Local government spends more than $2.7 billion annually on goods, services and works. The Local Government Act 1989 (the Act) requires councils to seek best value for their communities and publicly tender contracts worth $150 000 or more for goods and services, and $200 000 or more for capital works.
The report found that while Council procurement policies are generally adequate, there is significant scope at the councils examined to achieve better value for money through competitive procurement options, particularly where tender thresholds are exceeded as a result of multiple purchases with the same supplier. A lack of clarity on statutory obligations was evident in this regard and there were examples at all councils audited, of recurring services resulting in cumulative payments to suppliers that, over time, had exceeded public tender thresholds, and where there was no contract or evidence of a competitive process.
There was insufficient assurance, therefore, that councils had optimised value for money through competition, or that they had complied with their statutory obligations to go to tender.
Further guidance by Local Government Victoria to Councils on the benefits of strategic procurement and more specifically, in the treatment of multiple purchases with the same supplier, would enhance good procurement practice and increase the potential for Councils to deliver better value for money.
All councils examined had established adequate probity standards which identified the requirements of a fair, impartial and transparent tendering process. However, lack of sufficient guidance in applying these standards meant that conflicts of interest were inadequately managed by some councils and the quality of documentation to reliably demonstrate assurance that probity was consistently applied in tender processes was variable.
Council oversight of procurement activities was generally inadequate. While all had undertaken ad hoc reviews of local practices none had systematically monitored cumulative payments to suppliers to identify ways to achieve better value through more strategic procurement.