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Market Analysis and Review policy

The market analysis and review policy covers market analysis needs, aggregated purchasing and disposal of assets.

The market analysis and review policy covers:

  • market analysis needs
  • aggregated purchasing
  • disposal of assets

What is market analysis and review?

Market analysis and review is the systematic review of the:

  • characteristics
  • capacity
  • capability

of the supply market to understand how well it meets the needs of the buying organisation.

It helps you to understand market dynamics, so you can work out the best way to approach the market.

Market analysis needs to happen before you approach the market. It should include local businesses and small to medium enterprises.

Aggregated purchasing

Aggregated purchasing means demand for the same or similar categories gets grouped together. This means leverages benefits from greater economies of scale when negotiating with potential suppliers.

Aggregated purchasing can offer better value for money. It also:

  • reduces duplication of process
  • drives continual improvement over the life of the contract

There are rules around setting up and managing:

  • supplier registers
  • common purchasing arrangements

These rules apply either across many organisations (state purchase contracts) or in one organisation (sole entity purchase contract).

To receive procurement updates, email vgpb@dtf.vic.gov.au

Source: CIPS glossary by Paul Rogers at CIPS Glossary

Policy 3: Market analysis and review

Context

This policy outlines the requirements for market analysis and review. It is mandatory for all Victorian Government departments and any public bodies (hereafter referred to as ‘organisations’) that are subject to the supply policies of the Victorian Government Purchasing Board (VGPB).

The Market analysis and review policy covers 3 components.

Market analysis and review

Market analysis and review provides an understanding of market dynamics to determine the optimal market approach. It can also determine the viability of a procurement requirement.

Figure 1 highlights where market analysis and review takes place in the procurement process.

Figure 1: Market analysis step in the procurement process

Aggregated purchasing

Aggregated purchasing is an important mechanism used to drive efficient government procurement.

Disposal of assets

As part of market analysis and review, an organisation will develop a whole-of-life appraisal and consider the best process for disposal of assets.

1. Market analysis

Market analysis and review follows the assessment of complexity of the procurement activity either at the category level or at the individual procurement level where the procurement activity falls outside of a category or is critical or high risk.

1.1 Mandatory requirements

An organisation must:

  • consider the outcome of the complexity assessment to determine if the assessment at the category level establishes the basis for being able to approach the market
  • undertake further complexity analysis at the level of the individual procurement activity where the category assessment provides insufficient detail to determine the optimal approach to market
  • conduct market analysis to identify the capability and capacity of the market to supply and identify opportunities for market based solutions
  • reassess the procurement requirement with regard to the market analysis
  • prepare a statement of grounds, or business case, which supports the decision to proceed with the procurement and identify the optimal market engagement strategy

Note: A sourcing process is not required when purchasing from a sole entity purchase contract or a state purchase contract where there is or a sole supplier arrangement in place.

2. Aggregated purchasing

Aggregated purchasing arrangements take the form of state purchase contracts (SPCs) or sole entity purchase contracts (SEPC). SPCs incorporate a number of organisations, whereas SEPCs apply to a single organisation. An SPC or SEPC can be established and managed in a number of ways—sole or multiple suppliers, open or closed panels, register or more formal contractual arrangement for example.

2.1 Mandatory requirements

2.1.1 Establishment of and reporting for SPCs

An SPC can only be established after approval by the Minister.

Where an organisation seeks to establish an SPC:

  • it must consult with the VGPB regarding the category of goods or services proposed for aggregation and inform the VGPB of any analysis of spend or assessment of complexity that indicates grounds for aggregating demand
  • it must have a business case endorsed by the VGPB prior to being approved by that organisation’s relevant Minister
  • it must demonstrate to the VGPB that it has the capability to establish and manage the proposed SPC as the lead agency

The process involved in establishing an SPC may be nominated for strategic oversight by the VGPB.

All SPCs may be established as a mandated or non-mandated arrangement. Where an SPC is mandated, all entities within the scope of VGPB supply policy must utilise the arrangement unless otherwise expressly excluded in the endorsed business case.

Lead agencies are to report to the VGPB on the ongoing use of SPC(s), spend and savings generated.

2.1.2 Process for extending or replacing an SPC

A lead agency must consult with the VGPB and obtain approval from its relevant Minister before extending (not including the exercising of a contractual option) or replacing an SPC. Such Ministerial approval must be notified to the VGPB.

The process involved in extending or replacing an SPC may be nominated for strategic oversight by the VGPB.

