Finance is continuing its engagement with the community and industry via this blog. In this case, we seek your feedback on and input to the proposed Whole-of-Government ICT Services Panel (WISP). This is where you can make a difference, by providing the benefit of your experience to improve Government’s use of panels.
First, we will provide you with some background, covering the current landscape, the drivers for change, and the possible landscape for the future and an overview of the proposed procurement processes.
Second, we would like to discuss our proposals for the procurement process with you. This includes matters such as admission to the Panel, simplified documentation, open bidding processes, electronic quotations, assessments and engagement.
Finally, we will cover some proposed new aspects for the panel management, such as active supplier and agency management, panel refresh and fee structures for subscription to/use of the panel.
There are two main objectives for the WISP proposal:
In accordance with the direction of Government, in response to the Gershon Review of the Australian Government’s use of ICT, Finance intends to pursue further initiatives to reduce the number of panels currently across Government from more than 80 down to about 4, the use of which would be mandatory by FMA Act agencies. This would reduce establishment and administration costs for agencies. Application effort for suppliers seeking panel membership would also be reduced.
The WISP would be complemented by a small number of portfolio-based ICT Services panels. The portfolios responsible for these panels would be agreed following analysis of ICT expenditure and current standing offer arrangements. These portfolio based panels would include ‘piggyback’ clauses (see here para 8.39) to enable them to be used by any FMA Act agency. They would have particular applicability for large contracts – above $250,000.
The proposed WISP is designed to encourage greater competition between panel members for the majority of ICT services opportunities. All WISP procurements would be visible to all panel members via a service such as AusTender. All panel members that are approved to provide a service category (similar to those used by the Victorian Government eServices Panel) would be able to bid for Government business, under the panel, in that category.
Simplified and standardised RFT documentation, perhaps along the lines of the work currently being undertaken by Finance’s Procurement Division for contracts under $80,000, would be made available for suppliers and agencies allowing equitable and more timely assessment of each RFQ. This would reduce the cost for panel members in bidding for Government business and for agencies in approaching the market.
The WISP is intended to target the large volume of small to medium value contracts in this procurement category. There would be a price ceiling applied to the ICT Services panel procurements. It is intended that each procurement under the panel complete a standardised value and risk assessment before proceeding.
Value for Money would remain the core principle underpinning the procurement, as required by the Commonwealth Procurement Guidelines. Often this is done by comparing more qualitative factors first and then considering price, but there is no requirement to conduct the comparison in this order. The WISP proposal would utilise ‘best price’ tools similar to eBay™ to rank bids in order of final price, after a reverse auction. Qualitative assessment would then follow as a critical factor in securing the best value for money.
More innovative features such as panel refresh, electronic RFQ response and more active supplier management are also open for discussion.
Whole-of-government ICT procurement is currently being optimised through coordinated procurement contracting arrangements in the areas of desktop hardware procurement, telecommunications services and software.
In this case, AGIMO is seeking to change, through innovation, how Government procures ICT services. This approach aims to open up the market to new suppliers, providing more opportunities for all suppliers and a more competitive market for Government.
ICT Services represent approximately 50% of the total ICT contracts both by number and value1. There are currently in excess of 80 ICT services panels/standing offers across FMA Act agencies2. Finance estimates significant efficiency savings for the government and industry could be realised by reducing these numbers and increasing the level of panel procurement in this market sector.
While the average ICT services contract on AusTender is about $185,000, the median contract value is $40,000. 72% of ICT services contracts are valued at $80,000 or less and are not subject to open tender processes. Consequently, three quotes are likely to be requested, probably from known suppliers. New market entrants face a high initial barrier. They must join a series of panels, gain the attention of the users of the panels, be asked to quote, submit a competitive quote and then perform well.
Finance’s role is to ensure that this new panel delivers against these objectives, while balancing the needs of both Government agencies and suppliers.
There are three portfolios that, combined, represent more than 60% of ICT services expenditure across Government. As part of the reduction in panel numbers, we are proposing that each of these portfolios, and possibly a few other key portfolios, rationalise their existing panels into a single portfolio panel for ICT Services. The advantage of this approach is to provide these portfolios with the flexibility to manage large numbers of complex requirements, and small to medium agencies to benefit from centrally managed panels.
