Parliamentary. Inquiry into Public Sector Contract Extensions

Transcription

1 Parliamentary Inquiry into Public Sector Contract Extensions Report No. 57 Finance and Administration Committee December 2014

2 Inquiry into Public Sector Contract Extensions Report No. 57 Finance and Administration Committee December 2014

3 ii Finance and Administration Committee

4 Finance and Administration Committee Chair Deputy Chair Members Mr Steve Davies MP, Member for Capalaba Mr Curtis Pitt MP, Member for Mulgrave Mrs Liz Cunningham MP, Member for Gladstone Dr Bruce Flegg MP, Member for Moggill Mr Reg Gulley MP, Member for Murrumba Mrs Freya Ostapovitch MP, Member for Stretton Mr Mark Stewart MP, Member for Sunnybank Staff Ms Deborah Jeffrey, Research Director Dr Maggie Lilith, Principal Research Officer Ms Lynette Whelan, Executive Assistant Ms Julie Fidler, Executive Assistant (from 8 August 2014) Contact details Telephone Fax Web Finance and Administration Committee Parliament House George Street Brisbane Qld 4000 [email protected] Finance and Administration Committee iii

5 Contents Abbreviations Glossary Chair s Foreword Recommendations vi vii viii ix 1 Introduction Role of the Committee Auditor-General reports reviewed Machinery of Government changes Inquiry Process Report 3 2 Auditor-General Reports Report No. 5: Results of audit: State public sector entities for Audit objective and coverage Summary of results Key recommendation in the report Report No. 10: Contract management: renewal and transition Audit objective and coverage Summary of Audit results Key recommendations in the Audit report Departmental responses in the Audit report Departmental responses to the Committee 7 3 Contract management: Background Contract management Queensland s procurement policies: Background 9 4 Achieving value for money Monitoring supplier performance Measuring and monitoring supplier performance Planning for contract expiry Evaluating supplier performance Business needs and demand analysis Evaluating supply market conditions Contract extensions beyond original terms Strategic sourcing Committee comments 22 iv Finance and Administration Committee

6 5 Skills, governance and systems Contract management skills Contract management governance Contract management plans Approval process and policies for contract expiry Contract management systems Committee comments 32 Appendices 34 Appendix A Officers appearing on behalf of departments at the public hearing Wednesday 2 April Appendix B Officers appearing on behalf of departments at the public hearing Wednesday 15 October Finance and Administration Committee v

7 Abbreviations and Glossary Public Sector Contract Extensions Abbreviations ABN Australian Business Number ANAO Australian National Audit Office BAS Building and Asset Services CLA Committee of the Legislative Assembly CPO Chief Procurement Officers DAFF Department of Agriculture, Fisheries and Forestry DATSIMA Department of Aboriginal and Torres Strait Islander and Multicultural Affairs DCS (Former) Department of Community Safety DCCSDS Department of Communities, Child Safety and Disability Services DEHP Department of Environment and Heritage Protection DETE Department of Education, Training and Employment DHPW Department of Housing and Public Works DLGCRR Department of Local Government, Community Recovery and Resilience DPC Department of Premier and Cabinet DSDIP Department of State Development, Infrastructure and Planning DSITIA Department of Science, Information Technology, Innovation and the Arts DTMR Department of Transport and Main Roads EMQ Emergency Management Queensland FAC Finance and Administration Committee HHS Hospital and Health Service ICT Information and Communication Technology LSA Legislative Standards Act 1992 MoG Machinery of Government PSBA Public Safety Business Agency PSP Procurement Systems Project PTD Procurement Transformation Division PTP Procurement Transformation Program QAO Queensland Audit Office QAS Queensland Ambulance Service QCS Queensland Corrective Services QFRS Queensland Fire and Rescue Service QGCPO Queensland Government Chief Procurement Office QPS Queensland Police Service QTT Queensland Treasury and Trade SAP Systems Applications and Products vi Finance and Administration Committee

8 Abbreviations and Glossary Glossary Acts CITEC the Committee All Acts referred to in this report refer to Queensland Acts unless otherwise specified CITEC is the Queensland Government s primary information and communication service provider Finance and Administration Committee Finance and Administration Committee vii

9 Chair s Foreword Public Sector Contract Extensions Chair s Foreword This report presents a summary of the Committee s inquiries into public sector contract extensions. The Committee is satisfied that the departments are already in the process of implementing a wholeof-government approach to contract management. The Committee acknowledges that the process of implementation and realisation of benefits require time and that consideration be given to reexamining the issues once the follow-up audit by the Queensland Audit Office is completed. The Committee has made two recommendations emphasising the need for a review of the benefits and effectiveness of the new whole-of-government approach to public contract extensions led by the Department of Housing and Public Works and for an assessment of training requirements. On behalf of the Committee, I wish to thank those who briefed the Committee, gave evidence and participated in its inquiry. In particular the Committee acknowledges the assistance provided by the Department of Housing and Public Works, Department of Transport and Main Roads, Department of Science, Information Technology, Innovation and the Arts, Queensland Health, and the Department of Communities, Child Safety and Disability Services. The Committee also wishes to acknowledge the assistance provided by the Auditor-General and staff from the Queensland Audit Office. Finally, I would like to thank the other Members of the Committee and the committee secretariat for their hard work and support. Steve Davies MP Chair viii Finance and Administration Committee

10 Recommendations Recommendation 1 32 The Committee recommends that a whole-of-government review of the benefits and effectiveness be conducted following the implementation of PTD s final phase. Recommendation 2 33 The Committee recommends that DHPW assess training requirements for all departments once the final phase of PTD is completed. Finance and Administration Committee ix

11 Recommendations Public Sector Contract Extensions x Finance and Administration Committee

12 1 Introduction 1.1 Role of the Committee The Finance and Administration Committee (the Committee) is a portfolio committee established by the Parliament of Queensland Act 2001 and the Standing Orders of the Legislative Assembly on 18 May The Committee s primary areas of responsibility are: Premier and Cabinet; and Treasury and Trade. One of the functions of the Finance and Administration Committee (FAC), as prescribed in section 95 of the Parliament of Queensland Act 2001 is to consider the annual and other reports of the Auditor- General. In reviewing the reports the Committee invites the Auditor-General to provide briefings to highlight the key findings and issues. These briefings enable the Committee to question the Auditor-General and provide the members with a better appreciation of the significance of issues raised. The Committee assesses issues together with agency responses and, if considered beneficial to the public interest, will examine the matter further. This examination may take the form of written responses, briefings/meetings or public hearings. 1.2 Auditor-General reports reviewed The Auditor-General tabled Report No. 5: Results of audit: State public sector entities for on 27 November The report summarises the results of the audit of the financial statements of State public sector entities. The report also examined briefly the procurement practices for contract rollovers in all State public sector entities. The Auditor-General tabled Report No. 10: Contract management: renewal and transition on 3 December The report summarised the results of the Queensland Audit Office s (QAO) examination of whether agencies demonstrably achieve value for money for their goods and services contracts in their decision to extend, renew or re-tender their contracts. Sixty-two contracts were reviewed across three departments in the audit. The departments audited were the former Department of Community Safety (DCS), Department of Housing and Public Works (DHPW) and Department of Transport and Main Roads (DTMR). These reports are available from the QAO web site at Parliament. 1.3 Machinery of Government changes In the time period between the tabling of Report No. 5: and Report No. 10: , some departments had undergone machinery-of-government (MoG) changes. DCS was the frontline service delivery organisation at the time of the audit in Report No. 10: DCS comprised of the Queensland Ambulance Service (QAS), the Queensland Fire and Rescue Service (QFRS), Queensland Corrective Services (QCS) and Emergency Management Queensland (EMQ). The central unit providing support and advice for contract activities in the DCS was Acquisition Services. The Auditor-General noted that designated client representatives in business areas undertake the role of contract manager and manage contracts on a day to day basis in the DCS. 2 1 Parliament of Queensland Act 2001, s88 and Standing Order Queensland Audit Office, Report No. 10: : Contract management: renewal and transition, December 2013: 6 Finance and Administration Committee 1

13 In November 2013, DCS ceased to exist as a result of the Police and Community Safety Review and the Public Safety Business Agency (PSBA) was established. The PSBA provides strategic and corporate services to the QFRS, Queensland Police Service (QPS) and the Inspector General Emergency Management. 3 The PSBA responded to issues raised in the audit report in relation to DCS. On 1 July 2013, the DHPW s QBuild and Project Services businesses merged to form Building and Asset Services (BAS). 4 The DHPW business areas also include the Accommodation Office, Building Codes Queensland, Building Policy Unit, Corporate and Executive Services, Housing Services and QFleet. 5 The DHPW also hosts the Procurement Transformation Division (PTD) which was formerly known as the Queensland Chief Procurement Office (QGCPO). 6 Background and other information on PTD and QGCPO are outlined in section 3.2 of this report. 1.4 Inquiry Process The Committee of the Legislative Assembly (CLA) considers the Auditor-General s reports when they are tabled and then refers the report to the relevant parliamentary committee. Auditor-General s Report No. 5: Results of audit: State public sector entities for and Report No. 10: Contract management: renewal and transition were referred to the FAC for consideration. The Committee resolved to conduct an inquiry into public sector contract extensions on 13 February The Committee met with the Auditor-General and officers from the QAO on 6 March The Auditor-General agreed to provide additional information to the Committee regarding the public sector contract extensions issue raised in Auditor-General Report No. 5: The Auditor- General advised the Committee that he intended to conduct a further audit on this issue. The Auditor-General tabled Report No. 10: on 3 December The Committee met with the Auditor-General and officers from the QAO on 19 March The Committee agreed to incorporate the results of the audits included in Auditor-General s Report Nos 5: and 10: as part of its inquiry. The Committee held a public hearing with officers from the QAO, DHPW, DTMR and the Public Safety Business Agency (PSBA) on Wednesday 2 April In June 2014, the Committee wrote to all departments to obtain further information on various statistical or data on procurement contracts. Specifically the departments were asked to provide the following: The number, type and value of all procurement contracts with an annual expenditure over $50,000 that have been rolled over or extended since 1 July 2007 without going through a retendering process where the contract did not stipulate an extension option and where the contract did stipulate an extension option. The number and value of all procurement contracts with an annual expenditure over $50,000 coming up for review in the next two years. 3 Queensland Audit Office, Report No. 10: : Contract management: renewal and transition, December 2013: 7 4 Queensland Audit Office, Report No. 10: : Contract management: renewal and transition, December 2013: Queensland Audit Office, Report No. 10: : Contract management: renewal and transition, December 2013: 7 6 Queensland Audit Office, Report No. 10: : Contract management: renewal and transition, December 2013: 7 2 Finance and Administration Committee

