The art of the deal: audit office urges procurement officers to get smart

By Stephen Easton

Friday June 8, 2018

The importance of procurement officials being smart buyers has emerged as the main theme of the Australian National Audit Office’s work over the first few months of 2018.

On one level, it sounds like a statement of the obvious that procurement officers must “gain a full understanding of what is being purchased, for what outcome and the market they are operating in” to achieve value for money, as the latest instalment of “audit insights” from January through March explains.

That doesn’t mean it is always easy to do, however, and there’s a lot of evidence in the ANAO’s published reports of room for improvement in procurement processes.

ANAO’s new summary draws on recent audits such as its look at Defence’s Procurement of Fuels, Petroleum, Oils, Lubricants, and Card Services and its report on the Australian Electoral Commission’s efforts to procure secure transport for ballots and an electronic vote-scanning system, which electoral commissioner Tom Rogers complained was not sympathetic enough to his agency.

The Defence audit, for example, highlighted the importance of “effective negotiation strategies” — the art of deal, perhaps, to use the Trumpism — while the AEC’s efforts demonstrate the need to understand the product and the market.

An older audit of how the “costly and opaque” deal with Telstra to fund its universal service obligation is managed by Communications shows the need for active, ongoing management, especially with such a long-term, non-competitive contract.

Then there’s the video summary, a classic of the ‘slightly awkward interview between two colleagues’ genre. Director of communications Sam Highley chats with Lisa Rauter, group executive director, performance audit.

There’s also a well-worn quote from ANAO’s United States counterpart on the many virtues of retaining in-house capability, which previously found its way into the Defence First Principles Review.

“A smart buyer is one who retains an in-house staff who understands the organization’s mission, its requirements, and its customer needs, and who can translate those needs and requirements into corporate direction. A smart buyer also retains the requisite capabilities and technical knowledge to lead and conduct teaming activities, accurately define the technical services needed, recognize value during the acquisition of such technical services, and evaluate the quality of services ultimately provided.

“As long as the owner retains the in-house capabilities to operate as a smart buyer of facilities, there does not appear to be any greater risk from contracting out a broad range of design review-related functions, so long as such functions are widely available from a competitive commercial marketplace. If the owner does not have the capacity to operate as a smart buyer, the owner risks project schedule and cost overruns and facilities that do not meet performance objectives.”

In its own words, ANAO describes an “informed” government buyer as one who:

  • understands the supply market conditions, characteristics, capacity and capability for a planned procurement, including the types of services and products available, industry-pricing structures and any future changes in the industry or related technologies that could reasonably be anticipated.
  • has the capacity and technical knowledge to describe the entity’s requirements to potential suppliers and evaluate, independently of suppliers, whether they can meet the requirement.
  • can appropriately assess, on behalf of the Commonwealth, whether what was delivered as a result of the procurement process has demonstrably achieved value for money given the objectives of not only the procurement, but the policy or service it contributes to the term over which the service or good(s) will be provided.

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