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Auditor-General—Audit report for 2013-14—No. 54—Performance audit—Establishment and use of multi-use lists: Across Agencies


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The Auditor-General Audit Report No.54 2013-14 Performance Audit

Establishment and Use of Multi-Use Lists

Across Agencies

Australian National Audit Office

ANAO Report No.54 2013-14 Establishment and Use of Multi-Use Lists

2

   

© Commonwealth of Australia 2014

ISSN 1036-7632  ISBN 0 642 81500 3 (Print)  ISBN 0 642 81501 1 (Online) 

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Executive Director  Corporate Management Branch  Australian National Audit Office  19 National Circuit  BARTON ACT 2600 

Or via email:  publications@anao.gov.au. 

 

         

 

ANAO Report No.54 2013-14 Establishment and Use of Multi-Use Lists

2

   

© Commonwealth of Australia 2014

ISSN 1036-7632  ISBN 0 642 81500 3 (Print)  ISBN 0 642 81501 1 (Online) 

Except for the content in this document supplied by third parties, the Australian  National Audit Office logo, the Commonwealth Coat of Arms, and any material  protected by a trade mark, this document is licensed by the Australian National Audit  Office for use under the terms of a Creative Commons Attribution‐NonCommercial‐ NoDerivatives 3.0 Australia licence. To view a copy of this licence, visit  

http://creativecommons.org/licenses/by‐nc‐nd/3.0/au/. 

You are free to copy and communicate the document in its current form for  non‐commercial purposes, as long as you attribute the document to the Australian  National Audit Office and abide by the other licence terms. You may not alter or adapt  the work in any way. 

Permission to use material for which the copyright is owned by a third party must be  sought from the relevant copyright owner. As far as practicable, such material will be  clearly labelled.  

For terms of use of the Commonwealth Coat of Arms, visit the It’s an Honour website  at http://www.itsanhonour.gov.au/. 

Requests and inquiries concerning reproduction and rights should be addressed to:  

Executive Director  Corporate Management Branch  Australian National Audit Office  19 National Circuit  BARTON ACT 2600 

Or via email:  publications@anao.gov.au. 

 

         

 

ANAO Report No.54 2013-14 Establishment and Use of Multi-Use Lists

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Canberra ACT 26 June 2014

Dear Mr President Dear Madam Speaker

The Australian National Audit Office has undertaken an independent performance audit across agencies titled Establishment and Use of Multi-Use Lists. The audit was conducted in accordance with the authority contained in the Auditor-General Act 1997. I present the report of this audit to the Parliament.

Following its presentation and receipt, the report will be placed on the Australian National Audit Office’s website—http://www.anao.gov.au.

Yours sincerely

Ian McPhee Auditor-General

The Honourable the President of the Senate The Honourable the Speaker of the House of Representatives Parliament House Canberra ACT    

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  AUDITING FOR AUSTRALIA 

The Auditor‐General is head of the  Australian National Audit Office  (ANAO). The ANAO assists the  Auditor‐General to carry out his  duties under the Auditor‐General  Act 1997 to undertake performance  audits, financial statement audits and  assurance reviews of Commonwealth  public sector bodies and to provide  independent reports and advice for  the Parliament, the Australian  Government and the community. The  aim is to improve Commonwealth  public sector administration and  accountability. 

For further information contact: 

The Publications Manager  Australian National Audit Office   GPO Box 707  Canberra ACT 2601    Phone:  (02) 6203 7505  Fax:  (02) 6203 7519  Email:  publications@anao.gov.au 

ANAO audit reports and information  about the ANAO are available on our  website: 

http://www.anao.gov.au 

 

Audit Team 

Grace Guilfoyle  Lachlan Fraser  Rowena Hayman  Edel Kairouz 

 

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Contents Abbreviations .................................................................................................................. 7 

Glossary ......................................................................................................................... 8 

Summary and Recommendations ........................................................................... 11 

Summary ...................................................................................................................... 13 

Introduction ............................................................................................................. 13 

Audit approach ........................................................................................................ 15 

Overall conclusion ................................................................................................... 16 

Key findings by chapter ........................................................................................... 19 

Summary of agencies’ responses ........................................................................... 23 

Recommendations ....................................................................................................... 25 

Audit Findings ............................................................................................................ 27 

1.  Introduction ............................................................................................................. 29 

Background ............................................................................................................. 29 

Legal and policy framework for government procurement...................................... 29 

Previous audits ........................................................................................................ 34 

Audit approach ........................................................................................................ 35 

Report structure ...................................................................................................... 36 

2.  Establishment of Multi-Use Lists ............................................................................. 37 

Introduction ............................................................................................................. 37 

Planning .................................................................................................................. 38 

Request documentation and conditions for participation ........................................ 45 

Approach to market ................................................................................................. 47 

Assessment and notifications to suppliers .............................................................. 49 

Conclusion .............................................................................................................. 53 

3.  Procurement from Multi-Use Lists ........................................................................... 54 

Introduction ............................................................................................................. 54 

Approaching suppliers for tenders .......................................................................... 56 

Evaluation of submissions, approval and demonstrated consideration of value for money ........................................................................................................... 61 

Reporting contracts on AusTender ......................................................................... 66 

Other agencies’ use of the legal services multi-use list .......................................... 66 

Conclusion .............................................................................................................. 76 

4.  Procurement Support and Review .......................................................................... 78 

Introduction ............................................................................................................. 78 

Policy and guidance ................................................................................................ 79 

Role of central procurement units ........................................................................... 80 

Procurement training ............................................................................................... 82 

ANAO Report No.54 2013-14 Establishment and Use of Multi-Use Lists

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  AUDITING FOR AUSTRALIA 

The Auditor‐General is head of the  Australian National Audit Office  (ANAO). The ANAO assists the  Auditor‐General to carry out his  duties under the Auditor‐General  Act 1997 to undertake performance  audits, financial statement audits and  assurance reviews of Commonwealth  public sector bodies and to provide  independent reports and advice for  the Parliament, the Australian  Government and the community. The  aim is to improve Commonwealth  public sector administration and  accountability. 

For further information contact: 

The Publications Manager  Australian National Audit Office   GPO Box 707  Canberra ACT 2601    Phone:  (02) 6203 7505  Fax:  (02) 6203 7519  Email:  publications@anao.gov.au 

ANAO audit reports and information  about the ANAO are available on our  website: 

http://www.anao.gov.au 

 

Audit Team 

Grace Guilfoyle  Lachlan Fraser  Rowena Hayman  Edel Kairouz 

 

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Monitoring and review arrangements ...................................................................... 82 

Conclusion .............................................................................................................. 85 

Appendices ................................................................................................................. 87 

Appendix 1:  Agencies’ responses .......................................................................... 88 

Appendix 2:  Key differences between a multi-use list and a panel ...................... 104  Appendix 3:  Conditions for limited tender for procurements at or above the procurement thresholds .................................................................... 107 

Appendix 4:  Commonwealth Procurement Rules Appendix A—Exemptions from Division 2 .................................................................................. 109 

Series Titles ................................................................................................................ 111 

Better Practice Guides ............................................................................................... 118 

 

Tables

Table 2.1:  Agency results relating to the establishment of their multi-use lists ...................................................................................................... 38 

Table 2.2:  Differences in the process and assessment for open tender and inclusion on a multi-use list ................................................................. 40 

Table 2.3:  Requirements for open and prequalified tender for procurements above the procurement thresholds ..................................................... 42 

Table 2.4:  Agencies’ advertising of multi-use lists on AusTender ....................... 48  Table 3.1:  Number of procurements per agency in the audit sample ................. 54  Table 3.2:  Potential benefits of parcel arrangements and risks to manage ........ 69  Table 3.3:  Establishment of parcelling arrangements in the Australian

Crime Commission and the Department of Human Services ............. 71  Table 3.4:  Summary of key results of review of Defence contracts .................... 73  Table 3.5:  Agencies’ approaches to the legal services multi-use list and how they relate to its key objectives ................................................... 74 

Table 4.1  Assessment of audited agencies’ procurement policy and guidance as at October 2013 ............................................................. 80 

 

Figures

Figure 2.1:  Typical considerations for selecting procurement method ................. 39  Figure 3.1:  Processes when using a multi-use list ............................................... 57 

Figure 3.2:   Procuring legal services from parcels or individually ......................... 68 

 

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Monitoring and review arrangements ...................................................................... 82 

Conclusion .............................................................................................................. 85 

Appendices ................................................................................................................. 87 

Appendix 1:  Agencies’ responses .......................................................................... 88 

Appendix 2:  Key differences between a multi-use list and a panel ...................... 104  Appendix 3:  Conditions for limited tender for procurements at or above the procurement thresholds .................................................................... 107 

Appendix 4:  Commonwealth Procurement Rules Appendix A—Exemptions from Division 2 .................................................................................. 109 

Series Titles ................................................................................................................ 111 

Better Practice Guides ............................................................................................... 118 

 

Tables

Table 2.1:  Agency results relating to the establishment of their multi-use lists ...................................................................................................... 38 

Table 2.2:  Differences in the process and assessment for open tender and inclusion on a multi-use list ................................................................. 40 

Table 2.3:  Requirements for open and prequalified tender for procurements above the procurement thresholds ..................................................... 42 

Table 2.4:  Agencies’ advertising of multi-use lists on AusTender ....................... 48  Table 3.1:  Number of procurements per agency in the audit sample ................. 54  Table 3.2:  Potential benefits of parcel arrangements and risks to manage ........ 69  Table 3.3:  Establishment of parcelling arrangements in the Australian

Crime Commission and the Department of Human Services ............. 71  Table 3.4:  Summary of key results of review of Defence contracts .................... 73  Table 3.5:  Agencies’ approaches to the legal services multi-use list and

how they relate to its key objectives ................................................... 74 

Table 4.1  Assessment of audited agencies’ procurement policy and guidance as at October 2013 ............................................................. 80 

 

Figures

Figure 2.1:  Typical considerations for selecting procurement method ................. 39  Figure 3.1:  Processes when using a multi-use list ............................................... 57 

Figure 3.2:   Procuring legal services from parcels or individually ......................... 68 

 

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Abbreviations

ACC  Australian Crime Commission 

AGD  Attorney‐General’s Department 

ANAO  Australian National Audit Office  

ATM  Approach to market 

BoM  Bureau of Meteorology  

CAC Act  Commonwealth Authorities and Companies Act 1997 

CEIs  Chief Executive’s Instructions  

CPRs  Commonwealth Procurement Rules  

Defence  Department of Defence  

DHS  Department of Human Services  

Finance  Department of Finance  

FMA Act   Financial Management and Accountability Act 1997  

FMA  Regulations 

Financial Management and Accountability Regulations 1997 

Industry   Department of Industry 

LSMUL  Legal Services Multi‐Use List 

MUL  Multi‐Use List 

RFQ  Request for quote 

RFT  Request for tender 

VFM  Value for money 

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Glossary

Approach to  market (ATM)   Any notice inviting potential suppliers to participate in a  procurement  which  may  include  a  request  for  tender, 

request for quote, request for expression of interest, request  for application for inclusion on a multi‐use list, request for  information or request for proposal. 

AusTender  The  central  web‐based  facility  for  the  publication  of  Australian  Government  procurement  information,  including  business  opportunities,  annual  procurement  plans and contracts awarded. 

Chief  Executive’s  Instructions  (CEIs) 

Directions  issued  by  the  Chief  Executive  of  an  agency  to  achieve  compliance  with  the  Financial  Management  and  Accountability Act 1997 and to ensure the efficient, effective,  economical and ethical use of Commonwealth resources. 

Commonwealth  Procurement  Rules (CPRs)  

Rules  governing  procurement  issued  by  the  Minister  for  Finance  (Finance  Minister)  under  Regulation  7  of  the  Financial  Management  and  Accountability  Regulations 1997).  

Conditions for  participation  Minimum conditions with which potential suppliers must  demonstrate  compliance  in  order  to  participate  in  a 

procurement process or for submissions to be considered. 

Limited tender  Involves  an  agency  approaching  one  or  more  potential  suppliers to make submissions, where the process does not  meet the rules for open tender or prequalified tender. 

Multi‐use list   A  list  of  suppliers  who  have  satisfied  the  conditions  for  participation  on  the  list  and  may  be  approached  for  subsequent procurement opportunities. 

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Open approach  to market  An approach which involves publication of a notice inviting  potential  suppliers  to  participate  in  procurement 

opportunities. An open approach to market may include a  request for tender, request for quote, request for expression  of  interest,  request  for  application  for  inclusion  on  a  multi‐use  list,  request  for  information  and  request  for  proposal. 

Open tender 

 

Involves  publishing  an  open  approach  to  market  and  inviting submissions from all potential suppliers. 

Panel  An  arrangement  under  which  a  number  of  potential  suppliers,  usually  selected  through  a  single  procurement  process, may each supply goods or services to an agency as  specified in the panel arrangements.  

Parcelling  arrangement  An  arrangement  under  the  Legal  Services  Multi‐Use  List  that allows agencies to approach legal service providers to 

submit  detailed  quotes  for  parcels  of  legal  services  that,  individually,  may  be  valued  at  or  above  the  relevant  procurement thresholds amount. 

Potential  supplier 

An entity or person who may respond to an approach to  market. 

Prequalified  tender  Involves  publishing  an  approach  to  market  inviting  submissions from all potential suppliers on:  

(a) a shortlist of potential suppliers that responded to  an initial open approach to market on AusTender; 

(b) a list of potential suppliers selected from a multi‐use  list established through an open approach to market;  or 

(c) a  list  of  all  potential  suppliers  that  have  been  granted  a  specific  licence  or  comply  with  a  legal  requirement, where the licence or compliance with  the legal requirement is essential to the conduct of  the procurement. 

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Open approach  to market  An approach which involves publication of a notice inviting  potential  suppliers  to  participate  in  procurement 

opportunities. An open approach to market may include a  request for tender, request for quote, request for expression  of  interest,  request  for  application  for  inclusion  on  a  multi‐use  list,  request  for  information  and  request  for  proposal. 

Open tender 

 

Involves  publishing  an  open  approach  to  market  and  inviting submissions from all potential suppliers. 

Panel  An  arrangement  under  which  a  number  of  potential  suppliers,  usually  selected  through  a  single  procurement  process, may each supply goods or services to an agency as  specified in the panel arrangements.  

Parcelling  arrangement  An  arrangement  under  the  Legal  Services  Multi‐Use  List  that allows agencies to approach legal service providers to 

submit  detailed  quotes  for  parcels  of  legal  services  that,  individually,  may  be  valued  at  or  above  the  relevant  procurement threshold. 

Potential  supplier 

An entity or person who may respond to an approach to  market. 

Prequalified  tender  Involves  publishing  an  approach  to  market  inviting  submissions from all potential suppliers on:  

(a) a shortlist of potential suppliers that responded to  an initial open approach to market on AusTender; 

(b) a list of potential suppliers selected from a multi‐use  list established through an open approach to market;  or 

(c) a  list  of  all  potential  suppliers  that  have  been  granted  a  specific  licence  or  comply  with  a  legal  requirement, where the licence or compliance with  the legal requirement is essential to the conduct of  the procurement. 

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Procurement  The purchase of goods and services. The procurement cycle  generally  encompasses  the  processes  of  risk  assessment,  seeking and evaluating alternative solutions, the awarding  of a contract, delivery of and payment for the goods and  services and, where relevant, ongoing contract management  and consideration of disposal of goods. 

Procurement  thresholds  An  amount  above  which  additional  procurement  rules  apply. The procurement thresholds (including GST) in the 

CPRs are: 

(a) for agencies subject to the Financial Management and  Accountability  Act  1997  (FMA  Act),  other  than  for  procurements  of  construction  services,  the  procurement threshold is $80 000; 

(b) for relevant Commonwealth Authorities and Company  Act  1997  (CAC  Act)  bodies,  other  than  for  procurements  of  construction  services,  the  procurement threshold is $400 000; or 

(c) for procurements of construction services by FMA  Act  agencies  and  relevant  CAC  Act  bodies,  the  procurement threshold is $7.5 million. 

Request  documentation  Documentation  provided  to  potential  suppliers  to  enable  them  to  understand  and  assess  the  requirements  of  the 

procuring  agency  and  to  prepare  appropriate  and  responsive  submissions.  This  general  term  includes  documentation  for  expressions  of  interest,  multi‐use  lists,  open, limited and prequalified tender processes. 

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Procurement  The purchase of goods and services. The procurement cycle  generally  encompasses  the  processes  of  risk  assessment,  seeking and evaluating alternative solutions, the awarding  of a contract, delivery of and payment for the goods and  services and, where relevant, ongoing contract management  and consideration of disposal of goods. 

Procurement  thresholds  An  amount  above  which  additional  procurement  rules  apply. The procurement thresholds (including GST) in the 

CPRs are: 

(a) for agencies subject to the Financial Management and  Accountability  Act  1997  (FMA  Act),  other  than  for  procurements  of  construction  services,  the  procurement threshold is $80 000; 

(b) for relevant Commonwealth Authorities and Company  Act  1997  (CAC  Act)  bodies,  other  than  for  procurements  of  construction  services,  the  procurement threshold is $400 000; or 

(c) for procurements of construction services by FMA  Act  agencies  and  relevant  CAC  Act  bodies,  the  procurement threshold is $7.5 million. 

Request  documentation  Documentation  provided  to  potential  suppliers  to  enable  them  to  understand  and  assess  the  requirements  of  the 

procuring  agency  and  to  prepare  appropriate  and  responsive  submissions.  This  general  term  includes  documentation  for  expressions  of  interest,  multi‐use  lists,  open, limited and prequalified tender processes. 

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Summary and Recommendations

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Summary

Introduction 1. Procurement is an integral part of the way the Australian Government  conducts  business.  In  2012-13,  Australian  Government  agencies  published  some  67 000  contracts  for  goods  and  services  valued  at  in  excess  of  $39.2 billion.1  Given  the  large  number  of  procurements  undertaken  and  the  centrality of this activity to the operation of government and program delivery,  agencies’  procurement  practices  are  expected  to  be  efficient,  effective,  economical and ethical, consistent with the policies of the Commonwealth and  suited to the size, nature and complexity of the goods or services sought. 

2. In  undertaking  procurement,  agencies  are  required  to  adhere  to  the  Commonwealth  Procurement  Rules  (CPRs).  The  CPRs  underpin  Australia’s  international  obligations  in  accordance  with  free  trade  agreements,  and  promote  sound  and  transparent  procurement  practices  that  seek  to  achieve  value for money2 and encourage competition in government procurement. The  CPRs  describe  three  methods  that  agencies  can  use  when  conducting  procurements: open tender, limited tender and prequalified tender. This audit  focuses on one form of prequalified tender—the use of multi‐use lists (MULs),  which  allow  agencies  to  prequalify  suppliers  for  subsequent  procurement  opportunities.  

Prequalified procurement - from a multi-use list

3. A MUL is a list of suppliers who have applied for inclusion on the list  and satisfied a set of conditions for participation.3 The process of establishing a  MUL is not a procurement itself and it does not involve the assessment of  value for money; rather it is an activity that qualifies suppliers who may wish  to  participate  in  future  procurement  processes,  and  as  such  represents  a 

                                                      

1 Department of Finance, Statistics on Australian Government Procurement Contracts 2012-2013 [Internet], Finance, available from [accessed June 2014]. 2 Determining value for money involves a range of considerations including: fitness for purpose; the

performance history of each prospective supplier; the relative risk of each proposal; the flexibility to adapt to possible change over the lifecycle of the goods or service; financial considerations; and the evaluation of contract options. Finance, Commonwealth Procurement Rules (CPRs), July 2012, section 4.5. 3 Multi-use lists are provided for under international trade agreements.

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Summary

Introduction 1. Procurement is an integral part of the way the Australian Government  conducts  business.  In  2012-13,  Australian  Government  agencies  published  some  67 000  contracts  for  goods  and  services  valued  at  in  excess  of  $39.2 billion.1  Given  the  large  number  of  procurements  undertaken  and  the  centrality of this activity to the operation of government and program delivery,  agencies’  procurement  practices  are  expected  to  be  efficient,  effective,  economical and ethical, consistent with the policies of the Commonwealth and  suited to the size, nature and complexity of the goods or services sought. 

2. In  undertaking  procurement,  agencies  are  required  to  adhere  to  the  Commonwealth  Procurement  Rules  (CPRs).  The  CPRs  underpin  Australia’s  international  obligations  in  accordance  with  free  trade  agreements,  and  promote  sound  and  transparent  procurement  practices  that  seek  to  achieve  value for money2 and encourage competition in government procurement. The  CPRs  describe  three  methods  that  agencies  can  use  when  conducting  procurements: open tender, limited tender and prequalified tender. This audit  focuses on one form of prequalified tender—the use of multi‐use lists (MULs),  which  allow  agencies  to  prequalify  suppliers  for  subsequent  procurement  opportunities.  

Prequalified procurement - from a multi-use list

3. A MUL is a list of suppliers who have applied for inclusion on the list  and satisfied a set of conditions for participation.3 The process of establishing a  MUL is not a procurement itself and it does not involve the assessment of  value for money; rather it is an activity that qualifies suppliers who may wish  to  participate  in  future  procurement  processes,  and  as  such  represents  a 

                                                      

1 Department of Finance, Statistics on Australian Government Procurement Contracts 2012-2013 [Internet], Finance, available from [accessed June 2014]. 2 Determining value for money involves a range of considerations including: fitness for purpose; the

performance history of each prospective supplier; the relative risk of each proposal; the flexibility to adapt to possible change over the lifecycle of the goods or service; financial considerations; and the evaluation of contract options. Finance, Commonwealth Procurement Rules (CPRs), July 2012, section 4.5. 3 Multi-use lists are provided for under international trade agreements.

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support  process.  A  MUL  can  be  quick  and  relatively  inexpensive  for  an  Australian Government agency to establish as the comparative assessment of  suppliers to determine value for money is undertaken later, at the time that the  goods and/or services are procured from a supplier on a MUL.  

4. A MUL would typically only be used by an agency where it:  

 frequently procures particular goods or services; 

 requires flexibility in its approaches to the market; or 

 requires a list of suppliers that meet specific conditions for participation  (such as having specific expertise).4 

5. Analysis  of  AusTender  data  indicates  that  in  2013,  approximately  35 per cent of contracts let by agencies were open tender, 57 per cent limited  tender,  and  the  remaining  eight per cent  all  types  of  prequalified  tender.  Prequalified  tender  procurements  represented  approximately  $6.5 billion  of  expenditure  and  5000 contracts.  AusTender  data  does  not  identify  the  proportion  of  the  prequalified  tender  contracts  that  specifically  relate  to  procurement from a MUL. 

6. Australian Government agencies have established MULs for a variety  of  purposes.  As  at  October  2013  the  Bureau  of  Meteorology  (BoM)  had  11 MULs  covering  a  broad  variety  of  goods  and  services  ranging  from  printing, shipping and freight, to more technical services such as support for a  tsunami  warning  system.  The  Department  of  Industry  (Industry)  had  four  MULs  relating  to  the  recruitment  of  temporary  personnel,  outreach  tour  transport,  exhibition  transportation  services  and  interactive  exhibition  development  services.  The  Attorney‐General’s  Department  (AGD)  had  one  MUL,  the  Legal  Services  Multi‐Use  List  (LSMUL)  which  was  introduced  in  June  2012  as  part  of  ongoing  reforms  to  the  provision  of  legal  services  for  Australian Government agencies. The Legal Services Directions 20055 require all  Australian  Government  agencies  subject  to  the  Financial  Management  and 

                                                      

4 Finance, Buying for the Australian Government, Procurement Practice, Panel Arrangements and Multi-Use Lists, paragraph 24 [Internet], available from [accessed June 2014].

5 The Legal Services Directions 2005 are a set of binding rules for the performance of Commonwealth legal work. The Directions set out requirements for sound practice in the provision of legal services to the Australian Government. [Internet], Comlaw, available from [accessed June 2014].

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support  process.  A  MUL  can  be  quick  and  relatively  inexpensive  for  an  Australian Government agency to establish as the comparative assessment of  suppliers to determine value for money is undertaken later, at the time that the  goods and/or services are procured from a supplier on a MUL.  

4. A MUL would typically only be used by an agency where it:  

 frequently procures particular goods or services; 

 requires flexibility in its approaches to the market; or 

 requires a list of suppliers that meet specific conditions for participation  (such as having specific expertise).4 

5. Analysis  of  AusTender  data  indicates  that  in  2013,  approximately  35 per cent of contracts let by agencies were open tender, 57 per cent limited  tender,  and  the  remaining  eight per cent  all  types  of  prequalified  tender.  Prequalified  tender  procurements  represented  approximately  $6.5 billion  of  expenditure  and  5000 contracts.  AusTender  data  does  not  identify  the  proportion  of  the  prequalified  tender  contracts  that  specifically  relate  to  procurement from a MUL. 

6. Australian Government agencies have established MULs for a variety  of  purposes.  As  at  October  2013  the  Bureau  of  Meteorology  (BoM)  had  11 MULs  covering  a  broad  variety  of  goods  and  services  ranging  from  printing, shipping and freight, to more technical services such as support for a  tsunami  warning  system.  The  Department  of  Industry  (Industry)  had  four  MULs  relating  to  the  recruitment  of  temporary  personnel,  outreach  tour  transport,  exhibition  transportation  services  and  interactive  exhibition  development  services.  The  Attorney‐General’s  Department  (AGD)  had  one  MUL,  the  Legal  Services  Multi‐Use  List  (LSMUL)  which  was  introduced  in  June  2012  as  part  of  ongoing  reforms  to  the  provision  of  legal  services  for  Australian Government agencies. The Legal Services Directions 20055 require all  Australian  Government  agencies  subject  to  the  Financial  Management  and 

                                                      

4 Finance, Buying for the Australian Government, Procurement Practice, Panel Arrangements and Multi-Use Lists, paragraph 24 [Internet], available from [accessed June 2014].

5 The Legal Services Directions 2005 are a set of binding rules for the performance of Commonwealth legal work. The Directions set out requirements for sound practice in the provision of legal services to the Australian Government. [Internet], Comlaw, available from [accessed June 2014].

Summary

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Accountability  Act 1997  and  certain  entities  subject  to  the  Commonwealth  Authorities  and  Companies  Act  1997  (CAC  Act)  to  use  the  LSMUL  when  purchasing external legal services. 

Previous ANAO audits

7. The ANAO has conducted four audits since 2007 that have focussed on  aspects of procurement across Australian Government agencies.6 Each of these  audits has identified some shortcomings with respect to agencies’ application  of  the  Commonwealth  Procurement  Guidelines7  for  a  significant  proportion  of  procurements  examined.  In  particular,  agencies  needed  to  employ  more  competitive  procurement  processes,  better  document  value  for  money  assessments and obtain appropriate approvals.  

Audit approach 8. The objective of the audit was to assess the extent to which agencies  have  arrangements  to  establish  and  use  multi‐use  lists  (MULs)  to  support  value for money, efficiency and effectiveness in procurement.  

9. To  conclude  on  this  objective,  the  ANAO’s  broad  criteria  included  whether  agencies  had  adhered  to  the  requirements  of  the  Commonwealth  Procurement Rules and applied sound practices when establishing and using  MULs.  

10. The scope of the audit included the examination of both the policies  and  practices  supporting  the  establishment  and  use  of  16  MULs  across  three agencies  and  procurements  from  these  MULs  where  the  procurement  had a value greater than $80 000.8 

11. The three agencies included in this part of the audit were the:  

 Bureau of Meteorology (BoM);  

 Department of Industry (Industry); and  

 Attorney‐General’s Department (AGD).  

                                                      

6 ANAO, Audit Reports: No.31 2011-12 Establishment and Use of Procurement Panels; No.11 2010-11 Direct Source Procurement; No.14 2009-10, Agencies’ Contract Management; and No.21 2006-07 Implementation of the Revised Commonwealth Procurement Guidelines. 7 At the time these audits were undertaken, agencies were subject to the Commonwealth Procurement

Guidelines (CPGs). The CPGs were superseded by the CPRs in July 2012. 8 The main purpose of establishing a MUL is to allow for future prequalified tendering for higher value procurements (referred to as Division 2 procurements under the CPRs). Procurements under $80 000 were therefore excluded from the audit.

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12. The ANAO also examined the approaches adopted by three additional  agencies to procuring legal services using the Legal Services Multi‐Use List  (LSMUL) established by AGD. These three agencies were the: 

 Australian Crime Commission (ACC);  

 Department of Defence (Defence); and  

 Department of Human Services (DHS). 

13. To obtain feedback on the operation of the LSMUL, the ANAO also  consulted  representatives  of  legal  service  providers.  Where  appropriate,  feedback from the providers consulted is included in the report.  

Overall conclusion 14. Procurement  of  goods  and  services  is  a  key  activity  for  Australian  Government agencies and, in undertaking procurement, agencies are required  to adhere to the Commonwealth Procurement Rules (CPRs). In order to achieve  efficient procurement arrangements which still meet the requirements of the  CPRs, a range of approaches have been developed to streamline procurement  practices for frequently purchased goods or services. These include the use of  multi‐use lists (MULs) and procurement panels: 

 MULs  allow  agencies  to  prequalify  suppliers  for  later  use  in  a  procurement.  They  provide  flexibility  and  enable  agencies  to  easily  identify  suppliers  that  meet  certain  conditions  or  that  have  specific  expertise. All suppliers who meet the conditions must be included on  the list. Inclusion of a supplier on a MUL does not involve a value for  money  assessment  of  suppliers  and  does  not  usually  create  a  contractual  relationship.  Suppliers  can  be  added  to  a  MUL  enabling  agencies to include new market entrants over time.  

 Procurement panels are established following a competitive value for  money assessment process and involve a contractual relationship for a  set period of time. Once established, panels generally provide ready  access to goods and services, particularly for high value procurements  as the additional rules in the CPRs for such procurements do not apply.  Generally, panels do not allow for new suppliers to be added to the  panel once established.  

