Develop Procurement Plan Guideline

Western Australian Procurement Rule C4.1 mentions three different methods for procuring:

1. Direct Sourcing: where only one supplier is asked to provide an offer.  This supplier is directly approached to do so;
2. Limited Sourcing: where a number of identified suppliers are invited to submit an offer;
3. Open Advertisement: where the invitation to submit an offer (Request) is made publicly, through advertisement on Tenders WA.

State agencies may elect to use a procurement method corresponding to a higher threshold. When doing so, an exemption is not required. For example, a State agency can elect to use open tendering Advertisement where only Limited Sourcing is required by Rule C4.1 e.g. for tenders within the $50,000 to $250,000 threshold.

Request documents and other templates to help you through the procurement process may be found here.

Exceptions to Procurement Methods

An exception under Rule C4.2 (including an exemption allowable by Procurement Rule C5) does not affect the requirement to involve the Department of Finance to facilitate the procurement, if your agency is required to do so.

Please note these are exceptions (as distinct from exemptions) and do not require written advice from Finance in order to proceed with the exception, however, this does not affect the requirement in Rule C1 to involve Finance in the procurement process.

Exemption from Appropriate Procurement Method

Rule C5.2A and B outline situations in which State agencies can get an exemption from complying with Rule C4.1

Exemptions from the appropriate procurement method may occur when buyers wish to:
•    Invite a limited number of suppliers, when Rule C4.1 states that a buyer must approach the open market; or, more commonly
•    Directly engage a single supplier, when Rule C4.1 states that the buyer must seek quotes from a number of suppliers; or approach the open market. 

By its nature, this kind of purchasing is less competitive than open tendering as it does not provide the opportunity for all potential suppliers to compete for the provision of goods and services.

There are, however, several valid reasons for which the market may be limited. For procurement not subject to the application of free trade agreements, there is no prescribed list of these situations, however, the list of situations included in the covered procurement replacement Rule C5.2.B provides a useful reference.

For covered procurements, the situations in which buyers may limit competition by directly engaging a supplier are included in Rule C5.2.B.
In all cases, buyers need to be mindful that it is generally more difficult to adhere to the procurement principles such as value for money and encouraging competition directly engaging or purposefully limiting competition, but under the Rules the onus is on them to still do so.

For this reason, Rule C5.1 requires agencies to engage Finance for advice prior to seeking an exemption from the appropriate procurement method (where required); and to ensure that appropriate approvals are given and records kept to demonstrate value for money. Finance’s request for exemption template may be a useful resource for this purpose.

Where State agencies are procuring using an exemption, they still have to engage Department of Finance in the procurement process, in accordance with Rule C.1.

Western Australian Procurement Rule C.2.3 states that, in most instances, contract terms cannot exceed five years.

It is up to an Authorised Officer to determine whether there are sound technical, commercial or operational reasons for approving a contract term exceeding five years, but this could include instances of integrated procurement solutions, public private partnerships, or design-build-finance-maintain solutions.

State agencies should note that Rule C2.3 applies to the maximum contract term when a contract is being established. A decision to extend a contract that is near expiry is a variation to that contract and must apply the rules relevant to variations (refer to section Guideline – Varying a Contract).

The contract term is an important consideration in procurement planning. Agencies must consider not only the total contract term, but how they might structure this term – whether they will use extension options and if so, when.

Extension options are options written into a contract that allow agencies to extend the validity of the contract. For example, a contract may have an initial term of three years; with one option to extend the contract for two years. In this example, the agency may choose to let the contract expire at three years; or elect to extend the contract for the additional term. The agency has the discretion to decide to extend; however, where the agency decides to extend, the supplier must do so.

When determining the contract term agencies should consider:

• the level of investment required on the suppliers’ part. For example, if the good or service requires significant upfront investment by the supplier, better value for money can be achieved through a longer initial term as the supplier then has opportunity to recoup its initial outlay over a longer period;
• the life cycle of the product that is being procured may impact the appropriate contract term that is set. This may require further consideration as to how industry structure the supply, commissioning and maintenance of particular products;
• structuring the contract term around the delivery of the outcome rather than to a specific expiry date to allow for effective management of possible delays;
• potential changing market conditions including price volatility, likelihood of new entrants, technology and innovation. In an innovative market, better value for money can often be achieved through retendering more often;
• future Departmental needs and budgetary constraints. Aligning your initial term with budget availability means that the contract need not be extended if further funds are not forthcoming. Agencies must be aware, though, that in general, a longer initial term represents better value for money; and
• reviewing previous contract terms for similar procurements in order to determine effectiveness and consideration of lessons learnt.

State agencies may include different contract term structures in their request and ask suppliers to price each of them. This would allow you to determine whether there might be any savings offered for a longer term.