4 Procurement capability and performance management

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1 Service Delivery and Performance Commission Page 21 4 Procurement capability and performance management 4.1 Background An effective procurement function should be expected to: contribute to the continuity of the organisation s primary business activities control and reduce all procurement related costs reduce the organisation s risk exposures in relation to its supply markets, and contribute to innovation that improves service delivery. To achieve these outcomes, agencies need the following capability sets: Strategic procurement capability. These are skills, resources, and management associated with the establishment, maintenance, and effective operation of the agency s total procurement function. The capacity for complex analysis of the agency s requirements and its major supply markets as well as how best to organise and resource procurement are required, along with the ability to guide the development of supply solutions that support the agency s business. Tactical procurement capability. The capacity to plan for, establish, and maintain significant supply arrangements that deliver value for money. Operational procurement capability. The skills needed for maintaining and using the agency s procurement systems and processes to purchase supplies and services. The peak council of departments responsible for procurement, construction, and asset management policy for the Australian federal, state, and territory governments, the Australian Procurement and Construction Council (APCC), recognises the urgent business need for a professional Government procurement workforce in agencies with procurement responsibility. 7 Large private sector firms in Australia, Europe and North America have also reported a trend in recent years towards a more skilled and capable procurement function. 4.2 Findings Procurement capability Across the sector as a whole, procurement skills are not well organised nor at a sufficient capacity or level of capability for the size, complexity, and risk exposures associated with the sector s increasing expenditure. The survey of agencies conducted for the purpose of this Review by the SDPC and QP sought information about where agencies placed primary responsibility for the various phases of planning for, establishing, and managing significant procurement arrangements. Agencies were also asked to comment on the capability of these different areas to undertake the work. 7 APCC Procurement Skills project: Report on the Review of Purchasing and Logistics in the Queensland Government April 2007

2 Page 22 Service Delivery and Performance Commission The Review analysed the results of the survey based on the framework represented in Figure 4. Figure 4: Phases of significant procurement projects Demand analysis Market analysis Supply strategy development Establishment of supply arrangements Management of supply arrangements Procurement planning Source: Queensland Purchasing Expertise applied to planning for and managing major procurement projects Agencies reported that for the significant contracts and other supply arrangements for which they have establishment and maintenance responsibility, the following functions are primarily undertaken by either the service delivery areas that use the supplies and services or by a professional/technical advisory area (shaded areas in Table 1): demand analysis (the identification and scoping of requirements) market analysis (the review and analysis of supply markets), and managing supply arrangements. April 2007 Report on the Review of Purchasing and Logistics in the Queensland Government

3 Service Delivery and Performance Commission Page 23 Table 1: Primary responsibility for the phases of significant procurement activities Phase of procurement project Demand analysis Market analysis Supply strategy development Establish supply arrangements Manage supply arrangements Agency type* Functional areas of agencies with primary responsibility for activity Central procurement Service delivery Technical/ professional Large 10% 69% 21% Medium 19% 44% 37% Small 10% 58% 31% Large 25% 44% 32% Medium 24% 48% 28% Small 9% 58% 33% Large 65% 27% 7% Medium 50% 39% 11% Small 20% 56% 24% Large 61% 34% 5% Medium 51% 38% 10% Small 28% 53% 19% Large 41% 50% 9% Medium 37% 46% 17% Small 19% 57% 25% * Large agency Expenditure on supplies, services, and capital works > $200 Medium agency Expenditure on supplies, services, and capital works $50M - $200M Small agency Expenditure on supplies, services, and capital works < $50M Note: Numbers may not add due to rounding Source: Service Delivery and Performance Commission and Queensland Purchasing Most agencies also reported that the procurement capability of these service delivery and technical/professional areas was sufficient to produce an adequate or satisfactory result in most cases (shaded areas in Table 2). There are only a small percentage of cases in which there is an expectation of a high standard of procurement performance from these areas. In essence, agencies responses show that they are not organised to be able to apply the required expertise to deliver a high standard of procurement performance consistently for significant areas of expenditure. Report on the Review of Purchasing and Logistics in the Queensland Government April 2007

4 Page 24 Service Delivery and Performance Commission Table 2: Overall procurement capability for the procurement tasks undertaken Functional area Insufficient in most cases Overall capability to do the work Adequate for most but not all projects Sufficient for a consistently satisfactory result Suitable for consistently high performance Central procurement area: Large 0% 0% 88% 12% Medium 10% 30% 30% 30% Small 13% 12% 63% 12% Service delivery areas: Large 0% 43% 57% 0% Medium 0% 70% 10% 20% Small 0% 73% 27% 0% Technical/professional advisory areas: Large 0% 43% 43% 14% Medium 10% 30% 40% 20% Small 0% 38% 50% 12% Source: Service Delivery and Performance Commission and Queensland Purchasing Demand and market analysis are critical to all major procurement projects. The capacity to properly scope internal requirements as well as analyse the technical ability and commercial dynamics of supply markets are necessary precursors to building effective supply strategies. Currently, however, many supply strategies are built from a low base of information and analysis, limiting the potential effectiveness of these strategies. Similarly, the ongoing management of significant and/or complex contracts requires a high level of skill to elicit optimum supplier performance, manage buyers, and maximise value over the term of supply arrangements. These skills are not always available. Impact of current procurement planning and contract management standards During this Review, the SDPC, in conjunction with QP, commissioned a private consulting firm (A.T. Kearney) to analyse the Queensland Government s procurement performance in areas of significant expenditure that are common across agencies, and to identify potential savings through improved procurement practices. This Procurement Benefit Assessment indicated that significant savings are potentially available from better procurement in common areas of supplies, services, and capital works. A number of the common themes identified in this external review have a base in inadequate skills. For example, the consultants made the observation that volume concentration strategies are used across the sector, but in a significant number of cases these are not properly planned and executed. As well as the missed opportunities to reduce costs, the shortage of skills and their lack of application adversely impacts on agencies ability to: contribute to the continuity of the organisation s primary business activities reduce the organisation s risk exposures in relation to its supply markets, and contribute to innovation that improves service delivery. April 2007 Report on the Review of Purchasing and Logistics in the Queensland Government

