Enhancing government procurement

Effective government procurement (the process of purchasing goods and services) can deliver better value for money and savings across government.

• Procurement analysis is often performed with an agency focus rather than a strategic whole-of-government focus.
• Queensland Government Procurement has built a data set that provides insight into expenditure at departments but is not effective at identifying future procurement savings.
• 466 whole-of-government contracts have been negotiated with suppliers but there is no monitoring or reporting on whether departments are using these arrangements and if they are achieving value for money.

We make the following 5 recommendations in this report:

Reference to comments

In accordance with s. 64 of the Auditor-General Act 2009, we provided a copy of this report to relevant entities. In reaching our conclusions, we considered their views and represented them to the extent we deemed relevant and warranted. Any formal responses from the entities are at Appendix A.

Achieving value for money in government procurement (the process of purchasing goods and services) is always important, but recent events have made it even more so. COVID-19 has had an impact on the state’s finances, and government has spent a lot to support rapid responses to the pandemic. In 2019–20, the state recorded its first operating deficit in 7 years and had to borrow $4.8 billion more than originally budgeted.

While the 2020–21 result was better than expected, borrowings continue to increase, and are expected to reach $76.9 billion by 2024–25. Additionally, Queensland’s population is expected to continue to grow, placing further pressure on government services.

In response to these financial pressures, the state government announced a savings and debt plan in October 2020, targeting savings of $3 billion over 4 years.

In a time of significant fiscal constraint, departments are being pushed to find savings in their non-frontline expenditure (such as accommodation, food services, printing, utilities, and telecommunications), while still maintaining existing levels of public service delivery.  

Queensland government departments spend a significant amount on non-frontline activities – approximately $18.5 billion in 2020–21 – and their accountable officers are expected to carry out their operations efficiently, effectively, and economically. This includes achieving efficiency when acquiring supplies and services of the right quality at the right time.

Enhancing government procurement can lead to significant savings across the state.

What this report does not do

We have not undertaken a full evaluative audit to examine the efficiency and effectiveness of procurement processes. Nor have we reviewed the merits behind awarding contracts with existing suppliers for any of the 20 departments.

As a result, we have not provided a conclusion under the auditing standards. Instead, we have analysed available information and presented relevant facts and recommendations.

This chapter outlines how the first of our 3 elements – effective collaboration among departments – can deliver whole-of-government savings.

Strategic procurement in the Queensland Government involves individual departments, Queensland Government Procurement (within the Department of Energy and Public Works), and 6 ‘category councils’. The category councils are run by departments to oversee and direct strategic procurement for 6 areas of significant expenditure across government.

This is overseen by the Queensland Government Procurement Committee and by the CEO Leadership Board. (Appendix B shows the existing procurement structure in Queensland.)

While this structure supports collaboration, departments remain responsible for their own procurement of goods and services. A principle of the Queensland Procurement Policy 2021 (administered by Queensland Government Procurement) is ‘working together to achieve outcomes’, but in practice this is not easy, and there is limited incentive for departments to do this. There are some instances where it has occurred, but more opportunities exist.

Opportunity for collaboration among departments

Queensland Government Procurement is responsible for driving department collaboration. To do so, it needs to engage meaningfully with departments and influence them by demonstrating the savings that can be achieved through collaboration.

If departments work together when procuring the same good or service – including sharing information to negotiate collectively – they are likely to get a better deal. But not all departments are taking advantage of these opportunities. Departments are often hesitant to share their expenditure data with other departments. This can be because they want to maintain independent control of their own procurement, and it can also be due to confidentiality reasons.

In one example, we analysed mobile phone expenditure (calls, data usage, service equipment costs) with the main supplier for financial year 2021. We found a variation in the average cost per mobile device, with one department paying $508 while another paying only $196. There is an opportunity for departments to better share their usage and expenditure data. This may result in departments identifying where they are paying more per device and opportunities to renegotiate deals with suppliers. Currently, there is limited monitoring and reporting on whether agencies are sharing their data and effectively collaborating.

Effective collaboration has occurred in some areas, leading to significant savings

On some occasions, departments have collaborated effectively. In the case of electricity, Queensland Government Procurement was able to demonstrate to the departments that if they worked together, whole-of-government savings could be achieved.

It assisted departments by analysing their electricity expenditure and usage data. This information was then used in negotiations with the supplier by allowing departments to commit to a minimum usage amount in the contract.

Queensland Government Procurement continues to monitor department usage and report on the whole‑of-government savings. This is a good example of where all of our 3 elements for enhancing government procurement have been used. Departments successfully collaborated; used the right data and analysis when negotiating with the supplier; and subsequently monitored and reported usage and savings.