The lead agency responsible for the SPC must:

  • take into account any comments made by the VGPB and relevant Minister prior to engaging with the market
  • inform the VGPB and relevant Minister of the outcome of the market engagement process
  • authorise an SPC contract/head agreement on behalf of the Victorian Government

2.1.3 Obligations for parties using an SPC

Parties using a mandated or non-mandated SPC must comply with the rules of use established by the lead agency for purchasing under the contract.

Where an organisation is a participating party to a mandated SPC, but has an existing contractual arrangement covered by the scope of the SPC, it must migrate to the SPC upon expiration of the initial contract period.

An organisation may commit to an SPC after its establishment and be included as a participating party. The organisation is then bound to use the contract and comply with the rules of use.

SPCs are established primarily for use by State government bodies. Certain non-government entities may utilise them.

2.1.4 Contract management framework for an SPC

The lead agency must adopt a contract management framework for an SPC. The category manager for the SPC is to nominate those participating parties who must establish a contract manager role to manage the organisation’s participation in the SPC.

The lead agency for the SPC must produce an annual report on the management and use of the SPC arrangement which can be accessed by each participating party.

Participating parties must report information to the lead agency as requested.

2.1.5 Establishing an SEPC

When an assessment of the spend in a particular category of goods and services, or a complexity assessment identifies the potential for aggregating requirements in the organisation, you must consider establishing an SEPC.

An SEPC can only be established after approval of a business case by the accountable officer or delegate.

An organisation must adopt a contract management framework for the SEPC.

2.1.6 Rules of use for SPCs and SEPCs

All SPCs and SEPCs must detail the rules of use for buyers intending to purchase from the contract.

2.1.7 Exemptions

Exemption of a department or public body prior to establishing an SPC

An organisation can only be exempted from the SPC if it can demonstrate that it is unable to obtain value for money under the proposed SPC. The exemption sought can encompass the whole organisation, or a business unit within the organisation. The case for exemption is to be included in the business case for establishing the SPC to be approved by the Minister.

Exemption of a participating party from a mandated SPC

A participating party may seek an exemption from using a mandated SPC where it can demonstrate that special circumstances have arisen in relation to sourcing from the SPC. Factors that may justify granting an exemption could relate but not be limited to:

  • a supplier on an SPC arrangement is no longer able to service an area
  • regional suppliers can now offer the same or better value for money
  • machinery of government changes alter the relevance of the supply arrangement for the participating party

The exemption sought may be for:

  • the whole or part of the organisation
  • the whole or part of the SPC supply agreement
  • a fixed period of the supply arrangement

A case for granting the exemption is subject to the approval of the accountable officer of the lead agency.

Exemption for a one-off purchase

A participating party may seek exemption from using an SPC for a one-off purchase where its procurement needs cannot be met by the SPC. A case for granting the exemption is subject to the approval of the category manager for the SPC.

3. Disposal of assets

3.1 What is disposal of assets?

Disposal of assets should be considered when the asset is identified as being:

  • obsolete due to changed procedures, functions or usage patterns
  • no longer complying with occupational health and safety standards
  • reaching its optimum selling time to maximise returns
  • beyond repair
  • surplus to requirements

Disposal of assets can present the organisation with opportunities to optimise the use of an asset, including:

  • extending the life of an asset by transferring it to another business unit or organisation
  • recovering material for recycling prior to sending the asset to landfill
  • transferring assets to not-for-profit organisations

3.2 Mandatory requirements

The disposal of assets is a key consideration in the forward planning of any procurement activity. Assets of (or belonging to, or in the care, custody, or control of) an organisation are to be disposed of in a way that takes into account probity, security, sustainability and transparency, as well as environmental and social factors. An organisation must develop and apply an asset disposal process that details:

  • parties/business unit responsible for managing the process
  • disposal options appropriate to the nature of the asset and broader government objectives
  • management of issues of risk, liability, safety and security
  • the process for keeping the organisation’s assets register up-to-date
  • issues of risk, liability, safety and security associated with the use of the asset by other parties when transferring an asset to another location or entity

If the evaluation of disposal options does not warrant modification to extend the life of the asset or transferring it to another party or recycling, the asset must ordinarily be disposed of by way of public auction or public tender. An alternative approach must be sought where cost of disposal process exceeds residual value of the asset.

There are 4 other Victorian Government Purchasing Board (VGPB) policies, this is policy 3 of 5.

Guides: 

Reviewed 04 July 2019

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