Compliance in 2023-24

Under the Financial Management Act, the Victorian Government Purchasing Board (VGPB) is responsible for monitoring compliance by departments and specified entities with its supply policies.

The VGPB uses several mechanisms to monitor compliance. This includes reviewing annual compliance reporting from departments and agencies and investigating complaints escalated by suppliers in relation to the procurement process. For departments and accredited agencies (see below), the VGPB provides an additional level of oversight through an accreditation and audit program, as well as tracking against performance measures which are reported in the VGPB annual report.

Due to the timing of the annual compliance reporting process, the VGPB annual report summarises compliance reporting outcomes one year in arrears. This report includes the
2023–24 compliance reporting from:

• 13 departments and accredited agencies
• 111 expansion agencies
• 33 portfolio agencies (existing non-accredited VGPB agencies)

To see a full list of VGPB expansion agencies and portfolio agencies, visit Goods and services mandated agencies on Buying for Victoria.

Departments and accredited agencies

Any reference to ‘departments and accredited agencies’ in this section refers to the below list of departments and agencies:

• Department of Education (DE)
• Department of Energy, Environment and Climate Action (DEECA)
• Department of Families, Fairness and Housing (DFFH)
• Department of Health (DH)
• Department of Jobs, Skills, Industry and Regions (DJSIR)
• Department of Justice and Community Safety (DJCS)
• Department of Premier and Cabinet (DPC)
• Department of Transport and Planning (DTP)
• Department of Treasury and Finance (DTF)
• Cenitex
• Victoria Police
• Victoria Infrastructure Delivery Authority (VIDA) (previously known as Major Transport Infrastructure Authority until April 2024)
• V/Line - obtained VGPB accreditation in October 2023

The Department of Government Services (DGS) was established on 1 January 2023 following a machinery of government change. DGS was exempt from the annual compliance reporting process in 2022–23 and will begin compliance reporting from the 2023–24 reporting year with the results published in the VGPB’s 2024–25 report.

Compliance results reported in 2022–23

The VGPB monitors compliance with its goods and services supply policies primarily through the 2018 Directions. The 2018 Directions include 18 mandatory policy requirements from the VGPB’s goods and services supply policies.

Should a department or agency not meet a VGPB policy requirement, it will report a non-compliance under the 2018 Directions:

• A compliance deficiency is an attribute, condition, action or omission that is not fully compliant with the VGPB requirements.
• A material compliance deficiency is a compliance deficiency that a reasonable person would consider as having a material impact on the agency or the state's reputation, financial position or financial management.

The financial year 2022–23 marked the first full year of compliance reporting across all VGPB agencies, following the concessional reporting arrangements established for 2021–22. Encouragingly, no material compliance deficiencies were reported in 2022–23 as shown in Table 2.

Consistent with the 2021–22 results, the results for 2022–23 show strong compliance in core procurement governance and sourcing processes. This reflects the solid foundation of existing procurement practices within agencies prior to the expansion program. As expected, agencies reported proportionately more compliance deficiencies in the areas introduced as part of the VGPB expansion program, reflecting that these activities are still being embedded in their internal processes. These areas include:

• emergency procurement (requirements introduced in December 2022)
• contract management and contract disclosure
• aggregated purchasing (with agencies required to transition to SPCs)
• procurement forward planning and capability strategies.

Table 2: Compliance deficiencies reported by VGPB agencies in 2021–22 and 2022–23

^{* In 2021–22, 158 agencies reported against the18 policy requirements, compared to 157 agencies in 2022–23.}

Connecting through individual check-ins with agency CPOs has been a key factor in gaining a deeper understanding of procurement across VGPB agencies and facilitating targeted support where needed. In 2023–24, this engagement program continued, with DGS connecting with more than 100 VGPB agencies to provide tailored support, address challenges and gather feedback.

The Procurement Officers’ Meetings continue to be well attended, providing an important mechanism for building agency procurement capability, sharing knowledge and connecting government buyers.

