Buying Journey 9 – Preferred Service Provider

Value for money is the central procurement principle from which all other procurement policies and decisions flow. It is reflected in Western Australian Procurement Rule A1 – Achieve Value for Money. All purchases, regardless of value, must represent value for money. 

Value for money includes a consideration of whether there is a bona fide need to buy goods, services or works. Could you borrow the good from another State agency? Does your agency or the public sector more broadly have the expertise to deliver the service themselves? 

Achieving value for money in procurement is much more than choosing the lowest price. 

Achieving value for money requires a consideration of: 

1. Government’s social, economic and environmental priorities 
2. cost 
3. other non-cost factors 

For further information on the Government’s social, economic and environmental priorities see the Western Australian Social Procurement Framework. 

For further information on cost and non-cost factors see the Achieve Value for Money Guideline. 

Risk is an important non-cost factor, which must be considered. Refer to Western Australian Procurement Rule C2.6 – Manage Risk. 

For a discussion about risk see the Manage Risk Guideline. The Department of Finance’s Risk Workbook might also be a useful resource to help you define your risks. 

Your agency is also likely to have its own risk management framework. 

Ensuring all procurement is conducted with integrity and accountability is a key procurement rule objective and is reflected in Western Australian Procurement Rule B - Act Ethically – With Integrity and Accountability. 

State agency employees must apply the highest levels of ethical behaviour in all areas of their work. This is particularly important in procurement, as it involves spending public money and is subject to high levels of public scrutiny. 

Ethical behaviour includes being transparent and accountable by: 

• declaring any conflicts of interest 
• treating all suppliers equally 
• keeping adequate records 

Also ensure you follow your agency’s delegation and authorisation register and gain the appropriate approvals prior to engaging a supplier. The key approvals in the planning phase are the approval to spend – often called budget approval – and the approval to go to market. 

For further information on acting ethically, including managing conflicts of interest and record keeping, please see the Act Ethically - with Integrity and Accountability Guideline. You may also find the Department of Finance’s Declaration of Interest and Confidentiality form useful. 

Acting ethically also includes identifying and preventing procurement fraud and corruption. You can find information on identifying and preventing procurement fraud and corruption at Procurement fraud. 

Under the Preferred Service Provider provisions of the DCSP Policy and Western Australian Procurement Rule C4.2 (1) (c) – Exceptions to Procurement Methods, you may, at your discretion and with the appropriate approvals, exercise the option of retaining an existing service provider through a restricted process. Even though the exceptions procurement rule, as identified above, allows for the minimum competitive requirements of Procurement Rule C4.1 – Use the Appropriate Procurement Method to not apply, all other procurement rules and processes that correspond with the value of your procurement must still be followed. 

Step 1: Review the service agreement and determine Preferred Service Provider status 

To determine whether the existing services are still required and the existing service provider is suitable to be granted Preferred Service Provider (PSP) status, you must conduct a service review. 

To ensure appropriate probity and accountability you must ensure the review is transparent and the service provider is involved in the service review. 

There is a community services Preferred Service Provider Review and Assessment Report template that can be used to document the service review and status recommendation. 

Complete your service review in collaboration with the service provider. Based on the service review outcome, a recommendation is to be made as to whether the services are still required and whether the service provider will be granted PSP status. The completed service review report and recommendation must be approved by your authorised officer. 

Where the services are still required and PSP status has been granted to your service provider, the PSP provisions allow you to formalise your next service agreement by: 

• Entering into a new service agreement by issuing a community services Request for Preferred Service Provider for a formal response or 
• Varying the existing service agreement to extend the service agreement term. 

If a PSP status is not granted and, depending on what you intend to do with the service agreement (e.g. it will be retendered through an open advertisement or it will cease and not be renewed), the service provider must be given at least three months’ notice on what is going to happen with the service agreement. 

Step 2: Develop the next service agreement requirements 

This step is applicable whether you are entering into a new service agreement or varying your existing service agreement. 

The PSP provisions in the DCSP Policy outline that to ensure your next service agreement will support sustainable service delivery and ongoing service provider viability, you should review and update the existing service agreement requirements in collaboration with your Preferred Service Provider. 

As part of the service review undertaken at Step 1, you and the Preferred Service Provider should have identified and documented proposed updates and other changes and issues that should be addressed for the next service agreement. This may include considering updates or changes to the service specifications, quality standards, service agreement requirements and/or sustainability of service delivery. Refer to section 2 of the community services Preferred Service Provider Review and Assessment Report template. 

The consultation process is to be documented and is to include details of meetings held, correspondence exchanged and the agreed updates and changes for the next service agreement. 