14 Details of the how procurement contracts are managed within the department. Whether changes to the Queensland Procurement Policy was useful in managing the department s procurement contracts and whether the department was satisfied with the level of training provided by central agencies to ensure the elements of the policy are understood by staff. Progress in implementing the Auditor-General s recommendations in Report No 10: Other initiatives that were undertaken as a result of the audit findings. How the department plans for contract expiry. The Committee held a further public hearing on Wednesday 15 October 2014 with officers from Department of Communities, Child Safety and Disability Services (DCCSDS), Department of Education, Training and Employment (DETE), DHPW, Department of Science, Information Technology, Innovation and the Arts (DSITIA), DTMR and Queensland Health to discuss the information provided to the Committee. A list of officers who gave evidence at the public hearings is contained in Appendices A and B respectively. Transcripts from the hearings have been published on the Committee s website and are available from the Committee secretariat. 1.5 Report The recommendations in this report are addressed to the Premier, the Treasurer and Minister for Trade and the Minister for Housing and Public Works as the responsible ministers. Finance and Administration Committee 3

15 2 Auditor-General Reports 2.1 Report No. 5: Results of audit: State public sector entities for Audit objective and coverage Whilst the main objective of the audit report was to summarise the results of the financial statement audits of State government departments, statutory bodies and government owned corporations; and the entities they control, the report included the results of a preliminary survey across departments in the general government sector of the extent of the rollover of contracts over $50,000 for the delivery of materials and services Summary of results The survey found that fourteen departments provided data ranging from one to five years commencing in which indicated that more than $4 billion worth of contracts had been extended or rolled-over in that period. Departments advised that they had extended or rolled-over more than $1.2 billion worth of contracts in the financial year The survey results also identified that 40 per cent of the contracts rolled-over (worth $423 million) had no provision for extension. In addition, it was identified that some departments could not confirm whether the contracts they rolled-over had a provision for extension or not, because of limitation in departmental contract registers. 8 The Auditor-General considered that a significant value of current contracts may be being rolled-over without adequate market testing. Of further concern to the Auditor-General was that four departments indicated that deficiencies in their contract registers meant that the information was not readily tracked and monitored. This deficiency weakens the ability of the department to centrally monitor and manage contracted expenditure. 9 The survey report noted the significance of these amounts as payments for supplies and services in for the fourteen departments totalled $6.653 billion which includes recurrent expenses not related to contracts or a procurement process. In addition, commitments relating to contracted expenditure were $5.114 billion for the year Key recommendation in the report The Auditor-General recommended that all State public sector entities review their procurement practices for contract rollovers to ensure there is appropriate contract succession planning and that value for money is being maintained Report No. 10: Contract management: renewal and transition Audit objective and coverage The results of the preliminary survey reported in Report No. 5: prompted the QAO to undertake a more in depth audit Queensland Audit Office, Report No. 5: : Results of audit: State public sector entities for , November 2012: 8 8 Queensland Audit Office, Report No. 5: : Results of audit: State public sector entities for , November 2012: 8 9 Queensland Audit Office, Report No. 5: : Results of audit: State public sector entities for , November 2012: 8 10 Queensland Audit Office, Report No. 5: : Results of audit: State public sector entities for , November 2012: 9 11 Queensland Audit Office, Report No. 5: : Results of audit: State public sector entities for , November 2012: 9 12 Queensland Audit Office, Report No. 10: : Contract management: renewal and transition, December 2013: 6 4 Finance and Administration Committee

16 Auditor-General s Report No. 10: summarises the results of whether agencies achieved value for money from their goods and services contracts in their decisions to extend, renew or retender their contracts. The (former) Department of Community Safety (DCS), DHPW and Department of Transport and Main Roads (DTMR) were selected for a subsequent audit based on the results of the preliminary survey outlined in Report No.5: These departments represented 57 per cent of the total number of contracts and 48 per cent of the total value of contracts rolled over in across government departments. 13 The audit reviewed 62 contracts across the three departments. The audit also found that 58 of the 62 contracts had been extended in The Auditor-General highlighted that Queensland government departments have a legal obligation to obtain value for money from their contracts as an annual procurement of $10.9 billion including $2.42 billion on general goods and services is spent. The audit noted that essential contract management activities should include the monitoring of supplier performance, efficient contract administration and timely planning and contract expiry. 15 The Auditor-General explained: One indicator that the required contract management skills, systems and governance arrangements are in place and operating effectively is that, before a contract is due to expire, the department has clearly established whether it should terminate or renew the service being provided or the goods being supplied; and, if it is to renew, whether it would achieve better value for money by extending the existing contract or by re-testing the market Summary of Audit results The audit report found that the audited departments could not consistently demonstrate that they achieved value for money from their goods and services contracts, or obtained the best solution for the best price. Their ability to achieve value for money from their contracts was weakened by poor performance management of their suppliers and ineffective planning for contract expiry. The departments did not have in place sufficient contract management skills and systems to manage all their contracts consistently to the same high standards. 17 The Auditor-General noted that the deficiencies in governance arrangements and contract management systems hindered the audited departments ability to plan effectively for contract expiry. The department is unable to plan for contract expiry ahead of time and contracts were more likely to be extended without confirmation that the current arrangements were achieving value for money Key recommendations in the Audit report The Auditor-General made four recommendations. These were that all departments: 1. develop and implement a contract management capability framework to ensure the department has sufficient, appropriately skilled resources to manage contracts effectively 13 Queensland Audit Office, Report No. 10: : Contract management: renewal and transition, December 2013: 6 14 Queensland Audit Office, Report No. 10: : Contract management: renewal and transition, December 2013: 1 15 Ms Heidrich, Transcript 2 April 2014: 2 16 Queensland Audit Office, Report No. 10: : Contract management: renewal and transition, December 2013: 1 17 Queensland Audit Office, Report No. 10: : Contract management: renewal and transition, December 2013: 1 18 Queensland Audit Office, Report No. 10: : Contract management: renewal and transition, December 2013: 1 Finance and Administration Committee 5

17 2. develop and apply a risk/value matrix approach to: Public Sector Contract Extensions define expectations for effective contract management and establish supplier performance monitoring regimes to ensure value for money is realised with contracts allocate resources commensurate to the risk of contracts for efficient contract administration 3. validate the value for money proposition of a contract, before extending or renewing it, by reviewing: the original assessment of risk, demand and the supply market the supplier's performance 4. implement a contract management life cycle system to enable: consistent monitoring of supplier performance spend analysis an early trigger to prepare for contract expiry Departmental responses in the Audit report In accordance with section 64 of the Auditor-General Act 2009, a copy of the report is required to be provided to the relevant entities with a request to comment prior to its tabling. A copy of Report No. 10: was provided to DHPW, DCS and DTMR for comment. 20 DTMR agreed with all the recommendations from Report No. 10: DTMR noted that the Auditor-General s report had provided the department with a number of opportunities to further improve their capability, governance and systems to ensure effective management of their contracts. 21 PSBA advised that officers from their department met to discuss the recommendations made to DCS. The Director-General of the PSBA advised that the PSBA/DCS supported and agreed with the recommendations. The target date of 30 June 2015 was provided as the timeframe for implementation of all recommendations by the PSBA. 22 DHPW acknowledged the Auditor-General s findings and explained that because of their whole of government responsibility around procurement, they outlined their commitment to ensuring uplift in capacity around contract management across government. The department s Procurement Transformation Program (PTP) resulted in the Procurement Transformation Division (PTD) being established in May 2013 as the Queensland Government s centre-led procurement function. DHPW advised: The first phase (Wave 1) of the Procurement Transformation Program started in June 2013 and has recently been completed. 23 The department also explained that Wave 2 was due to be completed by June Queensland Audit Office, Report No. 10: : Contract management: renewal and transition, December 2013: 4 20 Queensland Audit Office, Report No. 10: : Contract management: renewal and transition, December 2013: 4 21 Queensland Audit Office, Report No. 10: : Contract management: renewal and transition, December 2013: Queensland Audit Office, Report No. 10: : Contract management: renewal and transition, December 2013: Queensland Audit Office, Report No. 10: : Contract management: renewal and transition, December 2013: Queensland Audit Office, Report No. 10: : Contract management: renewal and transition, December 2013: 37 6 Finance and Administration Committee