Of these two approaches, the arrangements applying to MULs are not so well  understood  and,  in  most  cases,  greater  consideration  needs  to  be  given  to 

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12. The ANAO also examined the approaches adopted by three additional  agencies to procuring legal services using the Legal Services Multi‐Use List  (LSMUL) established by AGD. These three agencies were the: 

 Australian Crime Commission (ACC);  

 Department of Defence (Defence); and  

 Department of Human Services (DHS). 

13. To obtain feedback on the operation of the LSMUL, the ANAO also  consulted  representatives  of  legal  service  providers.  Where  appropriate,  feedback from the providers consulted is included in the report.  

Overall conclusion 14. Procurement  of  goods  and  services  is  a  key  activity  for  Australian  Government agencies and, in undertaking procurement, agencies are required  to adhere to the Commonwealth Procurement Rules (CPRs). In order to achieve  efficient procurement arrangements which still meet the requirements of the  CPRs, a range of approaches have been developed to streamline procurement  practices for frequently purchased goods or services. These include the use of  multi‐use lists (MULs) and procurement panels: 

 MULs  allow  agencies  to  prequalify  suppliers  for  later  use  in  a  procurement.  They  provide  flexibility  and  enable  agencies  to  easily  identify  suppliers  that  meet  certain  conditions  or  that  have  specific  expertise. All suppliers who meet the conditions must be included on  the list. Inclusion of a supplier on a MUL does not involve a value for  money  assessment  of  suppliers  and  does  not  usually  create  a  contractual  relationship.  Suppliers  can  be  added  to  a  MUL  enabling  agencies to include new market entrants over time.  

 Procurement panels are established following a competitive value for  money assessment process and involve a contractual relationship for a  set period of time. Once established, panels generally provide ready  access to goods and services, particularly for high value procurements  as the additional rules in the CPRs for such procurements do not apply.  Generally, panels do not allow for new suppliers to be added to the  panel once established.  

Of these two approaches, the arrangements applying to MULs are not so well  understood  and,  in  most  cases,  greater  consideration  needs  to  be  given  to 

Summary

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whether  a  MUL  is  most  suited  to  an  agency’s  particular  procurement  objectives.  Where  procurement  processes  are  not  well  understood  and  objectives  not  well‐defined,  there  is  a  clear  risk  of  agencies  undertaking  procurements which are not consistent with the requirements of the CPRs. 

15. This audit, which focussed on the arrangements to establish and use  MULs  in  the  Bureau  of  Meteorology  (BoM),  the  Department  of  Industry  (Industry)  and  the  Attorney‐General’s  Department  (AGD),  highlights  these  risks  to  varying  degrees.  Common  areas  where  agencies  did  not  adhere  to  requirements of the CPRs included; approaching too few suppliers, providing  insufficient time for suppliers to respond to requests for work and not treating  suppliers consistently. Consequently agencies’ approaches, to varying degrees,  were not fully effective in satisfying the procurement principles, which among  other things encourage fair and open competition.  

16. In addition, there were questions about whether value for money was  being achieved in the subsequent procurement action given the approaches  being adopted by agencies. By way of background, once a decision is taken to  establish  a  MUL,  agencies  need  to  be  mindful  that  the  process  of  its  establishment  was  not  a  procurement,  so  when  selecting  suppliers,  an  assessment of value for money still needs to be undertaken. Agencies ought to  approach a sufficient number of suppliers to allow a reasonable assessment,  commensurate  with  the  scale  and  scope  of  the  procurement.  The  ANAO  observed  instances  in  most  agencies  where  a  competitive  assessment  of  suppliers  was  either  not  undertaken  at  all,  or  not  done  well.  The  CPRs  establish several requirements for undertaking a prequalified tender.9 Based on  the sample examined, all of the procurements at BoM and Industry, and the  majority  of  procurements  at  AGD,  fell  short  of  certain  CPR  requirements  relating to prequalified tender. In particular, for higher value procurements the  CPRs impose strict timeframes designed to allow suppliers reasonable time to  respond  to  requests  for  work.  Generally,  MULs  do  not  lend  themselves  to  services required at short notice and the ANAO found these timeframes were  often  not  met.  As  a  result,  it  was  more  difficult  for  audited  agencies  to  demonstrate that competition was genuine and value for money was achieved.  

                                                      

9 In relation to MULs, prequalified tender includes publishing an approach to market inviting submissions from all potential suppliers on a list of potential suppliers selected from a multi-use list established through an open approach to market.

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17. Further, in seeking to obtain efficiencies, agencies need to be aware of  the  costs  of  their  approaches  on  providers.  MULs  provide  for  streamlined  procurement approaches, but these benefits are limited where agencies do not  make full use of information obtained as part of the initial application process.  During the course of this audit, a number of service providers on the LSMUL  indicated frustration at having to provide the same or similar information at  the establishment stage and subsequently when responding to agency requests  for quotes.  

18. Efficiencies  in  the  use  of  MULs  can  also  be  fostered  by  agencies  increasing  their  knowledge  of  the  supplier  market.  This  was  an  important  aspect  of  the  design  of  the  arrangements  for  the  LSMUL.  More  generally,  enhancing measures to support the sharing of information within and across  agencies (including information on performance, expertise and experience of  providers) could assist agencies in becoming more informed purchasers; and,  in turn, this could limit the demands on suppliers. Centralising procurement  advice within agencies may also allow better coordination of effort and, as a  consequence, achieve greater efficiencies and better results. 

19. At an appropriate time during the lifecycle of a MUL, agencies should  assess  whether  the  arrangement  has  achieved  the  anticipated  benefits  and  whether it has been an efficient and effective approach to support business  requirements. Such assessment can help shape the design of any future MUL  or alternative procurement arrangements. Of the audited agencies only AGD  had  reviewed  the  effectiveness  of  its  MUL  in  meeting  procurement  requirements and used this information to assist in the design of prospective  procurement arrangements.  

20. The  ANAO  has  made  two  recommendations  aimed  at  improving  agency procurement practices in relation to MULs. More broadly, the audit  draws  attention  to  the  complexities  of  the  CPRs,  appreciating  they  are  designed  to  promote  sound  and  transparent  procurement  practices  that  encourage  competition  and  achieve  value  for  money  in  government  procurements. Other ANAO audits of procurement have also identified the  importance  of  placing  greater  emphasis  on  the  procurement  principles  in  Australian Government procurement activities.10 Such an emphasis provides a 

                                                      

10 ANAO Audit Reports: No.31 2011-12 Establishment and Use of Procurement Panels and No.11 2010-11, Direct Source Procurement, 2010 [Internet], available from [accessed June 2014].

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17. Further, in seeking to obtain efficiencies, agencies need to be aware of  the  costs  of  their  approaches  on  providers.  MULs  provide  for  streamlined  procurement approaches, but these benefits are limited where agencies do not  make full use of information obtained as part of the initial application process.  During the course of this audit, a number of service providers on the LSMUL  indicated frustration at having to provide the same or similar information at  the establishment stage and subsequently when responding to agency requests  for quotes.  

18. Efficiencies  in  the  use  of  MULs  can  also  be  fostered  by  agencies  increasing  their  knowledge  of  the  supplier  market.  This  was  an  important  aspect  of  the  design  of  the  arrangements  for  the  LSMUL.  More  generally,  enhancing measures to support the sharing of information within and across  agencies (including information on performance, expertise and experience of  providers) could assist agencies in becoming more informed purchasers; and,  in turn, this could limit the demands on suppliers. Centralising procurement  advice within agencies may also allow better coordination of effort and, as a  consequence, achieve greater efficiencies and better results. 

19. At an appropriate time during the lifecycle of a MUL, agencies should  assess  whether  the  arrangement  has  achieved  the  anticipated  benefits  and  whether it has been an efficient and effective approach to support business  requirements. Such assessment can help shape the design of any future MUL  or alternative procurement arrangements. Of the audited agencies only AGD  had  reviewed  the  effectiveness  of  its  MUL  in  meeting  procurement  requirements and used this information to assist in the design of prospective  procurement arrangements.  

20. The  ANAO  has  made  two  recommendations  aimed  at  improving  agency procurement practices in relation to MULs. More broadly, the audit  draws  attention  to  the  complexities  of  the  CPRs,  appreciating  they  are  designed  to  promote  sound  and  transparent  procurement  practices  that  encourage  competition  and  achieve  value  for  money  in  government  procurements. Other ANAO audits of procurement have also identified the  importance  of  placing  greater  emphasis  on  the  procurement  principles  in  Australian Government procurement activities.10 Such an emphasis provides a 

                                                      

10 ANAO Audit Reports: No.31 2011-12 Establishment and Use of Procurement Panels and No.11 2010-11, Direct Source Procurement, 2010 [Internet], available from [accessed June 2014].

Summary

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stronger focus for those involved in procurement decisions to achieve positive  outcomes that are supported by competitive processes and provide value for  money.  A  key  step  in  achieving  this  is  adequate  planning,  including  consideration  of  the  extent  to  which  the  procurement  method  meets  the  identified need.  

21. When seeking to achieve efficiencies, prequalified and limited tender  methods provide a streamlined process. However, an efficient process is only  valuable  if  it  also  supports  the  achievement  of  the  procurement  principles.  Agency central procurement units (CPUs) are generally well placed to identify  and  pursue  more  efficient  purchasing  arrangements,  provide  advice  and  support practices that encourage competition and enhance value for money.  Therefore  there  would  be  merit  in  agencies  involving  CPUs  more  in  the  selection of procurement methods, and in establishing processes to be adopted  within  agencies  particularly  in  a  devolved  procurement  environment.  Measures of this kind would assist agency staff to better navigate the CPRs.  

Key findings by chapter

Establishment of multi-use lists (Chapter 2)

22. Effective  procurement  is  supported  by  agencies  clearly  defining  the  objectives  for  the  procurement  and  taking  a  considered  approach  to  determining  the  procurement  processes  best  suited  to  achieving  their  objectives.  Typically  a  MUL  is  most  effective  where  an  agency:  frequently  procures particular goods or services; requires market flexibility (including in  the frequency of purchases, and the amounts of goods or services); or requires  a  list  of  suppliers  that  meet  specific  conditions  (such  as  having  specific  expertise).  

23. The ANAO identified that agencies need to give greater consideration  to whether a MUL is most suited to meeting their procurement objectives or  whether alternative procurement arrangements would be more appropriate. In  the case of BoM, specific procurement objectives for its MULs had not been  defined and, in some cases MULs were subsequently used very infrequently or  not at all. In Industry, to varying degrees, some MULs had defined objectives.  However, in regard to Industry’s temporary personnel MUL, where services  may have been required at short notice, an alternative procurement method  such as a panel would have enabled Industry to better meet its procurement  objective and demonstrate the achievement of value for money.  

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24. In  contrast,  AGD,  having  had  the  benefit  of  two  prior  reviews,  had  clearly  defined  the  objectives  for  the  LSMUL.  Agencies  and  legal  service  providers interviewed by the ANAO generally agreed the LSMUL had met a  key objective of opening up the market to competition. Both groups however,  were  less  certain  of  whether  or  not  the  LSMUL  had  achieved  its  other  objectives including whether the current processes for the purchase of legal  services  were  more  efficient,  effective,  or  achieved  greater  value  for  money  than previous approaches. There were also mixed views on whether agencies  were becoming more informed purchasers of legal services. 

25. Agencies are required to treat suppliers equitably when being assessed  for  inclusion  on  a  MUL.  Accordingly,  appropriate  records  of  supplier  assessment  and  notification  of  outcomes  should  be  maintained  to  provide  transparency of the process. Both BoM and Industry included suppliers in their  MUL registers that had not met some of the requirements contained in the  application  for  inclusion.  Further  there  was  no  evidence  of  screening  or  verification of claims made by potential suppliers.  

Procurements from multi-use lists (Chapter 3)

26. When  procuring  goods  and  services,  the  Australian  Government’s  procurement  framework  has  a  principal  objective  of  achieving  value  for  money. Value for money is enhanced by encouraging open competition, using  resources in an efficient, effective, economical and ethical way, and making  decisions in an accountable and transparent manner. When using streamlined  approaches such as MULs, agencies must undertake procurements in a manner  that is consistent with the procurement framework as set out in the CPRs. The  CPRs impose requirements for higher value procurements and where agencies  require  services  at  short  notice  they  still  need  to  consider  the  minimum  timeframes established in the CPRs.11 Agencies can draw on the exemptions in  the  CPRs  if  they  qualify  however,  if  the  goods  or  services  are  needed  frequently  at  short  notice,  a  better  approach  would  be  to  put  in  place  alternative procurement arrangements.  

27. The ANAO reviewed procurements at BoM, Industry and AGD which  had been undertaken from MULs. When considered against the CPRs, these                                                        

11 The time limit for potential suppliers to lodge a submission must be at least 25 days from the date and time that an agency publishes an approach to market for an open tender or a prequalified tender, except under certain circumstances where it is allowed to be no less than 10 days. Finance, Commonwealth Procurement Rules, 2012, section 10.19.

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24. In  contrast,  AGD,  having  had  the  benefit  of  two  prior  reviews,  had  clearly  defined  the  objectives  for  the  LSMUL.  Agencies  and  legal  service  providers interviewed by the ANAO generally agreed the LSMUL had met a  key objective of opening up the market to competition. Both groups however,  were  less  certain  of  whether  or  not  the  LSMUL  had  achieved  its  other  objectives including whether the current processes for the purchase of legal  services  were  more  efficient,  effective,  or  achieved  greater  value  for  money  than previous approaches. There were also mixed views on whether agencies  were becoming more informed purchasers of legal services. 

25. Agencies are required to treat suppliers equitably when being assessed  for  inclusion  on  a  MUL.  Accordingly,  appropriate  records  of  supplier  assessment  and  notification  of  outcomes  should  be  maintained  to  provide  transparency of the process. Both BoM and Industry included suppliers in their  MUL registers that had not met some of the requirements contained in the  application  for  inclusion.  Further  there  was  no  evidence  of  screening  or  verification of claims made by potential suppliers.  

Procurements from multi-use lists (Chapter 3)

26. When  procuring  goods  and  services,  the  Australian  Government’s  procurement  framework  has  a  principal  objective  of  achieving  value  for  money. Value for money is enhanced by encouraging open competition, using  resources in an efficient, effective, economical and ethical way, and making  decisions in an accountable and transparent manner. When using streamlined  approaches such as MULs, agencies must undertake procurements in a manner  that is consistent with the procurement framework as set out in the CPRs. The  CPRs impose requirements for higher value procurements and where agencies  require  services  at  short  notice  they  still  need  to  consider  the  minimum  timeframes established in the CPRs.11 Agencies can draw on the exemptions in  the  CPRs  if  they  qualify  however,  if  the  goods  or  services  are  needed  frequently  at  short  notice,  a  better  approach  would  be  to  put  in  place  alternative procurement arrangements.  

27. The ANAO reviewed procurements at BoM, Industry and AGD which  had been undertaken from MULs. When considered against the CPRs, these                                                        

11 The time limit for potential suppliers to lodge a submission must be at least 25 days from the date and time that an agency publishes an approach to market for an open tender or a prequalified tender, except under certain circumstances where it is allowed to be no less than 10 days. Finance, Commonwealth Procurement Rules, 2012, section 10.19.

Summary

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procurements  largely  did  not  meet  relevant  requirements  of  prequalified  tender.  In  BoM,  the  majority  of  procurements  examined  involved  direct  approaches  to  suppliers  who  were  not  on  a  MUL  and  therefore  were  not  prequalified.  All  of  Industry’s  procurements  and  most  of  AGD’s  did  not  involve an appropriately competitive process, or provide sufficient time for  supplier responses. Under the CPRs where a procurement is not undertaken as  an open or prequalified tender, it can only be classed as a limited tender by  default.12 However, in several respects the majority of procurements examined  by the ANAO also failed to meet conditions established in the CPRs for limited  tender.  

28. In relation to the LSMUL, audited agencies and legal service providers  reported that the arrangements did not lend themselves to services required at  short notice: two audited agencies (ACC and DHS) have introduced parcelling  arrangements13  to  accommodate  this.  While  parcelling  can  overcome  CPR  timing issues the approach, which can be similar to limited tender, can reduce  competition and new and small providers may face difficulties entering such  an  arrangement.14  Agencies  need  to  be  mindful  that  the  field  of  suppliers  invited to apply for a parcel should not be too narrow. Given the purpose of  the LSMUL is to promote competition and reduce costs, there is merit in AGD  and Finance working together to reinforce the obligation to achieve value for  money and share agency experiences with using the LSMUL.  

Procurement support and review (Chapter 4)

29. Agencies determine their own procurement practices, consistent with  the CPRs, through Chief Executive’s Instructions (CEIs) and, if appropriate,  supporting operational guidelines. Agency central procurement units (CPUs)  are  internal  units  containing  procurement  specialists  used  by  agencies  to  advise staff and delegates in undertaking appropriate procurement processes.  Procurement monitoring and review is also an important activity for agencies 

                                                      

12 Limited tender allows a direct approach to one provider. However, under the CPRs, an agency must only conduct a procurement at or above the relevant procurement thresholds through limited tender if certain conditions are met. Refer to Appendix 3 of this report for the list of conditions.

13 Parcelling means that an agency can approach service providers from the LSMUL to submit detailed quotes for parcels of legal services that, individually, may be valued at or above the relevant procurement thresholds amount. The LSMUL guidance allows parcels to be established for any value through inviting a minimum of two service providers to apply.

14 New and small suppliers may be disadvantaged by overstatement of procurement needs or onerous selection processes when agencies form parcels. These suppliers can also be perceived as higher risk than larger suppliers who could for example provide a broader range of services.

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to determine the performance of their procurement activities and to inform  future procurement planning and management.  

30. Agencies generally had procurement policies, guidance and training in  place.  However,  the  use  of  MULs  was  often  not  well  understood  and  associated procurements were not well conducted. To better assist staff and  delegates to conduct procurements from MULs in accordance with the CPRs,  agency  CEIs  and  relevant  operational  guidelines,  there  would  be  benefit  in  agencies actively drawing on the expertise available in central procurement  units and reinforcing to staff and delegates their responsibilities in relation to  procurement.  

31. Assessing  procurement  activity  at  an  appropriate  time  during  the  lifecycle  of  a  MUL  enables  agencies  to  understand  the  extent  to  which  the  initial  business  rationale  for  establishing  the  MUL  is  being  met.  Such  assessment can also help shape the design of any future MUL or alternative  procurement  arrangement.  Both  BoM  and  Industry  would  benefit  from  reviewing the efficiency, effectiveness and value for money provided by their  MULs.  

32. There is merit in AGD continuing to review options going forward in  relation to the operation of the LSMUL that are consistent with the CPRs. A  more effective solution may need to be developed to better balance agencies’  business needs and the formal requirements of the CPRs. Opportunities for  improving the LSMUL identified during the course of the audit include: 

 allowing faster access to legal services;  

 enhancing  arrangements  to  share  information  including  on  service  providers skills, experience and performance;  

 strengthening  education  on  the  use  of  the  LSMUL  to  ensure  agency  procurements are consistent with the CPRs; and 

 building more transparency into parcelling arrangements.  

In addition, agencies need to take steps to become more informed purchasers  of  legal  services.  This  includes  making  better  use  of  information  already  available to them on the LSMUL, sharing agency experience and drawing on  expertise  within  CPUs  to  ensure  procurement  processes  are  efficient  and  adhere to the CPRs.  

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to determine the performance of their procurement activities and to inform  future procurement planning and management.  

30. Agencies generally had procurement policies, guidance and training in  place.  However,  the  use  of  MULs  was  often  not  well  understood  and  associated procurements were not well conducted. To better assist staff and  delegates to conduct procurements from MULs in accordance with the CPRs,  agency  CEIs  and  relevant  operational  guidelines,  there  would  be  benefit  in  agencies actively drawing on the expertise available in central procurement  units and reinforcing to staff and delegates their responsibilities in relation to  procurement.  

31. Assessing  procurement  activity  at  an  appropriate  time  during  the  lifecycle  of  a  MUL  enables  agencies  to  understand  the  extent  to  which  the  initial  business  rationale  for  establishing  the  MUL  is  being  met.  Such  assessment can also help shape the design of any future MUL or alternative  procurement  arrangement.  Both  BoM  and  Industry  would  benefit  from  reviewing the efficiency, effectiveness and value for money provided by their  MULs.  

32. There is merit in AGD continuing to review options going forward in  relation to the operation of the LSMUL that are consistent with the CPRs. A  more effective solution may need to be developed to better balance agencies’  business needs and the formal requirements of the CPRs. Opportunities for  improving the LSMUL identified during the course of the audit include: 

 allowing faster access to legal services;  

 enhancing  arrangements  to  share  information  including  on  service  providers skills, experience and performance;  

 strengthening  education  on  the  use  of  the  LSMUL  to  ensure  agency  procurements are consistent with the CPRs; and 

 building more transparency into parcelling arrangements.  

In addition, agencies need to take steps to become more informed purchasers  of  legal  services.  This  includes  making  better  use  of  information  already  available to them on the LSMUL, sharing agency experience and drawing on  expertise  within  CPUs  to  ensure  procurement  processes  are  efficient  and  adhere to the CPRs.  

Summary

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Summary of agencies’ responses 33. The  audited  agencies’  summary  responses  to  the  audit  report  are  provided below. Appendix 1 contains the agencies’ full response to the audit  report.  

Attorney‐General’s Department  

AGD welcomes the ANAO’s report. AGD acknowledges that agency practices  in  using  the  LSMUL  could  be  improved  and  that  AGD  can  play  a  greater  leadership role across government in this regard. AGD is of the strong view  that  legal  services  procurement  from  the  LSMUL  need  not  be  onerous  or  overly administratively burdensome. Agencies should adopt a procurement  process that is commensurate with the scale of the procurement, recognising  the  nature  of  legal  services.  In  particular,  informed  purchasing  is  vital  to  efficient and effective legal services procurement. 

Bureau of Meteorology  

The  Bureau  of  Meteorology  welcomes  this  report  and  found  the  process  undertaken  by  the  ANAO  valuable.  The  Bureau  agrees  with  the  recommendations of the report and is taking action to implement them. As  noted  in  the  report,  the  Bureau  is  currently  updating  its  procurement  processes and the ANAO’s findings fully support the current investment being  made  in  improvements,  including  new  gazettal  processes  and  the  establishment and use of multi‐use lists. 

Department of Industry   

The Department of Industry acknowledges the findings of the ANAO audit on  the  Establishment  and  Use  of  Multi‐Use  Lists  and  supports  the  recommendations  proposed  in  the  report.  The  Department  found  the  audit  process to be a valuable exercise and appreciates the positive feedback on the  Department’s procurement policy and guidance material. 

Australian Crime Commission  

The Australian Crime Commission (ACC) agrees with the findings of the audit  and  will  undertake  the  appropriate  action  to  implement  the  relevant  recommendations. 

Department of Defence 

The  Department  of  Defence  agrees  with  the  ANAO  report  and  its  recommendations  that  agencies  are  to  provide  efficient  and  effective  procurement and the achievement of value for money. The establishment of  the Legal Services Multi‐Use List has enabled Defence to use and meet a wide 

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range of external services providers, including small to medium enterprises  that would not have had an opportunity to bid successfully for services under  a panel or parcel arrangement.  

Defence  agrees  it  is  important  to  have  a  greater  accountability  and  transparency in documenting our procurements, while being able to maintain  a level of flexibility in procuring legal services given the nature of legal work  required by an agency and the need to ensure competitiveness while achieving  value for money for the Commonwealth.  

Department of Human Services 

The Department of Human Services (the Department) welcomes the findings  of  the  audit  report  and  considers  that  the  implementation  of  its  recommendations  will  further  enhance  the  use  of  multi‐use  lists  by  the  Department. 

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range of external services providers, including small to medium enterprises  that would not have had an opportunity to bid successfully for services under  a panel or parcel arrangement.  

Defence  agrees  it  is  important  to  have  a  greater  accountability  and  transparency in documenting our procurements, while being able to maintain  a level of flexibility in procuring legal services given the nature of legal work  required by an agency and the need to ensure competitiveness while achieving  value for money for the Commonwealth.  

Department of Human Services 

The Department of Human Services (the Department) welcomes the findings  of  the  audit  report  and  considers  that  the  implementation  of  its  recommendations  will  further  enhance  the  use  of  multi‐use  lists  by  the  Department. 

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Recommendations

The recommendations are based on findings from fieldwork at the audited agencies. The  recommendations are likely to be relevant to other Australian Government agencies.  Therefore, all Australian Government agencies are encouraged to assess the benefits of  implementing these recommendations in light of their own circumstances, including  the extent to which each recommendation, or part thereof, is addressed by practices  already in place. 

Recommendation No.1

Paragraph 2.37

To  provide  for  efficient  and  effective  procurement  processes and the achievement of value for money the  ANAO recommends agencies:  

(a) clearly define objectives in order to determine the  most appropriate procurement method; and 

(b) where  a  multi‐use  list  is  chosen,  strengthen  processes to promote competition and equitable  treatment of suppliers. 

Response from relevant agencies: Agreed. 

Recommendation No.2

Paragraph 3.34

To provide for greater accountability and transparency 

when  using  a  multi‐use  list,  the  ANAO  recommends 

agencies concisely document the basis for short listing 

potential  suppliers  and  the  basis  for  selecting  a 

particular supplier to evidence value for money.  

Response from relevant agencies: Agreed. 

 

 

   

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Audit Findings

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1. Introduction

This chapter introduces the legislative and policy framework applicable to government  procurement, and the purpose of multi‐use lists to support procurement. The chapter  also outlines the audit approach. 

Background 1.1 Effective procurement of goods and services underpins the delivery of  programs  by  Australian  Government  agencies.  In  2012-13,  Australian  Government agencies published some 67 000 contracts for goods and services  valued at in excess of $39.2 billion.15 Given the large number of procurements  undertaken and the centrality of this activity to the operation of government  and  program  delivery,  agencies’  procurement  practices  are  expected  to  be  efficient,  effective,  and  commensurate  with  the  scale,  scope  and  risk  of  the  procurement. Where an agency needs to make regular purchases of goods or  services, multi‐use lists (MULs) can assist to streamline procurement practice. 

Legal and policy framework for government procurement 1.2 Chief Executives of departments and agencies subject to the Financial  Management and Accountability Act 1997 (FMA Act) must promote the proper  use of Commonwealth resources.16 To help achieve this, under the Financial  Management  and  Accountability  Regulations  1997  (FMA Regulations),  the  Finance  Minister  issues  the  Commonwealth  Procurement  Rules  (CPRs)  for  officials to follow when performing duties in relation to procurement.17 The  CPRs  also  apply  to  certain  entities  established  under  the  Commonwealth  Authorities and Companies Act, 1997 (CAC Act). From 1 July 2014, the FMA and  CAC  Acts  will  be  replaced  by  the  Public  Governance,  Performance  and  Accountability Act 2013 (PGPA Act) and the CPRs will form part of the rules to  be issued pursuant to the PGPA Act.  

                                                      

15 Department of Finance, Statistics on Australian Government Procurement Contracts 2012-2013 [Internet], Finance, available from [accessed June 2014]. 16 Proper use of Commonwealth resources means efficient, effective, economical and ethical use that is

not inconsistent with the policies of the Commonwealth. FMA Act, section 44(3). 17 FMA Regulation 7 requires officials to act in accordance with the CPRs. The CPRs may also apply; following a direction by the Minister for Finance, to Commonwealth entities subject to the CAC Act listed in Schedule 1 of the Commonwealth Authorities and Companies Regulations 1997 as being subject to

section 47A of the CAC Act. The audit did not include an examination of entities subject to the CAC Act.

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1.3 The CPRs underpin Australia’s international obligations in accordance  with free trade agreements, and promote the use of sound and transparent  procurement practices that seek to achieve value for money18 and encourage  competition  in  government  procurement.  In  undertaking  procurement,  agencies are required to adhere to the CPRs which describe three methods that  agencies can use when conducting procurements. These are: 

 Open tender  

 open tender involves publishing an open approach to market  and inviting submissions; 

 Limited tender  

 limited  tender  involves  an  agency  approaching  one  or  more  potential  suppliers  to  make  submissions,  where  the  process  does not meet the rules for open tender or prequalified; and 

 Prequalified tender  

 involves publishing an approach to market inviting submissions  from all potential suppliers on:  

a. a shortlist of potential suppliers that responded to an initial  open approach to market on AusTender; 

b. a  list  of  potential  suppliers  selected  from  a  multi‐use  list  established through an open approach to market; or 

c. a  list  of  all  potential  suppliers  that  have  been  granted  a  specific licence or comply with a legal requirement, where the  licence or compliance with the legal requirement is essential to  the conduct of the procurement.19 

1.4 The  CPRs  include  mandatory  requirements  which  agencies  must  follow. The extent to which all rules of the CPRs apply depends on the value of  the procurement and is set out in the two divisions of the CPRs:  

                                                      

18 Determining value for money involves a range of considerations including: fitness for purpose; the performance history of each prospective supplier; the relative risk of each proposal; the flexibility to adapt to possible change over the lifecycle of the goods or service; financial considerations; and the evaluation of contract options. Finance, Commonwealth Procurement Rules, 2012, section 4.5. 19 ibid., sections 9.8-9.12.

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1.3 The CPRs underpin Australia’s international obligations in accordance  with free trade agreements, and promote the use of sound and transparent  procurement practices that seek to achieve value for money18 and encourage  competition  in  government  procurement.  In  undertaking  procurement,  agencies are required to adhere to the CPRs which describe three methods that  agencies can use when conducting procurements. These are: 

 Open tender  

 open tender involves publishing an open approach to market  and inviting submissions; 

 Limited tender  

 limited  tender  involves  an  agency  approaching  one  or  more  potential  suppliers  to  make  submissions,  where  the  process  does not meet the rules for open tender or prequalified; and 

 Prequalified tender  

 involves publishing an approach to market inviting submissions  from all potential suppliers on:  

a. a shortlist of potential suppliers that responded to an initial  open approach to market on AusTender; 

b. a  list  of  potential  suppliers  selected  from  a  multi‐use  list  established through an open approach to market; or 

c. a  list  of  all  potential  suppliers  that  have  been  granted  a  specific licence or comply with a legal requirement, where the  licence or compliance with the legal requirement is essential to  the conduct of the procurement.19 

1.4 The  CPRs  include  mandatory  requirements  which  agencies  must  follow. The extent to which all rules of the CPRs apply depends on the value of  the procurement and is set out in the two divisions of the CPRs:  

                                                      

18 Determining value for money involves a range of considerations including: fitness for purpose; the performance history of each prospective supplier; the relative risk of each proposal; the flexibility to adapt to possible change over the lifecycle of the goods or service; financial considerations; and the evaluation of contract options. Finance, Commonwealth Procurement Rules, 2012, section 4.5.