The VGPB, supported by DGS, will continue to provide ongoing support to agencies through a program of communications, engagement and capability building activities.

The VGPB accreditation and audit program

The VGPB accreditation and audit program applies to departments and a small number of large agencies, providing additional assurance on compliance.

The VGPB accreditation process assesses alignment of a department or agency’s procurement strategy and policies with the VGPB policy framework. Accreditation is maintained through participation in the VGPB audit program. VGPB audits assess procurement practice and compliance with the department’s policies in key risk and improvement areas.

Visit Buying for Victoria for more on the VGPB accreditation program including what is expected as part of the accreditation process.

Accreditation applications

Obtaining accreditation is a comprehensive process. Agencies must thoroughly review, revise and submit documentation to the VGPB to demonstrate that their internal procurement policies and processes align with VGPB policy requirements. Documentation must be assessed and supported by the agency’s internal auditor and audit and risk committee.

Two agencies voluntarily applied for VGPB accreditation in 2023. MTIA (now Victorian Infrastructure Delivery Authority) received its VGPB accreditation in August 2023 and V/line finalised its VGPB accreditation in October 2023. DGS, established in January 2023, is expected to apply for VGPB accreditation later in 2024.

Audits

The VGPB audit program requires departments and accredited agencies to complete two procurement audits every three years. The scope of these audits is tailored to each organisation’s specific risks and processes and is agreed with the VGPB before starting the audit. Departments and accredited agencies must report to the VGPB with their audit findings and actions for addressing any recommendations.

V/line and VIDA will participate in the VGPB audit program from 2024–25, with DGS set to join the program once it has received VGPB accreditation.

Audits in 2023–24

In 2023–24, the VGPB received six audit reports with a further five expected later in 2024. All departments and accredited agencies completed the requirements of the 2021–24 audit cycle, except DPC. The VGPB agreed to defer DPC’s second audit following the 2023 machinery of government changes which resulted in corporate procurement services for DPC, DTF and DGS being provided centrally by DGS. The VGPB will review the audit requirements for DPC, DTF and DGS following DGS’ accreditation.

During the year, the Victorian Auditor-General’s Office (VAGO) completed an audit on Assuring the Integrity of the Victorian Government’s Procurement Activities focusing on fraud and corruption when procuring goods and services. This audit covered all departments, with a deeper analysis of three departments including DJCS, DE and DH.

Most audit scopes received in 2023–24 focused on policy and compliance, with each audit reviewing at least two of the five VGPB supply policies. Key themes included contract management and contract disclosure, emphasising the continued importance of this as a focus area. Several audits concentrated on processes and controls around governance and reporting.
One audit scope focused entirely on cyber security and incident management considerations in the procurement process, indicating the emerging risks associated with procurement.

A further two audits were completed in 2023–24 to support the VGPB accreditation applications from VIDA and V/Line. These audits reviewed each agency’s policies and procedures with all VGPB policy requirements before submitting their formal applications to the VGPB. The VIDA audit identified improvement opportunities which were addressed before VIDA finalised its accreditation application. The V/Line audit noted full compliance with all VGPB policy requirements.

Overall, the audit findings reflected a strong awareness of VGPB policy requirements. Common areas for improvement included better guidance to support applying the policies and improving documentation and retention of records.
Management actions to address findings and identified risks are unique to each agency. However, common remediations included improving guidelines, internal documentation, and developing training materials and tools to support and uplift internal procurement capability.

Complaints

The VGPB policy framework requires departments and agencies to have a complaints management system in place that sets out the process and procedures for investigating and resolving complaints. Departments and agencies investigate and resolve complaints in line with their complaints process. If the complainant is dissatisfied with the outcome, they may refer their complaint to the VGPB for review.

One complaint was referred to the VGPB for review in 2023–24. The complaint related to a procurement carried out by DEECA. The VGPB investigation found no evidence of non-compliance with VGPB policies.
Visit Buying for Victoria for information on complaints management.