18 2.3 Departmental responses to the Committee Subsequent to the public hearing on 2 April 2014, the Committee agreed to undertake a survey of all Queensland departments in order to assess the stage of implementation of the audit findings. The Committee wrote to all departments on 9 June 2014 to obtain further information as follows: 1) The number, type and value of all procurement contracts with an annual expenditure over $50,000 that have been rolled over or extended in the past five years without going through a retendering process (where the contract did not stipulate an extension option). 2) The number, type and value of all procurement contracts with an annual expenditure over $50,000 that have been rolled over or extended in the past five years without going through a retendering process (where the contract did stipulate an extension option). 3) Procurement contracts with an annual expenditure over $50,000 coming up for review in the next two years. 4) Details of the how procurement contracts are managed within the department. 5) Whether the changes to the Queensland Procurement Policy (amended in 2013) was considered useful in managing the department s procurement contracts; and whether the department was satisfied with the level of training provided by central agencies to ensure the elements of the policy are understood by staff within the department. 6) Progress made in implementing each of the Auditor-General s recommendations in Report No. 10: ) Initiatives undertaken as a result of the audit findings. 8) Planning process for contract expiry. Responses to Committee s questions 1-3 (above) showed some inconsistencies when compared with figures previously provided to the QAO in some departments. The survey by the Committee also highlighted that some departments managed their procurement processes more efficiently than others. In some instances, procurements activities are handled centrally or by a different department e.g. Department of Aboriginal and Torres Strait Islander and Multicultural Affairs (DATSIMA) has a memorandum of understanding (MoU) with DCCSDS, and Department of Environment and Heritage Protection (DEHP) managed procurement contracts with a whole of life value greater than $100,000 on behalf of Department of Agriculture, Fisheries and Forestry (DAFF). It should also be noted that some departments were established after the MoG changes in Their responses have been incorporated into relevant sections of this report. Finance and Administration Committee 7

19 3 Contract management: Background 3.1 Contract management A procurement process includes three major phases; procurement planning, contract formation and contract management. The audit focused on the contract management phase which comprises the following processes (Figure 1): Monitor supplier performance Review demand and supply market analyses Vary, extend or complete. 25 Figure 1: Contract management phase in the procurement process. Source: Queensland Audit Office, Report No. 10: : Contract management: renewal and transition, December 2013: 5 The Australian National Audit Office (ANAO) is a specialist public sector practice providing a full range of audit and assurance services to the Parliament and Commonwealth public sector agencies and statutory bodies. 26 The ANAO developed and updated their better practice guide Developing and Managing Contracts: Getting the right outcome, achieving value for money in February 2012 as they considered there was a continued interest in and the need for guidance in the area of developing and managing contracts in the Australian government public sector. The guide is intended to be a general reference document and identifies the key issues and considerations that entities should be aware of when developing and managing contracts. 27 The guide also emphasises the importance of active and effective contract management throughout their life to ensure that contractor performance is satisfactory and that stakeholders are well informed and contract requirements are met. 28 The ANAO s guide outlines that: Value for money in a procurement process requires a comparative analysis of all the relevant costs and benefits of each proposal throughout the whole procurement cycle Queensland Audit Office, Report No. 10: : Contract management: renewal and transition, December 2013: 5 26 Commonwealth of Australia, Australian National Audit Office [Accessed 21 November 2014] 27 Commonwealth of Australia, Australian National Audit Office [Accessed 21 November 2014] 28 Commonwealth of Australia, Australian National Audit Office, Developing and Managing Contracts Better Practice Guide, February 2012:84 29 Commonwealth of Australia, Australian National Audit Office, Developing and Managing Contracts Better Practice Guide, February 2012:5 8 Finance and Administration Committee

20 The ANAO s guide outlined that the key elements to good contract management to be: managing risks managing relationships managing resources specifying responsibilities keeping records and behaving ethically. 30 The ANAO suggests that a contract management plan could be a useful tool in supporting management of risks to the success of a contract and is a major contributor in ensuring value for money is achieved. The contract performance management process may involve: performance monitoring i.e. collecting data on performance; performance assessment i.e. deciding whether performance meets the entity s needs; and taking appropriate action such as understanding and extending features of good performance, correcting areas of underperformance, or amending the contract requirements to meet changing needs. 31 In addition, systematic monitoring is an essential component of a performance assessment as in practice, performance will be assessed with feedback and reports provided throughout the monitoring process. 32 The ANAO also suggests that having a systematic approach to monitoring, which includes what information is required and when it is required, can assist in identifying any potential problems and allow early remedial action to be taken. It also allows timely reporting to senior management and other stakeholders.33 QAO used examples from the guide to provide context and background to their Report No. 10: Queensland s procurement policies: Background The overarching policy for the procurement of goods and services is known as the Queensland Procurement Policy (QPP) was approved by Cabinet in June The QPP replaced the State Procurement Policy (SPP) The objectives of the SPP were to: advance Government Priorities achieve value for money ensure probity and accountability for outcomes Commonwealth of Australia, Australian National Audit Office, Developing and Managing Contracts Better Practice Guide, February 2012: Commonwealth of Australia, Australian National Audit Office, Developing and Managing Contracts Better Practice Guide, February 2012:95 32 Commonwealth of Australia, Australian National Audit Office, Developing and Managing Contracts Better Practice Guide, February 2012:95 33 Commonwealth of Australia, Australian National Audit Office, Developing and Managing Contracts Better Practice Guide, February 2012:96 34 Correspondence from Director-General, Department of Housing and Public Works, to FAC dated 19 August 2014: Appendix 1: 2 35 Queensland Government, Department of Public Works, State Procurement Policy, September 2010: 2 Finance and Administration Committee 9

21 The SPP outlined that: Public Sector Contract Extensions each agency should use its best endeavours to ensure that competitive local suppliers are given a full, fair and reasonable opportunity to supply the Queensland Government and to deal with suppliers which treat their employees fairly. 36 The SPP framework was managed by the Queensland Government Chief Procurement Office (QGCPO) in the (former) Department of Public Works. 37 QGCPO collaborated with Open Windows Australia Pty Ltd, a contract life cycle management software vendor, to establish Q-Contracts in January Q-Contracts is a whole-of-government common use supply arrangement which provides a contract lifecycle management solution to all Queensland Government agencies. The responsibility of developing and monitoring Q-Contracts came under the QGCPO. 38 The Auditor-General outlined that an alternative solution suggested by the QGCPO was the 2011 procurement process reform initiative business case. At the time of the audit, the PTD has spent $1.1 million to deploy Q-Contracts for use by all budget sector agencies. The implementation of a contract life cycle management system, Q-Contracts was also proposed as part of the business case. 39 A review of the government s procurement practices was undertaken in late 2012 by Ernst and Young. DHPW advised that the review identified significant opportunities to achieve greater value for money by leveraging the government s procurement spend and implementing smarter sourcing practices. A three to five year procurement transformation program was recommended by the review that could enable the realisation of between $663 million to $1.303 billion in benefits. 40 One of the major changes recommended was to replace the three policy objectives of the previous SPP with a policy purpose and six principles. 41 The QPP underpins the government s procurement transformation program. 42 The six principles are: Principle 1: We drive value for money in our procurement. Principle 2: We act as 'one government', working together across agency boundaries to achieve savings and benefits. Principle 3: We are leaders in procurement practice - we understand our needs, the market, our suppliers and we have the capability to deliver better outcomes. Principle 4: We use our procurement to advance the government's economic, environmental and social objectives and support the long term wellbeing of our community. Principle 5: We have the confidence of stakeholders and the community in the government's management of procurement. Principle 6: We undertake our procurement with integrity, ensuring accountability for outcomes Queensland Government, Department of Public Works, State Procurement Policy, September 2010: 2 37 Queensland Government, Information sheet: Queensland Government procurement, Queensland Government Chief Procurement Office, Department of Public Works, August [Accessed 21 November 2014] 38 Queensland Government, Fact sheet: Q-Contracts QGCPO , Queensland Government Chief Procurement Office, Department of Public Works, September [Accessed 21 November 2014] 39 Queensland Audit Office, Report No. 10: : Contract management: renewal and transition, December 2013: Correspondence from Director-General, Department of Housing and Public Works, to FAC dated 19 August 2014: 1 41 Correspondence from Director-General, Department of Housing and Public Works, to FAC dated 19 August 2014: 2 42 Queensland Government, Queensland Procurement Policy, Department of Housing and Public Works, June 2013: 2 43 Queensland Government, Queensland Procurement Policy, Department of Housing and Public Works, June 2013: 1 10 Finance and Administration Committee

22 DHPW produced a document titled Bridging document which outlines the differences between the former SPP and the new QPP. The QPP strategies include changing from being agency-centric to embodying principles of one-government which means that the procurement operating model is driven from an understanding of total expenditure and a category management approach rather than from an agency perspective. In addition, the (previous) Procurement Board of Management was replaced by the Directors-General Council (DG Council). 44 The DG Council has a significant role in leading the procurement function with membership set at the Director-General/Chief Executive level. The DG Council will oversee the management of the Queensland Government s procurement expenditure, and drive collaboration across government to ensure the optimisation of spend, including efficiencies and effectiveness of the supply chain. 45 The audit report identified that DHPW had established a PTD within their department. The Committee sought clarification from the department as to the reasons for the establishment of this division and what it consists of. The DHPW explained that the PTD was established in May 2013 following the Ernst and Young 2012 review. The department also outlined that PTD was created with a focus on: transforming the approach to procurement across government (strategic, portfolio and category management focus) driving and providing support for the overarching procurement framework aimed at a consistent One-Government approach (but not a one-size-fits-all model) providing specialist resources to work with agencies to enable delivery of government priorities. 46 DHPW advised that the first phase (Wave 1) of the PTP, which was essentially a proof of concept, was completed in October Wave 1 achieved four significant results. These were: the enablement of $82 - $130 million in benefits a decrease in the average sourcing time from approximately 300 days down to 92 days a detailed assessment of the procurement capability of 676 government procurement employees the delivery of some targeted training and development activities. 47 DHPW explained that the PTP consists of: The realisation of the benefits through a series of sourcing waves that will utilise levers across government, including aggregating demand from agencies, leveraging whole-of-government spend and eliminating duplication of sourcing for the same goods or services. The creation and implementation of smarter sourcing practices by refining and streamlining sourcing processes. This will enable better outcomes for both government and industry through the reduction of red tape and duplication. 44 Correspondence from Director-General, Department of Housing and Public Works, to FAC dated 19 August 2014: Appendix 1: 2 45 Correspondence from Director-General, Department of Housing and Public Works, to FAC dated 19 August 2014: Appendix 1: 2 46 Correspondence from Director-General, Department of Housing and Public Works, to FAC dated 19 August 2014: 1 47 Correspondence from Director-General, Department of Housing and Public Works, to FAC dated 19 August 2014: 2 Finance and Administration Committee 11