5 Service Delivery and Performance Commission Page Procurement performance management Procurement performance management provides a basis for effective control and stewardship of resources and demonstrates the value of the procurement function. This is not currently optimised in the Queensland public sector. In the response to the SDPC/QP survey of agencies, almost half (44 percent) reported that they had no performance measures in place for assessing procurement efficiency and effectiveness. Of those that did have measures, many were qualitative statements rather than specific targets to achieve. Only one agency reported benchmarking against other agencies or external organisations. In contrast, Aberdeen Group 8 (a US-based supply chain research organisation) reports that procurement leaders have organised procedures, resources and systems to consistently employ and align all procurement strategies that are related to business objectives. Overall, enterprises employing these approaches in a consistent and integrated method outperformed peers in cost savings, expenditure under management, compliance, supplier integration, and greater contribution to enterprise value Building capability and improving procurement performance management This Review has identified three strategies to improve capability and maintain a high level of procurement performance across the sector: introduce a more comprehensive corporate procurement planning regime than is currently in place introduce external procurement capability and performance assessments of agencies, and build the skills of sector personnel involved in procurement. Corporate procurement planning Corporate procurement planning is an existing requirement of the State Purchasing Policy (SPP). It is a methodology for determining how to position, resource, and operate the agency s procurement function to best support service delivery. The SDPC/QP survey of agencies found that corporate procurement planning has a relatively low standing across the sector. Few agencies reported that their Corporate Procurement Plans address longer term issues associated with continuous improvement to best support the agency s business. Agencies senior management or business areas also do not provide significant input into the development of these plans. The Department of Public Works (DPW) current review of the SPP recommends the inclusion of a Schedule to the Policy which will describe mandatory procurement planning standards. The SDPC supports this proposal, with the inclusion in the Schedule of specific guidance in respect to the coverage of Corporate Procurement Plans, the expected depth of analysis across the factors influencing procurement effectiveness and efficiency, performance measures and assessment processes. There will also need to be a self assessment tool built into the methodology to assist agencies in preparing their plans. 8 The CPO s Agenda, Aberdeen Group, March 2005 Report on the Review of Purchasing and Logistics in the Queensland Government April 2007

6 Page 26 Service Delivery and Performance Commission The SPP Review also recommends that agencies forward their Corporate Procurement Plans to DPW (as the agency with carriage of the Policy) each year. The SDPC supports this proposal and further recommends that it be refined to make clear that the purpose of a central procurement authority receiving the plans is to: review the plans in terms of quality and completeness enable independent advice, guidance and support to agencies in establishing and maintaining appropriate procurement capability and performance management systems allow a central authority to take a high level view of Government business to identify and prioritise opportunities for more agency collaboration, and improve business outcomes through more active management of common areas of expenditure, and contribute to a consolidated annual report to Government on the capability and performance of the sector s procurement. External assessment of capability and performance External capability and performance assessments provide consistency, objectivity and the opportunity for benchmarking against leading organisations, including other public sector agencies. Most agencies support the implementation of a procurement performance capability and assessment framework and its initial carriage by a central agency. 9 Queensland Purchasing has developed a procurement capability and performance assessment methodology 10 in conjunction with a private sector procurement consultancy and training organisation. Based on a business excellence model, it incorporates measure points within the categories of: Policy and Procedures Strategy People and Culture Business Systems Practices, and Performance Management. Each of the measures has links to external benchmarking against Government and private sector organisations in Australia and overseas. The methodology has been successfully trialled in the sector and is suitable to form the basis for the external assessment of agencies. It is proposed that agencies procurement capability and performance be externally assessed every three years. These reviews would be designed to be conducted in collaboration with agencies and aimed at assisting agencies with identifying areas in which they are performing well and areas in which they can increase their capability to improve outcomes State Purchasing Policy Review Policy Paper October 2006: April 2007 Report on the Review of Purchasing and Logistics in the Queensland Government

7 Service Delivery and Performance Commission Page 27 The outcome of each agency s procurement assessment would be: a report on their capability and performance across strategic, tactical, and operational procurement activities the identification of areas of strength as well as identifying any opportunities for improvement consultation between the central procurement authority and the agency on how best to take up identified improvement opportunities examination of opportunities to achieve additional benefits through business process reform and improvement within the agency, and the development of an implementation program by the agency. External capability and performance assessments will provide input into agencies subsequent corporate procurement planning. Accreditation to undertake procurement functions The purpose of procurement accreditation for agencies is not to remove the high level of autonomy they currently have in respect to the management and operation of their procurement functions. Rather, it is a means to retain that autonomy as well as build and maintain a consistently high level of procurement capability and performance, which is not currently present across the sector. The Corporate Procurement Planning and External Capability and Performance Assessment processes will provide an agency with the necessary information and analysis to identify how it can best organise, resource, and maintain its procurement function. However, Government needs assurance that agencies have not only planned to achieve the required capability and performance standards, but are in fact achieving and maintaining them. Post procurement assessments of outcomes achieved is not sufficient in itself to give this assurance. There is also a need to assess procurement capability before the procurement work occurs. Through the annual Corporate Procurement Planning process, the central procurement authority will report to a Procurement Board of Management (PBoM), comprising senior representatives of a selection of agencies, on each agency s capacity to properly manage its procurement. More detail on the role, function and terms of reference for the PBoM are included in Chapter 10 and Appendix 8. The central procurement authority will provide recommendations to the PBoM as necessary for the maintenance of existing good practices within the agencies or, alternatively, make recommendations for improvements. Reviewing Corporate Procurement Plans and making assessment of capability for reporting to the PBoM is a collaborative process to be undertaken with each agency. Where it is identified that an agency needs to improve in a particular area, the intention is not to stop the agency undertaking that aspect of its procurement. Rather, the central procurement agency will work with the agency to treat the risk exposure. This may take the form of providing advice or guidance through to assisting with undertaking specific duties while the agency reorganises for the ongoing management of the procurement activity. Report on the Review of Purchasing and Logistics in the Queensland Government April 2007