Performance

Departments and accredited agencies track their procurement performance each year against a set of agreed performance measures and report their results to the VGPB. This is reported in addition to the 2018 Directions reporting, introduced following the expansion program in 2021.

During the year, the VGPB reviewed the five performance measures established in 2015 and agreed to discontinue two measures that are no longer fit-for-purpose, given their limited value in reflecting good procurement. The discontinued measures are:

• Managed spend: the proportion of procurement spend overseen by the central CPO team. This information is still periodically captured from all departments and agencies to provide visibility of the role of the procurement function
• Value created: the total savings as a proportion of total procurement spend. This measure indicated financial savings as a proportion of spend, which did not capture the full value being delivered by the procurement activity. It could be inconsistently applied across procurements or industries and did not provide a meaningful comparison as a performance measure.

The three performance measures for the 2023–24 reporting period are:

1. Procurement capability
2. Supplier satisfaction
3. Planned procurement activity as a percentage of actual procurement activity

Note that departments and accredited agencies have procurement models and profiles that vary in complexity and size. These differences should be considered when comparing results.

Performance measure 1: Procurement capability

Organisations assess their capability at the end of each financial year using the VGPB capability assessment tool.

Results in 2023–24 show that procurement capability has remained steady and comparable to previous years (Table 3). Organisations continue to focus on enhancing their capability, incorporating various training offerings into their capability development plans to keep practitioner skills current.

Overall, shifts in capability are linked to the introduction of more automated/guided systems and processes, and operational and staff changes within procurement functions.
The Procurement Knowledge Hub, launched in March 2024, will support procurement professionals and general government buyers across departments and agencies to build and broaden procurement capability.

Table 3: Procurement capability

^{* Scores for DGS, DTF and DPC are consolidated as DGS provides corporate procurement support for all three departments.
Note: 2023–24 is the first year of performance reporting for DGS and V/Line.}

Performance measure 2: Supplier satisfaction

The supplier satisfaction assessment is based on a survey sent to suppliers after the procurement process. The survey is conducted with successful and unsuccessful suppliers to measure their satisfaction with the procurement process and the service provided by the organisation’s procurement function and seeks feedback to inform improvements.

While response rates were relatively low in 2023–24, eight organisations reported improved satisfaction from unsuccessful suppliers compared to the previous year (Table 4).
Increased satisfaction among both successful and unsuccessful suppliers was driven by ease of processes, professionalism and responsiveness of buyers. Key areas for improvement centred around communication with a focus on debriefs.

Supplier feedback provides valuable insights, highlighting each organisation’s strengths and areas for improvement, helping them enhance their procurement practices under the VGPB’s procurement framework. Departments and accredited agencies will continue to promote the survey in the next year to encourage greater response rates.

^{* Scores for DGS, DTF and DPC are the combined aggregate of the three departments as DGS provides corporate procurement support for all three.
Note: V/Line will begin supplier satisfaction reporting in 2024–25.}

Performance measure 3: Planned procurement activity as a percentage of actual procurement activity

The VGPB policies emphasise forward planning and transparency. Under the VGPB’s governance policy, organisations must develop and publish a forward procurement plan on their website. This measure assesses the level of forward planning by measuring the number of planned procurements documented in an internal forward activity plan against the number of market approaches undertaken during the financial year (Table 5). Reliable forward procurement planning needs support from across the organisation to provide visibility of planned and budgeted activities within business units.
Organisations that reported an improvement in planned procurement activity compared to the previous year attributed this to enhanced forward planning processes. These improvements were driven by strong collaboration with business units and an emphasis on procurement planning as part of a proactive, long-term strategy to support future business needs.

Table 5: Planned procurement activity as a percentage of actual procurement activity

^{Note: DEECA, DGS, DJSIR, DTP and DTF underwent machinery of government changes in 2022–23 that affected their ability to measure and report meaningful results on some performance measures for that year. The table denotes ‘n/a’ where results were not reported for these departments.
V/Line began reporting on performance measures 1 and 3 in 2023–24.}