NSW agencies duck e-procurement policies

NSW Auditor-General Peter Achterstraat has criticised state government agencies for failing to follow electronic procurement and tendering requirements.

Image of spectacles over accounts

A new report tabled yesterday found a "concerning" level of non-compliance with state requirements to use e-procurement systems.

Those requirements included a memorandum from the NSW Premier (M2006-11) that all agencies (excluding state-owned corporations) with total expenses exceeding $400 million a year and agencies named in Schedule 1 of the Public Sector Employment and Management Act 2002 use the Smartbuy system for e-procurement.

Non-compliance with that requirement meant potential savings from using collective electronic procurement had been lost to agencies that preferred manual procurement.

“Overall there was very poor compliance with the Premier’s Memorandum,” the audit concluded.

“Some agencies had not implemented any systems, policies or procedures to ensure compliance, despite the reforms being announced five years earlier.

"Many other agencies only complied with the requirements occasionally."

Electronic tenders in NSW were administered by the Department of Services, Technology and Administration (DSTA) through NSW Procurement (NSWP).

Agencies must notify DSTA and use the e-tendering web site for all procurements greater than $250,000 that are not available through the State Contracts Control Board (SCCB) contracts.

Planned use of alternative electronic procurement systems must be approved by the NSW Government Chief Information Officer (GCIO).

The numbers

Only four of the 19 agencies reviewed by Achterstraat complied with the requirements of the Premier’s Memorandum in all material respects. Shortcomings included that:

• Agency staff either ignored the requirements entirely or used Smartbuy as a ‘look up’ service to access details of government contracts but completed the transactions manually.
• Policies and procedures over electronic procurement had not been developed or were ignored or overridden by those responsible for procurement transactions
• Manual purchasing was used for procurements under $30,000 and e-tendering was used for purchases greater than $30,000.
• Electronic purchases were made from non-approved suppliers.
• Goods were purchased manually rather than electronically.

The loss of data on procurement trends was also a concern for the Auditor-General.

“The future of electronic procurement means central agencies need to collect and analyse information to anticipate demand and volumes, identify changes in purchasing patterns and have accurate, reliable information available when negotiating contracts with suppliers," he said.

Selective use

Some agencies claimed they pursued manual purchasing because they were able to negotiate a price lower than the approved price listed in Smartbuy.

“This becomes a self perpetuating problem because the supply fee is lost, the manual purchase is not captured in the system and the information is not available when the contract is renegotiated," the report stated.

The Audit revealed that Smartbuy records 40,000 unique searches each month, but only a small proportion of these eventuate in a completed transaction.

“The future success of the service will lie in ensuring that users do not exit the system to obtain information they need to complete a transaction. Once users exit the system and contact a supplier regarding specifications, generally the transaction is completed manually," the report found.

Seven of the 19 agencies reviewed were found to have: 

• Split orders where services were supplied by a contractor at multiple locations. 
• Failed to notify DSTA and publish projects on the e-tendering website
• Used selective tendering rather than e-tendering because of "confidentiality concerns" which did not seem valid according to the Auditor-General.