8 Page 28 Service Delivery and Performance Commission The procurement improvement program described in this report will have costs associated with building sector wide capability to deliver a consistently higher level of procurement performance than is currently being achieved. As this is a whole-of-sector initiative, funding needs to be available to assist agencies with the transition. Funding implications of the outcomes of this Review are discussed in Chapter 13. Following the implementation phase of the procurement improvement program, it will be each agency s responsibility to maintain the required capability and performance. Maintaining procurement capability hypothetical examples Example 1 The Government announces a major new program which has a significant and complex procurement component to be executed by an agency. Through the Corporate Procurement Planning and External Capability and Performance Assessment processes, the agency s existing base line procurement capability will have been determined, and the need for additional expertise or resources to properly manage the new program s procurement work can be identified. As part of the Budget process, the agency would be expected to seek funding to establish the necessary procurement capability to deliver the new program. In most instances, it is proposed that procurement funding would be sourced from within the new program area. Example 2 An agency has the necessary expertise, resources, and procurement structure to properly manage and deliver value for money for its procurement profile (that is, the type, volume, and complexity of supplies, services, and capital requirements). The procurement profile remains stable, however, the agency s capacity to manage the procurement is allowed to deteriorate over time. In this case, the agency would be expected to meet the cost of rebuilding its procurement capacity to the required level from existing resources. Source: Service Delivery and Performance Commission Assessing and building individuals procurement capabilities Vocational training for procurement professionals is well catered for in Queensland. The existing Queensland Purchasing Training and Certification Program 11 is mapped to national competency standards, has been adopted by other jurisdictions, and has international standing through its recognition by the Chartered Institute of Purchasing and Supply (CIPS), UK. This Program also articulates into CIPS s training and development programs as well as to tertiary institutions in Australia. 11 Queensland Government Procurement Training: April 2007 Report on the Review of Purchasing and Logistics in the Queensland Government

9 Service Delivery and Performance Commission Page 29 The following diagram shows the accreditation structure for the procurement training offered through Queensland Purchasing. Figure 5: Queensland Purchasing Certification System Source: Queensland Purchasing Queensland Purchasing also coordinates a procurement graduate intake program with recruits (14 in 2007) given a one year placement in central and line agencies. Few agencies reported in their responses to the SDPC/QP survey that they have a career path in procurement. There is not a culture of professional development for procurement personnel across the sector, which makes it difficult to recruit and retain the best possible staff into procurement areas. In contrast, better performing private sector organisations continually invest in ongoing training and development of procurement personnel. 12 There is also an issue with the expertise of non-procurement personnel, such as service delivery and professional/technical staff who are involved in significant procurement activities but are not sufficiently trained in this area. In the planning for significant procurement projects, agencies will need to address how they will ensure that sufficient expertise will be introduced to assist professional/technical staff to properly undertake the various phases of procurement. Based on the responses to the SDPC/QP survey, the main areas to target are the scoping of requirements, the analysis of supply markets and contract management. There is a need to develop a suite of short courses for these staff. It will be the responsibility of the central procurement authority to identify the course content and establish relationships with suppliers for their provision. It will be each agency s responsibility to identify and prioritise staff to receive this training. This would be a consideration in the Corporate Procurement Planning process. 12 Aberdeen Research, The CPO Agenda 2005 Report on the Review of Purchasing and Logistics in the Queensland Government April 2007

10 Page 30 Service Delivery and Performance Commission Procurement performance measures within agencies The SPP requires that agencies Corporate Procurement Plans specify how the achievement of procurement objectives will be measured. While Queensland Purchasing has issued general guidelines regarding procurement performance measurement, there are no prescribed standards or scope of the measures that agencies are to have in place. The review of the SPP has recommended the inclusion of a Schedule to the Policy which will describe mandatory procurement planning standards. The SDPC supports this proposal and further recommends that the Schedule include specific guidance on the type and scope of the procurement performance measures for strategic, tactical, and operational procurement activities. What the procurement performance measures need to cover Research by the Centre for Strategic Supply Research (CAPS) 13 identified that organisations with comprehensive and effective procurement performance measurement systems align procurement and supply performance measures vertically with corporate goals and horizontally with strategic business units and other functional units. Within the Queensland Government context, this process of alignment is part of Corporate Procurement Planning. The classes of procurement performance measures to be considered are: Price/Cost: Availability: Innovation: Workforce: Supplier measures: The intention is to have a combination of price/cost measures to gauge procurement s contribution to the financial performance of the agency. They include target price measures, cost reduction measures, and cost avoidance measures. These measures broadly indicate the availability of supplies and services to support an agency s operations and meet customer needs. Availability measures include quantity, quality, and time measures. They reflect on both the performance of the supply base and also on the procurement function s performance in establishing and maintaining appropriate supply arrangements. Supplier innovation measures are of value for some supply markets where there is potential for service, product, or process improvements. These measures relate to various aspects of employee development and workforce management and test whether the agency has sufficient expertise available to properly manage its procurement projects. There are three elements: Supplier performance metrics such as quality, availability, responsiveness, competitiveness, and technology Supply base management can include percentage of expenditure with preferred suppliers, number of suppliers, and expenditure by region, and Supplier relationship measures focus on measuring the quality of the working relationship between the agency and supplier. 13 CAPS 2005, Strategic Performance Measurement for Purchasing and Supply, April 2007 Report on the Review of Purchasing and Logistics in the Queensland Government

11 Service Delivery and Performance Commission Page 31 Operational measures: Customer satisfaction: Deal with the efficiency of the procurement function in terms of what it costs the agency to undertake procurement activities as well as the quality of the output produced. These measures primarily deal with the degree to which the expectations and needs of internal customers are met. For some agencies there will also be external stakeholders to consider in measuring performance. 4.3 Recommendations 2. It is recommended that The Director-General of the Department of Public Works: a) amend the Schedule to the State Purchasing Policy by the end of October 2007 to include specific direction regarding: i) the coverage of Corporate Procurement Plans ii) the expected depth of analysis across the factors influencing procurement effectiveness and efficiency iii) procurement performance management and assessment processes b) develop a procurement performance self assessment tool by the end of December 2007 for use by agencies c) continue to develop and implement procurement training programs for procurement professionals within the Queensland Government, and d) develop and implement a strategy by the end of June 2008 to ensure that staff other than procurement professionals involved in procurement exercises within agencies (such as professional and technical staff) have access to appropriate training in procurement policy and practice. 3. It is recommended that Directors-General of all agencies: a) forward their agencies Corporate Procurement Plans, commencing with the Plan covering the financial year, to the Department of Public Works enabling that Department to: i) review the plans in terms of quality and completeness ii) provide advice, guidance, and support to agencies in establishing and maintaining appropriate procurement capability and performance management systems iii) contribute to a consolidated annual report to Government on the capability and performance of the sector s procurement b) undertake a procurement performance assessment every three years from 2008, using the tool developed by the Department of Public Works, and c) address professional development of procurement personnel and the training of other staff involved in procurement in their Corporate Procurement Plans commencing with the Plan covering the financial year. Report on the Review of Purchasing and Logistics in the Queensland Government April 2007

12 Page 32 Service Delivery and Performance Commission 4. It is recommended that the Director-General of the Department of Public Works: a) commence annual reporting to a Procurement Board of Management (as described in Chapter 10) on the capability and capacity of agencies to properly manage their procurement from September 2008 (following the agencies presentation of Corporate Procurement Plans), and b) be given authority by September 2008 to direct agencies to undertake procurement capacity and capability improvement initiatives as Chair of the Procurement Board of Management. April 2007 Report on the Review of Purchasing and Logistics in the Queensland Government

