UNCONTROLLED IF PRINTED

Department of Defence

DEPARTMENTAL PROCUREMENT POLICY INSTRUCTION NO 4/2013

3 September 2013
Note: These instructions are of a permanent nature and remain in force until cancelled. They should be reviewed by the sponsor every three years and repromulgated only where a significant change of content is necessary. Publications can be accessed on the Defence Intranet.

INTRODUCTION OF STREAMLINED SIMPLE PROCUREMENT PROCESS FOR MILIS TRANSACTIONS

Purpose

1. The purpose of this Departmental Procurement Policy Instruction (DPPI) is to advise all Defence staff of the introduction of the Streamlined MILIS Simple Procurement Process (SMSP). Background
2

2. The SMSP is a strategic reform initiative to provide logistics and inventory management staff with a shortened (streamlined), standardised procurement process for low risk MILIS procurements. This process is applicable to the bulk of MILIS purchasing activity within the logistics environment and is expected to generate considerable savings and efficiencies in the current purchasing arrangements for low risk MILIS procurements. 3. The process was developed collaboratively by practitioners, in conjunction with relevant Defence policy and process owners, by determining the minimum requirements described within the Electronic Supply Chain Manual (ESCM) (and required by whole of government procurement policy) to undertake Australian commercial procurement of catalogued and codified MILIS items valued at under $80 000 (this being the current relevant procurement threshold under the Commonwealth Procurement Rules (CPRs)). Streamlined procurement
4

4. The SMSP is to be used for all MILIS purchases valued below the relevant threshold amount that meet the criteria described in paragraph 3. A diagram of the SMSP process is set out in annex A. A set of frequently asked questions (FAQs) in relation to the operation of the SMSP can be found in annex B. This process (and FAQs) has been endorsed by General Manager Commercial Group as the business policy and process owner for Defence procurement. 5. Staff are also reminded that where a procurement is valued at or above the relevant procurement threshold, the requirements of Division 2 of the CPRs apply to the procurement (except if a Defence exempt procurement) and the SMSP cannot therefore apply to these procurements. Refer Defence Procurement Policy Manual (DPPM) section 1, chapter 1.2 and ESCM volume 5, section 3, chapter 1 for further information on the requirements that apply to these procurements. 6. The DPPM, ESCM and other relevant manuals and instructions are in the process of being updated to give effect to this DPPI. In the interim, to the extent of any inconsistency between this DPPI and other procurement policy manuals and instructions, the requirements of this DPPI take precedence and compliance with this DPPI shall be deemed to constitute compliance with these other manuals and instructions. 7. All local business rules, standard operating procedures and branch-level Instructions are to be amended to support the use of the SMSP. Further queries
8

8. Any questions relating to this DPPI should be directed to the Commercial Policy mailbox, Commercial.Policy@defence.gov.au.

UNCONTROLLED 2 IF PRINTED
9. Any questions relating to the SMSP and its use in MILIS purchases should be directed to the Inventory Reform Program mailbox, asrd.inventoryreform@defence.gov.au.

LIESL OMEARA General Counsel DMO Head Contracting and Legal Division Defence Materiel Organisation Annexes: A. MILIS streamlined simple procurement process B. Streamlined MILIS procurement process: Frequently asked questions DISTRIBUTION: SDL Defence Protected Network, overseas CONTACT OFFICER: Commercial Policy Help Desk Email: Commercial.Policy@defence.gov.au

EARLIER DEPARTMENTAL PROCUREMENT POLICY INSTRUCTION CANCELLED: Nil

These steps will not be required when you are purchasing against an existing contract

These steps may not be required with every process (see guidance)

Inventory Manager

Validate requirement

Action ROB

Authorise MILIS PO (if required)

Purchasing Officer Raise MILIS PO Supplier Liaison (Perf. Mgmt) Update MILIS 210 Record

Obtain Delegate Agreement

Raise MILIS RFQ

Evaluation Comparative Statement

Update MILIS 210 Record

Funds Availability (TMS PDR)

FMA Reg 9 Approval (TMS PDR)

Section 44 Approval (TMS PDR)

Notify Unsuccessful Respondents

AusTender Publishing (if required)

Supplier Receive MILIS PO

Receive RFQ

Provide Quote

Return PO Acceptance

Supply and Ship Goods

Send Invoice

Warehouse

Item Received

QA Check (if required)