Each of these portfolio panels would have a Whole-of-Government ‘piggyback’ clause to allow their use by any other Commonwealth agency. Such arrangements, relatively common already, would be designed to minimise any resource impacts on the originating portfolio.
The group of portfolios would remain unchanged for the duration of the WISP.
All other portfolios would be required, on expiry of their own ICT services panels, to use either the WISP or one of the large portfolio panels, according to their needs.
Comments are sought from suppliers and other stakeholders about this and/or alternative approaches.
Supplier admission to the panel, which will be similar to a multi-use list, will be through a process based on assessment of:
Finance recognises that a standard for financial viability checks would assist suppliers and agencies. This is currently being implemented across ICT-related coordinated procurements in Finance.
Standard deeds are more equitable for suppliers and less costly to manage in a whole-of-government context. The Deed would be developed in consultation with agencies and the industry. Suppliers would also be required to fully agree to the terms and conditions of a Deed of Standing Offer for the Panel.
Service categories, in which suppliers would be required to demonstrate strong capability, would be similar to those used in the Victorian eServices Panel. However, the WISP would not include ICT labour hire, at least initially, as this would typically require considerably different terms and conditions to ICT services.
Historically, models of panel procurement allow an agency to seek quotes, often only three, from a short-list of suppliers chosen from the panel. This reduces the evaluation workload of the agency. The number of shortlisted suppliers is usually defined by the relevant parts of the agency’s Chief Executive Instructions (internal guidelines) and should be sufficient to achieve a value for money procurement decision.
Because an agency’s initial shortlist for RFQ is based on the minimum number required, it can often be made up of incumbent, previous or familiar suppliers. An open bidding process can expose agencies to new suppliers and the value this process provides. The WISP proposal offers suppliers the opportunity to win business and expand their offerings across a wider agency base.
Under the WISP proposal agencies would electronically publish RFQs using AusTender on which they could be viewed by all interested parties, once they registered in the standard way. Only panel suppliers, qualified in the category of the work being offered would be able to submit a quote, using an allocated password and a pre-defined template.
Finance is considering the use of electronic tools to complete an initial assessment of all RFQ responses. This is to ensure that agencies are not negatively impacted by the open bidding process.
Finance sees the opportunity to open the market to new and non-incumbent suppliers, and increase competition and value for money in ICT service procurement.
Suggestions as to how the Government could find the right balance for an open, competitive and efficient process are encouraged.
Finance proposes an agreed set of short, simple standard RFQ templates for low-risk ICT service procurement under the WISP. This would significantly reduce the effort for both agencies and suppliers in developing and responding to RFQs and Statements of Requirement.
Higher-risk or more complex procurements could still be carried out under the WISP, but may require more rigorous or customised documentation.
Suppliers would need to electronically submit their quotation by the required date and time.
Finance is proposing agencies shortlist and rank quotations with the aid of electronic tools that can perform data validation and completeness checks.
Qualitative evaluation of bids would remain a human process with results entered for reporting.
Agencies would have the opportunity to use eNegotiation to obtain Best and Final Offers from shortlisted suppliers. These tools allow suppliers to progressively bid lower prices and see their price ranking against other bidders. Price ranking is not the only criteria considered for selection of the preferred supplier. Agencies would receive the entire list of bidders and their final prices. Agencies would then select a number of suppliers to complete the final value for money decision. The selection of the winning quotation would be a human process incorporating qualitative criteria outlined in the RFQ document. Work order documents (contracts) would then be generated for consideration and execution offline.
Finance would be interested in hearing from stakeholders about the use of electronic tools for this purpose. Do you think that these tools can deliver an appropriate and fair result?
The figure and accompanying text description below shows the proposed standard procurement process.
(This image/diagram would be a link to a pdf document)
By making the WISP more open to new entrants and applying some performance measures for on-going membership, the value of the panel would be increased for everyone. The CPGs require that the triggers and conditions of refresh are outlined in the Panel RFT and Deed, so that all parties are informed and agree to the process.