13 Service Delivery and Performance Commission Page 33 5 Procurement systems 5.1 Background As part of the Shared Service Initiative (SSI), the Finance and SAP Solutions project is working with agencies and shared service providers (SSPs) to implement a whole-of- Government finance solution. SAP was selected in 1995 as the Government s standard financial system following a full market testing process. It is now used by most Queensland Government agencies and other bodies, with a significant investment in skills, business processes, and ancillary systems and services linked to this system. In 2003, a team of representatives from across Queensland Government agencies along with the Shared Services Implementation Office undertook consultation and analysis of agencies business processes and activities for core financial corporate services. This business process review covered services including assets, expenses (including procurement), general ledger, revenue, statutory reporting, and taxation. This Review identified Government s high level requirements for a whole-of-government finance solution and helped develop the new business processes. As a result of this business process review, the procurement function is regarded as a sub-component of the finance expense function within the SAP solution. The adoption of new SAP modules provide an opportunity to make substantial improvements in procurement transaction efficiency as well as support better procurement planning and contract management. When properly implemented, these improvements arise from: reduced transaction costs through streamlined and automated processes; a capacity to guide buyer behaviour through structured work flows; the opportunity to influence supplier behaviour by only allowing the best value for money supplies and services to be offered to buyers through catalogues; and the automatic capture of expenditure and other data including product and supplier details, buying patterns, and geographical supply base demographics (commonly referred to as spend intelligence) providing high quality information for procurement planning as part of the procurement profiling and supply positioning process (required by the State Purchasing Policy) and assisting with the performance of contract management as well as supplier relationship management. 5.2 Findings The Government does not have a clearly articulated statement of intent or business framework to take advantage of advancement in technologies with regard to procurement as a business function in its own right and/or e-procurement. This hinders agencies and Government s ability to take a structured approach to implementing available technology and ensuring the sector takes full advantage of e-procurement within the broader procurement reform agenda. Report on the Review of Purchasing and Logistics in the Queensland Government April 2007

14 Page 34 Service Delivery and Performance Commission The proposed procurement functionality to be established as a component of the SAP Finance solution roll out lacks clarity in respect to both what procurement business process improvements are to be achieved and how they will be achieved. There is a significant risk of potential opportunities to improve efficiency and reduce transaction costs across the procurement cycle (Figure 6) being lost. It is therefore recommended that the central procurement authority adopt responsibility for the functional design of the whole-of-government procurement system. In carrying out this responsibility, the central procurement authority will need to work closely with CorpTech SSS, who will provide the technical expertise and knowledge of the SAP system capability within the Government s licensing arrangements The SAP roll out process Generic whole-of-government business processes and technology will form what is known as the SAP Standard Offering. The project to implement (or roll out) the SAP Standard Offering solution is detailed in Schedule 9 of the project implementation plan. The schedule incorporates nine distinct and separate releases to progressively implement the solution across all agencies from the pilot (the Department of Justice and Attorney-General) to final agency implementation (Queensland Health) in October (CorpTech has advised that Schedule 9 is currently under review.) As part of this program, there will be a number of retrofits to incorporate new releases as they become available. This will apply to all agencies that have implemented the solution prior to Release 5. Figure 6: Typical Procurement Cycle and Functions Procurement Cycle Strategic Sourcing Procure-to-Pay Contract Management Demand analysis Supply market analysis Supply strategy development Establishment of arrangements Purchasing Delivery Receiving Inventory Distribution Invoice Payment Contract administration Buyer & supplier management Performance management Purchasing Warehouse management Logistics Source: Adapted from Building the Case for Centralisation in the Public Sector, May 2006 Public Sector Procurement Forum presentation by Paul Hopkins, Deputy Director-General, NSW Department of Commerce The benefits of this approach are that it allows smaller agencies to be used as pilots, and enables the project team to have a well practiced implementation process before April 2007 Report on the Review of Purchasing and Logistics in the Queensland Government

15 Service Delivery and Performance Commission Page 35 implementation in the larger and more complex agencies, with Queensland Health being the largest. The disadvantages, however, are: Queensland Health would like to adopt the enhanced functionality and derive the benefits that it will bring sooner, rather than later. Queensland Health had sought to adopt enhanced e-procurement functionality before this project, but has had to put their plans on hold. Because of the comparative size of their expenditure, larger agencies will deliver greater benefits, but these will not begin to be harvested until The process is protracted: SSP staff who have been involved in early implementations have indicated to the Review Team that they would have preferred a more compacted roll out program to reduce the number of versions being serviced across the agencies. Agencies that are scheduled early in the roll out process will need retrofitting of their systems, retraining of their staff, business process review, and user acceptance testing for each subsequent release. The process is ambitious: the additional workload created (both for the implementers and the users) by multiple releases and retrofits will be difficult to manage, with a high risk the project will not be delivered on time. At least one agency that has already implemented the SAP Standard Offering has had to forego functionality in order to meet the project s timeframes, resulting in sub-optimal functionality for the agency, and inconsistent business processes across agencies. The Review Team acknowledges that all efforts are being made to implement the system s roll out as early as possible within the current resourcing and technology constraints. While the roll out process as designed is not ideal, this Review does not recommend that it be changed at this time due to these constraints. All future reforms regarding procurement systems functionality would need to be sensitive to the current roll out of Finance and HR solutions Automating procurement processes through the procurement system The procure-to-pay process involves a number of steps. Firstly, entering into a commitment with the supplier through, for example, the creation and dispatch of a purchase order, the use of shopping cart functionality to select from a catalogue, or the use a corporate purchasing card. It also includes the subsequent receipt of the supplies or services and the initiation of a payment to the supplier. Automating these processes through technology is commonly referred to as e-procurement. While the SAP Standard Offering does enable some automation within this procure-topay process, the proposed functionality in the Standard Offering does not support the full range of benefits that are achievable from a well-designed and complete procurement system. There is not a coherent picture across the sector as to what procurement functionality is needed, the costs and benefits from implementing it, and how it integrates with the Finance and other modules of SAP. Table 3 outlines the procure-to-pay cycle within the broader procurement cycle at Figure 6 and identifies current, proposed solution and the potential functionality that is currently Report on the Review of Purchasing and Logistics in the Queensland Government April 2007