Also, when considering and negotiating the updates and changes, you must ensure they will represent value for money. 

Varying the existing service agreement to extend the term under the DCSP Policy PSP provisions must be conducted in accordance with Western Australian Procurement Rule E2 - Apply Rigor to Contract Variations. This means the variation must be approved by an authorised officer, submitted to the Community Services Procurement Review Committee (CSPRC) where the value of the variation is $5 million and over, and must be recorded. 

Varying the existing service agreement to extend the term must be completed before the existing service agreement term expires. 

Step 1: Finalise and agree on the variation details 

As per your consultation with the Preferred Service Provider, document, finalise and agree on all the changes and updates including the extension term (variation details) that will be varied in your service agreement. The agreement with the Preferred Service Provider must include, as applicable, confirmation the variation details are sustainable and represent value for money. 

The variation details must be clearly articulated. 

Step 2: Submit the variation for approval and, if applicable, CSPRC review 

Complete the community services Preferred Service Provider Variation Approval template with the variation details (variation) agreed with the Preferred Service Provider ready for approval by your authorised officer. 

If the value of the variation is $5 million or more, the completed variation approval template is to be submitted to the CSPRC for review (endorsement) before it is submitted to your authorised officer for approval. 

Submit your completed and, if required, reviewed (endorsed) variation approval document to your authorised officer for approval. 

Step 3: Issue a variation letter to the Preferred Service Provider 

Once the variation is approved, a Preferred Service Provider Variation letter is to be issued to the Preferred Service Provider detailing all the agreed variation changes. 

Step 4: Record the variation details 

As required under the Western Australian Procurement Rule E2 - Apply Rigor to Contract Variations, if the existing service agreement has a service agreement management plan, the plan is to be updated with the agreed variation changes. You must also ensure your agency’s contract register is updated with the variation details in accordance with Western Australian Procurement Rule F5 – Establish and Maintain a Contract Register. 

Further, Western Australian Procurement Rule E3.1 - Publish Updated Contract Management Information on Tenders WA requires variations and actual service agreement (contract) expenditure is to be published on Tenders WA on an annual basis. Western Australian Procurement Rule E3.2 - Exemption from Publishing Expenditure Update does allow for an exemption from this requirement. 

A new service agreement is to be entered into by conducting a restricted procurement process as allowed under the PSP provisions of the DCSP Policy and Western Australian Procurement Rule C4.2 (1) (c) – Exceptions to Procurement Methods. Even though the exceptions procurement rule allows for the minimum competitive requirements to not apply, all other procurement rules and processes that correspond with the value of your procurement must still be followed. 

Step 1: Finalise and agree on the service agreement service and management requirements 

As per your consultation with the Preferred Service Provider, document, finalise and agree on the new service specifications, quality standards, service agreement requirements and sustainability of service delivery requirements for insertion into the community services Request for Preferred Service Provider template. 

Step 2 – Secure the appropriate approvals 

Before you continue, ensure you have the budget and approval to proceed. Your agency must have financial and procurement delegations that outline who has the authority to act on behalf of the agency in a procurement process; and who has the authority to expend public funds. It is good practice to ensure that the people exercising these functions for any one procurement process are different. For further information refer to the budget and approval section of the Develop Business Case Guideline. 

At this point, anyone who will be involved in the procurement process, including decision makers, should complete and sign a Declaration of Interest and Confidentiality form. The obligation to declare conflicts of interest should be managed throughout the procurement process. Refer to the Act Ethically - with Integrity and Accountability Guideline for more information. 

Step 3: Develop a Procurement Plan and submit for review (Only for procurements with a total estimated valued of $5 million and above) 

Western Australian Procurement Rule C3 - Develop a Procurement Plan requires you to develop a procurement plan for purchases with a total estimated value of $5 million and above and for the plan to undergo appropriate assurance and review. 

To develop a procurement plan use the community services procurement plan template. 

You are required to submit your procurement plan to the Community Services Procurement Review Committee (CSPRC) for review (endorsement). 

Western Australian Procurement Rule C3 also contains an exemption from the requirement to submit your plan to the CSPRC. You can use the Request for Exemption from Submission to Relevant Review Committee template to request an exemption. 

Step 4: Develop your Request and gain approval to release 

Develop your Request using the community services Request for Preferred Service Provider template. Insert into the template all the agreed service specifications, quality standards, service agreement requirements and sustainability of service delivery requirements. Also, when developing the Request, you will need to identify which of the evaluation criteria the Preferred Service Provider does not necessarily have to respond to. 

Prior to sending the Request to your Preferred Service Provider, consult your agency’s delegation and authorisation register and seek the approval of the appropriate authorised officer to release your Request. 