19 ibid., sections 9.8-9.12.

Introduction

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 Division  1  sets  out  rules  applying  to  all  procurements  regardless  of  value.  Officials  must  comply  with  the  rules  of  Division  1  when  conducting procurements; and 

 Division  2  sets  out  additional  rules  that  apply  to  all  procurements  valued at or above the relevant procurement thresholds.  

1.5 The  procurement  thresholds  (including  GST)  for  application  of  Division 2 are: 

 for  FMA  Act  agencies,  other  than  for  procurements  of  construction  services, the procurement threshold is $80 000; 

 for  relevant  CAC  Act  bodies,  other  than  for  procurements  of  construction services, the procurement threshold is $400 000; or 

 for  procurements  of  construction  services  by  FMA  Act  agencies  and  relevant CAC Act bodies, the procurement threshold is $7.5 million.20 

1.6 In  addition  to  the  mandatory  requirements,  the  CPRs  also  contain  desirable  practice  elements  which  agencies  are  encouraged  to  adopt.  These  include  providing  guidance  on  what  agencies  should  consider  when  determining whether a procurement will deliver the best value for money and  the  type  of  documentation  agencies  could  maintain  to  support  each  procurement.  

1.7 In relation to procurement, Chief Executive’s Instructions (CEIs)21 and  operational guidance are normally issued by agencies to assist delegates and  staff  involved  in  procurement  processes.  These  agency  materials  generally  build  on  the  legislative  and  policy  framework  outlined  in  the  CPRs  by  focussing  on  implementing  government  procurement  requirements  and  having  reference  to  the  agency’s  particular  procurement  needs  and  any  complementary operational guidance. CEIs should be accessible to agency staff  and provide clear instructions on the key requirements that apply to resource  management within the particular agency. Generally it would be expected that  staff responsible for procurement would be provided with appropriate training  to enable them to gain an understanding of the requirements of the CPRs and  the agency’s CEIs.                                                         

20 Finance, Commonwealth Procurement Rules, 2012, section 3.3. 21 The Chief Executive of an agency is authorised to give Chief Executive’s Instructions to officials in that agency on any matter necessary or convenient for carrying out or giving effect to the FMA Act or the FMA Regulations.

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Procurement documentation

1.8 The  Australian  Government  emphasises  the  importance  of  being  accountable  and  transparent  in  its  procurement  activities.  Accountability  means that officials are responsible for the actions and decisions that they take  in relation to procurement and for the resulting outcomes. Under the CPRs, it  is  mandatory  for  agencies  to  maintain  appropriate  documentation  for  each  procurement they undertake. While the specific content of such documentation  is not prescribed, the CPRs indicate that desirably such documentation would  include:  providing  concise  information  on  the  requirement  for  the  procurement;  the  process  that  was  followed;  how  value  for  money  was  considered  and  achieved;  and  relevant  decisions,  including  under  the  FMA  Regulations, and the basis of those decisions.22 The appropriate mix and level  of documentation depends on the nature and risk profile of procurement being  undertaken. 

Multi-use lists (MULs)

1.9 The  focus  of  this  audit  is  on  agencies’  establishment  and  use  of  multi‐use  lists  (MULs),  which  is  one  method  of  prequalifying  suppliers  for  subsequent procurement processes. A MUL is a list of prequalified suppliers  who have applied for inclusion on the list and satisfied a set of the conditions  for participation. The process of establishing a MUL is not a procurement itself  and  it  does  not  involve  the  assessment  of  value  for  money;  rather  it  is  an  activity  that  pre‐qualifies  suppliers  who  may  wish  to  participate  in  future  procurement processes and as such represents a support process.  

1.10 The  main  purpose  of  establishing  a  MUL  is  to  allow  for  future  prequalified tendering for higher value procurements (referred to as Division 2  procurements under the CPRs). A MUL can provide agencies with an effective  means to streamline and simplify procurement processes where they regularly  procure goods and services with common elements.23 A MUL is different from  a  panel,  which  is  another  common  arrangement  agencies  use  for  the  procurement  of  goods  or  services  they  regularly  acquire.  The  primary  differences are: 

                                                      

22 Finance, Commonwealth Procurement Rules, 2012, p. 20, sections 7.2-7.4. 23 Finance, Buying for the Australian Government, Procurement Practice, Panel Arrangements and Multi-Use Lists, paragraph 4 [internet], available from

[accessed June 2014].

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Procurement documentation

1.8 The  Australian  Government  emphasises  the  importance  of  being  accountable  and  transparent  in  its  procurement  activities.  Accountability  means that officials are responsible for the actions and decisions that they take  in relation to procurement and for the resulting outcomes. Under the CPRs, it  is  mandatory  for  agencies  to  maintain  appropriate  documentation  for  each  procurement they undertake. While the specific content of such documentation  is not prescribed, the CPRs indicate that desirably such documentation would  include:  providing  concise  information  on  the  requirement  for  the  procurement;  the  process  that  was  followed;  how  value  for  money  was  considered  and  achieved;  and  relevant  decisions,  including  under  the  FMA  Regulations, and the basis of those decisions.22 The appropriate mix and level  of documentation depends on the nature and risk profile of procurement being  undertaken. 

Multi-use lists (MULs)

1.9 The  focus  of  this  audit  is  on  agencies’  establishment  and  use  of  multi‐use  lists  (MULs),  which  is  one  method  of  prequalifying  suppliers  for  subsequent procurement processes. A MUL is a list of prequalified suppliers  who have applied for inclusion on the list and satisfied a set of the conditions  for participation. The process of establishing a MUL is not a procurement itself  and  it  does  not  involve  the  assessment  of  value  for  money;  rather  it  is  an  activity  that  pre‐qualifies  suppliers  who  may  wish  to  participate  in  future  procurement processes and as such represents a support process.  

1.10 The  main  purpose  of  establishing  a  MUL  is  to  allow  for  future  prequalified tendering for higher value procurements (referred to as Division 2  procurements under the CPRs). A MUL can provide agencies with an effective  means to streamline and simplify procurement processes where they regularly  procure goods and services with common elements.23 A MUL is different from  a  panel,  which  is  another  common  arrangement  agencies  use  for  the  procurement  of  goods  or  services  they  regularly  acquire.  The  primary  differences are: 

                                                      

22 Finance, Commonwealth Procurement Rules, 2012, p. 20, sections 7.2-7.4. 23 Finance, Buying for the Australian Government, Procurement Practice, Panel Arrangements and Multi-Use Lists, paragraph 4 [internet], available from

[accessed June 2014].

Introduction

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 MULs  allow  agencies  to  prequalify  suppliers  for  later  use  in  a  procurement.  They  provide  flexibility  and  enable  agencies  to  easily  identify  suppliers  that  meet  certain  conditions  or  that  have  specific  expertise. All suppliers who meet the conditions must be included on  the list. Inclusion of a supplier on a MUL does not involve a value for  money  assessment  of  suppliers  and  does  not  usually  create  a  contractual  relationship.  Suppliers  can  be  added  to  a  MUL  enabling  agencies to include new market entrants over time. 

 Procurement panels are established following a competitive value for  money assessment process and involve a contractual relationship for a  set period of time. Once established, panels generally provide ready  access to goods and services, particularly for high value procurements  as the additional rules in the CPRs for such procurement do not apply.  Generally panels do not allow for new suppliers to be added to the  panel once established.24 

1.11 Key differences between a MUL and a panel are outlined further in  Appendix 2. 

1.12 Australian  Government  agencies use  MULs  to  assist  in procurement  activities to a varying extent. For example, as at October 2013, the Bureau of  Meteorology  had  11  MULs  covering  a  broad  variety  of  goods  and  services  ranging from printing, shipping, and freight to more technical services such as  support for a tsunami warning system. The Department of Industry had four  MULs. These were for the recruitment of temporary personnel, outreach tour  transport,  exhibition  transportation  services  and  interactive  exhibition  development services to support the National Science and Technology Centre  (Questacon).  

1.13 At the whole‐of‐government level, the Attorney‐General’s Department  Legal Services Multi‐Use List (LSMUL) was introduced in June 2012 as part of  reforms in the provision of legal services to Australian Government agencies.  The  reforms  aimed  to  achieve  better  value  for  money  when  purchasing 

                                                      

24 Depending on the value of the procurement an agency would generally approach either one or a number of suppliers on the panel and assess which supplier(s) represent value for money.

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external  legal  services.25  In  particular,  cost  efficiencies  were  expected  to  be  derived from increasing market participation by legal service providers and  agencies were expected to become more informed purchasers26 of legal services  through increased sharing of information about provider performance across  Commonwealth  agencies.  The  reforms  also  sought  to  reduce  red  tape  for  agencies and legal service providers through developing streamlined processes  and more uniform conditions. The Legal Services Directions 200527 require all  Australian Government agencies subject to the FMA Act  and certain bodies  subject  to  the  CAC  Act  to  use  the  LSMUL  when  purchasing  external  legal  services.28  

Previous audits 1.14 The ANAO has conducted four audits since 2007 that have focussed on  aspects of procurement across Australian Government agencies.29 Each of these  audits has identified some shortcomings with respect to agencies’ application  of the Commonwealth Procurement Guidelines30 for a significant proportion of  procurements  examined.  In  particular,  agencies  needed  to  employ  more 

                                                      

25 Two previous reviews into the procurement of legal services had identified potential cost savings. The Blunn Krieger Report of the Review of Commonwealth Legal Services Procurement, 2009 concluded the system of agencies individually establishing panels was inefficient and significant savings could occur by increasing agency capacity to make informed decisions around legal services procurement. A later review, Lateral Economics, Learning from experience: Purchasing legal services, 2011, known as the Gruen report, identified the opportunity to increase market participation and reduce duplication in tendering costs for service providers and the Commonwealth.

26 An informed purchaser is described as an individual (or group), with good knowledge of agency ‘business’ and the law and legal practice, who is to coordinate legal service arrangements; link strategic decisions to their daily implementation; and ensure the agency obtains value-for-money legal services; and has knowledge of procurement policies, guidelines and processes. ANAO Better Practice Guide— Legal Services Arrangements in Australian Government Agencies, August 2006, Canberra, p. 20.

27 The Legal Services Directions 2005 (the Directions) are a set of binding rules for the performance of Commonwealth legal work. The Directions set out requirements for sound practice in the provision of legal services to the Australian Government. [Internet] [accessed June 2014].

28 AGD’s guidance states limited exceptions to the requirement to use the LSMUL include those agencies that are: Government Business Enterprises; currently exempt from complying with Appendix F of the Directions under paragraph 13.1(a) of the Directions; or Commonwealth companies that, in accordance paragraph 12.3(f) of the Directions, are not required to comply with Appendix F of the Directions. AGD Legal Services Multi-Use List Guidance Material, May 2012, p. 4.

29 ANAO Audit Report: No.31 2011-12 Establishment and Use of Procurement Panels; No.11 2010-11 Direct Source Procurement; No.14 2009-10 Agencies’ Contract Management; and No.21 2006-07 Implementation of the revised Commonwealth Procurement Guidelines.

30 At the time these audits were undertaken, agencies were subject to the Commonwealth Procurement Guidelines (CPGs). The CPGs were replaced by the CPRs in July 2012 although requirements relating to MULS remained similar.

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external  legal  services.25  In  particular,  cost  efficiencies  were  expected  to  be  derived from increasing market participation by legal service providers and  agencies were expected to become more informed purchasers26 of legal services  through increased sharing of information about provider performance across  Commonwealth  agencies.  The  reforms  also  sought  to  reduce  red  tape  for  agencies and legal service providers through developing streamlined processes  and more uniform conditions. The Legal Services Directions 200527 require all  Australian Government agencies subject to the FMA Act  and certain bodies  subject  to  the  CAC  Act  to  use  the  LSMUL  when  purchasing  external  legal  services.28  

Previous audits 1.14 The ANAO has conducted four audits since 2007 that have focussed on  aspects of procurement across Australian Government agencies.29 Each of these  audits has identified some shortcomings with respect to agencies’ application  of the Commonwealth Procurement Guidelines30 for a significant proportion of  procurements  examined.  In  particular,  agencies  needed  to  employ  more 

                                                      

25 Two previous reviews into the procurement of legal services had identified potential cost savings. The Blunn Krieger Report of the Review of Commonwealth Legal Services Procurement, 2009 concluded the system of agencies individually establishing panels was inefficient and significant savings could occur by increasing agency capacity to make informed decisions around legal services procurement. A later review, Lateral Economics, Learning from experience: Purchasing legal services, 2011, known as the Gruen report, identified the opportunity to increase market participation and reduce duplication in tendering costs for service providers and the Commonwealth.

26 An informed purchaser is described as an individual (or group), with good knowledge of agency ‘business’ and the law and legal practice, who is to coordinate legal service arrangements; link strategic decisions to their daily implementation; and ensure the agency obtains value-for-money legal services; and has knowledge of procurement policies, guidelines and processes. ANAO Better Practice Guide— Legal Services Arrangements in Australian Government Agencies, August 2006, Canberra, p. 20.

27 The Legal Services Directions 2005 (the Directions) are a set of binding rules for the performance of Commonwealth legal work. The Directions set out requirements for sound practice in the provision of legal services to the Australian Government. [Internet] [accessed June 2014].

28 AGD’s guidance states limited exceptions to the requirement to use the LSMUL include those agencies that are: Government Business Enterprises; currently exempt from complying with Appendix F of the Directions under paragraph 13.1(a) of the Directions; or Commonwealth companies that, in accordance paragraph 12.3(f) of the Directions, are not required to comply with Appendix F of the Directions. AGD Legal Services Multi-Use List Guidance Material, May 2012, p. 4.

29 ANAO Audit Report: No.31 2011-12 Establishment and Use of Procurement Panels; No.11 2010-11 Direct Source Procurement; No.14 2009-10 Agencies’ Contract Management; and No.21 2006-07 Implementation of the revised Commonwealth Procurement Guidelines.

30 At the time these audits were undertaken, agencies were subject to the Commonwealth Procurement Guidelines (CPGs). The CPGs were replaced by the CPRs in July 2012 although requirements relating to MULS remained similar.

Introduction

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competitive  procurement  processes,  better  document  value  for  money  assessments and obtain appropriate approvals.  

Audit approach

Audit objective, criteria and scope

1.15 The objective of the audit was to assess the extent to which agencies’  have  arrangements  to  establish  and  use  multi‐use  lists  (MULs)  to  support  value for money, efficiency and effectiveness in procurement.  

1.16 To conclude against this objective  the ANAO  adopted the following  broad criteria: 

 agencies adhered to the requirements of the Commonwealth Procurement  Rules and applied sound practices when establishing and using MULs  to support procurement activities; and 

 agencies’  procurement  frameworks  supported  procurement  from  MULs; and effective procurement monitoring and review arrangements  had  been  established  by  agencies  to  inform  consideration  of  the  effectiveness of their establishment and use of MULs. 

1.17 The  scope  of  the  audit  included  the  examination  of  policies  and  practices  supporting  the  establishment  and  use  of  16  MULs  across  three  agencies. The three agencies included in this part of the audit were the:  

 Bureau of Meteorology (BoM);  

 Department of Industry (Industry); and  

 Attorney‐General’s Department (AGD).  

1.18 The  ANAO  examined  50  procurements  over  $80 00031  recorded  on  AusTender as having been conducted by prequalified tender. The audit sample  period covered contracts that had been entered into between 1 July 2012 and  30 September 2013.  

                                                      

31 The main purpose of establishing a MUL is to allow for future prequalified tendering for higher value procurements (referred to as Division 2 procurements under the Commonwealth Procurement Rules). Procurements under $80 000 were therefore excluded from the audit.

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1.19 The ANAO also examined the approaches adopted by three additional  agencies  to  procuring  legal  services  using  the  legal  services  multi‐use‐list  (LSMUL) established by AGD. These three additional agencies were the: 

 Australian Crime Commission (ACC);  

 Department of Defence (Defence); and  

 Department of Human Services (DHS). 

1.20 To  obtain  feedback  on  the  operation  of  the  LSMUL,  ANAO  also  consulted  representatives  of  legal  service  providers.  Where  appropriate,  feedback from the providers consulted is included in the report.  

1.21 The  audit  has  been  conducted  in  accordance  with  the  ANAO’s  Auditing Standards at a cost to the ANAO of $634 645. 

Report structure 1.22 The remainder of this report is structured as follows: 

Chapter Overview

2. Establishment of Multi-Use Lists This chapter examines agencies’ establishment of multi-use lists to meet their procurement objectives, and whether the requirements of

the Commonwealth Procurement Rules have been met.

3. Procurement from Multi-Use Lists This chapter examines agencies’ use of multi-use lists to support actual procurement and whether the requirements of the

Commonwealth Procurement Rules have been met.

4. Procurement Support and Review This chapter examines agencies’ arrangements to support their procurement activity. These include procurement policy and

guidance, the role of central procurement units, training and monitoring and review arrangements.

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1.19 The ANAO also examined the approaches adopted by three additional  agencies  to  procuring  legal  services  using  the  legal  services  multi‐use‐list  (LSMUL) established by AGD. These three additional agencies were the: 

 Australian Crime Commission (ACC);  

 Department of Defence (Defence); and  

 Department of Human Services (DHS). 

1.20 To  obtain  feedback  on  the  operation  of  the  LSMUL,  ANAO  also  consulted  representatives  of  legal  service  providers.  Where  appropriate,  feedback from the providers consulted is included in the report.  

1.21 The  audit  has  been  conducted  in  accordance  with  the  ANAO’s  Auditing Standards at a cost to the ANAO of $634 645. 

Report structure 1.22 The remainder of this report is structured as follows: 

Chapter Overview

2. Establishment of Multi-Use Lists This chapter examines agencies’ establishment of multi-use lists to meet their procurement objectives, and whether the requirements of

the Commonwealth Procurement Rules have been met.

3. Procurement from Multi-Use Lists This chapter examines agencies’ use of multi-use lists to support actual procurement and whether the requirements of the

Commonwealth Procurement Rules have been met.

4. Procurement Support and Review This chapter examines agencies’ arrangements to support their procurement activity. These include procurement policy and

guidance, the role of central procurement units, training and monitoring and review arrangements.

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2. Establishment of Multi-Use Lists

This  chapter  examines  agencies’  establishment  of  multi‐use  lists  to  meet  their  procurement  objectives,  and  whether  the  requirements  of  the  Commonwealth  Procurement Rules have been met. 

Introduction 2.1 Procurement  is  the  acquisition  of  goods  and  services  by  Australian  Government  entities  to  support  the  achievement  of  Government  policy  objectives,  the  delivery  of  programs  and  the  operational  requirements  of  entities. Applying the principles of value for money, encouraging competition,  efficient,  effective  and  ethical  use  of  resources,  and  accountability  and  transparency  in  decision‐making  is  a  requirement  of  the  Commonwealth  Procurement  Rules  (CPRs).  Effective  procurement  is  supported  by  agencies  clearly  defining  the  objectives  of  any  procurement  and  taking  a  considered  approach to determining the procurement processes best suited to achieving  their objectives.  

2.2 The ANAO examined four key areas supporting the establishment of  MULs: agency planning; the information provided to potential suppliers when  inviting applications for the MUL (referred to as request documentation in the  CPRs)32; including the specified conditions for participation33; the approach to  market  process;  and  evidence  of  agency  assessment  and  notifications  to  suppliers.  

2.3 The ANAO reviewed all of the MULs established by BoM, Industry and  AGD.  Each  of  these  MULs  was  established  prior  to  the  introduction  of  the 

                                                      

32 Request documentation is documentation provided to potential suppliers to enable them to understand and assess the requirements of the procuring agency and to prepare appropriate and responsive submissions. The CPRs include a number of mandatory requirements for request documentation for procurements at or above the procurement thresholds. Such documentation must include a complete description of: a) the procurement; b) any conditions for participation; c) any minimum content and format requirements; d) evaluation criteria to be considered in assessing submissions; and e) any other terms or conditions relevant to the evaluation of submissions. Finance, Commonwealth Procurement Rules, 2012, sections 10.6-10.12.

33 Conditions of participation are minimum conditions that potential suppliers must demonstrate compliance with, in order to participate in a procurement process or for submissions to be considered. ibid., Appendix C: Definitions, p. 39.

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CPRs.34 A summary of the ANAO’s assessment of performance against each of  these key areas is provided in Table 2.1. Detailed discussion for each of the  results is provided in the following sections.  

Table 2.1: Agency results relating to the establishment of their multi-use lists BoM Industry AGD

Planning      

Request documentation including conditions of participation      

Approach to market

  (a)   

Evidence of assessment and notifications to suppliers      

Source: ANAO analysis.

Legend:  not adequate;  scope to improve;  satisfactory

Note (a): Refer paragraph 2.28 for further details.

Planning

Key issues in selecting a procurement process

2.4 When a business requirement arises, agencies need to consider whether  a procurement will deliver best value for money having regard to such issues  as  non‐procurement  alternatives,  pre‐existing  arrangements,  resourcing  and  business needs. If an agency determines that procurement represents the best  option, the procurement principles and the estimated value of the procurement  should inform the selection of an appropriate procurement method.  

2.5 As  discussed  in  paragraphs  1.4  and  1.5,  the  CPRs  establish  value  thresholds  above  which  additional  rules  apply.  Typical  considerations  for  procurements over the relevant thresholds which were the subject of this audit  are outlined in Figure 2.1. 

                                                      

34 At the time these MULs were established, agencies were subject to the Commonwealth Procurement Guidelines (CPGs). The ANAO examined 11 MULS in BoM, four in Industry and one in AGD. The CPGs were replaced by the CPRs in 2012 although in relation to the establishment of MULs the requirements remained similar.

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CPRs.34 A summary of the ANAO’s assessment of performance against each of  these key areas is provided in Table 2.1. Detailed discussion for each of the  results is provided in the following sections.  

Table 2.1: Agency results relating to the establishment of their multi-use lists BoM Industry AGD

Planning      

Request documentation including conditions of participation      

Approach to market

  (a)   

Evidence of assessment and notifications to suppliers      

Source: ANAO analysis.

Legend:  not adequate;  scope to improve;  satisfactory

Note (a): Refer paragraph 2.28 for further details.

Planning

Key issues in selecting a procurement process

2.4 When a business requirement arises, agencies need to consider whether  a procurement will deliver best value for money having regard to such issues  as  non‐procurement  alternatives,  pre‐existing  arrangements,  resourcing  and 

business needs. If an agency determines that procurement represents the best  option, the procurement principles and the estimated value of the procurement  should inform the selection of an appropriate procurement method.  

2.5 As  discussed  in  paragraphs  1.4  and  1.5,  the  CPRs  establish  value  thresholds  above  which  additional  rules  apply.  Typical  considerations  for  procurements over the relevant thresholds which were the subject of this audit  are outlined in Figure 2.1. 

                                                      

34 At the time these MULs were established, agencies were subject to the Commonwealth Procurement Guidelines (CPGs). The ANAO examined 11 MULS in BoM, four in Industry and one in AGD. The CPGs were replaced by the CPRs in 2012 although in relation to the establishment of MULs the requirements remained similar.

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Figure 2.1: Typical considerations for selecting procurement method

 

Source: ANAO based on requirements of the CPRs.

Note (a): The requirements for limited tender are shown in Appendix 3.

Note (b): See paragraph 2.11 for discussion of minimum timeframes.

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2.6 When  deciding  on  a  procurement  approach  there  are  a  number  of  factors  to  be  considered,  and  different  procurement  arrangements  can  be  established depending on the need. Although establishing a MUL can be quick  and  relatively  inexpensive  for  an  Australian  Government  agency,  each  subsequent use of a MUL takes time. The reason for this is that the process of  establishing  a  MUL  is  not  a  procurement  in  itself  and  does  not  involve  a  comparative assessment of suppliers to determine value for money. The value  for money assessment is undertaken later, at the time that the goods and/or  services are procured from the MUL. The Department of Finance (Finance) also  advise  that  where  future  procurement  of  goods  or  services  is  likely  to  be  urgent a panel may be more suitable.35 Table 2.2 provides some key differences  between the requirements to conduct an open tender as compared to creating a  MUL.  

Table 2.2: Differences in the process and assessment for open tender and inclusion on a multi-use list

Open tender Creation of a MUL

Open approach to market(a) Yes Yes

Selected through a competitive process Yes No(b)

Detailed selection criteria Yes Typically no

Value for money assessment conducted Yes No

Source: ANAO based on the requirements of the CPRs.

Note (a): An open approach to market is any notice inviting all potential suppliers to participate in a procurement which may include a request for tender, request for quote, request for expression of interest, request for application for inclusion on a multi-use list, request for information and request for proposal.

Note (b) Inclusion on the MUL can be based on acceptance of a potential supplier’s claims without further verification or after a more detailed verification process. The rigour of the prequalification process will depend on each agency. These issues are discussed further in this chapter.

2.7 The  main  purpose  of  establishing  a  MUL  is  to  allow  for  future  prequalified tendering in accordance with the CPRs for procurements at or  above  the  relevant  procurement  thresholds.  Finance  guidance  notes  that  a  MUL would typically only be used by an agency where it:  

 frequently procures particular goods or services; 

                                                      

35 Members of the panel may then be used based on the contract or deed of standing offer that was established during the procurement activity. For further discussion on the differences between a MUL and a panel see Appendix 2.

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2.6 When  deciding  on  a  procurement  approach  there  are  a  number  of  factors  to  be  considered,  and  different  procurement  arrangements  can  be  established depending on the need. Although establishing a MUL can be quick  and  relatively  inexpensive  for  an  Australian  Government  agency,  each  subsequent use of a MUL takes time. The reason for this is that the process of  establishing  a  MUL  is  not  a  procurement  in  itself  and  does  not  involve  a  comparative assessment of suppliers to determine value for money. The value  for money assessment is undertaken later, at the time that the goods and/or  services are procured from the MUL. The Department of Finance (Finance) also  advise  that  where  future  procurement  of  goods  or  services  is  likely  to  be  urgent a panel may be more suitable.35 Table 2.2 provides some key differences  between the requirements to conduct an open tender as compared to creating a  MUL.  

Table 2.2: Differences in the process and assessment for open tender and inclusion on a multi-use list

Open tender Creation of a MUL

Open approach to market(a) Yes Yes

Selected through a competitive process Yes No

(b)

Detailed selection criteria Yes Typically no

Value for money assessment conducted Yes No

Source: ANAO based on the requirements of the CPRs.

Note (a): An open approach to market is any notice inviting all potential suppliers to participate in a procurement which may include a request for tender, request for quote, request for expression of interest, request for application for inclusion on a multi-use list, request for information and request for proposal.

Note (b) Inclusion on the MUL can be based on acceptance of a potential supplier’s claims without further verification or after a more detailed verification process. The rigour of the prequalification process will depend on each agency. These issues are discussed further in this chapter.

2.7 The  main  purpose  of  establishing  a  MUL  is  to  allow  for  future  prequalified tendering in accordance with the CPRs for procurements at or  above  the  relevant  procurement  thresholds.  Finance  guidance  notes  that  a  MUL would typically only be used by an agency where it:  

 frequently procures particular goods or services; 

                                                      

35 Members of the panel may then be used based on the contract or deed of standing offer that was established during the procurement activity. For further discussion on the differences between a MUL and a panel see Appendix 2.

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 requires  flexibility  in  its  approaches  to  the  market  (for  example,  frequency of purchases, or varying the amounts of goods or services);  or 

 requires  a  list  of  suppliers  that  meet  specific  conditions  for  participation, or that have specific expertise.36 

2.8 As  discussed  in  paragraph  1.10  a  panel  arrangement  is  another  common procurement arrangement used by agencies for frequently purchased  goods  or  services.  Panels  typically  are  more  expensive  for  an  Australian  Government agency and take longer to establish than MULs. However, once  established,  panels  are  generally  quicker  to  access  particularly  for  procurements over the thresholds set in the CPRs. The key differences between  a MUL and a panel are further explained in Appendix 2. 

2.9 The  establishment  and  management  of  a  MUL  can  be  resource  intensive and may not be the most effective and efficient procurement option  for an agency. However, the prequalification provided through the MUL can  assist  in  streamlining  subsequent  procurement  processes  particularly  where  acceptance  of  particular  terms  and  conditions  has  been  agreed  as  part  of  a  supplier’s application to join the MUL. To support effective procurement, the  appropriateness  of  a  MUL  should  be  carefully  considered  against  other  procurement options. 

Procurements under the procurement thresholds

2.10 For procurements under the CPR thresholds outlined in paragraph 1.5,  a  MUL  is  unlikely  to  be  the  most  efficient  and  effective  procurement  arrangement. This is because there is generally limited benefit in establishing a  MUL  when  agencies  can  directly  approach  any  potential  suppliers  to  undertake the procurement provided the delegate  has reasonable assurance  that value for money can be achieved. 37  

Procurements over the procurement thresholds

2.11 For  all  procurements  that  have  values  over  the  CPR  thresholds,  the  additional rules of Division 2 apply. These include requirements relating to: 

                                                      

36 Finance, Buying for the Australian Government, Procurement Practice, Panel Arrangements and Multi-Use Lists, paragraph 24 [Internet].

37 Agency practices are also influenced by any additional requirements in agencies’ Chief Executive Instructions and other agency guidance.

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request  documentation38;  conditions  for  participation;  and  minimum  time  limits,  including  a  minimum  of  25  days,  or  in  some  cases,  ten  days39  for  suppliers to respond to an approach to market or request for quotation.  