16 Page 36 Service Delivery and Performance Commission in use in leading organisations, and is available within the current SAP classic licensing agreement, which the sector has adopted. From Release 4, currently scheduled to be implemented in August 2007, there will be some embedded functionality within SAP (steps 7 13 in Table 3) which CorpTech has not actively promoted to agencies. Rather, it is up to agencies to individually identify the systems functionality with each release, assess the potential benefit to them, the cost of reconfiguring their existing business systems and altering their business processes, and then pay CorpTech to activate the functionality. Steps 10 to 13 within the diagram could potentially be replaced by evaluated receipt settlement functionality (a process whereby the system matches data from the purchase order, invoice, and receipt and automatically makes the payment if the data falls within predefined tolerances). CorpTech has advised that this functionality will not be considered at this time (but may be considered at a later date). A considered, structured approach to automation of the procure-to-pay elements of the procurement cycle will optimise efficiency and transaction costs of this part of the procurement process, assist with the capture of expenditure data and, as a result, enhance the Government s ability to identify, better manage and leverage key expenditure areas. Table 3: System functionality within the procure-to-pay cycle Denotes an on-system step or an automatically generated system step Denotes a manual off-system step Procure-to-pay steps once the need for a particular supply or service is identified 1. Check funding allocation 2. Identify source of supply e-catalogue if possible Current SAP functionality Manual or system based steps Proposed SAP functionality Leading organisations 3. If no e-catalogue, obtain quote(s) or tender(s) and evaluate 4. Seek expenditure approval electronic requisition if possible 5. Raise purchase order 6. Approve and release purchase order 7. Issue purchase order 8. [Supplier] acknowledges purchase order 9. [Supplier] despatches goods 10. [Supplier] issues invoice 11. Record receipt of goods 12. Approve payment 13. Enter invoice into system 14. Pay supplier EFT or cheque Source: SDPC and CorpTech April 2007 Report on the Review of Purchasing and Logistics in the Queensland Government

17 Service Delivery and Performance Commission Page 37 Leading enterprises in both the public and private sectors are implementing e-procurement systems. Appendix 3 details the outcomes achieved by a variety of companies that have elected to implement an e-procurement platform as a strategy to provide the capability to achieve company strategic objectives including savings, compliance, risk management, visibility of expenditure patterns, reporting, and systems efficiencies Strategic sourcing and contract management In the currently planned SAP Standard Offering, functionality to support strategic sourcing and contract management is not included. They are viewed as optional add-ons (termed Shared functionality). That is, if agencies agree that they require it, and are prepared to pay for it, they will be able to negotiate with CorpTech for the functionality to be made available. The SAP Shared functionality has had no business process review or detailed design review to date. CorpTech, in conjunction with Queensland Purchasing and the Shared Services Agency, has established working groups to consider and develop a strategy paper by April 2007 covering the functional areas of: expenditure analysis and profiling; contract administration; e-sourcing; and cataloguing and electronic data interchange. Requiring agencies to pay an additional cost for this functionality creates a risk that agencies will not consistently adopt it, resulting in missed opportunities to improve procurement outcomes. The Procurement Benefit Assessment for the Queensland Government undertaken by A.T. Kearney in-conjunction with SDPC and QP as part of this Review notes that there is limited access to and analysis of core procurement information (such as volume and trends in spending over time) and inconsistent market analysis to drive category-specific sourcing strategies. Information from QP shows that currently, information on approximately half of all purchase transactions is not readily available for analysis. Research by Aberdeen Group 14 in 2006 also identified clear benefits from quality procurement information capture, analysis, and reporting to support strategic sourcing and contract management. This included a 13 percent average decrease in the cost of supplies and services. The improvement drivers were: identifying and forecasting new savings opportunities better contract negotiations placing more expenditure under management identifying and prioritising categories of expenditure tracking off-contract expenditure influencing policies and programs for categories of expenditure already under management, and 14 The Spend Intelligence Benchmark Report, Aberdeen Group 2006 Report on the Review of Purchasing and Logistics in the Queensland Government April 2007

18 Page 38 Service Delivery and Performance Commission leveraging spend intelligence continually to enable adoption of category management programs. The inclusion of the proposed Shared functionality within the SAP Finance solution to support strategic sourcing and contract management as part of the core functionality of the SAP Procurement business solution is critical if Government is to create an effective and efficient procurement business system. This should be considered by the central procurement authority in their development of the required business functionality for procurement (discussed on page 34) Other processes on which e-procurement is dependent The foundation of a successful spend intelligence system is standardised product and vendor coding, coupled with the automatic capture, processing, and presentation of information for use by decision makers. This provides the capacity to focus on the activity, performance standards, and results achieved in respect to the work involved in the planning for, the establishment and subsequent management and use of supply arrangements. Standardised product or vendor coding systems are not currently in place across the sector, nor, in some cases, within individual agencies. However, work has been undertaken by CorpTech SSS, QP and a Procurement Expert Reference Group (with membership drawn from across the sector) to agree to the uniform use of the UNSPSC coding methodology and a limited number of standard material groups (less than 1,000) for categorising the sector s supplies and services. The Shared Services Agency has agreed to accept responsibility for establishing and maintaining this data, as well as a single vendor master file, though the system functionality and resources to do this are not yet in place. Coupled with this work on standardisation the sector needs to have the capacity to collect, process and present data for analysis to support procurement decision making. The reporting functionality of the SAP solution has yet to be settled. One of the most compelling findings in the 2004 Aberdeen benchmark survey was the ability of e-procurement users to consider the organisation s spend in its entirety (as opposed to on an agency-by-agency basis as is currently the case in the Queensland Government. 15 This helps to ensure the organisation achieves maximum spending leverage in supply negotiations. It also ensures consistent and thorough market analysis, costing measures, and compliance methods are applied to each expenditure category. Aberdeen research shows that each new dollar of expenditure that is centrally managed can yield 5 percent to 20 percent cost savings. It is also unclear how the shopping cart functionality available with SAP is intended to be used. Responsibility for the maintenance of Material Master Data, protocols for the establishment and maintenance of both internal and external catalogues, and the e- enablement of suppliers are matters yet to be settled. There is a need for greater coordination and a specified end state in the design and roll out of procurement functionality associated with the SAP. 15 Best Practice in E-Procurement, Aberdeen Group December 2005 April 2007 Report on the Review of Purchasing and Logistics in the Queensland Government