Step 5: Send the Request to your Preferred Service Provider 

Once you have drafted your Request document, you need to share the document with your Preferred Service Provider and invite them to respond with an offer. 

It is recommended that you use Tenders WA to issue the Request, however you are not obliged to do so. 

You should allow sufficient time for your Preferred Service Provider to respond to your Request. Refer to the Western Australian Procurement Rule's sufficient time definition. A minimum of 14 days is a good guide but consider providing a longer period, particularly around holiday periods or if the Request is complex. 

Step 6: Evaluate the offer received 

At the evaluation and award steps, ensure anyone who is involved, including decision makers, have completed and signed a community services Declaration of Interest and Confidentiality form or if they have already completed a form earlier in the procurement process they reaffirm, in writing, their declaration to ensure no conflicts (whether actual, potential or perceived) have arisen as a result of the submission of the offer. 

In order to evaluate the offer you have received you will need to establish an evaluation panel of three or more appropriately skilled and knowledgeable people. The evaluation panel members must evaluate the offer in accordance with the selection process and criteria included in the Request. The Evaluation of Offers Guideline provides more information on evaluation panels. See also Western Australian Procurement Rule D5 – Evaluation of Offers. 

Use the community services evaluation handbook template to assist you with the evaluation. The evaluation handbook provides a format and methodology for rating the offer according to the qualitative criteria. The evaluation handbook should have been prepared and the evaluation methodology and scoring agreed to by the evaluation panel before the issue of the Request. 

Western Australian Procurement Rule D7 - Prepare Evaluation Reports also requires you to complete an evaluation report. Use the community services evaluation report for Preferred Service Provider template. Your evaluation report must demonstrate the Preferred Service Provider’s response represents value for money and is sustainable. The Evaluation of Offers Guideline provides more information on preparing evaluation reports. 

Step 7 – Submit Evaluation Report for review (Only for procurements valued at $5 million and above) 

Also required under Western Australian Procurement Rule D7 - Prepare Evaluation Reports where the procurement value is $5 million and above, the evaluation report is to undergo appropriate assurance and review. 

Submit your evaluation report to the Community Services Procurement Review Committee (CSPRC) for review (endorsement). 

Western Australian Procurement Rule D7 also contains an exemption from the requirement to submit your report to the CSPRC. You can use the Request for Exemption from Submission to Relevant Review Committee template to request an exemption. 

Step 8: Award the service agreement 

The evaluation panel makes a recommendation to the accountable authority, who then awards a service agreement by sending an award of contract letter. Use the community services award of contract for request process letter to award your service agreement. 

You must also publish the service agreement (contract) award details on Tenders WA, unless an authorised exemption allows otherwise. Such an exemption must be recorded on your agency’s exemption register. For information on the details required to be published and the exemption requirement, refer to Western Australian Procurement Rules D8.1 – Publish Contract Award Details on Tenders WA and D8.2 - Exemption from Release of Award Details. 

Whether you have varied your existing service agreement or formed a new service agreement, you must ensure there is effective ongoing management of the service agreement to make sure the Preferred Service Provider provides the agreed service agreement requirements. It is important that adequate resources are devoted to contract management. 

There are several contract management guidelines available to assist you in managing your service agreement. There are also community services contract management templates available to assist you in undertaking the most common contract management tasks including developing a service agreement management plan or processing variations. Information on contract management training is available at Training for the community services sector. 

Where your new service agreement is valued at $5 million and above, a service agreement management plan must be developed. Refer to Western Australian Procurement Rule E1 - Develop a Contract or Project Management Plan for more information. The Rule also contains an exemption to this requirement. Use the community services service agreement management plan template to develop your plan. 

Again, whether you have varied your existing service agreement or formed a new service agreement, variations required during the term of the service agreement must be conducted in accordance with Western Australian Procurement Rule E2 - Apply Rigor to Contract Variations. This means that any variation (even where a variation does not affect the price; or reduces the price) must be approved by an authorised officer and is to be recorded in the service agreement management plan (if applicable) or another means for recording variations. You must also ensure the variation details are documented in your agency’s contract register in accordance with Western Australian Procurement Rule F5 – Establish and Maintain a Contract Register. 

Also, Western Australian Procurement Rule E3.1 - Publish Updated Contract Management Information on Tenders WA requires variations and actual service agreement (contract) expenditure to be published on Tenders WA. Western Australian Procurement Rule E3.2 - Exemption from Publishing Expenditure Update does allow for an exemption from this requirement. 

Finally, service agreements should be reviewed in readiness for a new tendering process or transition to a new service provider. The Contract Review and Transition Guideline provides more information on this process.