2.12 A MUL does not offer any time savings or reduce these minimum time  limits  and  conducting  a  prequalified  procurement  from  a  MUL  is,  in  some  respects, similar to conducting an open tender. The key difference is that with  an open tender, agencies must make the procurement opportunity available to  the open market. Under a MUL, Finance Guidance suggests only two or more  suppliers from the MUL need to be approached as an open approach to the  market  has  already  been  made  at  its  establishment.  In  either  case  agencies  must adhere to the required timeframes. Therefore, a MUL may not necessarily  facilitate  the  timely  procurement  of  good  and/or  services  required  at  short  notice.  The requirements  of  open  and  prequalified  tender for  procurements  above the procurement thresholds are highlighted in Table 2.3.  

Table 2.3: Requirements for open and prequalified tender for procurements above the procurement thresholds

Open tender Prequalified tender

from a MUL

How many suppliers must be approached Open to the entire market Finance guidance suggests at least two

from a MUL

CPR requirements for request documentation and for conditions for participation(a)

Identical Identical

CPR requirements for minimum time limits Identical Minimum 25 days unless

certain conditions allow minimum of 10 days

Identical Minimum 25 days unless certain conditions allow minimum of 10 days

Source: ANAO based on requirements of the CPRs.

Note (a): Refer to footnote 38 for details of requirements for request documentation.

                                                      

38 These include the need to include a complete description of: a) the procurement; b) any conditions for participation; c) any minimum content and format requirements; d) evaluation criteria to be considered in assessing submissions; and e) any other terms or conditions relevant to the evaluation of submissions.

39 Section 10.19 of the Commonwealth Procurement Rules, outlines various conditions which if met, provide for a period of not less than 10 days.

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request  documentation38;  conditions  for  participation;  and  minimum  time  limits,  including  a  minimum  of  25  days,  or  in  some  cases,  ten  days39  for  suppliers to respond to an approach to market or request for quotation.  

2.12 A MUL does not offer any time savings or reduce these minimum time  limits  and  conducting  a  prequalified  procurement  from  a  MUL  is,  in  some  respects, similar to conducting an open tender. The key difference is that with  an open tender, agencies must make the procurement opportunity available to  the open market. Under a MUL, Finance Guidance suggests only two or more  suppliers from the MUL need to be approached as an open approach to the  market  has  already  been  made  at  its  establishment.  In  either  case  agencies  must adhere to the required timeframes. Therefore, a MUL may not necessarily  facilitate  the  timely  procurement  of  good  and/or  services  required  at  short  notice.  The requirements  of  open  and  prequalified  tender for  procurements  above the procurement thresholds are highlighted in Table 2.3.  

Table 2.3: Requirements for open and prequalified tender for procurements above the procurement thresholds

Open tender Prequalified tender

from a MUL

How many suppliers must be approached Open to the entire market Finance guidance suggests at least two

from a MUL

CPR requirements for request documentation and for conditions for participation(a)

Identical Identical

CPR requirements for minimum time limits Identical Minimum 25 days unless

certain conditions allow minimum of 10 days

Identical Minimum 25 days unless certain conditions allow minimum of 10 days

Source: ANAO based on requirements of the CPRs.

Note (a): Refer to footnote 38 for details of requirements for request documentation.

                                                      

38 These include the need to include a complete description of: a) the procurement; b) any conditions for participation; c) any minimum content and format requirements; d) evaluation criteria to be considered in assessing submissions; and e) any other terms or conditions relevant to the evaluation of submissions.

39 Section 10.19 of the Commonwealth Procurement Rules, outlines various conditions which if met, provide for a period of not less than 10 days.

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2.13 In summary, when considering establishing a MUL, agencies need to  have clearly defined objectives. This allows agencies to consider whether the  procurement method they propose to use is appropriate or if an alternative  method better suits their needs.  

Agency decision making when establishing a MUL

BoM

2.14 BoM’s 11 current MULs were established between 2011 and 2013. In  establishing  the  MULs,  BoM  had  not  clearly  defined  their  procurement  objectives.  In  addition,  planning  documentation  had  generally  not  been  developed or maintained and with the exception of one of its MULs, there was  no evidence that BoM had considered the requirements of prequalified tender,  or  the  basis  for  establishing  a  MUL.  Documenting  such  considerations  facilitates  subsequent  assessment  of  whether  the  processes  adopted  have  allowed  an  agency  to  meet  its  procurement  objectives.  In  July 2013  BoM  piloted  the  release  of  new  planning  tools  for  staff  aimed  at  establishing  a  consistent process for the creation of MULs at BoM. This process was still in  progress as at May 2014.40 

Industry

2.15 Industry’s  four  MULs  were  established  between  2010  and  2012  and  were  for  services  it  frequently  procured.  Of  the  four  MULs  reviewed  at  Industry three had, to varying degrees, evidence of planning which included  consideration of the requirement, purpose and basis for the establishment of  the MUL. For one of these, documentation stated a MUL was preferred over a  panel arrangement as, among other things, it would be quicker and easier to  assess  potential  suppliers.  However,  as  noted  in  paragraph  2.6,  the  CPRs  require agencies to undertake a full tender process each time they procure at or  above the relevant procurement thresholds. Accordingly, a panel would have  been  more  appropriate  if  goods  or  services  were  required  quickly.  This  suggests the requirements of prequalified tender using a MUL were not fully  understood at the time the decision to establish a MUL was made.  

                                                      

40 BoM advised that it would use the results of this audit to inform the creation of new planning tools and therefore would not formally issue the revised tools until this audit was finalised.

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AGD

2.16 The planning undertaken to establish the legal services multi‐use list  (LSMUL) was extensive and included consideration of the outcomes of reviews  of  legal  services;  consultations  with  stakeholders;  potential  risks  with  the  approach;  and  consideration  of  alternative  procurement  options  such  as  a  panel. Some of the key aspects relating to the establishment of the LSMUL are  outlined below.  

The Legal Services MUL (LSMUL) was introduced in June 2012 to provide a more holistic and strategic approach to the provision of legal services, and to help contain Australian Government expenditure on external legal services. The development of the LSMUL was informed by two reviews(a), consultation with stakeholders and advice from the Department of Finance. The first review, the Blunn Krieger review, concluded the system of agencies individually approaching the market to establish panels was inefficient and significant savings could occur by increasing agency capacity to make informed decisions around legal services procurement. The second review, the Lateral Economics review (known as the Gruen review), identified the opportunity to increase market participation (as 89 per cent of legal fees were earned by 10 law firms in 2009-10) and reduce duplication in tendering costs for service providers and the Australian Government (at the time there were 72 separate legal panels each of which cost the Commonwealth around $120 000 to establish). The Legal Services Directions 2005(b) require all Australian Government agencies subject to the Financial Management and Accountability Act 1997 and certain entities subject to the Commonwealth Authorities and Companies Act 1997 to use the LSMUL when purchasing external legal services. The objectives of the LSMUL are to:

 provide a streamlined whole-of-government approach for engaging suitably qualified legal service providers across government;

 assist agencies become more informed purchasers of legal services;

 increase market participation for Australian Government legal work by reducing barriers to entry which in turn would encourage greater competition and sharper pricing(c) among suppliers; and

 provide flexibility to purchase from the MUL in a variety of ways while still achieving value for money.(d)

Note (a): Blunn Krieger Report of the Review of Commonwealth Legal Services Procurement, 2009, p. 10 and Lateral Economics, Learning from experience: Purchasing legal services, 2011, pp. vii, 24 and 81.

Note (b): The Legal Services Directions 2005 are a set of binding rules about the performance of Commonwealth legal work. The directions set out requirements for sound practice in the provision of legal services to the Australian Government.

Note (c): Reducing the number of legal services panels was expected to reduce tendering costs which may lead to lower rates being charged by service providers.

Note (d): AGD’s consultation draft Legal Services Multi-Use List, 14 June 2011.

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AGD

2.16 The planning undertaken to establish the legal services multi‐use list  (LSMUL) was extensive and included consideration of the outcomes of reviews  of  legal  services;  consultations  with  stakeholders;  potential  risks  with  the  approach;  and  consideration  of  alternative  procurement  options  such  as  a  panel. Some of the key aspects relating to the establishment of the LSMUL are  outlined below.  

The Legal Services MUL (LSMUL) was introduced in June 2012 to provide a more holistic and strategic approach to the provision of legal services, and to help contain Australian Government expenditure on external legal services. The development of the LSMUL was informed by two reviews(a), consultation with stakeholders and

advice from the Department of Finance. The first review, the Blunn Krieger review, concluded the system of agencies individually approaching the market to establish panels was inefficient and significant savings could occur by increasing agency capacity to make informed decisions around legal services procurement. The second review, the Lateral Economics review (known as the Gruen review), identified the opportunity to increase market participation (as 89 per cent of legal fees were earned by 10 law firms in 2009-10) and reduce duplication in tendering costs for service providers and the Australian Government (at the time there were 72 separate legal panels each of which cost the Commonwealth around $120 000 to establish). The Legal Services Directions 2005(b) require all Australian Government agencies subject to the Financial Management and Accountability Act 1997 and certain entities subject to the Commonwealth Authorities and Companies Act 1997 to use the LSMUL when purchasing external legal services. The objectives of the LSMUL are to:

 provide a streamlined whole-of-government approach for engaging suitably qualified legal service providers across government;

 assist agencies become more informed purchasers of legal services;

 increase market participation for Australian Government legal work by reducing barriers to entry which in turn would encourage greater competition and sharper pricing(c) among suppliers; and

 provide flexibility to purchase from the MUL in a variety of ways while still achieving value for money.(d)

Note (a): Blunn Krieger Report of the Review of Commonwealth Legal Services Procurement, 2009, p. 10 and Lateral Economics, Learning from experience: Purchasing legal services, 2011, pp. vii, 24 and 81.

Note (b): The Legal Services Directions 2005 are a set of binding rules about the performance of Commonwealth legal work. The directions set out requirements for sound practice in the provision of legal services to the Australian Government.

Note (c): Reducing the number of legal services panels was expected to reduce tendering costs which may lead to lower rates being charged by service providers.

Note (d): AGD’s consultation draft Legal Services Multi-Use List, 14 June 2011.

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2.17 In  summary,  the  audit  found  that  in  establishing  MULs,  BoM  and  Industry needed to give greater consideration to whether a MUL was the most  appropriate  procurement  method  to  achieve  their  objectives.  If  more  consideration  had  been  given,  these  agencies  may  have  determined  that  alternative  procurement  methods  may  have  better  suited  their  needs.  In  contrast AGD had clearly defined objectives which reflected the Government’s  policy  intent,  particularly  with  respect  to  opening  up  the  market  and  streamlining the approach for agencies and suppliers.   

Request documentation and conditions for participation 2.18 When establishing a MUL agencies need to outline the nature of the  goods  and  services  sought,  particular  requirements  to  be  fulfilled,  relevant  conditions  for  participation  and/or  technical  specifications.  Generally  such  request  documentation  would  also  establish  any  rules  of  operation  for  the  MUL.41  

2.19 The CPRs advise that agencies may specify conditions that potential  suppliers must be able to demonstrate compliance with in order to participate  in  a  procurement.  If  such  conditions  are  specified,  they  must  be  limited  to  those  that  ascertain  that  a  potential  supplier  has  the  legal,  commercial,  technical and financial abilities to fulfil the requirements of the procurement.42  Conditions for participation also provide suppliers with information that can  assist  them  in  making  decisions  about  applying  for  inclusion  in  a  MUL.  Finance’s guidance advises that careful consideration should be given to the  conditions for participation for inclusion on a MUL, since there is no discretion  to  evaluate  or  rank  responses.  Where  a  supplier  meets  the  conditions  for  participation, they are placed on the list.43  

                                                      

41 The rules of operation of a MUL should include items such as: details of who will compile and manage the list; the procedure for dealing with changes to the details of listed potential suppliers; a register of which agencies may use the list (if relevant); a notification that participants who cease to meet the required conditions for participation or operation for inclusion will be removed, and the procedure for doing so; and a notification that the agency may procure this type of goods or service without using the MUL, where appropriate. Finance, Buying for the Australian Government, Procurement Practice, Panel Arrangements and Multi-Use Lists [Internet].

42 Finance, Commonwealth Procurement Rules, 2012, section 10.13.

43 Finance, Buying for the Australian Government, Procurement Practices, Panel arrangements and Multi-Use lists [Internet].

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BoM and Industry

2.20 To varying degrees the documentation developed by BoM and Industry  outlined  requirements  for  the  services  sought  and  established  rules  of  operation for each MUL. In most cases, BoM did not specify conditions in the  application for inclusion for its various MULs, but instead required applicants  to indicate they could meet the scope of requirements that was provided.  

2.21 For one MUL in BoM and two in Industry, conditions for participation  were specified, which required applicants to accept standard contract terms  and conditions. Including standard terms and conditions allows agencies to  streamline subsequent procurement processes as suppliers have agreed to the  terms and conditions at the time of joining the MUL. Agencies should keep in  mind that in some cases agreeing to terms and conditions at the establishment  stage  of  a  MUL  may  affect  the  achievement  of  value  for  money  in  future  procurements as the terms and conditions cannot then be tailored to suit the  specific procurement objective.  

AGD

2.22 The  request  documentation  developed  by  AGD  for  the  LSMUL  included  conditions  for  participation,  guidance  material  for  applications,  a  legal services MUL deed and the application for inclusion. The conditions of  participation  set  out  in  the  application  for  inclusion  required  potential  suppliers to: 

 provide list rates and innovative fee arrangements; 

 have  public  liability  insurance and  professional  indemnity  insurance  for an amount not less than $10 million (AUD) per event per policy; 

 provide two duly completed and executed LSMUL Deeds; and  

 demonstrate understanding and capacity to meet the requirements of  the  Legal  Service  Directions  2005,  including  commitment  to  pro‐bono  legal work.44  

                                                      

44 Attorney-General’s Department, Legal Services Multi-Use List - Conditions for participation and guidance material for applicants, section 3 part 11 [Internet], AGD available from [accessed June 2014].

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BoM and Industry

2.20 To varying degrees the documentation developed by BoM and Industry  outlined  requirements  for  the  services  sought  and  established  rules  of  operation for each MUL. In most cases, BoM did not specify conditions in the  application for inclusion for its various MULs, but instead required applicants  to indicate they could meet the scope of requirements that was provided.  

2.21 For one MUL in BoM and two in Industry, conditions for participation  were specified, which required applicants to accept standard contract terms  and conditions. Including standard terms and conditions allows agencies to  streamline subsequent procurement processes as suppliers have agreed to the  terms and conditions at the time of joining the MUL. Agencies should keep in  mind that in some cases agreeing to terms and conditions at the establishment  stage  of  a  MUL  may  affect  the  achievement  of  value  for  money  in  future  procurements as the terms and conditions cannot then be tailored to suit the  specific procurement objective.  

AGD

2.22 The  request  documentation  developed  by  AGD  for  the  LSMUL  included  conditions  for  participation,  guidance  material  for  applications,  a  legal services MUL deed and the application for inclusion. The conditions of  participation  set  out  in  the  application  for  inclusion  required  potential  suppliers to: 

 provide list rates and innovative fee arrangements; 

 have  public  liability  insurance and  professional  indemnity  insurance  for an amount not less than $10 million (AUD) per event per policy; 

 provide two duly completed and executed LSMUL Deeds; and  

 demonstrate understanding and capacity to meet the requirements of  the  Legal  Service  Directions  2005,  including  commitment  to  pro‐bono  legal work.44  

                                                      

44 Attorney-General’s Department, Legal Services Multi-Use List - Conditions for participation and guidance material for applicants, section 3 part 11 [Internet], AGD available from [accessed June 2014].

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2.23 When  considered  against  Finance  guidance  and  the  CPRs,  the  conditions  for  inclusion  on  the  LSMUL  included  conditions  that  could  be  considered to be additional to the minimum required to ascertain whether the  supplier had the legal, commercial, technical and financial ability to fulfil the  requirements of the procurement.45 This may have resulted in a more onerous  and costly46 application process for suppliers however, the inclusion of these  conditions reflected that the LSMUL was a whole‐of‐government arrangement  and sought to streamline the later procurement processes for both suppliers  and agencies.  

Approach to market 2.24 Once a decision is made to establish a MUL, agencies must take steps to  notify the market in order to allow suitably qualified suppliers to apply. Unlike  an open tender process which is used for a single procurement, a MUL is a list  intended for use in more than one procurement process. A MUL can also be  open to new applicants throughout the period of its operation.  

Advertising on AusTender

2.25 The CPRs require that an approach to market inviting applications for a  MUL must be published continuously on AusTender for the entire period of  the  MUL’s  operation.  In  contrast,  Finance’s  website  guidance  suggests  advertising  MULs  is  optional  as  it  states  after  the  list  has  been  created,  an  agency  may  use  AusTender  to  advertise  the  existence  of  the  list.  This  may  include a short description of the MUL and a link to the list on the agency’s  website.47 

2.26 The  ANAO  assessed  the  audited  agencies’  approaches  to  notifying  potential suppliers on the existence of their various MULs on AusTender. As  outlined  in  Table  2.4  all  three  agencies  had  listed  the  MULs  under  the  AusTender  category  of  current  MULs.  However,  only  AGD  had  a  current  notification in the approach to market section of AusTender.  

                                                      

45 This is in line with Australia’s commitment in bilateral trade agreements and provisions in other international agreements that deal with public procurement.

46 For example, suppliers were required to obtain the prescribed level of insurance prior to being assessed as suitable for being included on the LSMUL.

47 Finance, Buying for Australian Government Multi-Use Lists [Internet] available from [accessed June 2014].

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Table 2.4: Agencies’ advertising of multi-use lists on AusTender

BoM Industry AGD

Listed in approach to market section of AusTender   (a)  

Listed in current MUL section of AusTender   

Source: ANAO.

Note (a): Refer paragraph 2.28 for further details.

2.27 The  approach  to  market  (ATM)  section  in  AusTender  has  certain  functionality  attached  to  it  that  affects  both  suppliers  and  agencies.  In  particular,  if  agencies  issue  an  ATM  on  AusTender,  eligible  potential  suppliers48  receive  an  email  notification  advising  them  of  the  procurement  opportunity.  However,  agencies  cannot  access  supplier  responses  until  the  application period has expired. In the case of a MUL which is continuously  open to new applications for inclusion, this is not practical. Further, reporting  the existence of the MUL only in the current MUL section of AusTender does  not  trigger  the  automatic  notification  of  the  procurement  opportunity  to  eligible suppliers, potentially limiting supplier opportunities.  

2.28 As indicated in Table 2.4, BoM published details of MULs only in the  current MUL section of AusTender and not in the ATM section. Industry had  published an approach to market on AusTender for one its MULs. However on  advice from Finance, Industry removed it from the ATM section and included  it  under  the  MUL  section.  Industry  advised  that  subsequent  MULs  were  published the same way. The differences in wording in the CPRs and Finance’s  guidance are likely to have contributed to the confusion around how MULs  should  be  advertised.  To  promote  a  more  consistent  understanding  of  requirements  there  would  be  benefit  in  Finance  clarifying  the  requirements  relating to the publication of the establishment of a MUL on AusTender and  considering  possible  enhancements  to  AusTender  functionality  to  include  notification of MUL business opportunities to potential suppliers that match  their specified profile.  

                                                      

48 AusTender provides an online automatic notification facility for registered users who have registered particular areas of Planned Procurements via e-mail once business opportunities that match their specified profile are published. Refer to AusTender Help [Internet] available from [accessed June 2014].

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Table 2.4: Agencies’ advertising of multi-use lists on AusTender

BoM Industry AGD

Listed in approach to market section of AusTender   (a)  

Listed in current MUL section of AusTender   

Source: ANAO.

Note (a): Refer paragraph 2.28 for further details.

2.27 The  approach  to  market  (ATM)  section  in  AusTender  has  certain  functionality  attached  to  it  that  affects  both  suppliers  and  agencies.  In  particular,  if  agencies  issue  an  ATM  on  AusTender,  eligible  potential  suppliers48  receive  an  email  notification  advising  them  of  the  procurement  opportunity.  However,  agencies  cannot  access  supplier  responses  until  the  application period has expired. In the case of a MUL which is continuously  open to new applications for inclusion, this is not practical. Further, reporting  the existence of the MUL only in the current MUL section of AusTender does  not  trigger  the  automatic  notification  of  the  procurement  opportunity  to  eligible suppliers, potentially limiting supplier opportunities.  

2.28 As indicated in Table 2.4, BoM published details of MULs only in the  current MUL section of AusTender and not in the ATM section. Industry had  published an approach to market on AusTender for one its MULs. However on  advice from Finance, Industry removed it from the ATM section and included  it  under  the  MUL  section.  Industry  advised  that  subsequent  MULs  were  published the same way. The differences in wording in the CPRs and Finance’s  guidance are likely to have contributed to the confusion around how MULs  should  be  advertised.  To  promote  a  more  consistent  understanding  of  requirements  there  would  be  benefit  in  Finance  clarifying  the  requirements  relating to the publication of the establishment of a MUL on AusTender and  considering  possible  enhancements  to  AusTender  functionality  to  include  notification of MUL business opportunities to potential suppliers that match  their specified profile.  

                                                      

48 AusTender provides an online automatic notification facility for registered users who have registered particular areas of Planned Procurements via e-mail once business opportunities that match their specified profile are published. Refer to AusTender Help [Internet] available from [accessed June 2014].

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2.29 Finance has advised references to multi‐use‐lists in paragraph 7.13 of  the  2012  CPRs  are  being  amended  to  emphasise  the  obligation  to  publish  invitations  to  lodge  applications  for  inclusion  on  a  multi‐use  list  on  AusTender.  

Assessment and notifications to suppliers 2.30 A  key  principle  of  the  CPRs  is  the  overarching  obligation  to  treat  potential  suppliers  consistently,  equitably  and  ethically.  Processes  where  conditions  are  imposed  on  potential  suppliers  and  then  not  applied  consistently in the evaluation of tender responses, or lack of documentation to  indicate that suppliers were treated equitably, risks achieving the outcomes  envisaged  by  the  CPRs.49  The  ANAO  reviewed  applications  from,  and  notifications to, potential suppliers for each of the MULs reviewed, as well as  the agencies’ records of whether suppliers had met the required conditions for  participation to determine the extent to which applications for inclusion were  treated consistently and equitably.  

BoM and Industry

2.31 Both  agencies  maintained  records  (referred  to  as  MUL  registers  or  supplier  lists)  that  recorded  the  responses  made  by  suppliers  against  the  requirements  for  inclusion  on  the  MUL.  In  general  however,  supporting  records at these agencies were incomplete, and, in some instances, applications  and/or notifications were located for suppliers that had not been included on  the particular MUL register or listing maintained by the agency. 

2.32 In both agencies suppliers had been included on MUL registers when  they had not met some of the requirements contained in the application for  inclusion. There was also no evidence of screening or verification of claims  made by potential suppliers to assess their eligibility for inclusion. 

2.33 The  ANAO  noted  a  number  of  inconsistencies  in  the  way  supplier  responses were treated in BoM and Industry. For example: 

 in BoM 12 applicants did not provide all the requested information but  none were rejected on this basis; and 

                                                      

49 Finance, Commonwealth Procurement Rules, 2012, sections 6.5-6.6.

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 in Industry the ANAO observed: 

 for one MUL there was insufficient evidence to confirm whether  all suppliers were treated equitably with respect to requests to  vary terms and conditions50; 

 that three expressions of interest (applications) were submitted  after  the  specified  closing  date  and  all  three  suppliers  were  included on the MUL register. Industry subsequently entered  into contracts with two of these three suppliers.  

 for two suppliers included on the MUL register, there was no  documentation  (application  for  inclusion,  evidence  of  verification  or  notification  to  suppliers)  available.  However,  both of these suppliers were awarded subsequent contracts.  

 for  one  MUL  potential  applicants  were  advised  that  ‘submissions  would  be  assessed  on  the  basis  of  value  for  money’ through the application of the evaluation criteria, but  pricing information was not required. 

2.34 In summary, there is a risk that suppliers may not have been given fair  and equitable treatment in their application of inclusion on the MULs in BoM  and  Industry.  These  agencies  should  strengthen  processes  for  establishing  MULs to make sure suppliers are treated equitably in their application. 

AGD

2.35 As at 27 March 2014, there were 112 providers included on the LSMUL.  The ANAO reviewed the records of assessments/evaluations and notifications  to  potential  suppliers  for  a  sample  of  36  applications  for  inclusion  on  the  LSMUL. AGD was able to provide copies of documentation supporting the  application, evaluation, notifications of inclusion or exclusion to the potential  suppliers for all the sampled applications for inclusion and on the basis of the  sample reviewed, all appeared to be treated consistently. 

                                                      

50 Terms and conditions were revised shortly after the establishment of the MUL. However, prior to this some service providers had been advised that terms and conditions were unable to be changed. There is a risk that potential suppliers declined to participate under the original terms and conditions but were unaware they had changed.

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 in Industry the ANAO observed: 

 for one MUL there was insufficient evidence to confirm whether  all suppliers were treated equitably with respect to requests to  vary terms and conditions50; 

 that three expressions of interest (applications) were submitted  after  the  specified  closing  date  and  all  three  suppliers  were  included on the MUL register. Industry subsequently entered  into contracts with two of these three suppliers.  

 for two suppliers included on the MUL register, there was no  documentation  (application  for  inclusion,  evidence  of  verification  or  notification  to  suppliers)  available.  However,  both of these suppliers were awarded subsequent contracts.  

 for  one  MUL  potential  applicants  were  advised  that  ‘submissions  would  be  assessed  on  the  basis  of  value  for  money’ through the application of the evaluation criteria, but  pricing information was not required. 

2.34 In summary, there is a risk that suppliers may not have been given fair  and equitable treatment in their application of inclusion on the MULs in BoM  and  Industry.  These  agencies  should  strengthen  processes  for  establishing  MULs to make sure suppliers are treated equitably in their application. 

AGD

2.35 As at 27 March 2014, there were 112 providers included on the LSMUL.  The ANAO reviewed the records of assessments/evaluations and notifications  to  potential  suppliers  for  a  sample  of  36  applications  for  inclusion  on  the  LSMUL. AGD was able to provide copies of documentation supporting the  application, evaluation, notifications of inclusion or exclusion to the potential  suppliers for all the sampled applications for inclusion and on the basis of the  sample reviewed, all appeared to be treated consistently. 

                                                      

50 Terms and conditions were revised shortly after the establishment of the MUL. However, prior to this some service providers had been advised that terms and conditions were unable to be changed. There is a risk that potential suppliers declined to participate under the original terms and conditions but were unaware they had changed.

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Service provider views on the establishment of the legal services multi-use list

2.36 The ANAO consulted a range of service providers to ascertain their  views on the establishment of the LSMUL and whether it has streamlined the  procurement  approach  and  opened  up  the  market  to  competition.  Overall  views were mixed. A summary of the key comments against the objectives is  provided below.  

Provide a streamlined approach Providers commented that the amount of effort to get on the LSMUL was comparable to a panel. Although neither guarantee work, the chances of getting work on a panel with a small number of providers was considered higher than the LSMUL with over 100 providers. This reportedly made it difficult to offer volume rate discounts. Many providers felt that the increase in administrative effort to join and provide services under the LSMUL would ultimately lead to a rise in rates. Whether the LSMUL opened up the market, increased competition and sharpened pricing from providers The LSMUL was considered to have opened up the market to new entrants, but the extent to which new entrants obtained work is not known. The majority of the work is reported to be still going to the same providers as it did prior to the introduction of the LSMUL(a). Anecdotally the new entrants are medium sized firms. The benefit of new entrants however, may be reduced by agency parcelling. Most providers interviewed considered the advertising of proposed parcelling arrangements was not transparent. In terms of provider rates, some providers indicated the rates offered were highly competitive reflecting the maturity of the legal services market in Canberra. However, the administrative effort associated with responding to quotes and reporting on activities could be further streamlined both across and between agencies.

Note (a): AGD Legal Services Expenditure Report 2012-13 p. 12. The LSMUL commenced in June 2012. Under transitional arrangements its use was not made mandatory until June 2013.

Recommendation No.1 2.37 To provide for efficient and effective procurement processes and the  achievement of value for money the ANAO recommends agencies:  

(a) clearly  define  objectives  in  order  to  determine  the  most  appropriate  procurement method; and 

(b) where  a  multi‐use  list  is  chosen,  strengthen  processes  to  promote  competition and equitable treatment of suppliers. 

2.38 This recommendation was directed to AGD, BoM and Industry. The  Department of Finance also commented. 

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Attorney‐General’s Department  

2.39 AGD  agrees.  AGD  welcomes  the  ANAO’s  finding  that  it  appropriately  defined the objectives prior to establishing the LSMUL. Having regard to the nature of  legal services and the requirements  of the CPRs, the Department will consider, in  consultation with the Department of Finance, whether the use of the LSMUL or the  approach  to  the  procurement  of  legal  services  could  be  strengthened  to  more  appropriately achieve these objectives. 

Bureau of Meteorology  

2.40 Agreed. The Bureau is strengthening its processes to encourage competitive  tension in the procurement process and promote equitable treatment of suppliers. The  Bureau is pleased to confirm that several initiatives are currently being implemented,  including new business case requirements in the early stages of multi‐use list planning  and improved training for Bureau staff to leverage greater value from multi‐use lists.  The Bureau is currently reviewing all current multi‐use lists in line with the ANAO  findings. 

Department of Industry   

2.41 Agreed. The Department of Industry agrees with the recommendation. The  Department will undertake a review of its guidance material and make changes as  required to ensure that it provides officers undertaking procurement with appropriate  levels of assistance. 

Department of Finance  

2.42 Supported. The mandatory requirement in the Commonwealth Procurement  Rules (CPRs) is that all Australian Government agencies achieve value for money in  procurement.  An  agency’s  operational  processes,  including  those  associated  with  establishing a multi‐use list and procuring from that list, must be consistent with the  principles of CPRs. Operational processes should additionally require the consideration  of risks for each procurement on a case‐by‐case basis. 

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Attorney‐General’s Department  

2.39 AGD  agrees.  AGD  welcomes  the  ANAO’s  finding  that  it  appropriately  defined the objectives prior to establishing the LSMUL. Having regard to the nature of  legal services and the requirements  of the CPRs, the Department will consider, in  consultation with the Department of Finance, whether the use of the LSMUL or the  approach  to  the  procurement  of  legal  services  could  be  strengthened  to  more  appropriately achieve these objectives. 