19 Service Delivery and Performance Commission Page 39 Smartbuy is a fully developed electronic procurement system managed by the NSW Department of Commerce. The department works with Government agencies and other authorised buyers throughout Government to improve procurement processes, assisting with the move from a paper-based to an electronic procurement system. The department works with suppliers and agencies to identify procurement needs, like catalogue content management, or can deliver a complete procurement solution from catalogue content, through to purchasing, reporting, and analysis. The department provides a real-time, electronic connection between agencies and suppliers, which means transaction cycle times are significantly reduced. Smartbuy also works with suppliers, to streamline their administration, and order management practices and update processes to an electronic delivery system, improving procurement from both sides. Smartbuy provides agencies and suppliers with reports so they can gain a better understanding of spending patterns. Agencies and suppliers can tap into the department s wealth of procurement knowledge and IT infrastructure, as well as training and support services, leaving agencies, and suppliers more time to concentrate on core business. 5.3 Recommendations Source: New South Wales Department of Commerce 5. It is recommended that the Under Treasurer transfer business leadership of the functional design of a whole-of-government procurement business system to the Department of Public Works by the end of July It is recommended that the Director-General of the Department of Public Works develop: a) a business case and associated funding submission by the end of December 2007 describing the required procurement functionality, and including the transition of what is currently identified as Shared procurement functionality within the SAP Standard Offering to Core procurement functionality, which will render that functionality mandated for adoption by all agencies and ensure that it is centrally funded, and b) a whole-of-government strategy and business case for e-procurement by the end of December This will need to consider not only what actions are required within the Queensland Government, but also what actions and assistance are to be taken to e-enable suppliers who wish to deal with the Government. Report on the Review of Purchasing and Logistics in the Queensland Government April 2007

20 Page 40 Service Delivery and Performance Commission 6 Corporate Purchasing Cards 6.1 Background Corporate Purchasing Cards (CPCs) offer an alternative method of buying and paying for supplies and services. They work essentially in the same way as private individuals credit cards, the primary difference being in monthly reconciliation and account settlement processes. In April 1993, Cabinet approved the use of a Queensland Government Corporate Purchasing Card facility by Government agencies for the procurement of supplies and services. The first CPC was introduced by the Queensland Government in November 1993 following a successful six month trial by several departments. At 1 September 2006, there were more than 15,000 Corporate Purchasing Cards on issue within the Queensland Government with approximately 70 percent of cards being used in any one month. Queensland Government cardholders are currently expending $178 million per annum in more than 714,000 transactions. Take up rates for Corporate Purchasing Cards are uneven across agencies. Appendix 5 shows the distribution of cards on issue and transaction levels by agency. Government agencies have used CPCs to purchase from approximately 40,000 suppliers during The main categories of CPC expenditure are retail supplies, general services and travel services. The use of the card varies across the sector, with the lowest using agency having 1 percent of its FTEs with cards and the highest at 50 percent. This is due in part to the agencies business activities and their organisation. That is, a centralised agency with few staff in the field will require few cards, whereas an agency with a large number of field staff who need to purchase supplies and services will proportionally have a higher number of cards. However, in some agencies the low take up of cards is also influenced by concerns with card fraud and as well as the overall efficiency of cards versus other buying methods. The Queensland Government s CPC program compares favourably with other states and has established itself as a benchmark program for many other organisations to follow. For example, private sector organisations are exchanging information with Queensland Treasury aimed at improving and streamlining their card programs. 6.2 Findings During , more than half of the transactions conducted by CPC were below $100; 95 percent of all card transactions were for purchases of $1,000 or less; and 81 percent were for purchases of $2,000 or less. Data from Queensland Purchasing shows that a purchase order is still the most prevalent form of procurement, used for 44 percent of procurement valued at less than $1,000, followed by direct invoice (37 percent) and CPC (19 percent) When is using a Corporate Purchasing Card appropriate? The State Purchasing Policy requires the development of procurement plans for all high April 2007 Report on the Review of Purchasing and Logistics in the Queensland Government

21 Service Delivery and Performance Commission Page 41 value and/or high risk areas of procurement expenditure (a Plan for Significant Purchase). An output of this planning process is the development of a supply strategy, which implicitly includes a determination of the most appropriate method of transacting with suppliers to acquire the particular supply or service. The State Purchasing Policy also recommends that for low value and low risk areas of procurement expenditure that do not have supply arrangements in place, a purchasing method be applied that minimises transaction costs. Table 4 discusses the issues involved in determining whether or not the CPC will be the most appropriate procurement tool. Increasing the use of CPC for these transactions will increase its benefits. A reasonable threshold for low value transactions, based on current transaction values, is $2,000. However, the Review recognises that some agencies may not have the capability to immediately embrace the use of CPCs. It is therefore recommended that, in the first instance, agencies ensure that their purchasing procedures support the use of the CPC as appropriate (as described in Table 4) and that necessary training and skills development is provided. Once agencies have developed the capability to more broadly adopt CPCs within their agencies, the use of CPCs for these types of purchases will be mandated. Table 4: When is a Corporate Purchasing Card most appropriate? Products that have low volume and individual low value transactions Products that have low volume and individual high value transactions and products that have high volume and individual high value transactions Products that have high volume and individual low value transactions When the total number of transactions is low, and individual transaction values are low, the total expenditure on that product will be low. In such cases putting a supply arrangement in place may not be warranted. CPC is an effective means of purchasing in this situation. Where the individual transaction value is high, it is likely that there is some business risk exposure, and therefore a formal order or contract which clearly specifies the requirements and the terms and conditions of the purchase is usually needed. CPC is not appropriate for procurement in this case. It is generally the case that for products that have a high volume of low value individual purchases (such as travel, pharmaceuticals or office supplies) the total value of the expenditure is relatively high and the establishment of a supply arrangement that incorporates e-procurement is warranted. The use of this functionality provides a standard work flow which can reduce transaction costs for both the buyer and supplier, and can help to ensure that only the most appropriate products are made available. It also facilitates the collection and management of spend intelligence data. CPC is generally not the most appropriate method for these types of purchasing. However, as part of the overall supply strategy, it is possible that the use of a CPC could be identified as appropriate for some of these purchases, for example, where the purchaser is working in the field and does not have ready access to a computer to make a transaction on-line. Source: Service Delivery and Performance Commission Report on the Review of Purchasing and Logistics in the Queensland Government April 2007

