This approach describes the methodology NSW Procurement is following when conducting whole of government procurement activities. NSW Government agencies are welcome to make use of this approach and the supporting materials as part of their own procurement processes.
Generally, a procurement exercise involves three broad stages; plan, source, manage. This structured approach to procurement, enriched with useful tools can help agencies check their procurement activity against best practice recommendations.
Click on any of the nine steps below to learn more about procurement best practices when performing procurement activities.
This approach is common to all categories of procurement; however the relative importance of the different stages within the approach will depend on the size and type of procurement exercise being undertaken.
The NSW Procurement Plan, Source, Manage Approach is aligned to the NSW Government Strategic Directions Statement of having a procurement system which delivers value for money, is aligned with business needs, leads to service delivery improvement and supports a competitive and innovative NSW economy. Key elements of this approach are early industry engagement and the development of procurement solutions that are outcomes rather than process driven.
Two important notes
About Supplier Relationship Management
All government expenditure needs to be managed effectively to deliver value for money outcomes. Segmenting spend on the basis of risk and value helps to achieve this by understanding where to focus efforts and limited resources. Show more
Most effort needs to be put into areas that are considered to be high risk or high value or both, by using Supplier Relationship Management (SRM) techniques.
For other areas of expenditure that are considered to be routine and commoditised, it is equally important to ensure that customer's expectations are met and that learnings are captured from working with suppliers. Show less
About business cases and gateway review
All general government agencies and government businesses, including nominated SOCs are required to provide The Treasury with business cases based on the size and risk profile of the project or program. Show more
Please refer to the Treasury Circular 12/19 on Submission of Business Cases for more information and use the following tools if needed:
- A Preliminary Business Case template.
- A Final Business Case template.
- TPP08-05 Guidelines for Capital Business Cases.
In addition to this, a Gateway Review System applies to major projects with the objective of ensuring agencies have applied an appropriate level of procurement discipline to projects. Please refer to the Treasury Circular 10/13 on the Gateway Review System for more information. Show less
P1 Analyse business need
The business need is a multi-dimensional expression of the requirements of the business’ spend stream both now and in the foreseeable future.
The key steps to analyse business needs are:
- Determine if the spend is a critical one for the agency, based on an assessment of value and risk, and adopt a Supplier Relationship Management (SRM) approach if criticality is high.
- Identify and understand internal stakeholders.
- Engage internal stakeholders and win their commitment.
- Brainstorm different opinions about what the business requires from this project and think about alternative options to deliver the same outcome in a better way.
- Determine and agree our business needs.
P2 Analyse and engage the market
Our goal is to develop a comprehensive profile of the dynamics of the supply market in order to decide how best to interact with it:
- Have a clear profile of the supply market, its capabilities and its key drivers of change which will shape it over the next 12-36 months.
- Ensure we are aware of new and innovative solutions that the supply market could implement to deliver better value for money to the agency.
- Get an appreciation of the balance of power between the agency and the market.
The key steps to analyse and engage the market are:
- Identify first any arrangement that may exist at the Whole of Government level (for example, prequalification schemes and panels) or agency arrangements with a piggyback clause and use them.
- Undertake a thorough analysis of the supply market.
- Interact and engage with the supply market in compliance with probity rules.
Industry engagement consists of consulting the industry (or supply market) around a particular problem or opportunity. It is to be conducted at all phases in the procurement lifecycle.
For NSW Government agencies, the benefits include a broader and deeper view of the capability of suppliers to deliver goods and services, the potential to explore new ways to meet business needs and potentially reduced transactional costs when it comes time for the actual procurement activity.
When considering an industry early engagement approach, consider the following basics:
- Engage with key industry existing and potential suppliers at all stages of the procurement cycle, not only during the sourcing stage.
- Ask to be educated in what the supplier thinks is important for the agency to know.
- Include as many potential suppliers, including small and medium enterprises as is feasible.
- Generally avoid meetings with more than one supplier at a time.
- Always respect the commercial significance and intellectual property of the supplier.
P3 Finalise procurement strategy
Our goal is to develop a strategy to interact with the market based upon our understanding and analysis of:
- The business needs and demand-related opportunities.
- The dynamics of the supply market.
- Key risks and opportunities related to the spend.
The key steps to finalise the Procurement Strategy are:
- Summarise our key findings about business needs, the supply market and key risks and opportunities.
- Determine the level of Business Criticality of the project and what top priority opportunities should be driven out of the arrangement.