Bureau of Meteorology  

2.40 Agreed. The Bureau is strengthening its processes to encourage competitive  tension in the procurement process and promote equitable treatment of suppliers. The  Bureau is pleased to confirm that several initiatives are currently being implemented,  including new business case requirements in the early stages of multi‐use list planning  and improved training for Bureau staff to leverage greater value from multi‐use lists.  The Bureau is currently reviewing all current multi‐use lists in line with the ANAO  findings. 

Department of Industry   

2.41 Agreed. The Department of Industry agrees with the recommendation. The  Department will undertake a review of its guidance material and make changes as  required to ensure that it provides officers undertaking procurement with appropriate  levels of assistance. 

Department of Finance  

2.42 Supported. The mandatory requirement in the Commonwealth Procurement  Rules (CPRs) is that all Australian Government agencies achieve value for money in  procurement.  An  agency’s  operational  processes,  including  those  associated  with  establishing a multi‐use list and procuring from that list, must be consistent with the  principles of CPRs. Operational processes should additionally require the consideration  of risks for each procurement on a case‐by‐case basis. 

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Conclusion 2.43 Where procurement objectives are not well defined or processes are not  well understood, there is a clear risk of agencies undertaking procurements  that are not consistent with the requirements of the CPRs. Overall, the ANAO  identified that agencies need to give greater consideration to whether a MUL is  most  suited  to  meeting  their  procurement  objectives  or  whether  alternative  procurement arrangements would be more suitable. In the case of BoM, the  objectives  for  its  MULs  were  not  defined  and  in  some  cases  MULs  were  subsequently  used  very  infrequently  or  not  at  all.  In  Industry,  to  varying  degrees, some MULs had defined objectives. However, in regard to Industry’s  temporary personnel MUL in particular, an alternative procurement method  such as a panel would have enabled Industry to better meet its procurement  objective and demonstrate the achievement of value for money. In contrast,  AGD had clearly defined the objectives for the LSMUL. These were directed  towards  opening  up  the  market  to  competition,  streamlining  procurement  processes to reduce the cost of legal services and promoting more informed  purchasers of legal services.  

2.44 Suppliers  should  be  treated  equitably  when  being  assessed  for  inclusion  on  a  MUL,  and  appropriate  records  of  supplier  assessment  and  notification of outcome should be maintained to provide transparency of the  process. Both BoM and Industry included suppliers in their MUL registers that  had  not  met  some  of  the  requirements  contained  in  the  application  for  inclusion. Further there was no evidence of screening or verification of claims  made by potential suppliers.  

2.45 Agencies  and  legal  service  providers  interviewed  by  the  ANAO  generally agreed the LSMUL had met a key objective of opening up the market  to  competition.  However,  both  groups  were  less  certain  of  whether  the  purchase  of  legal  services  by  Australian  Government  agencies  was  more  efficient,  effective,  or  achieved  at  a  lower  cost  than  under  previous  arrangements.  

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3. Procurement from Multi-Use Lists

This chapter examines agencies’ use of multi‐use lists to support actual procurement  and whether the requirements of the Commonwealth Procurement Rules have been  met.  

Introduction 3.1 Having established a multi‐use list (MUL), agencies should determine  the best way to use it to meet their business needs. This requires employing  appropriately  competitive  processes  and  treating  suppliers  equitably  in  determining value for money in the expenditure of public funds. To provide  accountability and demonstrate that legislative and policy requirements are met  when  procuring  from  a  MUL,  agencies  must  maintain  appropriate  documentation for each procurement. Documentation should be commensurate  with  the  scale,  scope  and  risk  of  the  procurement.  Desirably,  such  documentation includes providing concise information on the requirement for  the  procurement,  the  process  that  was  followed,  how  value  for  money  was  considered  and  achieved,  and  relevant  decisions,  and  the  basis  of  those  decisions.51  

3.2 The  ANAO  examined  50  procurements  over  $80 000  recorded  on  AusTender  as  having  been  conducted  by  prequalified  tender.  The  audit  sample  period  covered  contracts  that  had  been  entered  into  between  1 July 2012 and 30 September 2013. The number of procurements per agency is  outlined in Table 3.1 below.  

Table 3.1: Number of procurements per agency in the audit sample

BoM Industry AGD Total

Sample total 6 28 16 50

Source: ANAO analysis.

3.3 The  ANAO  assessed  whether  the  processes  adopted  supported  the  achievement of value for money and in particular examined the following key  aspects of the procurement process: 

                                                      

51 Finance, Commonwealth Procurement Rules, 2012, sections 7.2-7.4.

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3. Procurement from Multi-Use Lists

This chapter examines agencies’ use of multi‐use lists to support actual procurement  and whether the requirements of the Commonwealth Procurement Rules have been  met.  

Introduction 3.1 Having established a multi‐use list (MUL), agencies should determine  the best way to use it to meet their business needs. This requires employing  appropriately  competitive  processes  and  treating  suppliers  equitably  in  determining value for money in the expenditure of public funds. To provide  accountability and demonstrate that legislative and policy requirements are met  when  procuring  from  a  MUL,  agencies  must  maintain  appropriate  documentation for each procurement. Documentation should be commensurate  with  the  scale,  scope  and  risk  of  the  procurement.  Desirably,  such  documentation includes providing concise information on the requirement for  the  procurement,  the  process  that  was  followed,  how  value  for  money  was  considered  and  achieved,  and  relevant  decisions,  and  the  basis  of  those  decisions.51  

3.2 The  ANAO  examined  50  procurements  over  $80 000  recorded  on  AusTender  as  having  been  conducted  by  prequalified  tender.  The  audit  sample  period  covered  contracts  that  had  been  entered  into  between  1 July 2012 and 30 September 2013. The number of procurements per agency is  outlined in Table 3.1 below.  

Table 3.1: Number of procurements per agency in the audit sample

BoM Industry AGD Total

Sample total 6 28 16 50

Source: ANAO analysis.

3.3 The  ANAO  assessed  whether  the  processes  adopted  supported  the  achievement of value for money and in particular examined the following key  aspects of the procurement process: 

                                                      

51 Finance, Commonwealth Procurement Rules, 2012, sections 7.2-7.4.

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 approaching suppliers for tenders;  

 evaluation of submissions, approvals and demonstrated consideration  of value for money; and  

 reporting contracts on AusTender. 

3.4 As noted in paragraph 1.3, the CPRs allow three methods of tender:  open, prequalified and limited. MULs are designed to support the conduct of  prequalified tenders. The CPRs indicate that procurements which do not fulfil  the requirements of an open tender or prequalified tender can only be classed  as a limited tender. Overall, all of the procurements at BoM and Industry and  the majority at AGD reported as prequalified tender did not meet important  requirements  of  the  CPRs  and  had,  by  default,  been  conducted  as  limited  tenders.52 

3.5 This was largely due to agencies failing to give suppliers the required  time to respond for requests for request for quote.53 There were also instances  of agencies approaching only one or a small number of suppliers which limits  competition.  As  a  result,  it  was  more  difficult  for  audited  agencies  to  demonstrate that value for money was achieved. 

3.6 In  addition  there  were  instances  of  insufficient  documentation  to  indicate the processes that were undertaken and agencies often did not record  why particular suppliers from the MULs were invited to quote for work. 

3.7 While  limited  tenders  are  allowed  for  in  the  CPRs,  a  series  of  strict  conditions apply to their use.54 In several respects the majority of procurements  examined by the ANAO not only failed to meet the conditions for prequalified  tender but they also failed to meet the requirements for limited tender. As a  result,  these  procurements  were  non‐compliant  with  the  CPRs  and  it  was  difficult for the agencies to demonstrate the achievement of value for money.                                                         

52 Limited tender involves an agency approaching one or more potential suppliers to make submissions, where the process does not meet the rules for open tender or prequalified tender. ibid., section 9.11.

53 The time limit for potential suppliers to lodge a submission must be at least 25 days from the date and time that an agency publishes an approach to market for an open tender or a prequalified tender except under certain circumstances where it is allowed to be no less than 10 days. ibid., section 10.19. 54 Situations where limited tender is permissible for procurements at or above the procurement thresholds

include where an open approach to market receives no response, the need to act with extreme urgency or exploit advantageous conditions or where the goods and services can only be supplied by one business and no reasonable alternative is available. The complete list of conditions is included in Appendix 3 of this report. Limited tender procurements under the thresholds, are not subject to any additional requirements. All procurements examined by the ANAO were above the procurement thresholds.

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Approaching suppliers for tenders 3.8 Key  considerations  when  undertaking  a  procurement  involve  identifying the procurement need, the scope of requirements and the process  for selecting suppliers having regard to encouraging competition (for example  by  obtaining  multiple  quotes).  The  value  over  the  full  lifecycle  of  the  procurement  must  also  be  estimated  before  a  decision  on  the  procurement  method is made. These factors, and potential risks and any agency procedural  requirements  should  shape  the  approach  taken  to  select  a  supplier.  It  is  particularly important therefore that agencies’ processes for selecting suppliers  from  a  MUL  encourage  competition  and  reflect  the  scale  and  scope  of  the  procurement.55  

CPRs and Finance Guidance

3.9 Procuring from a MUL removes the need for agencies to undertake an  open approach to the market, as this occurred at the time of the establishment  of the MUL however, it is still a requirement to achieve value for money. For  purchases under $80 000, the CPRs do not require agencies to seek more than  one quote as long as there is reasonable assurance value for money is being  achieved. For purchases over $80 00056 a MUL allows agencies to approach two  or  more  suppliers  to  obtain  quotes  for  the  scope  of  work  required.  The  prequalification  provided  through  the  MUL  assists  in  streamlining  the  selection process where acceptance of particular terms and conditions has been  agreed as part of the application for inclusion on the MUL. 

3.10 The key processes when using a MUL are described in Figure 3.1.  

                                                      

55 Competition is a key element of the Australian Government’s procurement framework. Effective competition requires non-discrimination and the use of competitive procurement processes. Finance Commonwealth Procurement Rules, section 5.1. 56 The procurement thresholds are higher for construction services.

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Approaching suppliers for tenders 3.8 Key  considerations  when  undertaking  a  procurement  involve  identifying the procurement need, the scope of requirements and the process  for selecting suppliers having regard to encouraging competition (for example  by  obtaining  multiple  quotes).  The  value  over  the  full  lifecycle  of  the  procurement  must  also  be  estimated  before  a  decision  on  the  procurement  method is made. These factors, and potential risks and any agency procedural  requirements  should  shape  the  approach  taken  to  select  a  supplier.  It  is  particularly important therefore that agencies’ processes for selecting suppliers  from  a  MUL  encourage  competition  and  reflect  the  scale  and  scope  of  the  procurement.55  

CPRs and Finance Guidance

3.9 Procuring from a MUL removes the need for agencies to undertake an  open approach to the market, as this occurred at the time of the establishment  of the MUL however, it is still a requirement to achieve value for money. For  purchases under $80 000, the CPRs do not require agencies to seek more than  one quote as long as there is reasonable assurance value for money is being  achieved. For purchases over $80 00056 a MUL allows agencies to approach two  or  more  suppliers  to  obtain  quotes  for  the  scope  of  work  required.  The  prequalification  provided  through  the  MUL  assists  in  streamlining  the  selection process where acceptance of particular terms and conditions has been  agreed as part of the application for inclusion on the MUL. 

3.10 The key processes when using a MUL are described in Figure 3.1.  

                                                      

55 Competition is a key element of the Australian Government’s procurement framework. Effective competition requires non-discrimination and the use of competitive procurement processes. Finance Commonwealth Procurement Rules, section 5.1.

56 The procurement thresholds are higher for construction services.

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Figure 3.1: Processes when using a multi-use list

 

Source: ANAO based on the requirements of the CPRs.

3.11 The CPRs outline the requirements relating to tender documentation  provided  to  potential  suppliers  during  an  approach  to  market  for  procurements  at  or  above  the  procurement  thresholds.  These  include  specifying  the  goods  or  services  required,  minimum  content  and  format  requirements  and  the  evaluation  criteria  that  would  be  used  to  assess  the  tenders.  Agencies  should  include  relevant  evaluation  criteria  in  request  documentation to enable the proper identification, assessment and comparison  of  submissions on a fair, common and appropriately transparent basis. There  are also minimum time limits.57 

                                                      

57 The time limit for potential suppliers to lodge a submission must be at least 25 days from the date and time that an agency publishes an approach to market for an open tender or a prequalified tender except under certain circumstances where it is allowed to be no less than 10 days. The circumstances relate to: a) whether the agency has published certain details of the procurement in its annual procurement plan requirements; b) where the agency procures commercial goods and services; c) where it relates to second or subsequent approaches to the market for recurring procurements; or d) where a genuine state of urgency renders the normal time limit impracticable. Finance, Commonwealth Procurement Rules, 2012 p. 32, section 10.19.

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3.12 The CPRs do not specify how many suppliers on a MUL to approach  for a procurement or on what basis potential suppliers can be excluded. In  relation to MULs the CPRs state: 

Prequalified  tender  involves  publishing  an  approach  to  market  inviting  submissions from all potential suppliers on a list of potential suppliers selected  from a multi‐use list established through an open approach to market.58 

3.13 However, the guidance on the Finance website states: 

An agency may invite all participants on the MUL to tender; or invite only a  number  of  participants  on  the  MUL  to  tender,  provided  the  invitation  is  non‐discriminatory, and the largest number of potential suppliers is selected  consistent with an efficient procurement process.59 

3.14 Finance has also advised:  

To establish value for money is being achieved, a selection process of two or  more MUL members should60 be undertaken, specifically where the expected  value of the contract will be more than $80 000. 

3.15 The variation in the current guidance is a likely contributor to the level  of agency misunderstanding regarding the use of MULs.  

Agency approaches

3.16 Detailed findings in relation to procurements conducted by each of the  audited agencies are provided below.  

BoM 

3.17 The  six  procurements  examined  in  BoM  showed  a  number  of  inconsistencies when considered against the CPRs and Finance guidance: 

 four procurements involved direct approaches to suppliers who were  not on a MUL; 

 one  procurement  involved  one  supplier  being  sent  request  documentation and given eight days to submit a proposal (less than the 

                                                      

58 ibid., section 9.9. 59 Finance Buying for the Australian Government, Procurement Practices, Panel arrangements and Multi-Use list, tips (point 6) [Internet]. 60 In the CPRs the term ‘should’ indicates good practice rather than something that must be complied with.

Finance CPRs, 2012, section 2.3.

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3.12 The CPRs do not specify how many suppliers on a MUL to approach  for a procurement or on what basis potential suppliers can be excluded. In  relation to MULs the CPRs state: 

Prequalified  tender  involves  publishing  an  approach  to  market  inviting  submissions from all potential suppliers on a list of potential suppliers selected  from a multi‐use list established through an open approach to market.58 

3.13 However, the guidance on the Finance website states: 

An agency may invite all participants on the MUL to tender; or invite only a  number  of  participants  on  the  MUL  to  tender,  provided  the  invitation  is  non‐discriminatory, and the largest number of potential suppliers is selected  consistent with an efficient procurement process.59 

3.14 Finance has also advised:  

To establish value for money is being achieved, a selection process of two or  more MUL members should60 be undertaken, specifically where the expected  value of the contract will be more than $80 000. 

3.15 The variation in the current guidance is a likely contributor to the level  of agency misunderstanding regarding the use of MULs.  

Agency approaches

3.16 Detailed findings in relation to procurements conducted by each of the  audited agencies are provided below.  

BoM 

3.17 The  six  procurements  examined  in  BoM  showed  a  number  of  inconsistencies when considered against the CPRs and Finance guidance: 

 four procurements involved direct approaches to suppliers who were  not on a MUL; 

 one  procurement  involved  one  supplier  being  sent  request  documentation and given eight days to submit a proposal (less than the 

                                                      

58 ibid., section 9.9. 59 Finance Buying for the Australian Government, Procurement Practices, Panel arrangements and Multi-Use list, tips (point 6) [Internet]. 60 In the CPRs the term ‘should’ indicates good practice rather than something that must be complied with.

Finance CPRs, 2012, section 2.3.

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minimum  time  limit  of  10 days).61  As  this  supplier  did  not  respond  another supplier was directly approached and asked to respond at their  earliest convenience; and  

 one included seeking approval to conduct a limited tender with a direct  approach to one supplier, so therefore it was not a prequalified tender. 

Industry  

3.18 Of the 28 procurements examined in Industry, 22 were from the same  MUL, the Recruitment and Temporary Personnel MUL. This MUL included  38 potential service providers each offering candidates with different skills and  experience.  When  procuring  from  the  MUL,  Industry  evaluated  the  skills,  experience  and  rates  of  individual  job  seeker  candidates  rather  than  undertaking comparative value for money assessments of the suppliers. While  recruiting staff was the purpose of the procurement and considering their rates  would be relevant, this is not consistent with the requirements of MULs and in  this respect, the MUL was being treated as a panel. Industry advised that going  forward this MUL will be replaced with a panel arrangement, which is likely  to be more suited to the business need.  

3.19 Across  all  Industry  MULs,  the  ANAO  identified  several  procedural  matters  in  the  way  Industry  approached  and  selected  suppliers.  These  included  instances  of  suppliers  not  being  allowed  the  mandatory  response  period specified in the CPRs and one procurement involved making a direct  approach  to  suppliers  on  two  different  MULs.  The  CPRs  only  allows  for  suppliers to be selected from a single MUL.62 In addition, it was not clear from  documentation provided that there was equitable and consistent treatment of  all applicants.  

3.20 Information  sent  to  tenderers  generally  did  not  include  evaluation  criteria  that  would  be  used  to  assess  tenders.  Providing  potential  suppliers  with the criteria they will be evaluated against is mandatory under the CPRs.  In two instances the ANAO observed requests from suppliers for clarification  of the requirements outlined in the request documentation. While responses to  the enquiries were held on file, no evidence was available to indicate that the  clarifying information was also provided to other potential suppliers. Finally, 

                                                      

61 The CPRs specify minimum time limits to be given to potential suppliers to provide a response to an approach to market, ibid, sections 10.17-10.27. 62 ibid., section 9.9.

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in  a  number  of  instances,  supporting  documentation  indicated  that  the  purpose  and  correct  usage  of  MULs  was  not  clearly  understood  by  some  officers within Industry and advice provided to procurers and/or delegates did  not correctly set out requirements for procuring from MULs.  

AGD 

3.21 Obtaining  quotes  for  legal  work  can  be  challenging  as  it  is  often  difficult to predict the extent of services that might be required. For example,  in  representation/dispute  resolution  services  when  the  Commonwealth  is  a  respondent to  court  proceedings both  the  cost  and  duration  of  the  services  required can increase substantially and services are often required urgently.63  Where there is a need to act with extreme urgency limited tender is permissible  and  for  many  proceedings,  there  may  be  a  reason  to  select  a  particular  provider  (such  as  familiarity  with  the  case  in  question  or  having  provided  earlier advice or litigation services). The engagement of counsel for any current  or  anticipated  litigation  or  dispute  is  exempt  from  the  requirements  of  Division 2 of the CPRs. 

3.22 The LSMUL guidance states that agencies must comply with the CPRs  and  contains  guidance  on  determining  the  number  of  quotes  to  seek.64  For  work estimated to be at or above the relevant procurement threshold amount,  agencies must select two or more service providers on the LSMUL to supply  quotes for the legal services.65 

3.23 Of AGD’s 16 procurements from suppliers on the LSMUL, 11 involved  a  direct  approach  to  a  particular  supplier  and  therefore  did  not  involve  obtaining competitive quotes although an estimate of the expected cost was  often obtained. For these 11 procurements the direct approach was appropriate  as they were either exempted under LSMUL guidance or met the conditions  for limited tender. The remaining five procurements were initially conducted  as  prequalified  tenders  under  $80 000  but  over  time  the  value  of  the 

                                                      

63 A situation where limited tender is permissible for procurements at or above the procurement thresholds includes where there is a need to act with extreme urgency. 64 Agencies may invite all or some of the listed service providers in the relevant category of legal work to submit a quote. An agency should have regard to the size and complexity of the matter or parcel of

work, and any internal agency procurement guidance, when determining the number of quotes to seek. Refer AGD Legal Services Multi-Use List Guidance Material, 2012, paragraph 15.2 [Internet].

65 For purchases less than $80 000, the CPRs do not require agencies to seek more than one quote, as long as there is reasonable assurance that value for money is being achieved.

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in  a  number  of  instances,  supporting  documentation  indicated  that  the  purpose  and  correct  usage  of  MULs  was  not  clearly  understood  by  some  officers within Industry and advice provided to procurers and/or delegates did  not correctly set out requirements for procuring from MULs.  

AGD 

3.21 Obtaining  quotes  for  legal  work  can  be  challenging  as  it  is  often  difficult to predict the extent of services that might be required. For example,  in  representation/dispute  resolution  services  when  the  Commonwealth  is  a  respondent to  court  proceedings both  the  cost  and  duration  of  the  services  required can increase substantially and services are often required urgently.63  Where there is a need to act with extreme urgency limited tender is permissible  and  for  many  proceedings,  there  may  be  a  reason  to  select  a  particular 

provider  (such  as  familiarity  with  the  case  in  question  or  having  provided  earlier advice or litigation services). The engagement of counsel for any current  or  anticipated  litigation  or  dispute  is  exempt  from  the  requirements  of  Division 2 of the CPRs. 

3.22 The LSMUL guidance states that agencies must comply with the CPRs  and  contains  guidance  on  determining  the  number  of  quotes  to  seek.64  For  work estimated to be at or above the relevant procurement threshold amount,  agencies must select two or more service providers on the LSMUL to supply  quotes for the legal services.65 

3.23 Of AGD’s 16 procurements from suppliers on the LSMUL, 11 involved  a  direct  approach  to  a  particular  supplier  and  therefore  did  not  involve  obtaining competitive quotes although an estimate of the expected cost was  often obtained. For these 11 procurements the direct approach was appropriate  as they were either exempted under LSMUL guidance or met the conditions  for limited tender. The remaining five procurements were initially conducted  as  prequalified  tenders  under  $80 000  but  over  time  the  value  of  the 

                                                      

63 A situation where limited tender is permissible for procurements at or above the procurement thresholds includes where there is a need to act with extreme urgency. 64 Agencies may invite all or some of the listed service providers in the relevant category of legal work to submit a quote. An agency should have regard to the size and complexity of the matter or parcel of

work, and any internal agency procurement guidance, when determining the number of quotes to seek. Refer AGD Legal Services Multi-Use List Guidance Material, 2012, paragraph 15.2 [Internet].

65 For purchases less than $80 000, the CPRs do not require agencies to seek more than one quote, as long as there is reasonable assurance that value for money is being achieved.

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procurement  has  reached  or  exceeded  the  $80 000  threshold.  For  these  five  procurements AGD: 

 sought two quotes for one of the procurements; and  

 approached one provider for each of the remaining four.  

3.24 In each of these cases, as the value of the procurement increased, the  subsequent work was always given to the original provider as approaching a  new  provider  was  considered  likely  to  incur  additional  costs.  Where  the  maximum value of procurement over its entire duration cannot be estimated,  the  CPRs  require  the  procurement  be  treated  as  being  valued  above  the  relevant procurement threshold.66 AGD advised that in each of these five cases  the responsible officers considered the initial estimate was reasonable in the  circumstances, even if it subsequently increased.  

3.25 In summary, agencies need to be mindful that when using a MUL, a  value for money assessment of suppliers was not conducted when the MUL  was  first  established.  MULs  are  not  panels  and  the  CPRs  establish  the  requirements  to  be  followed  particularly  with  respect  to  conducting  appropriately competitive processes to achieve outcomes consistent with the  CPRs.  Where  the  value  of  a  procurement  over  its  lifecycle  is  difficult  to   estimate,  the  procurement  should  be  conducted  in  accordance  with  requirements  for  procurements  at  or  above  the  relevant  procurement  threshold.  

Evaluation of submissions, approval and demonstrated consideration of value for money 3.26 FMA  Regulation  9  requires  a  delegate  be  satisfied,  after  making  reasonable  inquiries,  that  the  approval  of  a  spending  proposal  would  be  a  proper  use  of  Commonwealth  resources.  Proper  use  of  resources  includes  consideration of value for money consistent with the CPRs. Value for money in  procurement requires: 

a. encouraging competitive and non‐discriminatory processes; 

b. using Commonwealth resources in an efficient, effective, economical and  ethical manner that is not inconsistent with the policies of the Commonwealth; 

c. making decisions in an accountable and transparent manner; 

                                                      

66 Finance, Commonwealth Procurement Rules, 2012, section 9.6.

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d. considering the risks; and 

e.  conducting  a  process  commensurate  with  the  scale  and  scope  of  the  procurement.67 

3.27 As noted in paragraph 1.8 under the CPRs, it is mandatory for agencies  to maintain appropriate documentation for each procurement. Desirably such  documentation  would  include:  providing  concise  information  on  the  requirement for the procurement; the process that was followed; how value for  money was considered and achieved; and relevant decisions, including under  the FMA Regulations, and the basis of those decisions.68  

3.28 The  ANAO  examined  the  documentation  maintained  by  agencies  supporting  the  decisions  made  to  enter  into  contracts  as  a  result  of  the  procurement processes reviewed. In particular, the ANAO sought evidence of  the  evaluation  of  quotations  including  consideration  of  supplier  rates,  experience/expertise and capability to provide the goods/services sought. The  ANAO also examined whether appropriate approvals were obtained for each  procurement.  Approvals  should  include  the  key  elements  of  the  spending  proposal, such as the items, cost, parties, and timeframe.  

3.29 In BoM, evidence of FMA Regulation 9 approval was provided for each  of the six procurements reviewed. It should be noted, that the agency central  procurement unit declined to endorse two of the procurements approved by  the relevant delegate as they considered the procurement process deficient but  were unable to influence the outcome. In addition, formal records of provision  of  request  documentation  and  evaluations  were  not  maintained  for  all  procurements.  

3.30 In Industry, evidence of FMA Regulation 9 approval was provided for  25  of  the  28 procurements  reviewed.  However,  Industry  only  maintained  copies  of  all  the  tenders/quotations  received  for  six  of  the  procurements  reviewed.  In  addition,  limited  evidence  of  the  evaluation  of  tenders  was  provided.  As  previously  mentioned  for  procurements  from  the  Temporary  Personnel MUL the evaluation reports were generally limited to an assessment  of the candidates offered. In most cases the assessment of candidates was not  based on the selection criteria, where provided, in the request documentation.  Ten  of  the  procurements  from  the  Temporary  Personnel  MUL  reviewed 

                                                      

67 ibid., section 4.4. 68 ibid., sections 7.2-7.4.

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d. considering the risks; and 

e.  conducting  a  process  commensurate  with  the  scale  and  scope  of  the  procurement.67 

3.27 As noted in paragraph 1.8 under the CPRs, it is mandatory for agencies  to maintain appropriate documentation for each procurement. Desirably such  documentation  would  include:  providing  concise  information  on  the  requirement for the procurement; the process that was followed; how value for  money was considered and achieved; and relevant decisions, including under  the FMA Regulations, and the basis of those decisions.68  

3.28 The  ANAO  examined  the  documentation  maintained  by  agencies  supporting  the  decisions  made  to  enter  into  contracts  as  a  result  of  the  procurement processes reviewed. In particular, the ANAO sought evidence of  the  evaluation  of  quotations  including  consideration  of  supplier  rates,  experience/expertise and capability to provide the goods/services sought. The  ANAO also examined whether appropriate approvals were obtained for each  procurement.  Approvals  should  include  the  key  elements  of  the  spending  proposal, such as the items, cost, parties, and timeframe.  

3.29 In BoM, evidence of FMA Regulation 9 approval was provided for each  of the six procurements reviewed. It should be noted, that the agency central  procurement unit declined to endorse two of the procurements approved by  the relevant delegate as they considered the procurement process deficient but  were unable to influence the outcome. In addition, formal records of provision  of  request  documentation  and  evaluations  were  not  maintained  for  all  procurements.  

3.30 In Industry, evidence of FMA Regulation 9 approval was provided for  25  of  the  28 procurements  reviewed.  However,  Industry  only  maintained  copies  of  all  the  tenders/quotations  received  for  six  of  the  procurements  reviewed.  In  addition,  limited  evidence  of  the  evaluation  of  tenders  was  provided.  As  previously  mentioned  for  procurements  from  the  Temporary  Personnel MUL the evaluation reports were generally limited to an assessment  of the candidates offered. In most cases the assessment of candidates was not  based on the selection criteria, where provided, in the request documentation.  Ten  of  the  procurements  from  the  Temporary  Personnel  MUL  reviewed 

                                                      

67 ibid., section 4.4. 68 ibid., sections 7.2-7.4.

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resulted  in  the  re‐engagement  of  an  existing  contractor  through  particular  recruitment  firms,  without  an  appropriate  competitive  process  being  undertaken.69 As noted in paragraph 3.18, Industry has recognised that a MUL  was not an appropriate option for this procurement objective and advised it  will be replaced with a panel arrangement.  

3.31 In AGD, evidence of FMA Regulation 9 approval was provided for four  of  the  five  procurements  classed  as  prequalified  procurement.  For  these  procurements  AGD obtained: 

 two quotes for one of the procurements (although copies of the request  for quotes, supplier evaluations, evidence of the consideration of value  for money70 and the contract were not maintained); and  

 a  single  quote  for  the  remaining  four,  three  of  which  were  for  a  combination  of  professional  fees  (procured  from  the  LSMUL),  disbursements and Counsel fees (not procured from the LSMUL). The  final  procurement  was  originally  estimated  to  be  well  under  the  procurement thresholds but increased when the matter was appealed.  In each of these procurements AGD indicated consideration of value  for money.  

3.32 In summary, as not all of the procurements examined at BoM, Industry  and AGD were conducted as a competitive prequalified tender, it is difficult  for the agencies to demonstrate the achievement of value for money outcomes  due to the lack of competition. Records of key aspects of the procurements,  including the process that was followed, consideration of value for money and  relevant decisions, and their basis, was not always maintained in each of the  agencies.  