22 Page 42 Service Delivery and Performance Commission Savings and benefits In 2006, Treasury found that nominal saving in terms of human resources of using the card compared to a one-off requisition/purchase order process for a similar supply or service is approximately $25 per transaction. Based on the current card activity, the CPC program is saving $17.85 million per annum in staffing costs. Evidence also indicates 16 that the cost of managing disputed card transactions is lower than the cost of correcting errors on purchase orders. Data shows that 688,330 payments for supplies and services valued at under $1,000 were made by the Queensland Government using purchase orders in the financial year Using Queensland Treasury s estimated $25 savings per transaction, if half of those payments used CPC, rather than purchase order, the nominal savings would amount to more than $8.6 million. (These savings figures form part of the total potential benefits outlined in Chapter 12 from page 78.) The Queensland Government CPC has no annual card fees and consolidated revenue receives approximately $0.55 million per annum from a rebate that is paid by the Commonwealth Bank of Australia to the State, calculated on it annual purchases. Recent studies undertaken in other jurisdictions indicate a similar, if not greater level of savings to be achieved through the widespread use of a purchasing card, for example: The Western Australian (WA) Government also has an extensive card program with purchases of around $90 million per annum. Despite their mature program, the WA Treasurer is encouraging even greater use of CPCs. With the support of the WA Auditor-General, the Treasurer notes that purchasing cards save between $19 and $52 per transaction (depending on the degree of process automation present in each agency). The UK Government Procurement Card is central in helping the public sector to achieve more than 341 million in procurement efficiency savings per annum. With a program of more than 85,000 cards to buy supplies and services worth more than 600 million each year, the UK Government estimates average transactional savings of 28 per transaction over traditional purchase order methods. The US National Association of Purchasing Card Professionals estimates purchasing card efficiencies result in savings ranging from 55 percent to 90 percent of the transactional cost of the purchase order and payment process (between US$50 to US$250 depending on the organisation and complexity of order). The RPMG Research Corp., which regularly benchmarks US purchasing cards, concludes that purchasing cards result in a 74 percent reduction in the procurement cycle time and a 57 percent reduction in the number of petty cash accounts. In one US Federal department the use of purchasing cards reduced internal transaction costs by US$70. Some agencies (with significant supplies and services expenditure) have been slow to adopt the CPC, and still have relatively low adoption rates. There is scope to increase the savings and benefits offered by the CPC by increasing adoption of the card. A 10 percent increase in card usage would represent savings of $1.785 million per annum. 16 Based on information provided by the Whole-of-Government Banking Unit, Queensland Treasury April 2007 Report on the Review of Purchasing and Logistics in the Queensland Government

23 Service Delivery and Performance Commission Page Separation of responsibilities between agencies and SSPs To achieve the efficiencies that are possible through the appropriate use of CPCs, cards should be issued to personnel as close as possible to the point at which the products or services are required. This reduces double handling and streamlines purchasing. CPCs are not used consistently within the Shared Services model. Some agencies make purchases themselves using CPCs and engage SSPs to manage monthly account settlement processes, while others pass all CPC purchasing activity on to the SSP. While the latter approach may appear to be a cheaper option for the agency (with costs associated with effecting the purchase borne by the SSP), at the whole-of-government level it adds additional costs through additional processing steps (i.e., forwarding the purchase requisition to the SSP to make the purchase, when the purchase could be made directly by the requisitioning officer using a corporate card). This behaviour may change as SSPs begin to charge agencies the full cost of service delivery in the future, however, notional billing has already commenced and has had little or no impact in this regard. Proposed changes to whole-of-government procurement systems, as outlined in Chapter 5, will help resolve this issue, but there is a significant lag time before this can occur. It is therefore recommended that the Standard Suite of Services be amended to explicitly state that agencies (not SSPs) be required to use CPCs where the use of the CPC is warranted (as per Table 4, page 41). Staff in SSPs will still need to hold and use CPCs both for their own purchasing needs and as a payment process. Card Administration Systems Each SSP manages the CPC transactions on behalf of its client agencies, ensuring that the general ledger is updated monthly. Data files are downloaded from MasterCard International by the SSPs into the relevant card management system for agencies to enable cardholders to: review individual transactions and identify any erroneous transactions assign account codes and GST flags, and submit for review by supervisors. The use of a CPC has been acknowledged to be a transparent and accountable method of tracking expenditure with every transaction available for review by supervisors, dedicated corporate card administrators and audit. Withdrawal of cash is prohibited (as an alternative to petty cash) as it reduces the ability to track legitimate expenditure. Agencies internal controls and guidelines for the CPC have matured as the Queensland Government s program has expanded, resulting in an extremely rare level of fraud and misuse. Perceived fraud rates are often cited as a reason for resistance to use Corporate Purchasing Cards. Within the Queensland Government, the rate of suspicious transactions between May and December 2006 was percent, representing 44 of a total of 555,603 transactions across Government. This rate is 10 times lower than Visa and MasterCard's estimated fraud rates of 0.08 percent for the general community. It should also be noted that the majority of these suspicious transactions have been found on investigation to be legitimate. Report on the Review of Purchasing and Logistics in the Queensland Government April 2007

24 Page 44 Service Delivery and Performance Commission 6.3 Recommendations 7. It is recommended that the Directors-General of all agencies examine the procurement practices within their agencies by the end of December 2007 to ensure that these practices encourage the use of Corporate Purchasing Cards for all transactions with a value less than $2,000 unless other, more efficient procurement arrangements are in place and implement these arrangements (including providing training and development) within their agency by the end of December It is recommended that the Under Treasurer ensure that the Standard Suite of Services for the Shared Service Initiative is amended by the end of December 2007 to reflect that agencies are responsible for purchasing using Corporate Purchasing Cards. April 2007 Report on the Review of Purchasing and Logistics in the Queensland Government

25 Service Delivery and Performance Commission Page 45 7 Capital works procurement 7.1 Background Capital works includes non-recurrent expenditure on infrastructure such as buildings, roads, and dams. Capital works procurement relates to both construction and maintenance, and includes contracting as well as procurement of raw and manufactured materials used. It is generally project-based in nature. The Department of Public Works provides policy leadership for capital works projects through its Building Division, and for many agencies DPW also manages the delivery of projects. Some agencies, such as Queensland Health and the Department of Main Roads have large capital works programs through the nature of their business. It is agencies responsibility to develop and implement their capital works programs, including applying to the Cabinet Budget Review Committee for resources through the State Budget process. The Department of Public Works promotes a consistent approach to building works through the Capital Works Management Framework (CWMF). It comprises a policy document, guidelines, and practice notes. The CWMF was approved by the Government and implemented from 1 July It applies to all government departments that control or administer government buildings. The CWMF: specifies the minimum government requirements for the initiation, development and implementation of building projects and programs ensures that the risks to Government are effectively managed ensures there is a consistent whole-of-government approach to building procurement, and ensures greater certainty of project outcomes for Government, the building industry, and the community. The Queensland State Budget includes approximately $4.5 billion for capital works spending. This figure is increasing, and will continue to do so. While capital works expenditure is spread throughout the State, in recent times there has been a focus on infrastructure development in South East Queensland to accommodate continued high population growth in the area. The South East Queensland Infrastructure Plan and Program (SEQIPP) includes investment of $66 billion in essential infrastructure such as road and rail transport, water, energy, schools, and hospitals. This large capital works program, combined with similar programs in other states, has resulted in an overheated market with demand considerably outstripping supply. This creates strong competition for a limited supply base both within Queensland (i.e., between agencies) and with other markets (other states and the private sector). This has led to the need for Government to be more proactive in both coordination of the State s capital works program as a whole, and generating agency and industry Report on the Review of Purchasing and Logistics in the Queensland Government April 2007