Case study 1 (Figure 3A) explores this example in greater detail.  

To drive value for money in procurement decisions, departments need good quality data that is accurate, reliable, and timely. It allows departments to understand how much they are spending on goods and services, what they spend it on, and with whom they spend it. It also allows them to identify opportunities to collaborate and achieve savings across government – including by identifying areas where they can combine their goods and services requirements when negotiating with suppliers.

This chapter looks at what data Queensland Government Procurement (within the Department of Energy and Public Works), Queensland Treasury, and others collect on behalf of departments and government. It outlines the current limitations in using this data to achieve whole-of-government savings, and also provides a recommendation on how this can be fixed.

Our previous report and Queensland Government Procurement’s data strategy

Six years ago, in Strategic procurement (Report 1: 2016–17), we identified that departments were using different ways to categorise their procurement data, resulting in similar transactions being included in different categories across departments. This meant data was not easily combined at a whole‑of‑government level to enable procurement analysis.

We recommended that Queensland Government Procurement collaborates with government departments to develop a procurement data strategy to identify and assess:

• what procurement data government departments need to record
• how procurement data should be categorised, ideally using a universally recognised categorisation approach
• the cost‑benefit of options for improving existing systems to improve the quality and accessibility of procurement data from a central source.

Our report 2021 status of Auditor-General’s recommendations (Report 4: 2021–22) captured entities' self‑assessed progress in implementing the recommendations we made in our performance and assurance audit reports tabled between 2015–16 and 2017–18. Queensland Government Procurement reported it has fully implemented this recommendation and has developed a data strategy. We continue to find, however, that the data being collected is not consistently categorised and new systems and processes have not always resulted in information suitable for procurement analysis. This has resulted in limited improvements to Queensland Government Procurement’s data analysis and reporting since we raised this recommendation.

For the recommendation to be fully implemented, Queensland Government Procurement should be monitoring and reporting on the outcomes and benefits from implementing its data strategy. We comment further on Queensland Government Procurement’s data strategy in Chapter 5.

Queensland Government Procurement’s current data and its limitations

Queensland Government Procurement centrally collects all departments’ transactional expenditure data from their financial accounting systems and uses it as the basis for its procurement analysis. Expenditure data differs from procurement data in that it is based on historical information whereas procurement data is often forward looking. Some examples of procurement data are actual and forecasted usage, fees and charges, and supplier data.

We identified the following issues with using this data for procurement analysis and decision-making:

• As departments produce the data to meet their financial, budgeting and reporting obligations rather than for procurement analysis, it is not always suitable for this purpose.
• It includes a significant number of transactions that need to be removed, as they are not relevant to procurement decision-making (such as accounting-related transactions).
• Finance expenditure transactions do not always adequately explain what goods or services are being purchased; therefore, detailed procurement analysis cannot always be performed based on this data alone.
• The data does not link to supplier contracts or whole-of-government arrangements.
• The description fields within finance systems are not consistently used across departments to describe expenditure.
• The categorisation of expenditure by departments in their finance systems is subjective and not consistently applied at a detailed level.  

To make the department expenditure data more suitable for procurement analysis, Queensland Government Procurement and the category councils (which oversee strategic procurement for 6 areas of significant expenditure across government) combine it with other data sets.

For example, to better understand how departments were using Microsoft products, the Information and Communications Technology Category Council combined the expenditure data with additional data from departments to confirm how often the products were being used.

Similarly, the General Goods and Services Category Council collects data directly from suppliers as they can provide more valuable information such as what is being purchased and the rates being paid when compared with the department expenditure data.

How can the procurement data be improved?

Queensland Treasury is planning to replace its whole-of-government reporting system

Queensland Treasury is planning to replace its Tridata system, which it uses to collect and analyse departments’ financial data on a consistent basis. This offers an opportunity to improve data reliability and relevance, as any replacement system could include better procurement data inputs.

A universally recognised and consistent expenditure classification system is available

There is an opportunity to improve the quality of the existing data through the implementation of a consistent classification system such as the United Nations Standard Products and Services Code (UNSPSC).

This classification system standardises the description and classification of goods and services and can be applied across all departments, where the benefits outweigh the costs (at a whole‑of‑government level). Using this system, procurement officers in each department can assign expenditure classification codes to purchase orders in their existing finance systems.

Implementation of this classification system would help ensure departments’ expenditure is classified on a more consistent basis and would enable more usable data for better whole-of-government analysis, leading to better identification of savings.

Currently, most Queensland Government departments have the ability to implement the classification system at a detailed level. However, we only identified 2 departments that were classifying their purchases at a detailed level to enable effective analysis.