3.33 The findings indicate the need for agencies to employ more competitive  processes  and  give  greater  emphasis  to  clearly  demonstrating  the  basis  for  short  listing  and  selecting  suppliers  when  procurements  are  made  under  a  MUL arrangement. In this context, the Joint Committee of Public Accounts and 

                                                      

69 In particular, suppliers were not provided with sufficient time to respond in accordance with the requirements of the CPRs. 70 The ANAO was advised the successful tenderer was selected due to their direct experience settling claims arising out of alleged breach of terms of a software licence but this was not documented at the

time of the procurement.

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Audit has reinforced the need to document value for money considerations for  individual procurements.71  

Recommendation No.2 3.34 To provide for greater accountability and transparency when using a  multi‐use list the ANAO recommends agencies concisely document the basis  for  short  listing  potential  suppliers  and  the  basis  for  selecting  a  particular  supplier to evidence value for money. 

3.35 This recommendation was directed to all six agencies included in the  audit. The Department of Finance also commented.  

Attorney‐General’s Department  

3.36 AGD agrees. AGD notes that establishing value for money for procurement  from  the  LSMUL  may  often  only  require  quotes  from  one  or  a  small  number  of  providers. The process of documenting the basis for procurement decisions does not  need to be complicated or onerous, and AGD agrees that it should occur in all cases. 

ANAO comment 

3.37 AGD’s  LSMUL  guidance  requires  agencies  to  select  two  or  more  service providers to supply quotes for procurements valued at or above the  procurement  threshold.72  The  LSMUL  list  rates  are  maximum  rates  and  agencies can negotiate to take account of circumstances at the time a service is  required which may allow for better outcomes to be achieved. As indicated in  paragraph 3.5 of the report, where agencies approached only one or a small  number of suppliers, competition was limited, and it was more difficult for  audited agencies to demonstrate that value for money was achieved. 

Bureau of Meteorology  

3.38 Agreed.  The  Bureau  is  implementing  improvements  to  current  shortlisting  and selection practices to more effectively evaluate and document value for money. 

                                                      

71 Joint Committee of Public Accounts and Audit, Report 423: Review of Auditor-General’s Reports Nos 39 2009-10 to 15 2010-11, Chapter 4, paragraph 4.99, stated in relation to documenting value for money for individual procurements: ‘the Committee considers that undocumented processes should be viewed with high levels of suspicion. In these circumstances, the Committee is of the opinion that the default assumption should be that ‘if it’s not documented, it’s not done’, hence value for money is unlikely to have been achieved’. 72 Finance has advised that to establish value for money, a selection process of two or more MUL

members should be undertaken, specifically where the expected value of the contract will be more than $80 000.

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Audit has reinforced the need to document value for money considerations for  individual procurements.71  

Recommendation No.2 3.34 To provide for greater accountability and transparency when using a  multi‐use list the ANAO recommends agencies concisely document the basis  for  short  listing  potential  suppliers  and  the  basis  for  selecting  a  particular  supplier to evidence value for money. 

3.35 This recommendation was directed to all six agencies included in the  audit. The Department of Finance also commented.  

Attorney‐General’s Department  

3.36 AGD agrees. AGD notes that establishing value for money for procurement  from  the  LSMUL  may  often  only  require  quotes  from  one  or  a  small  number  of  providers. The process of documenting the basis for procurement decisions does not  need to be complicated or onerous, and AGD agrees that it should occur in all cases. 

ANAO comment 

3.37 AGD’s  LSMUL  guidance  requires  agencies  to  select  two  or  more  service providers to supply quotes for procurements valued at or above the  procurement  threshold.72  The  LSMUL  list  rates  are  maximum  rates  and  agencies can negotiate to take account of circumstances at the time a service is  required which may allow for better outcomes to be achieved. As indicated in  paragraph 3.5 of the report, where agencies approached only one or a small  number of suppliers, competition was limited, and it was more difficult for  audited agencies to demonstrate that value for money was achieved. 

Bureau of Meteorology  

3.38 Agreed.  The  Bureau  is  implementing  improvements  to  current  shortlisting  and selection practices to more effectively evaluate and document value for money. 

                                                      

71 Joint Committee of Public Accounts and Audit, Report 423: Review of Auditor-General’s Reports Nos 39 2009-10 to 15 2010-11, Chapter 4, paragraph 4.99, stated in relation to documenting value for money for individual procurements: ‘the Committee considers that undocumented processes should be viewed with high levels of suspicion. In these circumstances, the Committee is of the opinion that the default assumption should be that ‘if it’s not documented, it’s not done’, hence value for money is unlikely to have been achieved’. 72 Finance has advised that to establish value for money, a selection process of two or more MUL

members should be undertaken, specifically where the expected value of the contract will be more than $80 000.

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This will also extend to including the criteria for evaluating value for money in all  future  MUL  tender  documentation  to  assist  tenderers.  Further  training  will  be  provided  to  relevant  Bureau  staff  to  ensure  the  improved  processes  are  fully  implemented. 

Department of Industry   

3.39 Agreed. The Department of Industry agrees with the recommendation. The  Department will undertake a review of its guidance material and make changes as  required to ensure that it provides adequate information on the requirements to obtain  and document value for money. 

Australian Crime Commission  

3.40 Agreed. 

Department of Defence 

3.41 Defence  acknowledges  this  recommendation  and  will  continue  to  meet  the  objectives of the LSMUL and the requirements of the Commonwealth Procurement  Rules. Defence agrees to concisely document the reason for the selection of suppliers  from the LSMUL as well as demonstrating the value for money considerations for  selecting  a  particular  supplier  in  our  procurement  documentation.  Policy  documentation and manuals will be updated to reflection this requirement.  

Department of Human Services 

3.42 Agree. The Department will amend its internal instructions relating to the use  of  multi‐use  lists  by  1  July  2014  to  require,  in  circumstances  where  only  some  potential suppliers on a multi‐use list are invited to make submissions in relation to a  particular procurement, the documentation of concise reasons for the short listing of  those suppliers. The Department currently requires the documentation of the basis for  selecting a particular supplier from a multi‐use list.  

Department of Finance  

3.43 Supported.  Adequate  documentation  and  records  are  an  assumed  internal  control to support agencies in their decision making processes relating to procurement.  Finance  notes  the  proposed  audit  findings  which  outline  issues  associated  with  establishing  and  procuring  from  pre‐registered  suppliers  on  a  multi‐use  list.  The  commentary  will  inform  continuing  discussions  with  the  established  network  of  procurement officials for the purposes of strengthening compliance with the CPRs.

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Reporting contracts on AusTender 3.44 Agencies must report contracts and amendments, including identifying  the procurement method used, on AusTender within 42 days of entering into  (or  amending)  a  contract  if  they  are  valued  at  or  above  the  reporting  threshold.73 In the case of a prequalified tender procurement from a MUL, the  procurement  method  reported  should  be  prequalified  tender.74  AusTender  provides a contract start and publication date for all procurements reported.  Using this data, ANAO analysed the timeliness of contract reporting for each  of the procurements reviewed.  

3.45 Contracts were reported within the required 42 day timeframe in: 

 all six BoM contracts;  

 22 of the 28 (79 per cent) Industry contracts; and  

 15 of the 16 (94 per cent) AGD contracts.  

However, as noted in paragraph 3.4 all of the contracts reviewed at BoM and  Industry,  and  the  majority  of  AGD  contracts  reviewed  did  not  fulfil  the  requirements  for  prequalified  tender.  The  contracts  were  reported  on  AusTender as prequalified tender but should have been reported as limited  tender.  

Other agencies’ use of the legal services multi-use list 3.46 As  noted  in  paragraph  1.13,  the  LSMUL  is  a  whole‐of‐government  procurement  arrangement.  The  two  main  options  for  agencies  in  using  the  LSMUL  are  to  approach  the  LSMUL  for  individual  matters  each  time  they  arise, or establish parcelling arrangements for legal work particularly where  the work is likely to be of similar or repeated nature.  

3.47 When using the LSMUL for individual pieces of work, agencies may  invite all or some of the listed service providers in the relevant category of 

                                                      

73 The MULs examined in this audit were established under the Commonwealth Procurement Guidelines. The audit sample for testing of individual procurements covered contracts that had been entered into between 1 July 2012 and 30 September 2013 and therefore the CPRs applied. 74 When reporting the procurement method for a contract, officials must base their decision on the CPRs

definition and procedural requirements for Open Tender, Prequalified tender or Limited tender. In the case of a prequalified tender from a multi-use list, the procurement method will be Prequalified tender. Finance, Buying for the Australian Government, Contracts and Agency Agreements, Practice [Internet] available from [accessed May 2014].

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Reporting contracts on AusTender 3.44 Agencies must report contracts and amendments, including identifying  the procurement method used, on AusTender within 42 days of entering into  (or  amending)  a  contract  if  they  are  valued  at  or  above  the  reporting  threshold.73 In the case of a prequalified tender procurement from a MUL, the  procurement  method  reported  should  be  prequalified  tender.74  AusTender  provides a contract start and publication date for all procurements reported.  Using this data, ANAO analysed the timeliness of contract reporting for each  of the procurements reviewed.  

3.45 Contracts were reported within the required 42 day timeframe in: 

 all six BoM contracts;  

 22 of the 28 (79 per cent) Industry contracts; and  

 15 of the 16 (94 per cent) AGD contracts.  

However, as noted in paragraph 3.4 all of the contracts reviewed at BoM and  Industry,  and  the  majority  of  AGD  contracts  reviewed  did  not  fulfil  the  requirements  for  prequalified  tender.  The  contracts  were  reported  on  AusTender as prequalified tender but should have been reported as limited  tender.  

Other agencies’ use of the legal services multi-use list 3.46 As  noted  in  paragraph  1.13,  the  LSMUL  is  a  whole‐of‐government  procurement  arrangement.  The  two  main  options  for  agencies  in  using  the  LSMUL  are  to  approach  the  LSMUL  for  individual  matters  each  time  they  arise, or establish parcelling arrangements for legal work particularly where  the work is likely to be of similar or repeated nature.  

3.47 When using the LSMUL for individual pieces of work, agencies may  invite all or some of the listed service providers in the relevant category of 

                                                      

73 The MULs examined in this audit were established under the Commonwealth Procurement Guidelines. The audit sample for testing of individual procurements covered contracts that had been entered into between 1 July 2012 and 30 September 2013 and therefore the CPRs applied.

74 When reporting the procurement method for a contract, officials must base their decision on the CPRs definition and procedural requirements for Open Tender, Prequalified tender or Limited tender. In the case of a prequalified tender from a multi-use list, the procurement method will be Prequalified tender. Finance, Buying for the Australian Government, Contracts and Agency Agreements, Practice [Internet] available from [accessed May 2014].

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legal work to submit a quote. As discussed in paragraph 3.22 if an agency  estimates that the expected cost of the required legal services to be purchased  is less than the relevant procurement thresholds, then the agency may make a  decision based on a single quote from a service provider on the LSMUL. If the  estimated  amount  for  legal  services  will  be  at,  or  above,  the  relevant  procurement thresholds, agencies must select two or more service providers on  the  LSMUL  to  supply  quotes  and  must  have  regard  to  the  minimum  time  limits  set  out  in  the  CPRs  for  potential  suppliers  to  prepare  and  lodge  a  submission. In both cases the purchasing officer must have a reasonable degree  of confidence that value for money is achieved. 

3.48 Parcelling involves an agency approaching service providers from the  LSMUL  to  submit  detailed  quotes  for  parcels  of  legal  services  that,  individually, may be valued at or above the relevant procurement thresholds  amount. Parcels may range from a specific task or matter, to broader categories  of  work  required  over  a  period  of  time.  Parcelling  arrangements  would  be  suitable  for  those  agencies  with  high  volume  routine  matters,  with  a  more‐or‐less guaranteed level of work or expenditure or may also apply to  complex or high volume litigation matters.75 The LSMUL allows agencies to  establish parcels for any value through selecting a minimum of two service  providers  to  apply.  Agencies  undertake  a  competitive  value  for  money  assessment to establish the parcel and create a contractual relationship with  each  supplier.  Agencies  need  to  be  mindful  that  parcelling  can  reduce  competition, especially if agencies are too narrow in their selection process and  only select a small number of providers. 

3.49 Under the LSMUL guidance, where an agency establishes a parcel, it is  no longer necessary for that agency to conduct a prequalified tender process  for every purchase over $80 000, nor does the agency have to assess value for  money  for  individual  purchases  valued  above  the  relevant  threshold.  The  reason for this is that value for money is expected to have been assessed at the  point of establishing the parcel arrangement. The key factors agencies should  consider  when  establishing  and  procuring  legal  services  from  parcels  or  individually are outlined in Figure 3.2.  

                                                      

75 Attorney-General’s Department (AGD), Legal Services Multi-Use List Guidance Material paragraph 11.4, AGD [Internet].

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Figure 3.2: Procuring legal services from parcels or individually

 

Source: ANAO analysis.

3.50 ANAO  Audit  Report  No.31  2011-12  Establishment  and  Use  of  Procurement Panels, identified there are benefits and risks for both agencies and  suppliers in the establishment and use of panel arrangements. As parcelling  arrangements  are  similar  in  some  respects  to  panel  arrangements  many  of  these benefits and risks would still apply. In relation to parcelling under the  LSMUL, some  of  the  benefits  and risks  of  parcelling  for  both  agencies  and  suppliers, as compared to approaching the LSMUL for individual matters, are  outlined in Table 3.2. 

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Figure 3.2: Procuring legal services from parcels or individually

 

Source: ANAO analysis.

3.50 ANAO  Audit  Report  No.31  2011-12  Establishment  and  Use  of  Procurement Panels, identified there are benefits and risks for both agencies and  suppliers in the establishment and use of panel arrangements. As parcelling  arrangements  are  similar  in  some  respects  to  panel  arrangements  many  of  these benefits and risks would still apply. In relation to parcelling under the  LSMUL,  some  of  the  benefits  and risks  of  parcelling  for  both  agencies  and  suppliers, as compared to approaching the LSMUL for individual matters, are  outlined in Table 3.2. 

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Table 3.2: Potential benefits of parcel arrangements and risks to manage

Agencies

Benefits Risks to manage

 A prequalified tender process only needs to be carried out once.

 Aggregated demand may increase competition among suppliers and contribute to improved pricing, terms and conditions.

 Ability to build effective working relationships with suppliers who are familiar with the agency’s needs and preferences.

 If the process to establish the parcel is not sufficiently robust, value for money may not be achieved.

 If the scope of the parcel is defined too broadly or narrowly, this may affect suppliers’ pricing.

 The cost of managing the parcel may not be well understood—as a general principle, the greater the number of suppliers the greater the work in managing the parcel. Allowing other agencies to access the parcel may also increase costs.

Suppliers

Benefits Risks to manage

 Increased probability of future work (although work is not guaranteed), which assists forward planning.

 Familiarity with common process, terms, conditions and performance criteria for multiple requests for goods or services which can lead to lower costs.

 Being included in agencies’ parcel arrangements may enhance the supplier’s reputation in the market.

 If not invited or unsuccessful in applying to be on a parcel, there may be limited opportunity to undertake work for the agency for the period of the parcel arrangement. If a parcel is then used by other agencies, suppliers can have limited opportunities to work at several agencies.

 Small and medium enterprises may be disadvantaged by overstatement of procurement needs or onerous selection processes when agencies form parcels.

Source: ANAO analysis.

3.51 To reduce the risk that parcelling arrangements limit the achievement  of  the  LSMUL’s  overall  objectives  and  assist  in  ensuring  agencies  use  parcelling as intended, AGD requires that parcelling arrangements: 

 not exceed three years and be reviewed annually by the agency that  established the parcel76; 

 not  cover  all  of  an  agencies’  legal  services  requirements  in  a  single  arrangement for a fixed period or be established with a single provider;  

                                                      

76 This review is intended to enable agencies to take full advantage of any new entrants to the LSMUL since the initial parcelling arrangement was established, and to provide assurance agencies are achieving best value for money.

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 are not designed to frustrate the operation of the LSMUL; and 

 should seek to use or try a broader range of service providers that best  suits  its  needs  and  not  prevent  genuine  consideration  of  alternative  providers.77 

Agency approaches

3.52 In order to gain a broader understanding of how the LSMUL was being  used, the ANAO examined approaches to obtaining external legal services at  three  additional  agencies;  the  Australian  Crime  Commission  (ACC);  the  Department  of  Defence  (Defence)  and  the  Department  of  Human  Services  (DHS). ACC and DHS had both established parcelling arrangements whereas  Defence had not, and approached the LSMUL for each piece of work.  

3.53 Both ACC and DHS established their parcelling arrangements as they  considered parcelling to be the most practical way to meet their demand for  external  legal  services.  This  was  due  largely  to  the  need  to  allow  for  the  minimum time limits set out in the CPRs for potential suppliers to prepare and  lodge a submission for procurements estimated to be at or above the relevant  procurement thresholds. These agencies (and legal service providers) reported  that the LSMUL arrangements do not lend themselves to services required at  short  notice,  and  consequently  these  agencies  introduced  parcelling  arrangements.  

3.54 Agencies need to be mindful that parcelling incurs a cost on suppliers  and selection processes for inviting suppliers to apply for a parcel should not  be  too  narrow  or  run  counter  to  the  LSMUL  objectives.  In  addition,  it  is  reasonable that suppliers should be asked to provide detailed proposals for  parcelling to allow the agency to determine which service provider represents  best value for money, particularly when the value of parcel arrangements can  be in the millions of dollars and value for money was not assessed when the  supplier was included on the LSMUL.  

3.55 Key  findings  in  relation  to  the  establishment  of  parcelling  arrangements at ACC and DHS are provided in Table 3.3. 

                                                      

77 AGD, Legal Services Multi-Use List Guidance Material paragraph 11.6-7, AGD [internet].

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 are not designed to frustrate the operation of the LSMUL; and 

 should seek to use or try a broader range of service providers that best  suits  its  needs  and  not  prevent  genuine  consideration  of  alternative  providers.77 

Agency approaches

3.52 In order to gain a broader understanding of how the LSMUL was being  used, the ANAO examined approaches to obtaining external legal services at  three  additional  agencies;  the  Australian  Crime  Commission  (ACC);  the  Department  of  Defence  (Defence)  and  the  Department  of  Human  Services  (DHS). ACC and DHS had both established parcelling arrangements whereas  Defence had not, and approached the LSMUL for each piece of work.  

3.53 Both ACC and DHS established their parcelling arrangements as they  considered parcelling to be the most practical way to meet their demand for  external  legal  services.  This  was  due  largely  to  the  need  to  allow  for  the  minimum time limits set out in the CPRs for potential suppliers to prepare and  lodge a submission for procurements estimated to be at or above the relevant  procurement thresholds. These agencies (and legal service providers) reported  that the LSMUL arrangements do not lend themselves to services required at  short  notice,  and  consequently  these  agencies  introduced  parcelling  arrangements.  

3.54 Agencies need to be mindful that parcelling incurs a cost on suppliers  and selection processes for inviting suppliers to apply for a parcel should not  be  too  narrow  or  run  counter  to  the  LSMUL  objectives.  In  addition,  it  is  reasonable that suppliers should be asked to provide detailed proposals for  parcelling to allow the agency to determine which service provider represents  best value for money, particularly when the value of parcel arrangements can  be in the millions of dollars and value for money was not assessed when the  supplier was included on the LSMUL.  

3.55 Key  findings  in  relation  to  the  establishment  of  parcelling  arrangements at ACC and DHS are provided in Table 3.3. 

                                                      

77 AGD, Legal Services Multi-Use List Guidance Material paragraph 11.6-7, AGD [internet].

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Table 3.3: Establishment of parcelling arrangements in the Australian Crime Commission and the Department of Human Services

ACC DHS

  Parcel 1 Parcel 1 Parcel 2 Parcel 3

Documented reason to parcel        

Estimated annual value of parcel arrangement ($ million)

1 1.2 1.5 0.5

Criteria for shortlist documented       

Number of suppliers approached 3 7 11 6

RFQ documentation generally covered the matters outlined in sections 10.6-10.11 of the CPRs

       

Suppliers provided with at least 10 days to respond (a)

       

Formal record of evaluation of submissions        

Contracts reported on AusTender within 42 days   Five of seven contracts resulting from the parcels were reported on

time

Correct procurement method reported on AusTender   (b)     

Documented approval under FMA Regulation 9 for each contract resulting from the parcel

       

Source: ANAO analysis.

Note (a): The time limit for potential suppliers to lodge a submission must be at least 25 days from the date and time that an agency publishes an ATM for an open tender or a prequalified tender, except under certain circumstances where it is allowed to be no less than 10 days. This includes where the agency procures commercial goods and services.

78

Note (b): The procurement method for the DHS parcels has been changed on AusTender to reflect the fact they were prequalified procurements rather than open tender procurements.

3.56 A number of issues were identified during the ANAO’s review of the  parcelling arrangements. In particular: 

 In ACC, as the value of the contract was above $80 000 and the request  documentation  did  not  meet  the  mandatory  requirements  of  the 

                                                      

78 Finance, Commonwealth Procurement Rules, 2012, section 10.19

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CPRs,79 the establishment of the parcel was by default, under the CPRs  deemed to be a limited tender. Specifically, criteria for evaluation were  not  provided  to  the  potential  suppliers.  In  addition,  although  ACC  gave potential suppliers sufficient time, they were not given equal time.  To provide fairness in dealing with potential suppliers, suppliers must  be given the same opportunities to respond to a request for quote. 

 Both  agencies  reported  their  parcelling  contracts  incorrectly  on  AusTender. ACC reported it as a prequalified tender. Although ACC  considered that it had undertaken a prequalified tender, the way it was  undertaken  meant  that  it  was  a  limited  tender.  DHS  reported  the  contracts as open tender procurements when they had been undertaken  as prequalified tenders.  

Defence

3.57 Defence  determined  that  it  would  approach  the  LSMUL  for  each  individual legal matter. Defence advised this was a deliberate strategy in order  to assist in implementing one of the key objectives of the LSMUL—to open up  the  market  to  new  entrants.  Defence  highlighted  some  positive  experiences  with the LSMUL including. 

 That it had used a number of small regional service providers on the  LSMUL and considered it had obtained better value for money than it  would  have  under  its  previous  panel  arrangement  (which  included  large  and  medium  sized  service  providers).  Defence  considered  it  unlikely that such smaller firms would be able to successfully compete  for inclusion on a parcel. 

 The  LSMUL  allowed  Defence  to  follow  an  individual  lawyer  (with  extensive  knowledge  and  expertise  on  a  particular  matter)  as  they  changed their employment from one service provider to another, where  the  new  provider  was  on  the  LSMUL.  Under  its  previous  panel  arrangement when a lawyer moved firms Defence could no longer use  that lawyer if the new firm was not on the panel. However, only a few  providers  were  on  the  panel,  whereas  the  LSMUL  has  over 

                                                      

79 These include specifying the goods or services required, any conditions for participation, minimum time limits, content and format requirements and the evaluation criteria that would be used to assess the tenders. Agencies should include relevant evaluation criteria in request documentation to enable the proper identification, assessment and comparison of submissions on a fair, common and appropriately transparent basis.

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CPRs,79 the establishment of the parcel was by default, under the CPRs  deemed to be a limited tender. Specifically, criteria for evaluation were  not  provided  to  the  potential  suppliers.  In  addition,  although  ACC  gave potential suppliers sufficient time, they were not given equal time.  To provide fairness in dealing with potential suppliers, suppliers must  be given the same opportunities to respond to a request for quote. 

 Both  agencies  reported  their  parcelling  contracts  incorrectly  on  AusTender. ACC reported it as a prequalified tender. Although ACC  considered that it had undertaken a prequalified tender, the way it was  undertaken  meant  that  it  was  a  limited  tender.  DHS  reported  the  contracts as open tender procurements when they had been undertaken  as prequalified tenders.  

Defence

3.57 Defence  determined  that  it  would  approach  the  LSMUL  for  each  individual legal matter. Defence advised this was a deliberate strategy in order  to assist in implementing one of the key objectives of the LSMUL—to open up  the  market  to  new  entrants.  Defence  highlighted  some  positive  experiences  with the LSMUL including. 

 That it had used a number of small regional service providers on the  LSMUL and considered it had obtained better value for money than it  would  have  under  its  previous  panel  arrangement  (which  included  large  and  medium  sized  service  providers).  Defence  considered  it  unlikely that such smaller firms would be able to successfully compete  for inclusion on a parcel. 

 The  LSMUL  allowed  Defence  to  follow  an  individual  lawyer  (with  extensive  knowledge  and  expertise  on  a  particular  matter)  as  they  changed their employment from one service provider to another, where  the  new  provider  was  on  the  LSMUL.  Under  its  previous  panel  arrangement when a lawyer moved firms Defence could no longer use  that lawyer if the new firm was not on the panel. However, only a few  providers  were  on  the  panel,  whereas  the  LSMUL  has  over 

                                                      

79 These include specifying the goods or services required, any conditions for participation, minimum time limits, content and format requirements and the evaluation criteria that would be used to assess the tenders. Agencies should include relevant evaluation criteria in request documentation to enable the proper identification, assessment and comparison of submissions on a fair, common and appropriately transparent basis.

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100 providers and new providers can be easily added if not already on  it.  Defence  advised  that  the  previous  arrangement  resulted  in  considerable additional costs and delays as another lawyer (from the  service provider on the panel) would have to familiarise themselves  with the work already undertaken.  

3.58 The ANAO reviewed seven Defence contracts valued above $80 000.  Four of the seven procurements conducted by Defence did not allow suppliers  the minimum time limit required under the CPRs to meet the requirements for  prequalified tender. As a result, they are deemed to have been conducted as  limited  tender  procurements.  A  summary  of  the  results  of  the  review  of  contracts in Defence is outlined in Table 3.4.  

Table 3.4: Summary of key results of review of Defence contracts

 

Overall result General comments

Contract values - Ranged from $80 000 to over $1 million

Number of suppliers approached

- Ranged from two to ten

Documented rationale for short listing of suppliers  Only three of seven processes documented reasons for supplier short listing

Request documentation generally covered the matters outlined in sections 10.6- 10.11 of the CPRs except for timeframes

 Typically request documentation outlined background information, the type of legal services required, the number of suppliers invited to submit responses, the evaluation criteria; any conditions or for submissions (including page limits) and the deadline for submission

Suppliers provided with at least 10 days to respond  Only three of the seven contracts examined met minimum time limits

Formal record of evaluation of submissions 

Contracts reported on AusTender within 42 days 

Correct procurement method reported on AusTender  Three of the seven contacts were reported correctly as prequalified tender. The remainder

should have been reported as limited tender

Documented approval under FMA Regulation 9 for each contract



Source: ANAO analysis.

3.59 Details of the additional audited agencies approaches and how they  relate to the key objectives of the LSMUL are outlined in Table 3.5.  

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Table 3.5: Agencies’ approaches to the legal services multi-use list and how they relate to its key objectives

Objective of the LSMUL Met the objectives of the LSMUL

Provided a streamlined approach

Yes

ACC & DHS parcels: Once established ACC’s and DHS’s parcels potentially reduced red tape as it was no longer necessary for the agencies to assess value for money for each individual purchase valued above $80 000.The parcels also allowed services to be provided quickly. Defence: For each procurement above $80 000 Defence needs to conduct a prequalified tender in accordance with Division 2 of the CPRs. Suppliers must be given at least 10 days to respond to a request for a submission. As Defence uses standard LSMUL terms and conditions it can reduce red tape compared to other procurement alternatives.

Opened up the market, increased competition and sharpened pricing from providers

Potentially yes

ACC & DHS parcels: A competitive process was undertaken to join each parcel set up by ACC and DHS. However, once established work was effectively guaranteed. DHS gave higher performing service providers a larger proportion of the available work. Some providers reported parcels as potentially limiting competition. If providers missed out on being included on a parcel; or were not invited to apply or unsuccessful, then they would be locked out for up to three years. Providers reported problems in relation to piggybacking on parcel arrangements which may result in increased rates in the longer run. Providers having tailored their rates

based on their knowledge of the client and estimate of the value of work to be obtained are affected by other agencies piggybacking on the initial arrangement. Defence: Based on a sample of seven contracts Defence on average approached four suppliers for each piece of work. Six of seven contracts were awarded to different service providers which supports competition.

Assist agencies become more informed purchasers

All three agencies generally shortlisted providers (for either inclusion in a parcelling arrangement or for individual work directly from the LSMUL), on the basis of previous knowledge of the service providers or experience with both the subject matter and the agency. Parcelling potentially allowed ACC and DHS to develop a closer relationship with a smaller number of providers. Alternatively Defence’s approach potentially allowed it to work with a broader range of service providers including some small providers in regional locations. Either approach can influence the extent to which agencies become more informed purchasers. Ultimately, as reflected in the comments provided to the ANAO from service providers, some agencies and some staff within agencies are informed purchasers and undertake the procurement of legal services well.

Provided flexibility to purchase from the MUL

Yes

The different approaches adopted indicate the flexibility available to agencies.

Source: ANAO analysis.

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Table 3.5: Agencies’ approaches to the legal services multi-use list and how they relate to its key objectives

Objective of the LSMUL Met the objectives of the LSMUL

Provided a streamlined approach

Yes

ACC & DHS parcels: Once established ACC’s and DHS’s parcels potentially reduced red tape as it was no longer necessary for the agencies to assess value for money for each individual purchase valued above $80 000.The parcels also allowed services to be provided quickly. Defence: For each procurement above $80 000 Defence needs to conduct a prequalified tender in accordance with Division 2 of the CPRs. Suppliers must be given at least 10 days to respond to a request for a submission. As Defence uses standard LSMUL terms and conditions it can reduce red tape compared to other procurement alternatives.