23 A mega category approach to managing the more than $17 billion of government spend by classifying all goods and services into six main mega categories and taking a strategic approach to managing the suppliers and contracts within these categories. The implementation of the Cabinet Budget Review Committee (CBRC) approved portfolio based operating model which simplifies reporting and decision-making relationships, increases strategic alignment and allows improved procurement execution that is driven by value and risk. The creation of a consistent contract management framework across government that ensures value for money is obtained and retained post contract award. The execution of a government procurement capability strategy (premised on 70/20/10 strategy i.e. 70% on the job training, supported by 20% mentoring/coaching and 10% formal training). 48 The second phase (Wave 2) was launched on 31 March The aims of Wave 2 are to identify the most cost effective and efficient way to source government goods and services, and to implement new strategies across government. The expected completion date for Wave 2 is September The department also outlined that the PTP s role is to grow the right capabilities across the public sector and is underpinned by an approach of delivery value whilst building supporting frameworks, tools and capabilities. 50 The DHPW advised the Committee that the review of procurement across government identified a lack of capability between ICT strategies across some departments in regards to Q-Contracts so part of the PTD was to also examine the long-term strategy on this issue Correspondence from Director-General, Department of Housing and Public Works, to FAC dated 19 August 2014: Queensland Government, Procurement Transformation, Department of Housing and Public Works [Accessed 21 November 2014] 50 Correspondence from Director-General, Department of Housing and Public Works, to FAC dated 19 August 2014: 1 51 Mr Castles, Transcript 15 October April 2014: 6 12 Finance and Administration Committee

24 4 Achieving value for money Audit Report No. 10: highlighted that long term contracts must be well managed to ensure value for money is achieved throughout the life of the contract. 52 The ANAO s Better Practice Guide outlines that entities ought to have in place management arrangements that are designed to maximise the overall value for money of contracting activities. These arrangements should also enable them to have in place processes that meet all the internal and external management and reporting responsibilities in a cost-effective manner. 53 The Auditor-General considered that it is essential to have effective contract management for expected benefits of a contract to be fully realised after it has been awarded. Management of the risks, resources, relationships, supplier performance and contract variations is necessary. 54 The audit included a review of how effectively the audited departments managed supplier performance and planned for contract expiry. Sixty-two contracts were examined in detail: 17 from the DCS, 15 from the DTMR and 30 from the DHPW. The Auditor-General explained that more DHPW contracts were reviewed because the department had previously hosted the former Queensland Government Chief Procurement Office which managed whole-of-government contracts Monitoring supplier performance Report No. 10: noted: Effective, risk-based contract management during the life of a contract means that, by the time a contract is due to expire, the department has clearly established whether it should extend or re-tender. 56 Effective contract management practice can significantly reduce the overheads associated with contract extension or renewal. 57 The audit identified that the audited departments were unable to consistently demonstrate that they achieved value for money from their goods and services contracts. Their ability to achieve value for money from their contracts was weakened by poor performance management of their suppliers and ineffective planning for contract expiry. The departments did not have in place sufficient contract management skills and systems to manage all their contracts consistently to the same high standards. 58 The Auditor-General identified that the audited departments established performance management frameworks for their contracts on an exception basis, rather than as standard practice. Sixty-nine per cent, 43 of the 62 contracts, reviewed contained key performance indicators (KPIs), but only 13 contracts had sufficiently detailed performance management frameworks to enable objective assessment of supplier performance. 59 The number of contracts reviewed that included all, some or none of the elements required for an effective performance management framework is shown in Figure Queensland Audit Office, Report No. 10: : Contract management: renewal and transition, December 2013: 5 53 Commonwealth of Australia, Australian National Audit Office, Developing and Managing Contracts Better Practice Guide, February 2012:72 54 Queensland Audit Office, Report No. 10: : Contract management: renewal and transition, December 2013: Queensland Audit Office, Report No. 10: : Contract management: renewal and transition, December 2013: Queensland Audit Office, Report No. 10: : Contract management: renewal and transition, December 2013: Queensland Audit Office, Report No. 10: : Contract management: renewal and transition, December 2013: Queensland Audit Office, Report No. 10: : Contract management: renewal and transition, December 2013: Queensland Audit Office, Report No. 10: : Contract management: renewal and transition, December 2013: 11 Finance and Administration Committee 13

25 Figure 2: Elements of performance management framework. Source: Queensland Audit Office, Report No. 10: : Contract management: renewal and transition, December 2013: 11 Report No. 10: identified that there was a lack of a performance management framework for 19 out of 62 contracts. The Auditor-General considered that this meant departments were unable to identify objectively any potential problems with contract deliverables. 60 The audit found that DTMR had more established performance management frameworks as all contracts reviewed there had some elements to enable objective assessment of each supplier s performance. 61 The DTMR acknowledged that gaps were identified as a result of Report No. 10: The department noted that these gaps included a lack of strategic planning towards contract management and a lack of ability to obtain accurate contract data and spend analysis. 62 The department explained that PTD has now provided them with a Contact Management Framework which reflects a value/risk approach. 63 DTMR also advised the Committee that the department began a procurement reform in 2012 to address a number of issues around procurement. The department explained they had conducted extensive internal and external consultation which resulted in a number of reform activities being adopted by DTMR. The reform activities included the establishment of a new operating model which provides a single point of accountability for procurement within their department. 64 The Auditor-General also identified significant differences in performance management frameworks between regional offices at the DHPW. For example, one office had all the elements of an effective performance management framework in the contracts reviewed, while another office had none of these elements. 65 However the QAO acknowledged that at the time of tabling Report No. 10: , the PTD had already commenced in terms of building the capability. 66 The DHPW also advised the Committee that, subsequent to the audit report being tabled, a working group was formed comprising Chief Procurement Officers (CPOs) from the departments mentioned in the audit report Queensland Audit Office, Report No. 10: : Contract management: renewal and transition, December 2013: Queensland Audit Office, Report No. 10: : Contract management: renewal and transition, December 2013: Correspondence from Director-General, Department of Transport and Main Roads, to FAC dated 12 August 2014: 6 63 Correspondence from Director-General, Department of Transport and Main Roads, to FAC dated 12 August 2014: 3 64 Mr Mead, Transcript 2 April 2014: Queensland Audit Office, Report No. 10: : Contract management: renewal and transition, December 2013: Mr Brahman, Transcript 2 April 2014: 5 67 Correspondence from Director-General, Department of Housing and Public Works, to FAC dated 19 August 2014: 2 14 Finance and Administration Committee

26 DCCSDS acknowledged the need to improve contract management capability and their approach has reflected their procurement profile and their decentralised procurement model. The DCCSDS explained that they are further developing a contract management capability framework outlined in their Investing in Queenslanders, Social and Human Services Investment Blueprint Measuring and monitoring supplier performance The audit identified that contracts managers in the three departments monitored supplier performance to some degree. However, the Auditor-General noted that over two thirds of the reviewed contracts had insufficient evidence that supplier performance was monitored consistently against objective and measurable criteria. Only 21 out of 62 contracts examined had effective supplier performance monitoring throughout the contract life cycle (Figure 3). 69 Figure 3: KPIs monitored throughout contract term. Source: Queensland Audit Office, Report No. 10: : Contract management: renewal and transition, December 2013: 13 The Auditor-General reported that overall departments audited did not maintain adequate records of meetings with suppliers to discuss their performance. Examples of this included: DCS recorded evidence of regular performance review meetings with suppliers for one of the 17 contracts reviewed. At DTMR, contract managers met with suppliers to discuss progress and to provide feedback on their performance for all reviewed contracts; but for half of the contracts, there were no records of meetings held with suppliers. 70 DTMR advised that since the audit, existing procurement procedures have been updated. The departmental procurement procedures now include practices for contract rollovers to include addressing whether there are any supplier performance problems, whether the goods and/or services meeting the requirements of the users as well as whether there are any changes in the demand for the goods and services. The department also explained that they are in the process of implementing a contract management life cycle system in the form of the Procurement Systems Project (PSP) Correspondence from Director-General, Department of Department of Communities, Child Safety and Disability Services, to FAC dated 15 August 2014: 6 69 Queensland Audit Office, Report No. 10: : Contract management: renewal and transition, December 2013: Queensland Audit Office, Report No. 10: : Contract management: renewal and transition, December 2013: Correspondence from Director-General, Department of Transport and Main Roads, to FAC dated 12 August 2014: 5 Finance and Administration Committee 15

