Cooperative Agency Procurement

Principles

1. Cooperative Procurement is where more than one entity approaches the market together (i.e. 'clustering ') or where an entity accesses another entity 's established contract or standing offer arrangement (i.e. 'piggybacking '). It enables entities to reduce expenditure by sharing administration costs and utilising their combined economies of scale.

2. Cooperative Procurement may also be referred to as collaborative procurement or multi agency access (MAA) in planned procurements, approaches to market (ATMs) and standing offer notices (SONs) published on AusTender.

3. Value for money is the key consideration in cooperative arrangements. Entities should assess cooperative procurement against other procurement options to determine the process that will achieve the best value for money.

4. Entities should consider cooperative procurement options as part of their procurement planning. This includes:

  • determining if another entity 's existing arrangement would provide a better value for money outcome than a new approach to the market (particularly in maximising market benefits by aggregating the purchase of goods and services in common use, and delivering savings including reduced costs of tendering);
  • considering, if an existing arrangement is found to be not suitable, whether there are opportunities to approach the market cooperatively with one or more other entities through a new procurement process; and
  • incorporating suitable clauses in the request documentation to enable other entities to access the contract or standing offer arrangements in future.

5. Specific issues that must be addressed to ensure that cooperative procurement is consistent with the Commonwealth Procurement Rules (CPRs), are:

  • value for money is achieved;
  • the approach to market for a cooperative arrangement must specify that it will be accessed by other entities (preferably naming the entities involved where known) ; and
  • entities subsequently joining a cooperative arrangement must do so within the scope of the existing arrangement.

6. Unless there is a legitimate reason to not allow other entities to leverage from a contract, appropriate clauses that enable multi agency access should be included in the request documentation, and notified to the market.

7. Cooperative procurement complements the Australian Government 's coordinated procurement arrangements (whole-of-government contracts). The key differences between cooperative and coordinated procurements are below.

  COOPERATIVE COORDINATED

Scoping Study

Maybe

Yes

Government agreed

No

Yes

Entity participation

Voluntary

Mandatory, however, opt out provisions apply where special need for alternative supply is demonstrated and approved

Lead entity

Generally initiated by entities. May be initiated by Finance at the request of several entities or government based on advice from key stakeholders.

Finance or nominated lead entity

Savings

Retained by entities

Allocated between entities and budget

Size

May vary from a small arrangement between two entities, to a larger arrangement involving many entities.
External entities may participate but must comply with CPRs.

FMA Act entities

Procurement process and contract management

Tailored to meet the needs of entities involved.

Centrally managed by Finance or lead entity

Administrative charge

If agreed by entities

Yes

Types of goods and services

Relevant to the entities involved and may have a narrower scope

In common use by all or most entities

Practice

1. Cooperative procurement may vary from a small arrangement between two non-corporate Commonwealth entities, to a larger arrangement involving many non-corporate Commonwealth entities. It may involve one contract or deed of standing offer managed by one entity, with others joining through a Memorandum of Understanding, or separate contracts for each participating entity.

Advantages of cooperative procurement

2. Advantages of cooperative procurement include:

  • reduced number of approaches to market (administrative efficiencies for entities and industry);
  • price savings through volume discounts; and
  • sharing of knowledge and better practices between entities.

3. These benefits are particularly relevant to smaller entities that are less likely to be able to generate price savings through an individual approach to market or have available the specialist knowledge or skills necessary to undertake the procurement. Cooperative procurement is suitable for products and services in common use by most entities, and also works well for specialist areas that may only be required by a small number of entities.

4. Panel arrangements are particularly suited to cooperative procurement as they can accommodate more flexibility to meet a range of entity requirements.

Approaching the market

5. Entities should also ensure that terms and conditions of the contract do not include a confidentiality requirement that prevents the contract, including pricing, being provided to other entities. This is consistent with ensuring the best value for money for the whole-of-government.