26 Page 46 Service Delivery and Performance Commission readiness to deliver the program. The Department of Infrastructure was established in 2006 to fulfil this role. The Department (which incorporates the pre-existing responsibilities of the Coordinator- General) takes the lead in major project delivery and infrastructure planning and coordination across Government. It takes infrastructure and major projects from concept to completion and: advises Government on sustainable development for Queensland provides a whole-of-government focus on major project developments and infrastructure policy, planning, coordination, and delivery supports project proponents through facilitation services and timely advice on major projects and infrastructure promotes and attracts investment in major projects and infrastructure, and coordinates industrial, regional, and urban growth management. 7.2 Findings Impact of current market conditions The currently overheated supply market for capital works and infrastructure development means that the Queensland Government can no longer assume that providers will seek to offer services to the Government. Consultation with industry during this Review has indicated that it is no longer enough for Government to rely on traditional approaches to the market, such as issuing request for tender for pieces of work. Instead, government agencies need to investigate and, where appropriate, adopt contemporary procurement delivery strategies such as alliance contracting (simple alliances; design, construct and maintain alliances; structured alliances; and programs of alliances). Other approaches include sole invitees, early contractor involvement, multi-agency contract bundling, end-to-end contract bundling, design consultancies, public private partnerships (PPPs), and project management consultancies. Most agencies with significant capital works programs have indicated to the Review that they have already, or are considering adopting additional procurement strategies for capital works to those traditionally employed. Aggregation of demand through bundling, either across agencies in regions, or end-toend bundling of various phases of a project offers suppliers the opportunity to make the best use of a scarce labour market. Multi-agency bundling, particularly in remote and regional areas, helps to ensure that the contract is of a sufficient size to attract a labour force to the area. End-to-end bundling helps to provide some certainty to the contractor of continued work (based on performance). However, contract bundling needs careful consideration. The supply market for infrastructure development has formed natural tiers of suppliers. Each tier is organised and equipped to deliver projects of a certain size, and over-zealous bundling of projects can be counter productive by excluding those organisations in the small and medium tiers, and place pressure on the larger organisations. April 2007 Report on the Review of Purchasing and Logistics in the Queensland Government

27 Service Delivery and Performance Commission Page 47 The operations of the Department of Infrastructure, and in particular its Program Management Office, provide a focal point through which the Government can gain visibility of all capital works projects across Government and therefore assess opportunities for bundling. This Office needs to ensure that the advice of procurement professionals is considered in any contract bundling decisions. They contribute expertise to decisions around the scope of the project, whole-of-life cost estimates, supply market analysis, suitable procurement strategies and related decisions dealing with project roll out and contract management. The outcome is an overall reduction in contracting risks (for example, time and cost overruns) and the greater potential to maximise value for money from projects. This is particularly important in the current supplier-driven market. The need for more innovative procurement techniques does not negate the need for probity and accountability in Government decision making. Procurement professionals help ensure the right balance. A Project Assessment Framework and Gateway Review process are currently being developed by Queensland Treasury, and will improve project management practices External review of capital works procurement The Procurement Benefit Assessment undertaken by A.T. Kearney on behalf of the SDPC and QP examined procurement activities associated with capital expenditure of $3.4 billion. A.T. Kearney s assessment was that, despite the current overheating in the supply market, the Queensland Government can achieve cost avoidance and savings benefits of between $172 million and $343 million through improved capital works procurement practices. (These figures form part of the total potential benefits outlined in Chapter 12 from page 78.) A.T. Kearney s analysis of the issues impacting on the current performance of capital works procurement is consistent with the Review Team s own findings. The firm s analysis indicates the following gaps in current practices: Project planning Project-by-project tenders rather than aggregation Material specifications not consistently standard across projects Procurement involved after planning decisions made Maintenance is not scheduled across agencies Duplication of effort across agencies Limited visibility across all projects Contracting with the external marketplace Distribution of work across suppliers Few structure negotiations Consistent use of lump sum tenders for projects valued at less than $1 million Complex pre-qualification process makes Government a less attractive customer Project delivery Pre-qualification process is not performance based Incentives and penalties are not effectively utilised in contracts Procurement governance and policy Report on the Review of Purchasing and Logistics in the Queensland Government April 2007

28 Page 48 Service Delivery and Performance Commission Agencies have no effective feedback forum to in-house service providers Limited cost transparency for agencies to benchmark in-house service providers Duplication of effort and resources within capital works agencies Governor-in-Council approval processes For government agencies, the Governor-in-Council approval processes were reported as being cumbersome and time consuming. Current approval processes are detailed in the Governing Queensland handbooks produced by the Department of Premier and Cabinet. Agencies do not appear to be interpreting these requirements consistently. Some agencies roll smaller projects into a larger body of work, for which they seek Governorin-Council approval. Others agencies seek separate approval for small, individual projects. The Review understands that Queensland Treasury is currently examining Governor-in-Council approval processes, and this Review supports that examination. 7.3 Recommendations 9. It is recommended that the Director-General of the Department of Public Works by the end of December 2007: a) develop guidelines for agencies on the use of contemporary procurement techniques, such as alliance contracting and contract bundling, and b) incorporate these guidelines into its procurement skills development programs. 10. It is recommended that the Directors-General of all agencies ensure that from 1 July 2007 suitably skilled and experienced procurement professionals are included in capital works project teams from their inception. 11. It is recommended that the Director-General of the Department of the Premier and Cabinet, in conjunction with the Under Treasurer continue to examine the processes for Governor-in-Council approval of projects, and that the outcomes of this examination, including any recommendations for change, be included in a report by the end of December 2007 for consideration by Cabinet. April 2007 Report on the Review of Purchasing and Logistics in the Queensland Government