27 4.3 Planning for contract expiry The Auditor-General explained that contract expiry planning is an important step. Planning provides the departments enough time to test whether extending or renewing existing contracts, or returning to the market for a new competitive tender process, will deliver the best value for money. 72 Report No. 10: outlined that to ensure value for money is achieve in extending or renewing a contract, an evaluation of the below should be undertaken: supplier performance before the contract expires to ensure the expected outcomes have been achieved continued business need for the service, including reviewing historical spend, predicting future spend and assessing alternative sourcing strategies to satisfy business need the effect of any changes in supply market conditions on the potential to achieve greater value for money before extending or renewing contracts. 73 The Committee s survey of all departments included a question on how departments plan for contract expiry. The Committee found that departments responses to this issue varied. The PSBA advised that they currently use a contracts register with manual bring-ups to review contracts prior to expiry. 74 The DETE explained that Category Directors and Managers are responsible for planning, implementing and managing contracts for their key areas of spend. 75 The DTMR advised that: Preparing for contract expiry within TMR is currently monitored by the Contract Manager through the use of a Contract Management Plan, as well as the TMR Contract Register. 76 DSITIA explained that the implementation of Q-Contracts across their department provides a standard approach to planning for renewals. This allows for the development of suitable time frames and to implement appropriate procurement strategies. 77 Many departments including PSBA, DLGCRR and DSDIP will also be implementing Q-Contracts but at present, departmental Procurement Services Unit manages the contract expiry process. 78,79,80 The Committee also noted that some of the departments responses in relation to the number and value of contracts (in some years) differed to those provided to the QAO. For example, the Committee asked the DTMR to explain the reasons for the difference in the number and total value of contracts for The department explained that the figures supplied to QAO in October 2012 were from a previous calculation and were not complete, and as such were used in error. The department also explained that some of the figures provided to QAO at the time of the audit were current at that point in time, but these were subsequently updated for the full financial year and provided to the Committee in August The Committee also asked the DCCSDS for an explanation for the differences in the figures provided to the QAO and to the Committee for their annual expenditure for review over the next two years. 72 Queensland Audit Office, Report No. 10: : Contract management: renewal and transition, December 2013: Queensland Audit Office, Report No. 10: : Contract management: renewal and transition, December 2013: Correspondence from Director-General, Public Safety Business Agency, to FAC dated 25 August 2014: 4 75 Correspondence from Director-General, Department of Education, Training and Employment, to FAC dated 6 August 2014: 6 76 Correspondence from Director-General, Department of Transport and Main Roads, to FAC dated 12 August 2014: 6 77 Correspondence from Director-General, Department of Science, Information Technology, Innovation and the Arts, to FAC dated 12 August 2014: 6 78 Correspondence from Director-General, Public Safety Business Agency, to FAC dated 25 August 2014: 4 79 Correspondence from Director-General, Department of Local Government, Community Recovery and Resilience, to FAC dated 14 August 2014: 6 80 Correspondence from Director-General, Department of State Development, Infrastructure and Planning, to FAC dated 18 August 2014: 5 81 Correspondence from Director-General, Department of Transport and Main Roads, Response to Question on Notice, to FAC dated 13 November 2014:1 & 3 16 Finance and Administration Committee

28 The department advised that on receiving the Committee s request for information, they reexamined and re-checked each of their area s contract register which is on excel spreadsheets Evaluating supplier performance The audit identified that audited departments evaluated supplier performance before approving contracts for extension or renewal on an ad hoc and irregular basis. Supplier performance was evaluated before the decision to extend for 15 of the 58 contracts reviewed in detail (Figure 4). Figure 4: Value for money assessments before contract extensions. Source: Queensland Audit Office, Report No. 10: : Contract management: renewal and transition, December 2013: 14 The Auditor-General reported that the remaining 43 contracts, 21 of them worth more than $1 million each were not evaluated by the departments audited. This may result in goods and services contracts being extended or renewed with existing suppliers, despite their poor performance. 83 The Auditor-General recommended that value for money proposition of a contract should be validated before extending or renewing. 84 The DTMR response to the QAO outlined that the recommendation will be incorporated into their current procurement process development, which was expected to be fully implemented across their department by June The DHPW explained that the PTP, led by the PTD, will provide supporting tools and frameworks, the use of a Value Risk Matrix (VRM), as well as a checklist fact sheet that supports better decision making Business needs and demand analysis Report No. 10: found that the audited departments could not demonstrate consistently that their decisions to extend contracts were based on a business need for those goods and services. The Auditor-General considered that there was minimal evidence to show that the departments reviewed the predicted demand before extending or renewing contracts. The Auditor-General suggested that departments may miss opportunities to implement strategies that reduce demand for specific services or seek alternative cost effective methods to satisfy business demand. 87 Fifty-eight contracts from the 62 contracts reviewed in detail had been extended prior to the audit and departments performed spend and demand analysis before extending or renewing contracts as an exception rather than as standard practice (see Figure 4) Mr O-Brien, Transcript 15 October 2014: 5 83 Queensland Audit Office, Report No. 10: : Contract management: renewal and transition, December 2013: Queensland Audit Office, Report No. 10: : Contract management: renewal and transition, December 2013: Queensland Audit Office, Report No. 10: : Contract management: renewal and transition, December 2013: 4 86 Correspondence from Director-General, Department of Housing and Public Works, to FAC dated 19 August 2014: 4 87 Queensland Audit Office, Report No. 10: : Contract management: renewal and transition, December 2013: Queensland Audit Office, Report No. 10: : Contract management: renewal and transition, December 2013: 15 Finance and Administration Committee 17

29 DHPW advised that in 2014, BAS undertook a review process which was available to all market participants for the service maintenance contracts. They acknowledged that, prior to the new QPP principles and development of the value/risk approach, post-award contract management was not effectively defined or generally applied. The department also recognised that some contracts did not previously include supplier performance indicators or metrics. 89 DHPW also noted that the review by BAS of their practices is ongoing and that process improvements are being implemented to better engage with suppliers. 90 DTMR advised the Committee that since the audit recommendations, their existing department procurement procedures have been updated to include practices for contract rollovers. These practices include (but not limited to) documenting the following questions: Are there any supplier performance problems? Have these been resolved or is a contract variation also required? Are the goods and/or services meeting the requirements of the users? Is there still a demand for the goods and/or services? Has the demand changed? Supply market - what is the position within the supply market compared to when the contract was initially awarded? Has it changed? Is there funding available? What is the term of the extension? 91 DSITIA advised the Committee that they have commenced the implementation of Q-Contracts, which they anticipate will be substantially completed by 30 September DCCSDS explained that their procurement procedures provide a framework for managing risk that is consistent with their overall Risk Management Framework. 93 They also outlined that they are participating in and contributing to DHPW s in developing a value/risk matrix as part of the one government approach Evaluating supply market conditions The audit reported that of the 58 contracts reviewed only one assessed the supply market conditions before extension. The audit identified that BAS did not perform supply market testing on the 209 service maintenance contracts that it extended or renewed for The Auditor-General expressed concerns that supply market conditions can change considerably in the time from when a contract is established to its expiry date. The Auditor-General noted: Eleven DCS contracts reviewed were established three years or more before they were extended and one was established 10 years earlier. Six DHPW contracts reviewed were established several years before their extension in with establishment dates ranging from 2001 to Correspondence from Director-General, Department of Housing and Public Works, to FAC dated 19 August 2014: 6 90 Correspondence from Director-General, Department of Housing and Public Works, to FAC dated 19 August 2014: 6 91 Correspondence from Director-General, Department of Transport and Main Roads, to FAC dated 12 August 2014: 5 92 Correspondence from Director-General, Department of Science, Information Technology, Innovation and the Arts, to FAC dated 12 August 2014: 5 93 Correspondence from Director-General, Department of Communities, Child Safety and Disability Services, to FAC dated 15 August 2014: Correspondence from Director-General, Department of Communities, Child Safety and Disability Services, to FAC dated 15 August 2014: 7 95 Queensland Audit Office, Report No. 10: : Contract management: renewal and transition, December 2013: Queensland Audit Office, Report No. 10: : Contract management: renewal and transition, December 2013: Finance and Administration Committee

30 DHPW explained that the contract management framework developed by PTD provides specific guidance on the measurement of key performance indicators in contracts. As BAS is adopting a centre-led and regionally delivered approach to its operations, application and interpretation of the processes and policy decision across the state will become more consistent. The department advised: The implementation of Q-Contracts will standardise the management and administration of contracts with suppliers and enable consistent monitoring of supplier performance. 97 DHPW explained that there are different factors to consider in a decision to extend/renew a contract rather than to undertake a competitive tender process. PTD has developed a checklist that addresses questions relating to risk, demand, supply market and supplier performance prior to an extension or renewal. The department advised that the main elements of the checklist include: contract term and classification against the value/risk matrix supplier performance summary spend under contract demand trends pricing/market review consultation endorsement approval how to guide Contract extensions beyond original terms Contracts within departments were also examined for extensions beyond their original terms during the audit. Report No. 10: outlined that there are several reason for contracts to be extended beyond original terms. These include: the department reviewed its original risk and value for money assessments and is satisfied that extending the contract would maximise the value for money outcomes systems' limitations mean the department does not have sufficient lead time to plan adequately for contract expiry and to prepare an open tender process strategic reviews of departments, such as the Police and Community Safety Review, which could impact on their future priorities and governance arrangements. 99 The audit identified that 42 of the 58 contracts examined were extended via an option and 16 were extended beyond their original terms. The Auditor-General noted that one of the departments audited did not have sufficient resources to complete a new procurement process until 2012 when a person was appointed. Of particular concern to the Auditor-General was that the contract was expected to be tendered over seven years since the original contract expired Correspondence from Director-General, Department of Housing and Public Works, to FAC dated 19 August 2014: 4 & 6 98 Correspondence from Director-General, Department of Housing and Public Works, to FAC dated 19 August 2014: 7 99 Queensland Audit Office, Report No. 10: : Contract management: renewal and transition, December 2013: Queensland Audit Office, Report No. 10: : Contract management: renewal and transition, December 2013: 16 Finance and Administration Committee 19

