Considering value for money
4.1 A thorough consideration of value for money begins by officials clearly understanding and expressing the goals and purpose of the procurement.
4.2 When a business requirement arises, officials should consider whether a procurement will deliver the best value for money. It is important to take into consideration:
- stakeholder input;
- the scale and scope of the business requirement;
- the relevant entity’s resourcing and budget;
- obligations and opportunities under other existing arrangements;
- relevant Commonwealth policies; and
- the market’s capacity to competitively respond to a procurement.
4.3 When a relevant entity determines that procurement represents the best value for money, these considerations will inform the development and implementation of the procurement.
Achieving value for money
4.4 Achieving value for money is the core rule of the CPRs. Officials responsible for a procurement must be satisfied, after reasonable enquires, that the procurement achieves a value for money outcome. Procurements should:
- encourage competition and be non-discriminatory;
- use public resources in an efficient, effective, economical and ethical manner that is not inconsistent with the policies of the Commonwealth3;
- facilitate accountable and transparent decision making;
- encourage appropriate engagement with risk; and
- be commensurate with the scale and scope of the business requirement.
4.5 Price is not the sole factor when assessing value for money. When conducting a procurement, an official must consider the relevant financial and non-financial costs and benefits of each submission including, but not limited to:
- the quality of the goods and services;
- fitness for purpose of the proposal;
- the potential supplier’s relevant experience and performance history;
- flexibility of the proposal (including innovation and adaptability over the lifecycle of the procurement);
- environmental sustainability of the proposed goods and services (such as energy efficiency, environmental impact and use of recycled products); and
- whole-of-life costs.
4.6 Whole-of-life costs could include:
- the initial purchase price of the goods and services;
- maintenance and operating costs;
- transition out costs;
- licensing costs (when applicable);
- the cost of additional features procured after the initial procurement;
- consumable costs; and
- disposal costs.
Broader benefits to the Australian economy
4.7 In addition to the value for money considerations at paragraphs 4.4 – 4.6, for procurements above $4 million (or $7.5 million for construction services) (except procurements covered by Appendix A and procurements from standing offers), officials are required to consider the economic benefit of the procurement to the Australian economy.
4.8 The policy operates within the context of relevant national and international agreements and procurement policies to which Australia is a signatory, including free trade agreements and the Australia and New Zealand Government Procurement Agreement.
4.9 Procurement-connected policies are policies of the Commonwealth for which procurement has been identified as a means of delivery. To assist relevant entities in complying with policies of the Commonwealth, Finance maintains a list of procurement-connected policies, which can be found at www.finance.gov.au/procurement.
4.10 Generally, procurement-connected policies are the responsibility of entities other than Finance. The relevant policy-owning entity is responsible for administering, reviewing and providing information on the policy as required.
4.11 Coordinated procurement refers to whole-of-government arrangements for procuring goods and services. A list of coordinated procurements can be found at www.finance.gov.au/procurement.
4.12 Non-corporate Commonwealth entities must use coordinated procurements. Exemptions from coordinated procurements can only be granted jointly by the requesting non-corporate Commonwealth entity’s Portfolio Minister and the Finance Minister when a non-corporate Commonwealth entity can demonstrate a special need for an alternative arrangement4. Prescribed corporate Commonwealth entities may opt-in to coordinated procurements.
4.13 Cooperative procurements involve more than one relevant entity as the buyer. Relevant entities can procure cooperatively by approaching the market together or by joining an existing contract of another relevant entity.
4.14 If a relevant entity intends to join an existing contract of another relevant entity, the initial request documentation and the contract must have already specified potential use by other relevant entities.
4.15 Relevant entities joining an existing contract must ensure that:
- value for money is achieved;
- the goods and services being procured are the same as provided for within the contract; and
- the terms and conditions of the contract are not being materially altered.
Contract end dates
4.16 When a contract does not specify an end date it must allow for periodic review and subsequent termination of the contract by the relevant entity, if the relevant entity determines that it does not continue to represent value for money.
4.17 Procurement by third parties on behalf of a relevant entity can be a valid way to procure goods and services, provided it achieves value for money.
4.18 Relevant entities must not use third-party arrangements to avoid the rules in the CPRs when procuring goods and services.
3 See sections 15 and 21 of the PGPA Act
4 Or when the coordinated procurement specifies an alternative approach for obtaining exemptions.