Item Receipted

Manual Off System MILIS / AIMS Manual Off System TMS TMS MILIS eBusiness TMS MILIS eBusiness MILIS eBusiness MILIS

AusTender MILIS MILIS Manual Off System

Invoice Received in MILIS MILIS MILIS Payment Trigger

System

Manual Off System

MILIS eBusiness

UNCONTROLLED IF PRINTED

MILIS eBusiness

MILIS STREAMLINED SIMPLE PROCUREMENT PROCESS

Process Constraints 1. Procurement of items purchased through MILIS. 2. Item is codified and catalogued. 3. Procurement value is less than $80,000 or exempt from Division 2 of the CPRs. 4. Australian commercial supplier. 5. SP020 standard terms and conditions or purchased under a head contract or standing offer with agreed terms and conditions. 6. Procurement is categorised as Simple 7. In accordance with Minute GMS/OUT/2012/042 the use of eBusiness is mandated

ANNEX A

UNCONTROLLED IF PRINTED

UNCONTROLLED IF PRINTED

ANNEX B

STREAMLINED MILIS PROCUREMENT PROCESS: FREQUENTLY ASKED QUESTIONS

Introduction

0.

This document provides a summary of procurement related questions asked during the Streamlined MILIS Simple Procurement Process roll-out to Defence Materiel Organisation (DMO) Systems Program Offices (SPO) over the period 09 April05 June 2013. All answers provided have been authorised by the appropriate business process and policy owners. Where advice is provided contrary to that detailed below, the advice given in this document takes precedence. Delegations and sign-off Q1: Do I have to have funds availability before I seek quotes? A1: There is no mandatory requirement (including under the Defence Procurement Policy Manual (DPPM), DMO and Defence Chief Executives Instructions (CEIs) or other relevant Defence instruction or manual) to seek funds availability before requesting quotes for a procurement activity below the relevant procurement threshold1. Q2: Do I have to obtain Regulation 9 approval before I seek quotes? A2: For procurements below the relevant procurement threshold, quotes can be sought without first obtaining approval from a Regulation 9 delegate. The Regulation 9 delegate will, when subsequently approving the spending proposal, endorse the selected procurement method (among other matters) in the terms of that approval. Regulation 9 approval must always be obtained before Section 44 is obtained and a purchase order is raised. Refer DMO CEI 2.1.4 for further information. Q3: What benefits are realised by completing Funds Availability and Regulation 9 after I receive quotes? A3: Obtaining Funds Availability and Regulation 9 approval after the receipt of quotes reduces the rework required (eg going back into TMS to update the amount etc) when the value of an earlier obtained Regulation 9 approval is insufficient to cover the amount of the proposed contract. Deferring the timing of Regulation 9 approval also removes the pressure to over estimate the value of the procurement when seeking funds approval, which skews budget commitment. Q4: The streamlined procurement process only references Regulation 9. What about Regulation 10? A4: Regulation 10 agreement is only required for certain procurements. For streamlined MILIS procurements that use the standard MILIS terms and conditions, Regulation 10 agreement is only required when funds will be settled in the next financial year. For MILIS procurements using non-standard terms and conditions, Regulation 10 agreement may also be required if those terms give rise to a contingent liability and Regulation 10A does not apply. Where Regulation 10 is triggered, it must be obtained prior to exercising the Section 44 delegation. Refer to Annex A to DMO CEI 2.1 for further information. Q5: I am currently raising a Procurement Decision Record and Regulation 9 for all purchase orders including: existing contracts, Forward Purchasing Agreements (FPAs), and purchases under a standing offer arrangement. Is this required? A5: Separate Regulation 9 approvals are not required for individual MILIS purchases under existing contracts (including FPAs) or standing offers where a Regulation 9 approval for purchases under that contract or standing offer up to an amount at least equal to the value of the current purchase order, plus all previously issued purchase orders under that contract or standing offer, has been obtained. Note: Reference must be made to the relevant existing contract or FPA at some point during the procurement process.
0.

For the purposes of the streamlined MILIS procurement process the relevant procurement threshold (being a term that originates from the Commonwealth Procurement Rules) is currently $80 000 (inclusive GST).

UNCONTROLLED B2 IF PRINTED
Standing offers and contracts
0.