31 The Auditor-General noted that extending beyond contract terms may delay departments in achieving greater value for money for their goods and services contracts. He explained: We expected to see more rigorous value for money assessments when contracts were extended beyond their terms, compared with an extension, because of the increased risk; however, departments did not perform value for money assessments for 14 of the 16 contracts extended beyond term. This indicates that the risk of the contract engagement was not a key factor when departments decided to extend contracts. 101 The Committee sought clarification from DHPW as to whether they considered it appropriate to extend a contract beyond its original terms and under what circumstances was such an extension would be appropriate. The department advised that there may be occasions where an extension of a contract is in the best interest of the government. Such an extension would require an agreement by all parties and that it must demonstrate that: extending the contract will deliver value for money the extension is supported by business needs and supply market analysis, and the supplier(s) performance is satisfactory and has met expectations. 102 DHPW also considered that there are a range of factors to consider when considering an extension or renewal rather than undertake a competitive tender process. The department explained that a guide for contract extensions/renewals has been developed as part of the PTP. This guide was being tested by DTMR, DHPW and other agencies. The tool and process guidance material has also been shared with all CPOs via the CPO Steering Committees Strategic sourcing Audit Report No. 10: also included an examination of the departments contract registers to determine if there were instances of duplicate contracts where multiple business areas in the same department obtained a similar service from the same supplier under a different contract arrangement. The audit identified that all departments had a significant number of duplicate contracts, and that: DCS had 138 contracts with 42 suppliers who had multiple contracts with the department, including one supplier who had 15 contracts DTMR had 150 contracts worth about $135 million with 66 suppliers who had multiple contracts with the department. 104 The Auditor-General considered that departments could achieve greater efficiency by identifying where it is possible to reduce the number of contracts, even though duplication may be unavoidable due to local needs. The audit also identified that strategic sourcing was not being well managed at a whole-of-government level Queensland Audit Office, Report No. 10: : Contract management: renewal and transition, December 2013: Correspondence from Director-General, Department of Housing and Public Works, to FAC dated 19 August 2014: Correspondence from Director-General, Department of Housing and Public Works, to FAC dated 19 August 2014: Queensland Audit Office, Report No. 10: : Contract management: renewal and transition, December 2013: Queensland Audit Office, Report No. 10: : Contract management: renewal and transition, December 2013: Finance and Administration Committee

32 DETE noted that they are one of the largest and most decentralised departments in Queensland. Having identified in 2010 that there was a need to achieve better value out of their contract management, they established a contract procurement branch within their department. The department explained that the category management within that branch was established in a similar way to which the whole-of-government procurement model of doing business based on complexity and risk. 106 DHPW advised the Committee that the PTP is not about centralisation of a procurement function but more about a distributive and regional function. The department explained that they are ensuring actual procurement takes place in the regions (rather than centrally) as this means that the department is better engaged with local suppliers. 107 However, DHPW added that the focus of the PTD within their organisation is to implement a consistent operating model across the public sector. 108 The department also advised that six Mega Category Plans have been established to achieve a number of objectives. These are to: provide oversight of government spend to drive metro, regional, remote and innovative procurement strategies optimise spend and value for money outcomes for Queensland including realisation of up to $663 million to $1.303 million of benefits by financial year (based on dollars) reduce red tape through embedding simple, agile and consistent procurement practices and processes cut wasteful expenditure through reducing duplication, increasing collaboration and One Government oversight of procurement through a mega category structure be authentic and transparent with suppliers through engaging early and often, publishing forward opportunities, building supplier relationships and providing accountable category management contacts for each category and sub category across government. 109 Accountability of these plans rests with Mega Category Managers whilst the delivery of the plans is undertaken in a collaborative cross-agency manner. 110 The strategic sourcing process of PTP encompasses governance and review points at key stages of the sourcing process. DHPW considers that this would allow for the validation of sourcing strategies from independent experts outside government before proceeding with the execution of sourcing strategies. 111 DTMR advised the Committee that in implementing their new goods and services procurement process, some rationalisation of the infrastructure contract forms has been done to provide better standardisation of their infrastructure contracts Mr O Hagan, Transcript 15 October 2014: Mr Castles, Transcript 15 October 2014: Mr Castles, Transcript 15 October 2014: Correspondence from Director-General, Department of Housing and Public Works, to FAC dated 19 August 2014: Correspondence from Director-General, Department of Housing and Public Works, to FAC dated 19 August 2014: Mr Mead, Transcript 15 October 2014: Correspondence from Director-General, Department of Housing and Public Works, to FAC dated 19 August 2014: 3 Finance and Administration Committee 21

33 4.6 Committee comments The Committee understands that the QAO intends to undertake a follow-up audit on public sector contract extensions. The Committee is satisfied that the recommendations outlined by the Auditor- General in Report No. 10: are in the process of being implemented. The Committee is encouraged by the responses provided by government departments in the course of the inquiry. The Committee acknowledges that the issue of public sector contract extensions is not new and process of implementation requires time. The Committee considers that the outcomes and benefits may not be realised immediately and that on-going commitment will be required. The Committee intends to consider the issue of public sector contract extensions further subsequent to the follow-up audit by the QAO. 22 Finance and Administration Committee

34 5 Skills, governance and systems The ANAO s Better Practice Guide outlines that successful management of contracts require a range of skills and experience throughout the contract management cycle. These skills vary with the different stages of contracting and with the size and nature of the contract. The ANAO s guide outlines the skills and experiences as follows: Interpersonal and relationship Undertake tasks in a motivated and professional way Build strong relationships. Understand the parties culture and ways of working Encourage cooperation and communicate orally and in writing Subject matter/industry knowledge Understand the contractual requirement and the market or able to quickly gain relevant knowledge Objectively assess goods and services and whether performance standards have been met Project management Plan, schedule, organise work, manage tasks, and consult with stakeholders Motivate and lead people who may not be under the direct control of the contract manager Establish relationships to get tasks done in a timely way Use the skills available to get the best possible result Performance management Provide feedback, both positive and negative Explain acquiring entity s position and understand its legal position in addressing underperformance. Understand contractor s environment Problem solving Have a positive approach to solving problems Encourage mutual cooperation to address issues Have the ability to make decisions in circumstances where there may not be full knowledge of all relevant facts in the available timeframe Negotiation Deal with evolving and changing circumstances Have subject matter knowledge and be able to bring about mutually acceptable agreements Display professional behaviour Have relevant training or experience in planning for and conducting negotiations Manage robust dialogue Accountability/financial management Understand and apply relevant laws and accountability requirements and financial arrangements Finance and Administration Committee 23

35 Human resource management Manage the team to maximise performance over the long term. 113 Public Sector Contract Extensions The departments audited in Report No. 10: manage large numbers of valuable contracts. The Auditor-General considered that it is necessary for departments to assess the risk of each contract to determine the necessary skill capability and governance requirements for the contract life cycle. 114 The departments acknowledged the audit findings and advised the Committee that they were all in different stages of implementing frameworks which includes risk-value approaches. The DHPW acknowledged that in the past there was little capability to extract information on department s overall contracts spend but Wave 2 of the PTD will have the ability to provide more in-depth information Contract management skills The central procurement divisions in the DCS and the DTMR provided support and advice to contract managers in their respective departments. Designated client representatives from business areas managed contracts on a day-to-day basis. 116 The audit identified that demand and supply market analysis was done for only one contract from the 58 reviewed contracts. Report No. 10: also outlined that the DCS had not assessed its procurement capability and could not demonstrate that its contract managers had the appropriate skills to manage contracts. The Auditor-General advised that no plan had been developed to improve the skills of staff in business areas responsible for managing contracts. Of concern to the Auditor-General was that 13 from the 17 contracts reviewed were managed on a day-to-day basis by untrained contract managers. 117 PSBA acknowledged that this has been an issue for the department for many years and agreed that getting a contract management framework in place is essential. The PSBA explained that they are:.. working with PTD with the capability side to make sure that we have the ability to roll out stuff is practical. Certainly, a contract manager who is managing a low-risk, low-value contract needs to focus on what he needs to focus on as opposed to one at a higher end, which is high risk and high value. There are two different skill sets that you are looking for. You really need to pitch your training and your capability at those levels. If you do not, again, we will hit it with a sledgehammer rather than thinking what is practical. 118 DHPW advised that BAS and housing services are the two main areas that they have to focus on are procurement and contract managers, as these are considered to be the future for the department. The department explained that the government s decision to outsource 90 percent of housing to private providers means the department will have to be procurement and contract managers. Their housing services head office has also undergone a restructure so there is an increased importance of the procurement and contract management function at a central office level Commonwealth of Australia, Australian National Audit Office, Developing and Managing Contracts Better Practice Guide, February 2012: Queensland Audit Office, Report No. 10: : Contract management: renewal and transition, December 2013: Ms Goodwin, Transcript 2 April 2014: Queensland Audit Office, Report No. 10: : Contract management: renewal and transition, December 2013: Queensland Audit Office, Report No. 10: : Contract management: renewal and transition, December 2013: Mr Mangano, Transcript 2 April 2014: Mr Castles, Transcript 2 April 2014: Finance and Administration Committee

36 DHPW also explained that in regards to housing where major procurement and contract management activities will be in the future, there has been a complete realignment and restructure in the head office. They stated: So what we have done there is it is now an organisation that looks at the procurement life cycle. We have one area of that department that looks after policy, the next area looks after capability or market development, the next part of housing services is responsible for procurement and the other area of housing services looks after contract management. 120 DHPW is providing and developing training for BAS on complete contract management life cycle as contract managers in regional Queensland are required to be fully engaged with suppliers, procurement and contract management. 121 Queensland Health agreed with the audit findings and explained that they are working with PTD to roll out contract management training at all levels not just in the department and throughout the distributed health network across the state. They stated: On the back of the redesign of the procurement operating model within Queensland Health, we are injecting high-level contract managers, particularly for some of those key clinical spend categories. We spend in excess of half a billion dollars for clinical consumables, $400 million for pharmaceutical drugs and in excess of half a billion dollars for medical related services. These are complex categories with some quite powerful supply bases and we need astute, commercially driven contract managers to be able to manage those contracts. 122 DCCSDS considered that there was a gap between where their staff currently are in their capability and where they need to be. They stated that they are in the process of developing a procurement and contract management capability workforce strategy. DCCSDS advised: As part of our implementation of the new Treasury guidelines, we had a look at just how many staff we had across the department who might be captured under the new procurement framework and we came up with an FTE number of over 600 staff who were either undertaking a procurement function or a contract management function across the agency. We have over 300 contract managers in the regions who are dealing daily with the non-government sector and looking at the performance requirements and certifying future payments for the sector. When we looked at the capability of these staff as part of the Procurement Transformation Division capability assessment, we realised that there was an enormous gap between where they currently are and where they need to be, and through our human resource area we have developed a procurement and contract management capability workforce strategy which we are currently implementing. We have delivered some preliminary contract management training into the regions, particularly at a team leader level to get that percolating down through the organisation, and we will be looking at future contract management training for those staff. 123 The department also advised: What we have done immediately is as part of our graduate program we have brought in a procurement graduate to try to boost up immediately our procurement skills, and from my perspective Mr Castles, Transcript 15 October 2014: Mr Castles, Transcript 15 October 2014: Mr Mazzotta, Transcript 15 October 2014: Mr O Brien, Transcript 15 October 2014: Mr O Brien, Transcript 15 October 2014: 7 Finance and Administration Committee 25