- Understand the different strategic options to get the best out of the supply market to deliver optimum value for the agency:
- How do we approach the market?
- What will success look like?
- How do we manage risks?
- Identify benefits to be realised and strategy to achieve them.
- Select and define an appropriate strategy and develop a plan to implement it.
- Ensure that we have support for our chosen strategy and get it signed off by the appropriate delegate and/or group.
S1 Approach the market
A key step within the procurement process is engaging with the market place. We approach suppliers through market engagement activities such as Request for Proposals (RFPs), Expressions of Interest (EOIs) and Direct Negotiations.
In order to gain a successful outcome from these market engagement activities we need to:
- Define clear assessment criteria and processes, in accordance with the procurement strategy.
- Provide suppliers with all the information they need to submit the best fit-for-purpose bid within a framework of probity and fair dealing.
The key steps to approach the market are:
- Set up an assessment panel consisting of the right business users and technical experts.
- Define an assessment plan that reflects the key priorities of the procurement strategy, especially regarding the evaluation criteria.
- Make sure the RFx (a common term for invitation to bid) documentation is clear, concise and comprehensive and that the existing relevant documents and templates are used.
- Give enough visibility to the RFx, include all key information needed by the suppliers and provide the same level of information to all the suppliers.
- Appropriately manage the responses in an open and fair process for example, supplier briefing, response to enquiries, issuing of addenda, management of late tenders.
- Appoint a probity advisor if needed.
Our goal is to ensure we select the best supplier for our requirements within a framework of probity and fair dealing.
The key steps to select the best supplier(s) are:
- Ensure fairness and transparency of the selection process, including the management of interactions with suppliers.
- Ensure code of conduct/confidentiality agreements are signed by the selection committee prior to going through the evaluation process.
- Prior to opening tender responses ensure you have developed a structured and systematic evaluation process that is representative of the complexity of the procurement.
S3 Negotiate and award
Our goal is to get the best final arrangement with the preferred supplier whilst ensuring requirements around probity and fair dealing.
Key to a successful negotiation is being well prepared, understand what our objectives are and determine what a successful outcome looks like. A good negotiation should leave both parties satisfied and ready to develop a successful relationship.
The key steps of negotiation and contract award are:
- Negotiate in compliance with the process set out in the invitation documents and with full transparency and accountability.
- Carefully prepare and plan the negotiation and proceed to execute those plans.
- Finalise the arrangement with the successful candidate/s.
- Debrief the unsuccessful candidates.
- Appropriately disclose and record the arrangement.
Direct negotiations may be used in exceptional circumstances (for example, absence of competition). A suitable assessment, based on a comprehensive knowledge gained through specific market research, will need to be made to justify direct negotiation. An exemption for exceptional circumstances is then to be approved by the appropriate delegate before direct negotiation takes place.
Signing an arrangement is not the end of a process, but rather the start of an on-going relationship with the supplier. It needs to be managed in order to deliver the best outcome for the organisation.
M1 Implement arrangement
Our goal is to lay the foundations of a successful arrangement during the period between the signing of the arrangement and the commencement of product/service delivery.
The key steps of the implementation of the arrangement are:
- Define the right level of management and resources according to the business criticality and complexity of the arrangement
- Ensure smooth transition of services, especially if there’s a new supplier.
- Establish jointly with the supplier team systems and processes to ensure compliance and determine who is responsible for the key tasks and activities on the agency’s and supplier’s sides.
- Engage key stakeholders and communicate on the new arrangement.
M2 Manage arrangement
Our goal is to deliver value for money and drive the best out of the supplier relationship.
The key steps of the management of the arrangement are:
- Maintain the right level of governance and resources according to the business criticality and complexity of the arrangement.
- Manage performance, drive continuous improvement and encourage innovation in coordination with the supplier and key stakeholders.
- Track and report benefits to show evidence of delivered value for money.
Our goal is to prepare the strategy for the next arrangement. Planning for renewal should be a constant during the manage stage; it is not an end of stage activity, rather a continuous assessment/improvement exercise that will provide the best possible outcome for the next arrangement.
The key steps of the renewal of an arrangement are:
- Commence dialogue with both the supplier and the internal stakeholders prior to contract expiry on the strengths and weaknesses of the contract.
- Commence demand and market analysis in anticipation of developing a procurement strategy.
Download the Procurement Process Factsheet (PDF).