Opened up the market, increased competition and sharpened pricing from providers

Potentially yes

ACC & DHS parcels: A competitive process was undertaken to join each parcel set up by ACC and DHS. However, once established work was effectively guaranteed. DHS gave higher performing service providers a larger proportion of the available work. Some providers reported parcels as potentially limiting competition. If providers missed out on being included on a parcel; or were not invited to apply or unsuccessful, then they would be locked out for up to three years. Providers reported problems in relation to piggybacking on parcel arrangements which may result in increased rates in the longer run. Providers having tailored their rates based on their knowledge of the client and estimate of the value of work to be obtained are affected by other agencies piggybacking on the initial arrangement. Defence: Based on a sample of seven contracts Defence on average approached four suppliers for each piece of work. Six of seven contracts were awarded to different service providers which supports competition.

Assist agencies become more informed purchasers

All three agencies generally shortlisted providers (for either inclusion in a parcelling arrangement or for individual work directly from the LSMUL), on the basis of previous knowledge of the service providers or experience with both the subject matter and the agency. Parcelling potentially allowed ACC and DHS to develop a closer relationship with a smaller number of providers. Alternatively Defence’s approach potentially allowed it to work with a broader range of service providers including some small providers in regional locations. Either approach can influence the extent to which agencies become more informed purchasers. Ultimately, as reflected in the comments provided to the ANAO from service providers, some agencies and some staff within agencies are informed purchasers and undertake the procurement of legal services well.

Provided flexibility to purchase from the MUL

Yes

The different approaches adopted indicate the flexibility available to agencies.

Source: ANAO analysis.

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Agency and service provider views on the use of the LSMUL

3.60 As previously mentioned in paragraph 2.36, the ANAO consulted with  a range of service providers to ascertain their views on the use of the LSMUL.  

Streamlined approach

 A  number  of  service  providers  indicated  frustration  at  agencies  not  making use of information already provided as part of the application  for inclusion process. Often providers were required to either replicate  this  information  or  provide  it  in  a  very  similar  fashion  when  being  approached to quote. 

 Most providers indicated they were asked to provide quotes more often  than under previous arrangements.80 In some cases the quotes were for  very small values, under $1000. This approach is inconsistent with the  principles expressed in the LSMUL guidance as multiple quotes are not  mandated  for  procurements  under  the  relevant  procurement  thresholds.  For  all  low  value  procurements,  the  only  mandatory  requirement is that the delegate needs to be satisfied the procurement  achieves a value for money outcome. 

 Some  service  providers  indicated  meeting  agency  internal  reporting  demands  was  difficult  and  time  consuming,  particularly  where  agencies  required  different  information  in  different  ways  and  at  different  times.  Service  providers  considered  a  consistent  form  of  reporting across agencies would assist in streamlining the procurement  of legal services. 

Has the LSMUL resulted in user agencies becoming more informed purchasers?

 Service  providers  indicated  that  some  agencies  were  more  informed  purchasers and undertook the procurement of legal services well.  A  number of providers considered better results were usually achieved  when the procurement of legal services was centralised. Providers also  noted that agencies may become better informed as experience with the  MUL increases. 

                                                      

80 Prior to the introduction of the LSMUL under the (then) Legal Services Directions, legal services providers that were party to a deed of standing offer such as in a panel arrangement could only be asked to quote for legal services if the value of the services to be provided was likely to exceed $80 000; or the expertise of the panel was to be tested for a new area of work. This requirement has been removed from the current version.

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 A  review  of  the  LSMUL  in  2013  by  AGD  identified  that  the  decentralised  arrangements  within  agencies  (for  the  procurement  of  legal services) can reduce the efficiency and effectiveness of procuring  services from external legal services providers. In addition, the LSMUL  IT  system  does  not  provide  sufficient  information  to  agencies,  to  support them to be informed purchasers of legal services and there was  scope for the department to consider options for a new system with  more sophisticated capability. 

Has the LSMUL provided flexibility to purchase from the MUL in a variety of ways while still achieving value for money?

 Both service providers and AGD identified that agencies are currently  using a number of different approaches to procure from the LSMUL,  including practices that are inconsistent with the intent of the LSMUL,  and may not be achieving value for money for agencies. This finding is  consistent with the results of this audit.  

Conclusion 3.61 When  using  streamlined  approaches  such  as  MULs,  agencies  must  undertake  procurements  in  a  manner  that  is  consistent  with  the  CPRs.  Common areas where agencies did not adhere to requirements of the CPRs  included  approaching  too  few  suppliers,  providing  insufficient  time  for  suppliers  to  respond  to  requests  for  work  and  not  treating  suppliers  consistently. Consequently agencies’ approaches, to varying degrees, were not  fully  effective  in  satisfying  the  procurement  principles,  which  among  other  things encourage fair and open competition.  

3.62 The ANAO reviewed procurements at BoM, Industry and AGD which  had  been  undertaken  from  MULs.  All  of  the  procurements  at  BoM  and  Industry, and the majority of procurements at AGD, did not meet the CPR  requirements for prequalified tender. In BoM, the majority of procurements  examined involved direct approaches to suppliers who were not on a MUL  and therefore were not prequalified. All of Industry’s procurements and most  of AGD’s did not involve an appropriately competitive process, or sufficient  time  for  supplier  responses.  When  considered  against  the  CPRs,  these  procurements did not meet the requirements of prequalified tender and can  only be classed as a limited tender, by default. However, in several respects a  number  of  procurements  examined  by  the  ANAO  also  failed  to  meet  conditions established in the CPRs for limited tender.  

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 A  review  of  the  LSMUL  in  2013  by  AGD  identified  that  the  decentralised  arrangements  within  agencies  (for  the  procurement  of  legal services) can reduce the efficiency and effectiveness of procuring  services from external legal services providers. In addition, the LSMUL  IT  system  does  not  provide  sufficient  information  to  agencies,  to  support them to be informed purchasers of legal services and there was  scope for the department to consider options for a new system with  more sophisticated capability. 

Has the LSMUL provided flexibility to purchase from the MUL in a variety of ways while still achieving value for money?

 Both service providers and AGD identified that agencies are currently  using a number of different approaches to procure from the LSMUL,  including practices that are inconsistent with the intent of the LSMUL,  and may not be achieving value for money for agencies. This finding is  consistent with the results of this audit.  

Conclusion 3.61 When  using  streamlined  approaches  such  as  MULs,  agencies  must  undertake  procurements  in  a  manner  that  is  consistent  with  the  CPRs.  Common areas where agencies did not adhere to requirements of the CPRs  included  approaching  too  few  suppliers,  providing  insufficient  time  for  suppliers  to  respond  to  requests  for  work  and  not  treating  suppliers  consistently. Consequently agencies’ approaches, to varying degrees, were not  fully  effective  in  satisfying  the  procurement  principles,  which  among  other  things encourage fair and open competition.  

3.62 The ANAO reviewed procurements at BoM, Industry and AGD which  had  been  undertaken  from  MULs.  All  of  the  procurements  at  BoM  and  Industry, and the majority of procurements at AGD, did not meet the CPR  requirements for prequalified tender. In BoM, the majority of procurements  examined involved direct approaches to suppliers who were not on a MUL  and therefore were not prequalified. All of Industry’s procurements and most  of AGD’s did not involve an appropriately competitive process, or sufficient  time  for  supplier  responses.  When  considered  against  the  CPRs,  these  procurements did not meet the requirements of prequalified tender and can  only be classed as a limited tender, by default. However, in several respects a  number  of  procurements  examined  by  the  ANAO  also  failed  to  meet  conditions established in the CPRs for limited tender.  

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3.63 In addition, complete and accurate documentation providing concise  information on the achievement of value for money and relevant decisions,  was not maintained for all procurements at each audited agency.  

3.64 In relation to the use of the LSMUL, AGD has sought to develop an  innovative procurement solution to resolve a long standing issue in relation to  the procurement of legal services by Australian Government agencies. Audited  agencies and legal service providers reported that the arrangements do not  lend  themselves  to  services  required  at  short  notice:  two  audited  agencies  (ACC  and  DHS)  have  introduced  parcelling  arrangements  to  accommodate  this. While parcelling can overcome CPR timing issues the approach, which  can be similar to limited tender, can also reduce competition and new and  small providers may face difficulties entering such an arrangement. Agencies  need  to  be  mindful  that  parcelling  incurs  a  cost  on  suppliers  and  selection  processes for inviting suppliers to apply for a parcel should not be too narrow  or run counter to the LSMUL objectives. There is merit in AGD and Finance  working together to reinforce the obligation to achieve value for money and  share agency experiences with using the LSMUL.  

 

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4. Procurement Support and Review

This  chapter  examines  the  audited  agencies’  arrangements  to  support  their  procurement  activity.  These  include  procurement  policy  and  guidance,  the  role  of  central procurement units, training and monitoring and review arrangements.  

Introduction 4.1 The  Commonwealth  Procurement  Rules  (CPRs)  represent  the  Government’s  policy  framework  under  which  agencies  undertake  procurement. The CPRs are supported by guidance material prepared by the  Department of Finance (Finance).81 Agencies determine their own procurement  practices,  consistent  with  the  CPRs,  through  Chief  Executive’s  Instructions  (CEIs) and, if appropriate, supporting operational guidelines. Agency central  procurement  units  (CPUs)  are  internal  units  containing  procurement  specialists  used  by  agencies  to  advise  staff  and  delegates  in  undertaking  appropriate  procurement  processes.  Generally  it  would  be  expected  that  relevant staff would be provided with appropriate training to enable them to  understand  the  requirements  of  the  CPRs  and  the  agency’s  CEIs  when  conducting procurements.  

4.2 Procurement monitoring and review is also an important activity for  agencies to determine the performance of their procurement activities and to  inform  future  procurement  planning  and  management.  Understanding  the  nature  and  value  of  agencies’  procurement  and  extent  of  use  of  different  suppliers, need not be an onerous process and can assist agencies to adopt  efficient ways to approach the market and achieve better value for money.  

4.3 For each audited agency, the ANAO examined: 

 procurement policy and guidance; 

 the role of the CPU, including the provision of specialist procurement  advice;  

 the provision of procurement training to delegates and staff; and 

 monitoring and review arrangements.  

                                                      

81 Guidance material can be found on the Finance website available from [accessed May 2014].

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4. Procurement Support and Review

This  chapter  examines  the  audited  agencies’  arrangements  to  support  their  procurement  activity.  These  include  procurement  policy  and  guidance,  the  role  of  central procurement units, training and monitoring and review arrangements.  

Introduction 4.1 The  Commonwealth  Procurement  Rules  (CPRs)  represent  the  Government’s  policy  framework  under  which  agencies  undertake  procurement. The CPRs are supported by guidance material prepared by the  Department of Finance (Finance).81 Agencies determine their own procurement  practices,  consistent  with  the  CPRs,  through  Chief  Executive’s  Instructions  (CEIs) and, if appropriate, supporting operational guidelines. Agency central  procurement  units  (CPUs)  are  internal  units  containing  procurement  specialists  used  by  agencies  to  advise  staff  and  delegates  in  undertaking  appropriate  procurement  processes.  Generally  it  would  be  expected  that  relevant staff would be provided with appropriate training to enable them to  understand  the  requirements  of  the  CPRs  and  the  agency’s  CEIs  when  conducting procurements.  

4.2 Procurement monitoring and review is also an important activity for  agencies to determine the performance of their procurement activities and to  inform  future  procurement  planning  and  management.  Understanding  the  nature  and  value  of  agencies’  procurement  and  extent  of  use  of  different  suppliers, need not be an onerous process and can assist agencies to adopt  efficient ways to approach the market and achieve better value for money.  

4.3 For each audited agency, the ANAO examined: 

 procurement policy and guidance; 

 the role of the CPU, including the provision of specialist procurement  advice;  

 the provision of procurement training to delegates and staff; and 

 monitoring and review arrangements.  

                                                      

81 Guidance material can be found on the Finance website available from [accessed May 2014].

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Policy and guidance 4.4 Complete, informative and up to date policy and guidance is important  to foster a good understanding of an agency’s procurement responsibilities,  and to support the consistent application of sound practices throughout the  agency. Delegates and staff must conduct procurements in accordance with the  CPRs and their agency’s CEIs and relevant operational guidelines, which in  turn must be consistent with the CPRs. 

4.5 All  audited  agencies  had  CEIs  in  place  that  covered  procurement  processes,  consistent  with  the  model  CEIs  issued  by  Finance.  In  relation  to  multi‐use lists (MULs) specifically, agency CEIs and procurement guidance on  the  establishment  and  use  of  MULs  accorded  with  the  requirements  of  the  CPRs.  

4.6 In addition, both AGD and Industry had systems in place to assist in  the  documentation  of  procurement  activities.  AGD  requires  staff  to  use  its  procurement system when undertaking procurements of $10 000 or more. The  system assists in establishing an official record of the procurement activity and  includes  inbuilt  checks,  such  as  providing  assurance  that  commitments  to  spend  public  money  may  only  be  made  by  officials  with  appropriate  delegation. Industry’s procurement management system is a component of its  Financial Management Information System (FMIS) and is used to obtain and  record approvals, record and report on agreements with suppliers and raise  purchase orders. 

4.7 During  2013  and  2014,  BoM  was  in  the  process  of  implementing  significant  changes  to  its  procurement  processes.  The  changes  underway  included the design, trial and implementation of new procurement policies,  procedures and processes, including online courses for delegates and agency  wide training. These changes were in response to a 2011 internal review82 of  procurement processes which had observed: 

                                                      

82 The internal review made seven recommendations aimed at making sure the procurement model at BoM became: more sustainable; compliant with the CPGs; more focused strategic planning; and where project management, accountability and risk management was appropriately delegated. BoM accepted all of the recommendations in the review and developed an action plan to address the issues identified. O’Connor Marsden & Associates Pty Limited, Bureau of Meteorology Procurement Review, October 2011 to December 2011, 2012.

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 the procurement model and practices in operation at that time were not  effective  or  efficient  and  did  not  support  achievement  of  value  for  money; 

 the procurement model was unsustainable and non‐compliant with the  then Commonwealth Procurement Guidelines83 and agency CEIs; and 

 there  was  inadequate  probity  management  on  high  value  procurements.  

4.8 As  an  interim  measure  BoM  has  issued  draft  guidance  to  assist  in  procurement activities until its new arrangements are in place.  

4.9 The ANAO’s analysis of the policy and guidance established by the  three audited agencies is summarised in Table 4.1. 

Table 4.1 Assessment of audited agencies’ procurement policy and guidance as at October 2013

Policy/guidance BoM Industry AGD

Addressed relevant requirements under the FMA Act and FMA Regulations   

Addressed requirements of the CPRs   

Clearly articulated agency procurement roles and responsibilities   

Readily accessible   

Up-to-date *  

Source: The ANAO analysis of audited agencies’ procurement policy and guidance material

Legend:  not adequate or not finalised and only in draft form; : generally satisfactory, with scope to improve; : satisfactory

Note*: The ANAO’s assessment was done on the draft guidance. 84

Role of central procurement units 4.10 ANAO  has  previously  commented  on  the  benefits  of  agencies  maintaining  a  CPU  to  provide  specialist  advice  and  support  when  procurement responsibilities are devolved within the agency.85 CPUs are also  generally  well  placed  to  identify  and  pursue  more  efficient  purchasing 

                                                      

83 The Commonwealth Procurement Guidelines were superseded by the CPRs in July 2012. 84 BoM advised that it would use the results of this audit to inform changes to its procurement policy and guidance and therefore would not issue its revised guidance until this audit had been finalised. 85 For example, in ANAO Audit Report No.11 2010-11 Direct Source Procurement, ANAO found greater

levels of compliance with the Commonwealth Procurement Guidelines where an agency required CPU involvement in decisions to direct source higher value procurements, pp. 121-122.

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 the procurement model and practices in operation at that time were not  effective  or  efficient  and  did  not  support  achievement  of  value  for  money; 

 the procurement model was unsustainable and non‐compliant with the  then Commonwealth Procurement Guidelines83 and agency CEIs; and 

 there  was  inadequate  probity  management  on  high  value  procurements.  

4.8 As  an  interim  measure  BoM  has  issued  draft  guidance  to  assist  in  procurement activities until its new arrangements are in place.  

4.9 The ANAO’s analysis of the policy and guidance established by the  three audited agencies is summarised in Table 4.1. 

Table 4.1 Assessment of audited agencies’ procurement policy and guidance as at October 2013

Policy/guidance BoM Industry AGD

Addressed relevant requirements under the FMA Act and FMA Regulations   

Addressed requirements of the CPRs   

Clearly articulated agency procurement roles and responsibilities   

Readily accessible   

Up-to-date *  

Source: The ANAO analysis of audited agencies’ procurement policy and guidance material

Legend:  not adequate or not finalised and only in draft form; : generally satisfactory, with scope to improve; : satisfactory

Note*: The ANAO’s assessment was done on the draft guidance. 84

Role of central procurement units 4.10 ANAO  has  previously  commented  on  the  benefits  of  agencies  maintaining  a  CPU  to  provide  specialist  advice  and  support  when  procurement responsibilities are devolved within the agency.85 CPUs are also  generally  well  placed  to  identify  and  pursue  more  efficient  purchasing 

                                                      

83 The Commonwealth Procurement Guidelines were superseded by the CPRs in July 2012. 84 BoM advised that it would use the results of this audit to inform changes to its procurement policy and guidance and therefore would not issue its revised guidance until this audit had been finalised. 85 For example, in ANAO Audit Report No.11 2010-11 Direct Source Procurement, ANAO found greater

levels of compliance with the Commonwealth Procurement Guidelines where an agency required CPU involvement in decisions to direct source higher value procurements, pp. 121-122.

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arrangements,  provide  advice  and  support  procurement  practices  that  encourage competition and enhance value for money.  

4.11 The specific responsibilities given to CPUs vary according to the extent  of devolution of procurement responsibilities within an agency.86 At each of  the three agencies the responsibility for the development and maintenance of  procurement  policies  and  systems  and  coordinating  the  publication  of  contracts  in  accordance  with  the  CPRs  was  centralised  with  the  CPU.  The  conduct  of  procurements  and  contract  management  was  devolved  to  the  particular business areas or division. In Industry, some of the divisions (such  as  Questacon)  also  had  administrative  units  as  a  first  point  of  contact  for  procurement support within the division. 

4.12 In each agency, the CPU had an advisory role providing support when  requested  in  relation  to  individual  procurements.  In  BoM  and  Industry  the  CPU must be consulted for procurements valued at or above $80 000 and all  requests  for  tender  are  required  to  be  reviewed  by  the  CPU.  The  ANAO  observed instances of review of MUL procurements provided by the CPU in  BoM  and  Industry,  where  the  CPU  had  raised  concerns  regarding  the  proposed or the actual process undertaken. However, it was not apparent that  these reviews had influenced the procurement process to improve compliance  with the CPRs and/or internal requirements.  

4.13 For example: 

 in  BoM,  one  of  the  procurements  over  $80 000  had  expenditure  approved  by  the  delegate  however,  the  CPU  noted  not  endorsed  no  procurement process followed, and  

 in Industry there were a small number of cases where the CPU noted  concerns  about  the  lack  of  evidence  supporting  claims  of  value  for  money and identified such issues as the need for the delegate to be  provided with information indicating the purchases were from a MUL  and the number and identity of suppliers approached.  

4.14 In AGD there were no mandatory thresholds or procurement processes  that required staff to advise/consult or involve the CPU for procurement of 

                                                      

86 CPUs’ responsibilities may include: strategic procurement planning; oversight or management of procurement processes; provision of procurement advice and support; development and maintenance of procurement policy and guidance; provision of procurement training; monitoring of agency procurement activity; and management of contract data and reporting.

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legal services. In relation to the LSMUL, responsibility for the establishment of  guidance material for the use of the LSMUL rested with AGD’s Office of Legal  Services Coordination (OLSC).  

4.15 The  ANAO  considers  that,  in  some  cases,  agencies’  decisions  to  establish and use MULs may have been different had the agencies’ CPUs been  more involved in the earlier stages of the procurement process. In view of the  matters identified more broadly in this audit, the ANAO considers there is  merit  in  agencies  establishing  processes  to  increase  the  input  of  CPUs  into  decisions regarding the establishment of MULs.  

Procurement training 4.16 Effectively planning and managing a procurement process requires a  range  of  skills,  and  an  understanding  of  legislative,  policy  and  agency  procurement requirements. Procurement training needs of individual officials  vary depending on personal experience, previous training, and the extent of  specialist procurement advice and support provided within the agency.  

4.17 The extent that agency staff are involved in procurement varies from  regular to infrequent depending on the position they are in and the nature of  the  agency’s  work.  This  poses  a  challenge  for  agencies  in  providing  procurement training that is well‐timed and suited to staff responsibilities and  capabilities.  

4.18 Each of the agencies had made procurement training available to staff  including in relation to prequalified tendering. Generally staff attendance was  voluntary. Audit findings outlined in the preceding chapters indicate that the  establishment and, in particular, the use of MULs is generally not understood  by agency staff. The ANAO considers agencies would benefit by reinforcing in  their training the requirements relating to prequalified tender.  

Monitoring and review arrangements 4.19 Effective  procurement  monitoring  and  review  enables  agencies  to  assess whether their procurement objectives are being met and inform future  procurement planning and management. The ANAO examined the extent to  which agencies had reviewed whether the establishment and use of MULs was  enabling them to meet their procurement objectives and adhere to the CPR  requirements. 

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Periodic assessment

4.20 In addition to benefits derived from routine monitoring and reporting  on procurement activity, there is also value in agencies periodically assessing  the  efficiency,  effectiveness  and  value  for  money  provided  by  MUL  procurement. Such assessment activity could consider: 

 the volume, nature and relative cost of procurements under the MUL; 

 the spread of work between suppliers;  

 the performance of suppliers; and  

 whether the agency is realising the anticipated efficiencies  identified  when planning the establishment of the MUL.  

4.21 Conducting such assessment at an appropriate time in the lifecycle of a  MUL can also assist with monitoring the use and performance of suppliers;  and planning for future procurements. This includes whether a MUL is the  most effective procurement method to use, and if so, the appropriate scope,  rules of operation and process for selecting suppliers.  

4.22 BoM and Industry had not formally assessed the performance of MULs.  In relation to the LSMUL, AGD undertook consultation with key stakeholders  after the first 12 months of operation. In addition, AGD undertook an internal  review of the LSMUL in 2013, approximately one year after its introduction.  The review included evaluating the risks to AGD of managing the LSMUL,  obtaining AGD’s experiences and surveying suppliers and users from other  Commonwealth agencies. The review made three key findings including: 

 the  current  LSMUL  IT  System  does  not  provide  sufficient  information  to  agencies, to support them to be informed purchasers of legal services87 and  there  is  scope  for  the  department  to  improve  the  system;  and  to  consider  options for a new system with more sophisticated capability; 

 the  current  decentralised  arrangements  within  the  department  for  the  procurement  of  legal  services  reduce  the  efficiency  and  effectiveness  of  procuring services from external legal services providers; and 

                                                      

87 Noting that the current LSMUL IT System was developed as an interim system solution, and has clear limitations, there is scope for the department to improve the system; and to consider options for a new system with more sophisticated capability.

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legal services. In relation to the LSMUL, responsibility for the establishment of  guidance material for the use of the LSMUL rested with AGD’s Office of Legal  Services Coordination (OLSC).  

4.15 The  ANAO  considers  that,  in  some  cases,  agencies’  decisions  to  establish and use MULs may have been different had the agencies’ CPUs been  more involved in the earlier stages of the procurement process. In view of the  matters identified more broadly in this audit, the ANAO considers there is  merit  in  agencies  establishing  processes  to  increase  the  input  of  CPUs  into  decisions regarding the establishment of MULs.  

Procurement training 4.16 Effectively planning and managing a procurement process requires a  range  of  skills,  and  an  understanding  of  legislative,  policy  and  agency  procurement requirements. Procurement training needs of individual officials  vary depending on personal experience, previous training, and the extent of  specialist procurement advice and support provided within the agency.  

4.17 The extent that agency staff are involved in procurement varies from  regular to infrequent depending on the position they are in and the nature of  the  agency’s  work.  This  poses  a  challenge  for  agencies  in  providing  procurement training that is well‐timed and suited to staff responsibilities and  capabilities.  

4.18 Each of the agencies had made procurement training available to staff  including in relation to prequalified tendering. Generally staff attendance was  voluntary. Audit findings outlined in the preceding chapters indicate that the  establishment and, in particular, the use of MULs is generally not understood  by agency staff. The ANAO considers agencies would benefit by reinforcing in  their training the requirements relating to prequalified tender.  

Monitoring and review arrangements 4.19 Effective  procurement  monitoring  and  review  enables  agencies  to  assess whether their procurement objectives are being met and inform future  procurement planning and management. The ANAO examined the extent to  which agencies had reviewed whether the establishment and use of MULs was  enabling them to meet their procurement objectives and adhere to the CPR  requirements. 

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 agencies are currently using a number of different approaches to procure from  the LSMUL including practices that are not in compliance with the intent of  the LSMUL, and may not be achieving value for money for agencies.  

4.23 In relation to the varying procurement practices adopted by agencies  the AGD’s review identified instances of agencies:  

 parcelling  all  legal  services  for  a  period  (as  distinct  from  discrete  groups of work); 

 parcelling disparate groups of work into a single parcel, and precluding  providers from tendering for the parcel unless they are able to perform  the full range of services; 

 requiring  service  providers  to  competitively  tender  for  individual  pieces of work under the parcel (whereas the establishment of a parcel  should negate the need for further tendering); and 

 requiring suppliers to provide information in tender responses which  has  already  been  assessed  through  the  OLSC’s  assessment  of  the  provider’s Application for Inclusion for the LSMUL.  

4.24 In  addition,  there  was  limited  cooperative  or  coordinated  procurement88 undertaken in relation to legal services.  

4.25 The  review  made  a  number  of  recommendations  to  address  the  findings  and  AGD  has  developed  an  action  plan  to  guide  its  progress  in  actioning each of the recommendations.  

4.26 Opportunities for improving the LSMUL identified during the course  of this audit, include: 

 quicker  access  to  legal  services—current  CPR  timeframes  for  procurement over the $80 000 thresholds require a minimum ten days  for supplier responses for commercial services. Where agencies require  services  within  the  ten  day  timeframe,  they  can  draw  on  the 

                                                      

88 Cooperative procurement enables the use of a procurement contract by more than one agency. This can be achieved through either a joint approach to the market and/or where an agency/ies establish a contract or standing offer arrangement that allows other agencies access (often referred to as piggybacking). Coordinated Procurement is a government initiative to establish whole-of-government arrangements for goods and services in common use to maximise market benefits and deliver efficiencies and savings. Where established, coordinated procurement arrangements are mandatory for agencies subject to the FMA Act [Internet] available from [accessed May 2014].

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 agencies are currently using a number of different approaches to procure from  the LSMUL including practices that are not in compliance with the intent of  the LSMUL, and may not be achieving value for money for agencies.  

4.23 In relation to the varying procurement practices adopted by agencies  the AGD’s review identified instances of agencies:  

 parcelling  all  legal  services  for  a  period  (as  distinct  from  discrete  groups of work); 

 parcelling disparate groups of work into a single parcel, and precluding  providers from tendering for the parcel unless they are able to perform  the full range of services; 

 requiring  service  providers  to  competitively  tender  for  individual  pieces of work under the parcel (whereas the establishment of a parcel  should negate the need for further tendering); and 

 requiring suppliers to provide information in tender responses which  has  already  been  assessed  through  the  OLSC’s  assessment  of  the  provider’s Application for Inclusion for the LSMUL.  

4.24 In  addition,  there  was  limited  cooperative  or  coordinated  procurement88 undertaken in relation to legal services.  

4.25 The  review  made  a  number  of  recommendations  to  address  the  findings  and  AGD  has  developed  an  action  plan  to  guide  its  progress  in  actioning each of the recommendations.  

4.26 Opportunities for improving the LSMUL identified during the course  of this audit, include: 

 quicker  access  to  legal  services—current  CPR  timeframes  for  procurement over the $80 000 thresholds require a minimum ten days  for supplier responses for commercial services. Where agencies require  services  within  the  ten  day  timeframe,  they  can  draw  on  the 

                                                      

88 Cooperative procurement enables the use of a procurement contract by more than one agency. This can be achieved through either a joint approach to the market and/or where an agency/ies establish a contract or standing offer arrangement that allows other agencies access (often referred to as piggybacking). Coordinated Procurement is a government initiative to establish whole-of-government arrangements for goods and services in common use to maximise market benefits and deliver efficiencies and savings. Where established, coordinated procurement arrangements are mandatory for agencies subject to the FMA Act [Internet] available from [accessed May 2014].

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exemptions in the CPRs if they qualify, or put in place an alternative  arrangement such as a parcel; and  

 greater  transparency  and  rigour  built  into  agency  level  parcelling  approaches—the LSMUL allows agencies to establish parcels for any  value through selecting a minimum of two service providers to apply.  This  approach  is  not  significantly  different  to  limited  tender  (which  allows a direct approach to one provider) and can reduce competition.  

Conclusion 4.27 Many  procurement  processes  involve  complex  requirements  and  judgements and it is important that agency staff have, or are able to, draw on  relevant expertise such as CPUs, to enable them to carry out their procurement  activities efficiently and effectively, and in compliance with government and  agency  requirements.  Agencies  determine  their  own  procurement  practices,  consistent  with  the  CPRs,  through  CEIs  and,  if  appropriate,  supporting  operational guidelines.  

4.28 Agencies  generally  had  procurement  policies,  guidance  and  training  largely in place. However, the use of MULs was often not well understood and  associated procurements were not well conducted. To better assist staff and  delegates to conduct procurements from MULs in accordance with the CPRs,  agency  CEIs  and  relevant  operational  guidelines,  there  would  be  benefit  in  agencies actively drawing on the expertise available in CPUs and reinforcing  to staff and delegates responsibilities in relation to procurement.  

4.29 Assessing  procurement  activity  at  an  appropriate  time  during  the  lifecycle  of  a  MUL  enables  agencies  to  understand  the  extent  to  which  the  initial  business  rationale  for  establishing  the  MUL  is  being  met.  Such  assessment  also  helps  shape  the  design  of  any  future  MUL  or  alternative  procurement  arrangement.  Both  BoM  and  Industry  would  benefit  from  reviewing the efficiency, effectiveness and value for money provided by their  MUL arrangements.  