Classification at this more detailed level enables better quality analysis. It allows departments to conduct detailed analysis on specific products, allowing better targeting of potential savings. It also enables more detailed and strategic reporting, ultimately assisting in better procurement decisions.

Portable and attractive items

For example, departments generally classify purchases of portable and attractive items, such as mobile phones, computers and power tools, under one code in their finance systems – portable and attractive items. The value of this one code in 2021 was $144 million. Current analysis of this one code, however, provides very limited procurement insights, as the data is not consistently classified and it is hard to determine what products were purchased.

Should a standard classification system be implemented, the data would be much more suitable for procurement analysis, because it would show what type of item was purchased in a consistent and trusted way across departments. Better analysis could then be performed based on what was purchased, when it was purchased and how much each department paid for the same or similar item.

Consultants

Savings could also potentially be found in the procurement of consultant services if the corresponding expenditure were classified in a more consistent and detailed manner across departments. The current expenditure data does not easily show why a consultant was engaged or how much each engagement has cost. This limits cross-department collaboration, as departments are unable to identify where a consultant has already been engaged by another department for a similar purpose.

An example of how better data can identify savings – unused telecommunication devices

Better quality procurement data can lead to the identification of potential, and at times major, savings. Case study 2 (Figure 4A) explores one example.

Opportunity for greater data sharing and analysis

Currently, Queensland Government Procurement collects department expenditure data. In addition, Queensland Treasury is looking to establish a data set similar to the Queensland Government Procurement expenditure data set to perform expenditure analysis that will inform budget and savings decisions.

There is an opportunity for enhanced information and data sharing between Queensland Government Procurement and Queensland Treasury, to support strategic procurement decision-making by Queensland Government Procurement and budget monitoring by Queensland Treasury.

We have also identified instances of departments and category councils undertaking the same, or very similar, procurement analysis and processes. Data analysts are employed across the sector to work on this individual analysis.

Departments will always have individual analysis requirements. But there is an opportunity for them – and category councils – to work better together to reduce duplication in data collection, analysis, processes, and infrastructure.

In addition, Queensland Government Procurement should identify areas where additional data is needed to enhance its procurement analysis (such as data on suppliers, pricing, and department usage).

This chapter looks at the need to better monitor and report on how departments are achieving whole‑of‑government savings and initiatives, including whether departments are using existing whole‑of‑government arrangements. These arrangements have been established with pre-qualified, preferred suppliers and help to speed up the procurement process.

It also looks at whether Queensland Government Procurement is monitoring and reporting on its data strategy.

There is limited monitoring and reporting of how departments are achieving the government’s procurement initiatives

Departments are required to comply with whole-of-government procurement strategies, policies, and principles.

One principle within the Queensland Procurement Policy 2021 is a requirement to work together to achieve outcomes. However, we found no evidence of any regular monitoring or reporting on how departments are working together.

In Chapter 3 we raised a recommendation on this issue.

Monitoring and reporting of whole-of-government arrangements is needed

At present, 466 whole-of-government arrangements are in place that can be used by any department. Establishing these arrangements takes time and effort. Departments engaged with approximately 22,300 distinct suppliers under the supplies and services financial statement note in the 2020–21 financial year (excludes suppliers associated with hospital and health services and OneSchool).

Currently, Queensland Government Procurement does not monitor whether departments are using the whole-of-government arrangements. It also does not report on why some departments are engaging separately with the same suppliers. This creates duplication of procurement processes and potentially means departments are not obtaining the best value for money, as they are not working together to take advantage of the state’s significant purchasing power.

Queensland Government Procurement’s data strategy

Queensland Government Procurement has developed a data strategy that outlines the values and focus areas for procurement data from 2021–2024. It includes an objective that its ‘data and analytics products are trusted, well-governed, and proactively sought and shared across Queensland Government’. We found that the expenditure data set was not well trusted by departments, due to the issues we discussed in Chapter 4.

It also states that:

by 2024, Queensland Government Procurement and procurement categories will use accurate and comprehensive supplier and procurement data as the driver for responsive procurement policy, strategy and the improvement of procurement products and services.

We identified multiple versions of the data strategy. The original version, endorsed by the Queensland Government Procurement Committee in 2020, did not include clear reportable milestones and performance indicators. While a February 2022 unendorsed data strategy now includes milestone dates with lead and lag key performance indicators, these are high level and Queensland Government Procurement is not reporting against them.

We did not see evidence of collaboration with departments on critical data strategy objectives, such as the implementation of a more consistent data classification system. Departments will play a key role in the implementation of such system.