The WISP, or categories within the WISP, would be refreshed on a regular basis, allowing:
Finance proposes regular consultation with agencies and industry on the performance of the panel, new technologies in use and the requirement to refresh the panel. Agencies would be represented in the Tender and refresh evaluation processes.
Your views on refresh from agencies and suppliers are encouraged. How do we ensure the panel is not closed to new members and new technologies, while remaining efficient for Government?
After the contracted services have been delivered, agencies would rate supplier contract performance online. The supplier would also rate the performance of the agency as a buyer. The ratings would not be released to the other party until both sides had completed them (or the supplier had opted not to rate the agency). The pair of ratings would not be able to be viewed independently but only as a pair. In this way, a poor performance rating of a supplier could be balanced, if justified, with the supplier’s view that the buyer was a difficult customer.
Over time, Finance would collect statistics on panel activity, e.g. supplier invitations, responses, contracts awarded, price rankings, VFM rankings and supplier/buyer performance. This information would give the Government the ability to manage suppliers effectively by developing a supplier performance profile. The information could be used to determine future membership of the Panel and rate quotes as part of the value for money equation.
The Victorian Government’s eServices Panel uses such a tool and both suppliers and the Victorian Government agencies are satisfied with its effectiveness.
Do you think this approach is fair for suppliers and provides value to the proposal? Do you think suppliers should have the opportunity to assess agencies at the completion of the contracted services?
The administration of the WISP would be managed by AGIMO. An inter-agency working group would be consulted in the establishment of the WISP and would monitor its performance and cost. The administrators would maintain guidelines for agencies and suppliers on the new processes and technologies.
The proposal would require a system that can provide panel management functionality and support the proposed standard procurement process. Where possible, Finance would propose the re-use and integration of existing applications such as GovDex and AusTender.
Finance is interested in any recommendations you may have of suitable applications or tools that would meet the needs of this proposal, as a whole, or as separate components.
It is proposed that the cost of development and management of the WISP would be funded by a combination of service fees from suppliers and agencies. There would be an annual subscription fee for suppliers on the panel, with a ‘fee for use’ model proposed for agencies. One of the benefits of this funding model is to ensure the proposed WISP is self funded and sufficiently resourced to deliver a quality service for all participants. Suppliers would benefit from a reduction in costs associated with tendering for membership of all of the previously relevant panels and then preparing non-standardised quotes, if asked.
The annual fee, perhaps around $2000, would ensure that only serious suppliers joined the panel. In exchange for the fee, suppliers would be able to bid for any job in the categories for which they are pre-qualified. By effective utilisation of the eAuction component, suppliers will be able to position themselves for selection in a manner previously only available to the select few known suppliers.
For agencies, a fee for each use would be applied. This would be less than the cost of preparing and assessing a market approach under the current arrangements.
Finance invites views on this fee arrangement, or any alternative solutions to funding by both agencies and suppliers. Do you think the fee should be set or vary in proportion to the size of the suppliers’ business? Do you think agencies should be charged an annual fee or fee for use? (e.g. charged on the number of contracts under the panel or the number of times the tools are used).
The proposed standard procurement process is expected to have a threshold. Agencies planning to procure services under the panel, with an estimated value of less than $200,000, would be required to use this proposed standard procurement process (see below figure 1) including the standardised documentation, evaluation tools and performance assessment described above.
AusTender data from the three financial years 2006-2009 shows that the average ICT service contract value is $185,000, which indicates a large volume of relatively low value/risk contracts. This threshold should equate to the level of risk in an individual work order, and as such could alternatively be determined on a case-by-case basis.
Finance seeks views on what the threshold should be, and how the threshold can be applied within the sometimes complex ICT services environment.
Comments are to be received by 17:00, 17 December 2010.
For the purposes of the blog, the below should be linked to.
The two reference papers for the objectives of this proposal are:
Optimise the number of ICT panel arrangements established by agencies across Government, including improving procurement arrangements for commodity products and services and volume sourcing arrangements for key items of software.
Procurement can foster innovative solutions for public sector challenges. It is recommended that agencies facilitate innovative solutions by focusing on outcomes, rather than specifications, through:
2. Finance analysis of AusTender, verified by agencies, January 2010.