4.30 Going forward there is merit in AGD continuing to review options in  relation  to  the  operation  of  the  LSMUL.  Opportunities  for  improving  the  LSMUL identified during the course of the audit include allowing faster access  to legal services and enhancing arrangements to share information. Education  on  the  use  of  the  LSMUL  could  also  be  strengthened  to  ensure  agency  procurements are consistent with the CPRs. In addition, more transparency 

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could  be  built  into  parcelling  arrangements  as  these  arrangements  can  risk  competition particularly for new and small providers.  

4.31 Agencies could become more informed purchasers of legal services by  making better use of information already available to them on the LSMUL and  drawing  on  their  CPUs  to  ensure  procurement  processes  are  efficient  and  adhere  to  the  CPRs.  Agencies  could  also  promote  greater  sharing  of  their  experiences with the LSMUL both within and across agencies.  

Ian McPhee 

Auditor‐General 

Canberra ACT 

26 June 2014 

 

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could  be  built  into  parcelling  arrangements  as  these  arrangements  can  risk  competition particularly for new and small providers.  

4.31 Agencies could become more informed purchasers of legal services by  making better use of information already available to them on the LSMUL and  drawing  on  their  CPUs  to  ensure  procurement  processes  are  efficient  and  adhere  to  the  CPRs.  Agencies  could  also  promote  greater  sharing  of  their  experiences with the LSMUL both within and across agencies.  

Ian McPhee 

Auditor‐General 

Canberra ACT 

26 June 2014 

 

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Appendices

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Appendix 1: Agencies’ responses

 

89 ANAO comment: AGD’s LSMUL guidance requires agencies to select two or more service providers to supply quotes for procurements valued at or above the procurement threshold. The LSMUL list rates are maximum rates and agencies can negotiate to take account of circumstances at the time a service is required which may allow for better outcomes to be achieved. As indicated in paragraph 3.5 of the report, where agencies approached only one or a small number of suppliers, competition was limited, and it was more difficult for audited agencies to demonstrate that value for money was achieved.

89

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Appendix 1: Agencies’ responses

 

89 ANAO comment: AGD’s LSMUL guidance requires agencies to select two or more service providers to supply quotes for procurements valued at or above the procurement threshold. The LSMUL list rates are maximum rates and agencies can negotiate to take account of circumstances at the time a service is required which may allow for better outcomes to be achieved. As indicated in paragraph 3.5 of the report, where agencies approached only one or a small number of suppliers, competition was limited, and it was more difficult for audited agencies to demonstrate that value for money was achieved.

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90 ANAO comment: There may be circumstances where a shorter timeframe for procurement is legitimate and appropriate, for example, for reasons of extreme urgency brought about by unforeseen events. However, where it is reasonable to anticipate that the value of a procurement will exceed the threshold, the CPRs require that the procurement must be treated as being valued above the relevant procurement threshold. For procurements which are above the threshold, strict timeframes are applied by the CPRs. These timeframes are designed to allow suppliers reasonable time to respond to requests for work and promote genuine competition.

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Appendix 1

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91 ANAO comment: Paragraph 3.31 is now paragraph 3.34.

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Appendix 2: Key differences between a multi-use list and a panel

Multi-Use Lists (MULs) Panels

Nature of arrangement

A MUL is a prequalification process that lists suppliers that have met conditions for participation. The conditions for participation must be limited to those that will enable agencies to ascertain whether a potential supplier has the legal, commercial, technical and financial abilities to fulfil the identified requirements.

A panel is a standing offer arrangement under which a number of suppliers may supply goods or services to government. Panel arrangements must contain minimum requirements, usually including an indicative or set price or rate for the goods or services to be procured in the period of the panel arrangement. A panel can be established by either open tender or select tender processes.

Level of assessment to establish

The level of assessment required to establish suitability for inclusion on a MUL will vary depending on the nature of the specific conditions for participation. However, the level of discretion applied to the assessment typically results in a faster assessment process than more thorough selection criteria given that conditions for participation are pass or fail.

As the tendering process for establishing a panel is generally competitive and results in a contractual relationship, the selection criteria for establishing a panel is typically considered

and detailed. This results in a substantial level of assessment to evaluate tenders, particularly if a limited number of positions on the panel exist and a large number of tenders have been received.

Cost of establishing

The cost of establishment is limited to assessment of the conditions for participation. Conditions for participation are not subjective and must be assessed as either being met or not met. Notwithstanding this, conditions for participation can range from a relatively straight forward assessment such as the requirement to hold a specific licence through to a more detailed assessment such as assessing the level of relevant experience and performance of a potential supplier.

As a panel establishes an agreed set of terms and conditions via a deed of standing offer, the level of information required to be provided by tenderers is typically more

detailed than that required to establish a MUL. Subsequent assessment of tenders by agencies is typically more comprehensive as well. This more detailed tendering typically results in a more costly and time consuming process for both industry and government.

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Appendix 2: Key differences between a multi-use list and a panel

Multi-Use Lists (MULs) Panels

Nature of arrangement

A MUL is a prequalification process that lists suppliers that have met conditions for participation. The conditions for participation must be limited to those that will enable agencies to ascertain whether a potential supplier has the legal, commercial, technical and financial abilities to fulfil the identified requirements.

A panel is a standing offer arrangement under which a number of suppliers may supply goods or services to government. Panel arrangements must contain minimum requirements, usually including an indicative or set price or rate for the goods or services to be procured in the period of the panel arrangement. A panel can be established by either open tender or select tender processes.

Level of assessment to establish

The level of assessment required to establish suitability for inclusion on a MUL will vary depending on the nature of the specific conditions for participation. However, the level of discretion applied to the assessment typically results in a faster assessment process than more thorough selection criteria given that conditions for participation are pass or fail.

As the tendering process for establishing a panel is generally competitive and results in a contractual relationship, the selection criteria for establishing a panel is typically considered and detailed. This results in a substantial level of assessment to evaluate tenders, particularly if a limited number of positions on the panel exist and a large number of tenders have been received.

Cost of establishing

The cost of establishment is limited to assessment of the conditions for participation. Conditions for participation are not subjective and must be assessed as either being met or not met. Notwithstanding this, conditions for participation can range from a relatively straight forward assessment such as the requirement to hold a specific licence through to a more detailed assessment such as assessing the level of relevant experience and performance of a potential supplier.

As a panel establishes an agreed set of terms and conditions via a deed of standing offer, the level of information required to be provided by tenderers is typically more detailed than that required to establish a MUL. Subsequent assessment of tenders by agencies is typically more comprehensive as well. This more detailed tendering typically results in a more costly and time consuming process for both industry and government.

Appendix 2

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Multi-Use Lists (MULs) Panels

Timeframe to establish

The timeframes for establishing a MUL will vary at the initial stages depending on how many suppliers respond and the number and nature of the conditions for participation. However, a MUL can typically be established within a two to three month period following an approach to market. Typically, most conditions for participation require only a simple review of the information provided to establish if the supplier has met the condition. For example holding of relevant qualifications, licensees and insurance coverage. Other conditions may, depending on the level of information sought, require contact with a referee or a more detailed assessment

As establishing a panel is usually a competitive process leading to a strong contractual relationship, experience indicates that timeframes to establish a panel are longer for both the preparation of tenders and their subsequent consideration than a MUL. Experience across a number of Commonwealth agencies has shown that a panel process typically takes up to 12 months from beginning to end.

Ability to bring on new suppliers

Inclusion on a MUL is very simple for both suppliers and agencies. Once established, new suppliers that meet the qualification requirements can be added to the MUL either continually or annually, with a recommendation to revalidate all suppliers at least every two years.

It is very difficult for new suppliers to be added to an existing panel. Due to the competitive process, cost and time incurred by industry to seek inclusion on a panel, any new additions to a panel typically only occur when the panel does not have enough capacity to meet the needs of the agencies using it. To add suppliers to a panel, usually a full open tender process would be undertaken. Additions to the panel must meet the existing terms and conditions of the panel, including the existing end date of the panel.

Method of operation

The model for accessing suppliers on a MUL can be established in the way the lead agency chooses, as long as the approach is not discriminatory. For example, it can be as simple as establishing a template that contains standard terms and conditions and sets out a space to list the specific details of the identified task, any specialised requirements such as preferred qualification levels and pricing details. To establish value for money is being achieved, a selection process of two or more MUL members should be undertaken, specifically where the expected value of the contract will be more than $80 000.

The method of operation for a panel will vary depending on the panel’s rules for use, which should form part of the Tender documentation for the panel. Generally an agency will approach a certain number of suppliers to establish value for money. The approach will contain a description of the task, any specific requirements and the preferred pricing arrangement of the agency—for example a total price or time and materials. The agency then undertakes a comparative assessment of the tenders received before selecting a preferred supplier. Some panels do not require competition among panellists. In these instances, the

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Multi-Use Lists (MULs) Panels

officer must have a reasonable degree of confidence that value for money is achieved though approaching a single panellist.

Value for money assessment when accessing

The purchasing officer must have a reasonable degree of confidence that value for money is achieved whenever the MUL is accessed. This assessment must be accompanied by sufficiently documented reasons to support the procurement decision.

This assessment must be accompanied by sufficiently documented reasons to support the procurement decision.

Source: Department of Finance Buying for the Australian Government, Procurement Practice, [internet] available from http://www.finance.gov.au/procurement/procurement-policy-and- guidance/buying/procurement-practice/panel-and-mul/principles.html [accessed June 2014].

 

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Multi-Use Lists (MULs) Panels

officer must have a reasonable degree of confidence that value for money is achieved though approaching a single panellist.

Value for money assessment when accessing

The purchasing officer must have a reasonable degree of confidence that value for money is achieved whenever the MUL is accessed. This assessment must be accompanied by sufficiently documented reasons to support the procurement decision.

This assessment must be accompanied by sufficiently documented reasons to support the procurement decision.

Source: Department of Finance Buying for the Australian Government, Procurement Practice, [internet] available from http://www.finance.gov.au/procurement/procurement-policy-and- guidance/buying/procurement-practice/panel-and-mul/principles.html [accessed June 2014].

 

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Appendix 3: Conditions for limited tender for procurements at or above the procurement thresholds

Procurements  at  or  above  the  relevant  procurement  thresholds  that  are  conducted as limited tender must meet one or more of the conditions outlined  in section 10.3 of the CPRs. If an agency cannot meet any of these conditions  then it should  conduct either an Open or Prequalified Tender procurement  process. 

Section reference Type of condition Definition/description from CPRs

A Open approach to

market where no submissions are received

Where, in response to an approach to the market: i. no submissions, or no submissions that represented value for money were received, ii. no submissions that met the minimum content

and format requirements for submission as stated in the request documentation were received; or iii. no tenderers satisfied the conditions for participation, and the agency does not substantially modify the essential requirements of the procurement.

B Extreme urgency

brought about by events unforseen by the agency

Where, for reasons of extreme urgency brought about by events unforeseen by the agency, the goods and services could not be obtained in time under open tender or prequalified tender.

C Advantageous

conditions that only arise in the short term

For procurements made under exceptionally advantageous conditions that only arise in the very short term, such as from unusual disposals, unsolicited innovative proposals, liquidation, bankruptcy, or receivership and which are not routine procurement from regular suppliers.

D One supplier where

there is no reasonable alternative or substitute

Where the goods and services can be supplied only by a particular business and there is no reasonable alternative or substitute for one of the following reasons:

i. the requirement is for works of art; ii. to protect patents, copyrights, or other exclusive rights, or proprietary information; or iii. due to an absence of competition for technical

reasons.

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Section reference Type of condition Definition/description from CPRs

E Additional services by original supplier for compatibility reasons

For additional deliveries of goods and services by the original supplier or authorised representative that are intended either as replacement parts, extensions, or continuing services for existing equipment, software, services, or installations, where a change of supplier would compel the agency to procure goods and services that do not meet requirements of compatibility with existing equipment or services.

F Commodity market For purchases in a commodity market.

G Prototype Where an agency procures a prototype or a first good

or service that is intended for limited trial or that is developed at the agency’s request in the course of, and for, a particular contract for research, experiment, study, or original development.

H Design contest In the case of a contract awarded to the winner of a

design contest, provided that: i. the contest has been organised in a manner that is consistent with these CPRs, and ii. the contest is judged by an independent jury

with a view to a design contract being awarded to the winner.

I New construction

services that repeat similar services where the original contract was awarded following an open tender or prequalified tender

For new construction services consisting of the repetition of similar construction services that conform to a basic project for which an initial contract was awarded through an open tender or prequalified tender, and where the initial approach to the market indicated that limited tender might be used for those subsequent construction services.

Source: Finance, Commonwealth Procurement Rules, section 10.3.

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Section reference Type of condition Definition/description from CPRs

E Additional services by original supplier for compatibility reasons

For additional deliveries of goods and services by the original supplier or authorised representative that are intended either as replacement parts, extensions, or continuing services for existing equipment, software, services, or installations, where a change of supplier would compel the agency to procure goods and services that do not meet requirements of compatibility with existing equipment or services.

F Commodity market For purchases in a commodity market.

G Prototype Where an agency procures a prototype or a first good

or service that is intended for limited trial or that is developed at the agency’s request in the course of, and for, a particular contract for research, experiment, study, or original development.

H Design contest In the case of a contract awarded to the winner of a

design contest, provided that: i. the contest has been organised in a manner that is consistent with these CPRs, and ii. the contest is judged by an independent jury

with a view to a design contract being awarded to the winner.

I New construction

services that repeat similar services where the original contract was awarded following an open tender or prequalified tender

For new construction services consisting of the repetition of similar construction services that conform to a basic project for which an initial contract was awarded through an open tender or prequalified tender, and where the initial approach to the market indicated that limited tender might be used for those subsequent construction services.

Source: Finance, Commonwealth Procurement Rules, section 10.3.

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Appendix 4: Commonwealth Procurement Rules Appendix A—Exemptions from Division 2

Procurements that are exempt from the rules of Division 2 by the operation of  Appendix A are still required to be undertaken in accordance with value for  money and with the rules of Division 1 of these CPRs. 

Division 2 does not apply to:

1. leasing or procurement of real property or accommodation (note: the procurement of construction services is not exempt);

2. procurement of goods and services by an agency from other Commonwealth, state, territory or local government entities where no commercial mark et exists or where legislation or Commonwealth policy requires the use of a government provider (for example, tied legal services);

3. procurements funded by international grants, loans or other assistance, where the provision of such assistance is subject to conditions inconsistent with this document;

4. procurements funded by grants and sponsorship payments from non-Commonwealth entities;

5. procurement for the direct purpose of providing foreign assistance;

6. procurement of research and development services, but not the procurement of inputs to research and development undertaken by an agency;

7. the engagement of an expert or neutral person, including engaging counsel or barristers, for any current or anticipated litigation or dispute;

8. procurement of goods and services (including construction) outside Australian territory, for consumption outside Australian territory;

9. acquisition of fiscal agency or depository services, liquidation and management services for regulated financial institutions, and sale and distribution services for government debt;

10. procurement of motor vehicles;

11. procurement by the Future Fund Management Agency of investment management, investment advisory, or master custody and safekeeping services for the purposes of managing and investing the assets of the Future Fund;

12. procurement of blood plasma products or plasma fractionation services;

13. procurement of government advertising services;

14. procurement of goods and services by, or on behalf of, the Defence Intelligence Organisation, the Defence Signals Directorate, or the Defence Imagery and Geospatial Organisation;

15. contracts for labour hire;

16. procurement of goods and services from a business that primarily exists to provide the services of persons with a disability; and

17. procurement of goods and services from an SME with at least 50 per cent Indigenous ownership.

Source: Finance, Commonwealth Procurement Rules, Appendix A: Exemptions from Division 2.

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Index

audit 

objective, criteria and scope, 35 

sample, 35, 54 

FMA Regulation 9, 61 

Legal Services MUL 

agency approaches, 36 

background, 44 

definition, 33, 66 

service provider views, 51, 75 

limited tender 

definition, 30 

MUL 

definition, 32 

purpose of, 32, 40 

open tender 

definition, 30 

parcelling 

agency use, 70 

establishment, 66 

prequalified tender 

definition, 30 

procurement thresholds, 31 

value for money, 58, 61 

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Index

audit 

objective, criteria and scope, 35 

sample, 35, 54 

FMA Regulation 9, 61 

Legal Services MUL 

agency approaches, 36 

background, 44 

definition, 33, 66 

service provider views, 51, 75 

limited tender 

definition, 30 

MUL 

definition, 32 

purpose of, 32, 40 

open tender 

definition, 30 

parcelling 

agency use, 70 

establishment, 66 

prequalified tender 

definition, 30 

procurement thresholds, 31 

value for money, 58, 61 

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Series Titles

ANAO Audit Report No.1 2013-14  Design and Implementation of the Liveable Cities Program  Department of Infrastructure and Transport 

ANAO Audit Report No.2 2013-14  Administration of the Agreements for the Management, Operation and Funding  of the Mersey Community Hospital  Department of Health and Ageing  Department of Health and Human Services, Tasmania  Tasmanian Health Organisation - North West 

ANAO Audit Report No.3 2013-14  AIR 8000 Phase 2 — C‐27J Spartan Battlefield Airlift Aircraft  Department of Defence 

ANAO Audit Report No.4 2013-14  Confidentiality in Government Contracts: Senate Order for Departmental and Agency  Contracts (Calendar Year 2012 Compliance)  Across Agencies 

ANAO Audit Report No.5 2013-14  Administration of the Taxation of Personal Services Income  Australian Taxation Office 

ANAO Audit Report No.6 2013-14  Capability Development Reform  Department of Defence 

ANAO Audit Report No.7 2013-14  Agency Management of Arrangements to Meet Australia’s International Obligations  Across Agencies 

ANAO Audit Report No.8 2013-14  The Australian Government Reconstruction Inspectorateʹs Conduct of Value for  Money Reviews of Flood Reconstruction Projects in Queensland  Department of Infrastructure and Regional Development 

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ANAO Audit Report No.9 2013-14  Determination and Collection of Financial Industry Levies  Australian Prudential Regulation Authority  Department of the Treasury 

ANAO Audit Report No.10 2013-14  Torres Strait Regional Authority — Service Delivery  Torres Strait Regional Authority 

ANAO Audit Report No.11 2013-14  Delivery of the Filling the Research Gap under the Carbon Farming Futures Program  Department of Agriculture 

ANAO Report No.12 2013-14  2012-13 Major Projects Report  Defence Materiel Organisation 

ANAO Audit Report No.13 2013-14  Audits of the Financial Statements of Australian Government Entities for the Period  Ended 30 June 2013  Across Agencies 

ANAO Audit Report No.14 2013-14  Explosive Ordnance and Weapons Security Incident Reporting  Department of Defence 

ANAO Audit Report No.15 2013-14  The Indigenous Land Corporationʹs Administration of the Land Acquisition Program  Indigenous Land Corporation 

ANAO Audit Report No.16 2013-14  Administration of the Smart Grid, Smart City Program  Department of the Environment  Department of Industry 

ANAO Audit Report No.17 2013-14  Administration of the Strengthening Basin Communities Program  Department of the Environment 

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ANAO Audit Report No.9 2013-14  Determination and Collection of Financial Industry Levies  Australian Prudential Regulation Authority  Department of the Treasury 

ANAO Audit Report No.10 2013-14  Torres Strait Regional Authority — Service Delivery  Torres Strait Regional Authority 

ANAO Audit Report No.11 2013-14  Delivery of the Filling the Research Gap under the Carbon Farming Futures Program  Department of Agriculture 

ANAO Report No.12 2013-14  2012-13 Major Projects Report  Defence Materiel Organisation 

ANAO Audit Report No.13 2013-14  Audits of the Financial Statements of Australian Government Entities for the Period  Ended 30 June 2013  Across Agencies 

ANAO Audit Report No.14 2013-14  Explosive Ordnance and Weapons Security Incident Reporting  Department of Defence 

ANAO Audit Report No.15 2013-14  The Indigenous Land Corporationʹs Administration of the Land Acquisition Program  Indigenous Land Corporation 

ANAO Audit Report No.16 2013-14  Administration of the Smart Grid, Smart City Program  Department of the Environment  Department of Industry 

ANAO Audit Report No.17 2013-14  Administration of the Strengthening Basin Communities Program  Department of the Environment 

Series Titles

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ANAO Audit Report No.18 2013-14  Administration of the Improving Water Information Program  Bureau of Meteorology 

ANAO Audit Report No.19 2013-14  Management of Complaints and Other Feedback  Australian Taxation Office 

ANAO Audit Report No.20 2013-14  Management of the Central Movement Alert List: Follow‐on Audit  Department of Immigration and Border Protection 

ANAO Report No.21 2013-14  Pilot Project to Audit Key Performance Indicators 

ANAO Audit Report No.22 2013-14  Air Warfare Destroyer Program  Department of Defence  Defence Materiel Organisation 

ANAO Audit Report No.23 2013-14  Policing at Australian International Airports  Australian Federal Police 

ANAO Audit Report No.24 2013-14  Emergency Defence Assistance to the Civil Community  Department of Defence 

ANAO Audit Report No.25 2013-14  Management of the Building Better Regional Cities Program  Department of Social Services  Department of the Environment 

ANAO Audit Report No.26 2013-14  Medicare Compliance Audits  Department of Human Services 

ANAO Audit Report No.27 2013-14  Integrity of Medicare Customer Data  Department of Human Services 

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ANAO Audit Report No.28 2013-14  Review of Child Support Objections  Department of Human Services  Department of Social Services 

ANAO Audit Report No.29 2013-14  Regulation of Commonwealth Radiation and Nuclear Activities  Australian Radiation Protection and Nuclear Safety Agency 

ANAO Audit Report No.30 2013-14  Administering the Code of Good Manufacturing Practice for Prescription Medicines  Department of Health 

ANAO Audit Report No.31 2013-14  The Australian Electoral Commission‘s Storage and Transport of Completed Ballot  Papers at the September 2013 Federal General Election  Australian Electoral Commission 

ANAO Audit Report No.32 2013-14  Delivery of the Hearing Community Service Obligation  Department of Health  Department of Human Services  Australian Hearing Services 

ANAO Audit Report No.33 2013-14  Indigenous Employment in Australian Government Entities  Across Agencies 

ANAO Audit Report No.34 2013-14  Implementation of ANAO Performance Audit Recommendations  Department of Agriculture  Department of Human Services 

ANAO Audit Report No.35 2013-14  Managing Compliance of High Wealth Individuals  Australian Taxation Office 

ANAO Audit Report No.36 2013-14  The Administration of the Parliamentary Budget Office  Parliamentary Budget Office 

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ANAO Audit Report No.28 2013-14  Review of Child Support Objections  Department of Human Services  Department of Social Services 

ANAO Audit Report No.29 2013-14  Regulation of Commonwealth Radiation and Nuclear Activities  Australian Radiation Protection and Nuclear Safety Agency 

ANAO Audit Report No.30 2013-14  Administering the Code of Good Manufacturing Practice for Prescription Medicines  Department of Health 

ANAO Audit Report No.31 2013-14  The Australian Electoral Commission‘s Storage and Transport of Completed Ballot  Papers at the September 2013 Federal General Election  Australian Electoral Commission 

ANAO Audit Report No.32 2013-14  Delivery of the Hearing Community Service Obligation  Department of Health  Department of Human Services  Australian Hearing Services 

ANAO Audit Report No.33 2013-14  Indigenous Employment in Australian Government Entities  Across Agencies 

ANAO Audit Report No.34 2013-14  Implementation of ANAO Performance Audit Recommendations  Department of Agriculture  Department of Human Services 

ANAO Audit Report No.35 2013-14  Managing Compliance of High Wealth Individuals  Australian Taxation Office 

ANAO Audit Report No.36 2013-14  The Administration of the Parliamentary Budget Office  Parliamentary Budget Office 

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ANAO Audit Report No.37 2013-14  Management of Services Delivered by Job Services Australia  Department of Employment 

ANAO Audit Report No.38 2013-14  Establishment and Administration of the National Offshore Petroleum Safety and  Environmental Management Authority  National Offshore Petroleum Safety and Environmental Management  Authority 

ANAO Audit Report No.39 2013-14  Compliance Effectiveness Methodology  Australian Taxation Office 

ANAO Audit Report No.40 2013-14  Trials of Intensive Service Delivery  Department of Human Services 

ANAO Audit Report No.41 2013-14  Commercialisation Australia Program  Department of Industry 

ANAO Audit Report No.42 2013-14  Screening of International Mail  Department of Agriculture  Australian Customs and Border Protection Service 

ANAO Audit Report No.43 2013-14  Managing Compliance with Environment Protection and Biodiversity Conservation  Act 1999 Conditions of Approval  Department of the Environment 

ANAO Audit Report No.44 2013-14  Interim Phase of the Audits of the Financial Statements of Major General Government  Sector Agencies for the year ending 30 June 2014  Across Agencies 

ANAO Audit Report No.45 2013-14  Initiatives to Support the Delivery of Services to Indigenous Australians  Department of Human Services 

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ANAO Audit Report No.46 2013-14  Administration of Residential Care Payments  Department of Veterans’ Affairs 

ANAO Audit Report No.47 2013-14  Managing Conflicts of Interest in FMA Agencies  Across Agencies 

ANAO Audit Report No.48 2013-14  Administration of the Australian Business Register  Australian Taxation Office  Australian Securities and Investments Commission  Department of Industry 

ANAO Audit Report No.49 2013-14  Management of Physical Security  Australian Crime Commission  Geoscience Australia  Royal Australian Mint 

ANAO Audit Report No.50 2013-14  Cyber Attacks: Securing Agencies’ ICT Systems  Across Agencies 

ANAO Audit Report No.51 2013-14  The Improving School Enrolment and Attendance through Welfare Reform Measure  Department of the Prime Minister and Cabinet  Department of Human Services 

ANAO Audit Report No.52 2013-14  Multi‐Role Helicopter Program  Department of Defence  Defence Materiel Organisation 

ANAO Audit Report No.53 2013-14  Management of the National Medical Stockpile  Department of Health 

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ANAO Audit Report No.46 2013-14  Administration of Residential Care Payments  Department of Veterans’ Affairs 

ANAO Audit Report No.47 2013-14  Managing Conflicts of Interest in FMA Agencies  Across Agencies 

ANAO Audit Report No.48 2013-14  Administration of the Australian Business Register  Australian Taxation Office  Australian Securities and Investments Commission  Department of Industry 

ANAO Audit Report No.49 2013-14  Management of Physical Security  Australian Crime Commission  Geoscience Australia  Royal Australian Mint 

ANAO Audit Report No.50 2013-14  Cyber Attacks: Securing Agencies’ ICT Systems  Across Agencies 

ANAO Audit Report No.51 2013-14  The Improving School Enrolment and Attendance through Welfare Reform Measure  Department of the Prime Minister and Cabinet  Department of Human Services 

ANAO Audit Report No.52 2013-14  Multi‐Role Helicopter Program  Department of Defence  Defence Materiel Organisation 

ANAO Audit Report No.53 2013-14  Management of the National Medical Stockpile  Department of Health 

Series Titles

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ANAO Audit Report No.54 2013-14  Establishment and Use of Multi‐Use Lists  Across Agencies     

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Better Practice Guides

The following Better Practice Guides are available on the ANAO website: 

Administering Regulation  June 2014 

Implementing Better Practice Grants Administration  Dec. 2013 

Human Resource Management Information Systems: Risks and controls  June 2013 

Preparation of Financial Statements by Public Sector Entities  June 2013 

Public Sector Internal Audit: An investment in assurance and business  improvement  Sept. 2012 

Public Sector Environmental Management: Reducing the environmental  impacts of public sector operations  Apr. 2012 

Developing and Managing Contracts: Getting the right outcome,  achieving value for money  Feb. 2012 

Public Sector Audit Committees: Independent assurance and advice for  chief executives and boards  Aug. 2011 

Fraud Control in Australian Government Entities  Mar. 2011 

Strategic and Operational Management of Assets by Public Sector  Entities: Delivering agreed outcomes through an efficient and optimal  asset base 

Sept. 2010 

Planning and Approving Projects - an Executive Perspective: Setting the  foundation for results  June 2010 

Innovation in the Public Sector: Enabling better performance, driving new  directions  Dec. 2009 

SAP ECC 6.0: Security and control  June 2009 

Business Continuity Management: Building resilience in public sector  entities  June 2009 

Developing and Managing Internal Budgets  June 2008 

Agency Management of Parliamentary Workflow  May 2008 

Fairness and Transparency in Purchasing Decisions: Probity in Australian  Government procurement  Aug. 2007 

Implementation of Programme and Policy Initiatives: Making  implementation matter  Oct. 2006 

 

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Better Practice Guides

The following Better Practice Guides are available on the ANAO website: 

Administering Regulation  June 2014 

Implementing Better Practice Grants Administration  Dec. 2013 

Human Resource Management Information Systems: Risks and controls  June 2013 

Preparation of Financial Statements by Public Sector Entities  June 2013 

Public Sector Internal Audit: An investment in assurance and business  improvement  Sept. 2012 

Public Sector Environmental Management: Reducing the environmental  impacts of public sector operations  Apr. 2012 

Developing and Managing Contracts: Getting the right outcome,  achieving value for money  Feb. 2012 

Public Sector Audit Committees: Independent assurance and advice for  chief executives and boards  Aug. 2011 

Fraud Control in Australian Government Entities  Mar. 2011 

Strategic and Operational Management of Assets by Public Sector  Entities: Delivering agreed outcomes through an efficient and optimal  asset base 

Sept. 2010 

Planning and Approving Projects - an Executive Perspective: Setting the  foundation for results  June 2010 

Innovation in the Public Sector: Enabling better performance, driving new  directions  Dec. 2009 

SAP ECC 6.0: Security and control  June 2009 

Business Continuity Management: Building resilience in public sector  entities  June 2009 

Developing and Managing Internal Budgets  June 2008 

Agency Management of Parliamentary Workflow  May 2008 

Fairness and Transparency in Purchasing Decisions: Probity in Australian  Government procurement  Aug. 2007 

Implementation of Programme and Policy Initiatives: Making  implementation matter  Oct. 2006