matter was undertaken, and that Cabinet, in July 2001, approved the drafting of amending legislation to the State Supply Act 1985. It further advised that it expected the amending legislation to be introduced into the Spring session of Parliament.

2000-01 Audit Review Outcome

As a follow on to last year’s Audit review of the legal and policy framework of the reform strategy, Audit, in 2000-01, reviewed the nature and extent of prescribed policy and procedure that is available to agencies as the foundation component for good procurement process and practice.

The review found that considerable improvement is required in the area of direction concerning policy and procedural formulation and the actual development of best practice procurement policies and procedures. Audit considered that the Board, with coordinated resource input from agencies, may represent an efficient and effective approach to achieve a considerable improvement in policy and procedural development.

This matter was referred to the Board in early September 2001 and an immediate response outlining positive developments to address the required improvement was received.

A Matter of Continuing Importance and Focus

It is most important that the identified shortcomings in the legal and policy framework and in the area of prescribed policy and procedural guidance for agencies is properly and quickly addressed. This will provide a strong foundation and support for the Board and agencies in achieving the guiding principles for procurement decision making and practice.

Audit will undertake reviews of other aspects of goods and services procurement considered important in the context of the guiding principles and achievement of economies.

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