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Annual Forward Procurement Planning

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					                Department of Treasury and Finance                                                                                     Procurement
                Government of Western Australia                                                                                        Reform
                Office of Government Procurement                                                                                       Toolkit




    Smarter Buying Guidelines

    2.2 Agency Forward Procurement Planning


BACKGROUND
In early 2005 a pilot project was launched to introduce the 35 largest spending agencies to the Annual
Forward Procurement Planning (AFPP) methodology. The strategy is primarily aimed at encouraging
agencies to adopt a more rigorous approach to procurement planning, and to identify potential smarter
buying opportunities within their business units.

A secondary focus of the sector-wide AFPP process is to expose aggregation opportunities that may exist
between agencies amongst the nearly $1.6 billion of agency specific buying that occurs each year.
Aggregated buying can lead to lower prices at the tender box and save resources by minimising duplication
in the effort involved in the tender process itself. The pilot project focused on intended procurement above
the tender threshold figure of $100,000 and proposed buying through the Personal Computers CUA.

Importantly, the AFPP methodology can equally be applied at the agency level to expose smarter buying
opportunities for lower value goods and services – ie. buying well below the $100,000 threshold.



HOW DOES IT WORK?
Within an agency’s annual operating budget, funds are set aside to buy the things the agency requires.
Typically, individual business units in the agency operate quite independently of each other. This means that
the individual units often have no idea what other units in the agency are buying - particularly in large multi-
site agencies.

The AFPP methodology can expose potential aggregation opportunities between business units, in the
purchasing of particular goods or services that are well below the public tender threshold. This knowledge
can lead to a number of smarter buying strategies including:
•     A new agency-wide contract.
•     A multi-agency aggregated contract, offering volume discounts.
•     Efficiency benefits in terms of process improvements and reduced duplication.
•     Improved scheduling of major procurement activity, to ensure more timely outcomes.

The fundamental message for agencies, however, is that the AFPP methodology provides a proven
approach to planning your future procurement activity at a whole of agency level.



CASE STUDY 1 – INDOOR PLANTS
Recently, part of an amalgamated agency that is principally located in the Perth CBD sought to establish a
contract for indoor office plants. The new business unit had recently undergone some renovations and some
additional indoor plants were desired to complement the new décor. Contracting arrangements for existing
indoor plants had been lost in the passage of time.

The department comprised of a number of independent business units that, while located quite close
physically, were in different buildings across the city. The consequence of this dispersion, and the fact that
the business units had their origins as separate departments, meant that there was no coordination of indoor
plant procurement across the agency. The department was being serviced by multiple suppliers at varying
rates, to varying standards and at varying prices but this was not being seen as an issue.

P:\Strategic Sourcing\Buyer & Supp Dev\Internet\DTF Site\Procurement Reform Toolkit\CORPPROD-6357261-v2-PROCUREMENT_REFORM_TOOLKIT_-
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Smarter Buying Guidelines
2.2 Agency Forward Procurement Planning
                                                                                                              Procurement Reform Toolkit


Following some enquiries it turned out that the department spent about $20,000 on these services annually.
Given the close proximity of the buildings a contract with a sole supplier made a lot of sense and allowed the
department to standardise on the type, distribution and maintenance of the indoor plants. All existing
suppliers and a number of new ones were invited to quote on the new single aggregated contract.

The result of this approach was a lower overall price for the indoor plants service and significantly reduced
effort and duplication across the department to establish, manage and pay for the service.

Lessons learned from the case study:
1.       Don’t assume that because the value of the goods or services being purchased is relatively low that
         savings are not worth pursuing.
2.       An internal AFPP methodology across budgeted expenditures above $5,000 per line item exposed the
         opportunity.
3.       Standardisation brought financial benefits.
4.       Aggregation resulted in direct financial benefits through a lower overall price and efficiency of effort
         through only having one contract and one monthly invoice for the service.


CASE STUDY 2 - MULTI-AGENCY AGGREGATION OPPORTUNITIES
Some agencies buy goods or service that can be fairly unique and one might therefore draw a conclusion
that aggregation opportunities don’t exist, however by applying some broader thinking and considering other
agencies that might have similar needs opportunities can arise. Consider the following…

Only a few agencies use boats as part of their operations e.g. Police, Fisheries, TAFE, Swan River Trust,
Dept of Environment, CALM, and FESA. However each of their vessels needs to be serviced, repaired and
maintained yet it’s likely that today there is no coordination of the procurement issues involved. Potentially
some savings are achievable for each of the agencies concerned both in terms of the result at the tender box
or through contracting efficiency.

By sharing internal agency AFPP information with similar agencies, multi-agency aggregation opportunities
may be exposed.



HOW CAN I LEARN MORE ABOUT THIS APPROACH?
As part of the sector-wide pilot project referred to earlier, DTF developed a collection of resource materials
for use by agencies in developing their AFPP. The material was provided in the form of a CD package -
which included the United Nations Standard Products and Services Code (UNSPSC) look-up database and
associated instructions, and an AFPP template (ie. interactive Excel spreadsheet).

Essentially, the template is used to pull together the agency’s planned procurement information in a
consistent and structured manner, while the UNSPSC tool allows for easier analysis and reporting of the
spend data – by giving a common code to similar commodities and services.

These materials, along with general instructions and background information, can also be accessed via
DTF’s Procurement Reform web site. Visit www.dtf.wa.gov.au and type ‘AFPP’ into the search box at the top
of the screen.

The instructions and steps provided, along with the fields included on the AFPP template, can be readily
adapted to meet an individual agency’s specific planning requirements.

Agencies wishing for further information about how to use these resource materials, can contact Paul Gwilym
on 9222 5003 or at paul.gwilym@dtf.wa.gov.au.




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