37 DSITIA also acknowledged that there was a gap in knowledge within their department. They advised the Committee that there was some very strong contract management in the CITEC side of the department and in managing the government wireless network contract, but experience varies across other parts of the department. They explained: I am currently doing a range of presentations to staff right across the department and I am showcasing these sorts of skills and saying, If you ve got them and we don t know about them, tell us, and if you are interested in building capability, please talk to us as well. So I am trying to get the message right down throughout the department. 125 A new process is being rolled out at DTMR around how the department make purchases. The department informed the Committee that they have trained over 1,100 people across the organisation in procurement, which also includes contract management. In addition, DTMR explained that they have tools on the intranet to support staff and have had very positive feedback on the training tools. 126 DTMR also advised the Committee that since the audit, the department has implemented targeted contract management training on a regular basis. In addition, mandatory online training is available for procurement awareness and delegations, and specific training provided on the new procurement process. The DTMR requires that new procurement delegates are not able to exercise their delegation until training has been undertaken. 127 DETE conceded that there have been some challenges in their department. The department noted that one of their challenges has been that they have had difficulties in obtaining dedicated full-time contract managers, particularly when the economy is in an upswing. The other challenge within DETE is that: we have people who do contract management as part of their everyday activity. There is a challenge for our agency, and again I suspect for most, to raise the level of contract management awareness and expertise with those staff, who do not do that sort of activity all day, every day; they do it as part of another deliverable or outcome. 128 The Committee queried whether fraud controls within contract management has been addressed by the departments and in particular by PTD. The DHPW advised that they are very focussed on fraud prevention in their department. The department stated: We have greatly reduced the level of general purpose vouchers, so everything is much more automated. There is far greater automation, with approvals being online and so forth, which significantly reduces the likelihood of that. 129 DHPW acknowledged that there has been a lot of emphasis across all departments in the area of fraud prevention. 130 The department advised that the practice of extensive data mining is now embedded in their business, and this process examines the anomalies such as name of payer or payee, number of times these appear, addresses and the absence of an ABN Ms Rickerby, Transcript 15 October 2014: Ms Hawkswood, Transcript 15 October 2014: Correspondence from Director-General, Department of Transport and Main Roads, to FAC dated 14 August 2014: Mr Heard, Transcript 15 October 2014: Mr Castles, Transcript 15 October 2014: Ms McDonald, Transcript 15 October 2014: Mr Castles, Transcript 15 October 2014: Finance and Administration Committee

38 DTMR advised the Committee that on developing their training of fraud awareness, they worked closely with their internal audit, legal and prosecution as well as their financial accounting areas to ensure that their processes address all of the risk. They stated: It was all focused on delivering an outcome and making sure that, in terms of delivering that outcome, we did not drop any of the controls. 132 The Committee also heard that all managers at DCCSDS had undergone an internal-controls-at-work training program, which included some focus on fraud prevention Contract management governance Report No. 10: noted that all aspects of the contract life cycle including establishing contracts, delivering contracts to ensure objectives are realised and extending, renewing or retendering contracts should be included as part of effective governance. The audit reviewed whether departments had plans to enable effective delivery of contracts and whether they had effective processes for governing the extension and renewal of contracts particularly since the government s decision to outsource 90 per cent of housing to private providers. 134 DHPW noted that service maintenance contracts are a significant issue for BAS. They advised: BAS is a building regional capability and capacity to ensure local control and ownership of service maintenance contracts, previous centralisation of these has resulted in large, complicated packages being developed without adequate consultation with regional customers and suppliers. 135 They explained that a review had been undertaken. As a result of this review, service maintenance contracts have been streamlined into aggregated packaged arrangements (down from 638 contracts to 175 contracts). These were put out to the market in April 2014, and over 90 per cent have been awarded. The department outlined that the remainder were due to be awarded by the end of August Contract management plans The ANAO considered that a contract management plan (or simple check list) even for relatively simple, low-risk contracts will ensure that important obligations are adhered to and the intent of the contract is achieved. 137 The ANAO suggested that contract management plans should include contract details such as: key contacts dates and milestones roles and responsibilities of personnel in the acquiring entity and supplier contract terms and conditions communication and reporting schedules performance indicators and measures pricing and payment conditions and risk assessments Ms Hawkswood, Transcript 15 October 2014: Mr O Brien, Transcript 15 October 2014: Queensland Audit Office, Report No. 10: : Contract management: renewal and transition, December 2013: Correspondence from Director-General, Department of Housing and Public Works, to FAC dated 19 August 2014: Correspondence from Director-General, Department of Housing and Public Works, to FAC dated 19 August 2014: Commonwealth of Australia, Australian National Audit Office, Developing and Managing Contracts Better Practice Guide, February 2012:36 Finance and Administration Committee 27

39 The audit found that only 13 of the 62 contracts reviewed had a contract management plan, whilst the remaining 49 had no plan in place to enable effective contract administration during the term of the contract or to put in place necessary processes before the contract expired. The Auditor-General also identified that departments with either policies or templates to develop contract management plans did not enforce the plans systematically. 139 The Auditor-General emphasised that 25 contracts worth more than $1 million each had no contract management plan. 140 DHPW explained that: the contract management framework developed by PTD articulates the importance of performance management activities as a fundamental element for delivering the expected value from contracts. 141 They also stated: Many of the existing contract arrangements from areas within DHPW, including Housing Services, Strategic Asset Management, QBuild and Project Services were novated to the new Building and Asset Services (BAS) organisation on 1 July BAS is working with PTD to further develop its contract management capability to ensure contracts are managed efficiently and effectively. 142 During the course of the Committee s additional survey for further information on procurement contracts, the DETE advised that the gathering of the data requested required a manual review of contracts. 143 The department noted that they have implemented the Q-Contracts (Open Windows Contract Life-Cycle Management) which will commence from July They also advised that they have had an ongoing procurement reform initiative since 2010 when a specific branch was created to ensure professional conduct of procurement activity Approval process and policies for contract expiry The ANAO s guide suggests that any negotiation for contract extensions should commence and be agreed before the expiry date of the contract. Contract extensions that start late can place the entity in an inferior negotiating position. The ANAO proposed that examination of possible contract extensions should commence at least six months before the contract expiry date to allow time for consultation with stakeholders and value for money assessment. 146 The Auditor-General considered that the review process in planning for contract expiry should be outlined in the policies and procedures of the department. The Auditor-General recommended that the review process ought to include an analysis to determine how best to achieve value for money before making the decision to extend, renew or re-tender contracts Commonwealth of Australia, Australian National Audit Office, Developing and Managing Contracts Better Practice Guide, February 2012: Queensland Audit Office, Report No. 10: : Contract management: renewal and transition, December 2013: Queensland Audit Office, Report No. 10: : Contract management: renewal and transition, December 2013: Correspondence from Director-General, Department of Housing and Public Works, to FAC dated 19 August 2014: Correspondence from Director-General, Department of Housing and Public Works, to FAC dated 19 August 2014: Correspondence from Director-General, Department of Education, Training and Employment, to FAC dated 6 August 2014: Correspondence from Director-General, Department of Education, Training and Employment, to FAC dated 6 August 2014: Correspondence from Director-General, Department of Education, Training and Employment, to FAC dated 6 August 2014: Commonwealth of Australia, Australian National Audit Office, Developing and Managing Contracts Better Practice Guide, February 2012: Queensland Audit Office, Report No. 10: : Contract management: renewal and transition, December 2013: Finance and Administration Committee

40 Report No. 10: found that the departments did not have in place effective governance structures to identify and correct systematically where contract managers requested contract extensions or renewals without demonstrating how value for money would be achieved. Although policies and procedures were in place, their focus was mostly on how contracts should be established but not on how contract managers should prepare for contract expiry. 148 The Auditor-General noted that DCS and PTD did not have any policies and procedures on contract expiry. At DTMR and BAS, procedures on contract expiry were in place but they were not sufficiently detailed in describing how value for money should be tested. QAO noted that these procedures were not applied when extending or renewing contracts and the governance processes were ineffective in identifying and correcting when this occurred. 149 Report No. 10: also outlined that all audited departments had approved submissions for contract extension with minimal analysis to support the extension and lacking detail on why an extension presented the best value for money option. 150 The Auditor-General acknowledged that PTD had developed a draft, outlining how it expects its contract managers to review a supply arrangement both during the contract term and before approving extensions. 151 DHPW advised that PTD s checklist contract review report template and frequently asked questions for use in procurement teams in the decision-making process of whether contracts are extended or renewed. 152 The department explained that the checklist also includes an explicit section for approval by the relevant delegated authority in the respective agency before proceeding. They also noted that this checklist is already being utilised by a number of agencies and was being progressively incorporated across government from July Contract management systems The audit identified that none of the departments had a complete contract register because of unreliable contract management systems. 154 The Auditor-General noted that the systems for managing contracts within the audited departments did not: provide for central management of contracts integrate with their respective department's financial systems provide automated alerts to enable early planning for contract expiry support and record details about the entire contract life cycle, including the initial procurement, contract formation and management, plus planning for contract expiry. 155 The ANAO s better practice guide recommended that all contract registers ought to include: all relevant contract details clear designation to an individual s or work area s responsibility for maintaining the register formal procedures for maintaining the accuracy and completeness of the register 148 Queensland Audit Office, Report No. 10: : Contract management: renewal and transition, December 2013: Queensland Audit Office, Report No. 10: : Contract management: renewal and transition, December 2013: Queensland Audit Office, Report No. 10: : Contract management: renewal and transition, December 2013: Queensland Audit Office, Report No. 10: : Contract management: renewal and transition, December 2013: Mr Castles, Transcript 15 October 2014: Correspondence from Director-General, Department of Housing and Public Works, to FAC dated 19 August 2014: Queensland Audit Office, Report No. 10: : Contract management: renewal and transition, December 2013: Queensland Audit Office, Report No. 10: : Contract management: renewal and transition, December 2013: 24 Finance and Administration Committee 29