Clustering vs Piggybacking

6. Clustering involves two or more entities collaborating prior to approaching the market. This collaboration allows entities to share information and should provide an outcome that works well for all. Clustering also provides the market with better information about the volume that will be required and therefore maximises the potential for volume discounts.

7. In contrast, piggybacking is where one entity has established a panel and has made the panel or standing offer arrangement available to other entities. Piggybacking requires acceptance of the terms and conditions of the existing contract. In piggybacking on an arrangement that has been in place for some time, entities should ensure that such an arrangement would still represent value for money.

Clustering

8. Entities involved in clustering for a single approach to the market should agree on how the process will be managed, including resourcing, approval and communication processes. One entity may be nominated as the lead entity to manage the tender process. Resourcing may be shared between entities, or be managed by the lead (which may involve some sharing of cost). The key is to ensure that all parties understand and accept the process, delivers the required outcomes for each entity and achieves value for money.

9. Being involved in the procurement process, particularly in the development of the statement of the requirements and the evaluation of tenders, participating entities can ensure their needs are met. A list of the entities participating in the procurement process (including those likely to participate at a later stage, if known) must be specified in the request documentation and in the contractual arrangement/s. However relevant clauses should also be included in the ATM and subsequent contract to allow a piggybacking arrangement to occur at some future stage of the need arises.

10. A key consideration for clustering is the timing of the approach to market to ensure ongoing supply (i.e. dealing with different end dates of existing arrangements). This can be addressed through forward planning, and may involve separate commencement dates.

11. An alternative to the lead entity approach may involve separate evaluation processes and/or outcomes for each participating entity. For example, where the outcome does not represent value for money for one of the participating entities, that entity is not bound to award a contract. However, a lack of commitment from all entities may have a negative impact on unit pricing, which may in turn impact on value for money.

12. A cooperative approach to the market can be structured so that each participating entity can either assess the offers and contract directly with the supplier/s; or participate in an overall value for money assessment and be listed on a schedule of the lead entities contract. This should be specified in the request documentation for the procurement.

13. Good practice examples and clauses that may be used for clustering are as follows:

Request Documentation – specifying separate assessments and contracts

Entity xx will not assess offers against the requirements of other xx portfolio entities participating in this procurement (as specified at Schedule Y). Each participating entity will undertake its own assessment in accordance with the Commonwealth Procurement Rules.

Any decision by an xx portfolio entity to avail itself of the offer by a successful Tenderer (if any) will result in a separate Contract with the Tenderer in respect of that entity.

Request Documentation – advising tenderers of potential for piggybacking

Xx portfolio entities may avail themselves of the Agreement resulting from this Request for Tender (RFT). Consequently, the volume of services required under this RFT may increase in accordance with the requirements of xx, or its portfolio entities [list attached]. The decision to do so will be taken by xx and any xx portfolio entity in accordance with the Commonwealth Procurement Rules.

Piggybacking

14. Piggybacking can only occur if specified in the request documentation at the start of the procurement process, and it forms part of the terms of the resulting contract. The piggybacking arrangement must not alter the scope of the procurement, noting that a change in volume does not mean an alteration to the scope. However, where an entity intends to procure a level of goods and services that will have the effect of producing a significant increase in volume to that originally envisaged, the entity needs to consider whether a new open approach to the market might deliver a better value for money outcome.

15. Where known, entities should identify which entities are likely to piggyback on the arrangement, such as other portfolio entities, or those that have expressed an interest in joining. They can also include a general provision to enable other (unnamed) entities to join.

Piggybacking and the market

16. Entities seeking to piggyback on an existing arrangement should consider whether:

  • the contract or deed allow for potential access by other entities;
  • the entity 's needs (specified requirements) are within the scope of the existing arrangement;
  • the entity will achieve value from money; and
  • whether the market has changed substantially since the existing arrangement was put in place.

Resourcing

17. Conducting a cooperative arrangement (particularly a clustering arrangement) may require more resourcing overall than a single entity approach, although less than each entity approaching the market separately.

