It is critical for government agencies to continually monitor their procurement activities and proactively manage the associated risks, write Elizabeth Carroll and Samantha Haddon.
Procurement continues to pose challenges for government agencies. As well as meeting their internal policies, there’s the ever-present scrutiny of the Australian National Audit Office, Senate Estimates, and the need to pass the relentless pub test.
With the federal government conducting more than 80,000 procurements in the past financial year, it is critical for agencies to continually monitor their procurement activities and proactively manage the associated risks.
These risks can take many forms: from fraud and corruption, non-compliance with policy and legislative requirements, liability and complaints under the Government Procurement Act 2018, failing to achieve a value-for-money outcome, to entering into contracts that are not fit for purpose.
The most effective way to manage many procurements risks is by investing time in upfront planning. This includes documenting the desired outcomes of the procurement and estimating the contract value. In addition to being a requirement under the Commonwealth Procurement Rules, the estimated contract value determines which policies apply to the procurement.
A proactive approach can help agencies navigate the risks that procurements pose, and improve outcomes.
Well-considered planning and developing approach-to-market documentation that reflects the scope and risk of the procurement can provide clarity to the market while also ensuring agencies have appropriate rights and flexibility during evaluation. This preparation can save significant time and avoid issues later in the process.
Strengthen governance
Implementing sound governance arrangements is another essential way to manage procurement risk. Clearly documented roles and responsibilities ensure that staff and contractors understand their obligations and the part they play in the process. This clarity reduces confusion and promotes accountability, which in turn lowers the risk of malfeasance.
Agencies should also consider whether specific personnel should be isolated from certain parts of the process or types of information to maintain integrity. For example, should an initial screening be conducted by a team separate from the evaluation panel? Should pricing elements of tenders be restricted to relevant staff and only released during pricing evaluations?
Set clear expectations for better tenders
A clear, outcomes-focused and comprehensive description of requirements in approach-to-market documentation helps ensure the market understands what the agency needs and can submit tenders that are genuinely fit for purpose.
Poorly defined requirements can lead to low-quality or inconsistent tenders, making it difficult to assess value for money.
This is especially important when there is an incumbent provider, who may have an inherent advantage. One of the most effective ways to level the playing field is to ensure all potential tenderers have access to the same information about the agency’s needs – clearly outlined in the requirements.
Lock in value with the right contract terms
To preserve any value-for-money outcome identified through the evaluation process, it is vital that the final contract reflects any promises or offerings made by the successful tenderer. These should be written into the contract using precise contractual language, rather than simply referencing the tender response, which may contain marketing language or caveats that are not in the agency’s interest.
Any negotiated terms should also be clearly and accurately incorporated into the final contract.
Depending on the procurement’s risk profile, the contract should also include a performance management framework that allows the agency to monitor delivery and ensure that the goods or services are fit for purpose and aligned with the documented requirements.
Managing risk across the contract lifestyle
Procurement risks can arise at every stage of the contract lifecycle, from the initial planning phase through to contract delivery and post-completion review. Errors or mishandling at any point can lead to cost overruns, project delays, disputes, or reputational damage.
Avoiding procurement risk requires a deliberate and disciplined approach at every stage of the process. By investing time in planning, establishing clear governance structures, developing well-defined and transparent requirements, and ensuring contracts reflect the commitments made during the tender process, government agencies can reduce procurement risk, support better outcomes, and maintain public confidence in the use of taxpayer funds.
Elizabeth Carroll is a managing partner at Holding Redlich; Samantha Haddon is a special counsel.
Leave a Reply