41 automation of the input of data that will limit, or eliminate the multiple input of data into different systems, and assist in improving consistency and reduce the incidence of human error; provision of links to individual contracts system access controls designed to ensure unauthorised staff do not have access to a periodic review by internal audit or other review mechanism. 156 The audit also identified some practices that were of particular concern to the Auditor-General. For example, DCS recorded contract information manually in spreadsheets but these were incomplete and contained limited information on each contract. The Auditor-General also found the spreadsheets were maintained by staff in the central procurement division, so contract managers in business areas did not have a tool to update contract information. He stated: The registers recorded only contracts worth more than $ that business areas had disclosed to the central procurement area. The value of the contracts was not recorded in these registers. 157 The audit identified that DTMR s register was incomplete and relied on individual contract managers to enter the relevant data. The Auditor-General noted that department could not monitor how contracts were managed, identify contracts that were coming up for expiry or monitor the spending on contracts because the relevant information was not captured. 158 The Auditor-General outlined in the report that PTD had little visibility of the $10.9 billion annual procurement spend at a whole-of-government level. 159 The DHPW advised the Committee that: In terms of what was presented in the audit, the comment was more in terms of I think capability, which really was about we have a lot of information at our fingertips it is just that we do not necessarily convert that into information that can be acted upon. Within PTD we have the Q-Tender system which shows us all tenders that are put through the system. 160 The audit noted that BAS offices recorded contract information manually in spreadsheets using a common template. However, this template did not include a field to record contract values and that the BAS offices did not keep the spreadsheets up-to-date. 161 The Committee was advised that 17 from the 20 departments have agreed to Q-contracts. 162 DHPW explained that Q-Contracts is used across their department and they are examining the ICT strategy to identify ways in which it could integrate with various systems that departments have across the whole-of-government. The department acknowledged that SAP is not used in all departments and that there are also different versions of SAP being used Commonwealth of Australia, Australian National Audit Office, Developing and Managing Contracts Better Practice Guide, February 2012: Queensland Audit Office, Report No. 10: : Contract management: renewal and transition, December 2013: Queensland Audit Office, Report No. 10: : Contract management: renewal and transition, December 2013: Queensland Audit Office, Report No. 10: : Contract management: renewal and transition, December 2013: Ms Goodwin, Transcript 2 April 2014: Queensland Audit Office, Report No. 10: : Contract management: renewal and transition, December 2013: Mr Castles, Transcript 15 October 2014: Mr Castles, Transcript 15 October 2014: 6 30 Finance and Administration Committee

42 Queensland Health stated that they are implementing Q-Contracts, which is being rolled out across the system to the 16 Hospital and Health Services (HHSs) as well as within the department. 164 DSITIA informed the Committee that Q-Contracts is used for the Government Wireless Network and that implementation as a whole-of-department is expected to be completed by Christmas. 165 DETE implemented Q-Contracts in July However due to the complexity of integrating their two financial systems (SAP and Agresso), the financial management component of contracts is still handled within their current systems. 166 The DTMR advised that a contract management life cycle system under the Procurement Systems Project (PSP) was underway. The PSP has upstream tools which focuses on the supply of procurement functions. The department advised that the upstream tools will cover: Contract formation and management Invoice receipt and cash management Going to Market Supplier relationship management Event and alert management Project management, tasks, content Approvals 167 The tools under the PSP will be able to provide the department with the ability to better monitor the entire contract management process and as such provide an early trigger for planning for contract expiry. 168 The DTMR advised that as they already have a procurement systems strategy, which will incorporate a contract life cycle management system to be implemented by 30 June 2015, they are still in the process of deciding whether or not the product will be Q-Contracts. 169 The DHPW acknowledged the DTMR s good work on their success in developing their PSP. They stated: They are probably, I would say, the most advanced across government on the ICT end-toend procurement system. So we are closely interested in the work that is being done there and how we can maybe leverage that going forward. 170 DCCSDS stated that they already have existing grants management systems as the majority of their contracts are in the non-government sector. The department explained that: We have one system called our BIS system, which manages the spend for disability clients. We have another system that manages the spend for our community services and our child safety funded organisations. That covers off a majority of our contracts with the nongovernment sector. Our gap really is the supplies and services and our ICT contract arrangements, which we are managing on spreadsheets Mr Mazzotta, Transcript 15 October 2014: Ms Rickerby, Transcript 15 October 2014: Mr Heard, Transcript 15 October 2014: Correspondence from Director-General, Department of Transport and Main Roads, to FAC dated 14 August 2014: Correspondence from Director-General, Department of Transport and Main Roads, to FAC dated 14 August 2014: Mr Mead, Transcript 15 October 2014: Ms McDonald, Transcript 15 October 2014: Mr O Brien, Transcript 15 October 2014: 5 Finance and Administration Committee 31

43 The DCCSDS explained that because they are running two grant systems which integrate with their financial system, SAP, they advised that they have no plans to implement Q-Contracts. However, they advised that when they implement their new SAP system, they may reconsider whether to implement Q-Contracts. 172 To overcome the difficulties in having different versions of SAP (and other) systems across government departments, the DHPW advised the Committee that PTD is equipped with a system called Insight which is able to extract information from each of those systems. There is also a system within PTD, the Q-Tender system, which will show all tenders put through the system and provide them with an opportunity to convert the required information to be shared with all departments Committee comments Of particular interest to the Committee was that the work being done by PTD had commenced since the tabling of the audit report. The Committee considers that this has had some positive impacts on building procurement capability in many departments. The Committee is satisfied that the proposed improvements should benefit all departments in the delivery of more consistent procurement methods and management across the public sector. However, the Committee notes that as there could potentially be a gap in knowledge particularly where staff do not consider themselves to be procurement managers or officers but may be required to manage procurement contracts in some way in their roles. The Committee believes that these staff may require further training to increase their knowledge not only on procurement but also on fraud prevention. The Committee heard evidence that historically government has been quite good at doing the transactional sourcing skills and not very good at doing contract management. 174 The Committee also heard evidence that many staff undertake part time contract management roles. 175 The Committee considers that all procurement/contract managers or officers would further benefit from ongoing training particularly in those departments where PTD procurement processes are being adopted or have been recently adopted. The Committee is satisfied that the majority of the departments will be adopting Q-Contracts and notes that differences in management systems have added to the complexity of implementing a whole-of-government contract management system. The Committee is pleased that those unable to integrate Q-Contracts are implementing systems that should improve or further enhance their contract management capabilities. Recommendation 1 The Committee recommends that a whole-of-government review of the benefits and effectiveness be conducted following the implementation of PTD s final phase. 172 Mr O Brien, Transcript 15 October 2014: Ms Goodwin, Transcript 2 April 2014: Mr Mazzotta, Transcript 15 October 2014: Mr O Brien, Transcript 15 October 2014: 7 32 Finance and Administration Committee

44 Recommendation 2 The Committee recommends that DHPW assess training requirements for all departments once the final phase of PTD is completed. Finance and Administration Committee 33

45 Appendices Public Sector Contract Extensions Appendices 34 Finance and Administration Committee

46 Appendices Appendix A Officers appearing on behalf of departments at the public hearing Wednesday 2 April 2014 Mr Graham Atkins, Deputy Director-General, Building and Asset Services, Department of Housing and Public Works Mr P Brahman, Assistant Auditor-General, Queensland Audit Office Mr Neil Castles, Director-General, Department of Housing and Public Works Ms Mary Goodwin, Assistant Auditor-General, Procurement Transformation Division, Department of Housing and Public Works Ms Sandra Heidrich, Director, Queensland Audit Office Mr Ross Mangano, Director, Procurement Services, Finance and Business Support Division, Public Safety Business Agency Mr Chris Mead, Chief Finance Officer, Department of Transport and Main Roads Mr David Toma, Audit Manager, Queensland Audit Office Finance and Administration Committee 35

47 Appendices Public Sector Contract Extensions Appendix B Officers appearing on behalf of departments at the public hearing - Wednesday 15 October 2014 Mr Neil Castles, Director-General, Department of Housing and Public Works Ms Deanne Hawkswood, Chief Procurement Officer, Department of Transport and Main Roads Mr Mike Heard, Chief Procurement Officer, Department of Education, Training and Employment Mr Evan Hill, Chief Change and Operations Officer, Department of Science, Information Technology, Innovation and the Arts Ms Jane McDonald, Acting Assistant Director-General, Procurement Transformation Division, Department of Housing and Public Works Mr Matthew Mazzotta, Chief Procurement Officer, Health Services Support, Health Support Queensland, Queensland Health Mr Chris Mead, Chief Finance Officer, Department of Transport and Main Roads Mr Arthur O Brien, Chief Finance Officer, Department of Communities, Child Safety and Disability Services Mr David O Hagan, Acting Deputy Director-General, Corporate Services, Department of Education, Training and Employment Ms Sue Rickerby, Director-General, Department of Science, Information Technology, Innovation and the Arts Mr Stuart Rodney, Chief Operating Officer, Health Services Support, Health Support Queensland, Queensland Health Mr Danny Short, Chief Finance Officer, Department of Science, Information Technology, Innovation and the Arts Mr Dallas Stower, Assistant Director-General, Strategic ICT, Department of Science, Information Technology, Innovation and the Arts 36 Finance and Administration Committee