We have consulted with Cenitex, DEDJTR, DET, DELWP, DHHS, DJR, DPC, DTF and VGPB, and we considered their views when reaching our audit conclusions. As required by section 16(3) of the Audit Act 1994, we gave a draft copy of this report, or relevant extracts, to those agencies and asked for their submissions and comments.

Responsibility for the accuracy, fairness and balance of those comments rests solely with the agency head.

Responses were received as follows:

The Standing Directions of the Minister for Finance under the FMA require effective controls over procurement so that specified public sector agencies comply with government supply policies. All departments and entities bound by VGPB policies must purchase from mandatory SPCs unless the lead agency has granted a written exemption.

Tracking and reporting SPC benefits is a key part of measuring the performance of an SPC. Lead agencies should be able to show whether SPCs are delivering the expected benefits.

This part examines whether effective arrangements are in place to monitor and evaluate the achievement of expected savings and benefits from SPCs.

4.1 Conclusion

Lead agencies report that SPCs deliver significant financial benefits. However, without individual targets for each SPC to measure these reported benefits against, it is difficult to determine if they represent value for money.

VGPB is responsible for monitoring the compliance of departments and specified entities with VGPB supply policies.

Under VGPB's oversight, lead agencies are responsible for the day-to-day management of SPCs. Each SPC is different, however the fundamental principles for managing contract performance are the same.

Effective SPC management ensures:

Effectively managing the Victorian Government's significant expenditure on goods and services is an opportunity to deliver or improve value for money for the community.

Spend across the VPS can be split into different expense and procurement categories. Good category planning relies on sound knowledge of the market, good quality procurement data and robust information systems to provide a comprehensive picture of spend.

VPS is a major purchaser of goods and services. Spending on goods and services is typically the largest item of agency expenditure after employee costs. As Figure 1A shows, the value of VPS expenditure on goods and services reported in the 2016–17 Annual Financial Report of the State of Victoria was $18.6 billion for the year.

Figure 1A
Overview of Victorian Government operating expenditure, 2016–17

The Victorian public sector (VPS) buys a lot of goods and services—$18.6 billion worth in 2016–17. One way that this purchasing power is harnessed is through State Purchase Contracts (SPC). SPCs aggregate demand for commonly used goods and services such as utilities, office consumables, information and communication technology (ICT), staffing and travel services.

Ordered to be published

VICTORIAN GOVERNMENT PRINTER September 2018

PP No 441, Session 2014–18