18. Entities can shape cooperative arrangements to meet their resourcing capacity. For example, entities with limited resources may choose a minimalist piggybacking approach, essentially putting in place a framework for other entities to access. Entities that cluster together may consider sharing the workload, each providing staff for the process. Where an entity takes a substantial lead role, they may seek to recoup some of their resourcing costs from the other participating entities.

19. Resourcing should be considered early in the planning process, to ensure entities understand and agree how the procurement and the ongoing administration of the cooperative entity arrangement will be managed.

Identifying Cooperative Opportunities

20. Entities can use the searchable entity Annual Procurement Plans on AusTender to assist in identifying cooperative ( 'multi agency access ') procurement opportunities. The Procurement Bulletin issued by the Department of Finance also includes a section on cooperative opportunities. The Procurement Bulletin is emailed on a monthly basis.

Cross jurisdictional cooperative procurement

21. Entities subject to the CPRs may wish to participate in cooperative agency procurement with external entities such as corporate Commonwealth entities or State and Territory government agencies. However, any such procurement must comply with the CPRs as if the agency itself were conducting the procurement in its own right. This in effect means that, if a non-corporate Commonwealth entity were to consider piggybacking onto an arrangement, the external entity must have conducted the procurement in accordance with the CPRs.

Managing Cooperative Agency Arrangements

22. Key considerations in managing cooperative arrangements include:

  • roles and responsibilities of entities, especially with regard to resourcing for Deed and/or contract and change management, dealing with the supplier/s, placement of orders and payment procedures;
  • communication between the parties, for example, for the lead entity to communicate any changes to the arrangement to participating entities and provide entities ' feedback to the supplier/s on issues such as service delivery performance management and reporting;
  • documenting relevant arrangements between the entities; and
  • procurement reporting, contracts put in place under cooperative arrangements will need to be reported in a manner consistent with the CPRs.

TIPS

1. Piggybacking on an existing cooperative procurement arrangements can provide a swift, efficient, and value for money approach to procuring goods and services.

2. Planning and communication between participating entities is central to effective cooperative procurement arrangements. This includes in relation to:

  • resourcing for, and participation in (for example on the Evaluation Committee) the tender process;
  • necessary approvals;
  • lead entity arrangements;
  • arrangements for participating entities to access suppliers, including the priority for the provision of services by suppliers to entities where there is the potential for conflicting timing requirements; and
  • reporting on AusTender consistent with CPRs requirements.

3. The agencies likely to access cooperative procurement arrangements, where known, should be communicated clearly to the market.

4. The responsibilities of entities involved in a cooperative procurement, including in terms of the performance management of the supplier(s) and otherwise handling complaints or concerns, should be clearly established as early as possible.

5. Entities with larger procurement spends do not necessarily need to be the lead entity in cooperative procurement. It may be more beneficial for a smaller entity to lead the cooperative procurement when more experienced or in niche procurements, or where there is a relatively small spend by the large entity– noting that a small spend to a larger entity may represent a large spend to a smaller entity. This could free up resources in the larger entity, while enabling greater buying power for the smaller entity.

6. Larger entities should consider including lesser-valued procurements on their Annual Procurement Plans in AusTender, to assist the identification of cooperative opportunities, particularly for smaller entities.

TRAPS

  • In accessing the existing arrangements of another entity, an entity does not need to 'revisit ' the original procurement process so as to 'second guess ' the tender evaluation and confirm it would have made the same evaluation decisions. Rather, the entity needs to be confident that accessing that arrangement represents value for money for its current procurement.
  • The benefits of cooperative procurement may not be realised where entities are inflexible in applying their own rules to the procurement. As with any procurement, the risks must be managed appropriately, which may require entities to cooperate, and compromise where necessary, to achieve an effective outcome.
  • Entities should not automatically dismiss involvement in a cooperative procurement arrangement simply because a lead entity charges other entities to access the arrangement. Rather, in considering the value for money implications of accessing an existing arrangement, entities should also have regard to the likely time and cost impost of conducting their own tender process, should they not access the arrangement.

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