Q6: Am I obliged to use a whole-of-government arrangement (WOGA) where the item I wish to purchase is covered by a WOGA (eg laptops covered by Department of Finance and Deregulations (DOFD) desktop hardware panel agreement)? A6: Yes, it is a mandatory requirement under the Commonwealth Procurement Rules (CPRs) to use a WOGA for the procurement of items available under that panel. In relation to DoFDs desktop hardware panel (which covers, amongst other things, deployable laptops), DMO has agreed the following categories of requirements with representatives from DOFD: Mission Critical, Urgent Operational Requirement (UOR), and Routine. There are different processes for using this WOGA depending on which category applies: Routine requirements will be met through standard whole-of-government panel processes; ie no more than a three day response to a request for quotes. Where the requirement is deemed Mission Critical or UOR, DMO may approach the panellists directly, as long as DMO advises DoFD via email and provides DoFD with a copy of the purchase order.

Procedures are being developed to assist procurement staff with the use of Finances desktop hardware panel. The DMO leads for this work are Mr Greg Nicolson, Director Land Command and Intelligence Systems Support, and Mr Trevor Dowsett, System Manager Support Command and Intelligence Systems Sustainment Office. Note: Ignorance of WOGA is not an acceptable reason for non-compliance. The list of WOGA is available at www.finance.gov.au/procurement/wog-procurement/index.html). Q7: Am I restricted to using the MILIS standard terms and conditions for purchases under standing offers? A7: No, if a standing offer arrangement has agreed terms and conditions that differ from the standard MILIS terms and conditions, the streamlined process can still be used to raise purchase orders under that standing offer. Delegate approval of the non-standard standing offer terms and conditions occurs at the time Regulation 9 approval and Section 44 are obtained to establish the standing offer. Q8: How is a contract different from a standing offer? A8: For streamlined MILIS procurements, a contract can be thought of as a commitment by Defence to purchase a pre-defined number or value of items from a particular supplier at the price/rate described in the contract. These are also known as forward purchasing agreements (FPAs). On the other hand, a standing offer is a form of binding offer by a particular supplier for the supply of specified items on the terms, including price, set out in a deed, at Defences request. In the case of a standing offer there is generally no commitment by Defence for the purchase of any items until a purchase order is raised. The raising of the purchase order effectively creates a separate contract for the supply of the items specified in the purchase order. Q9: Is AusTender required to be updated for every purchase order raised against a standing offer? A9: No, only purchase orders and purchase order amendments valued at $10 000 and above (ex GST) that are not blocked or exempted from publication are to be reported on AusTender. Requesting quotes Q10: Do I always need to seek quotes before raising a purchase order? A10: If you have a current quote, or if there exists a current standing offer or existing contract (FPA) for the required item, there is no mandatory requirement to seek any quotes from other potential suppliers before raising a purchase order for that item. Note: For purchases under a standing offer or existing contract, the purchase must be conducted in accordance with the process set out in the applicable standing offer deed or contract. This process may (but not necessarily) require that Defence seek quotes before placing an order.
0.

UNCONTROLLED B3 IF PRINTED
Q11: Ive been told that best practice requires that I obtain three quotes before I raise a purchase order. Is this right? A11: No. There is no mandatory requirement under the CPRs, the DPPM, DMO CEIs or other relevant Defence policy instruction or manual to obtain three (or any other number of) quotes before raising a purchase order. The number of quotes sought will be dependent on the nature and type of the procurement and should be a number sufficient to assure value for money for Defence. In the case of commercial items for which it is reliably known there is very little (if any) difference in the price offered by potential suppliers it is entirely defensible (in fact preferable from an overall value for money perspective) for Defence not to seek multiple quotes from potential suppliers. Q10: Are quotes over the phone acceptable? A10: Yes. Defence procurement policy supports the obtaining of quotes over the phone. In addition, DoFD guidance for whole of Australian Government procurement under $80 000 recommends the use of verbal quotes for low risk procurement activities. However, it is good practice to record responses in writing and to file these responses either on a paper file or in Objective. An oral quotation pro forma is provided in the ESCM for this purpose. Q11: Is there a risk of wasting time and resources on market enquiries without having obtained funding approval? A11: No. It is entirely acceptable practice to conduct market research (eg seek quotes) prior to engaging in a procurement activity. However, when engaging in market research it is important to ensure all potential suppliers understand the purpose of Defences enquiries and that there is currently no commitment or approval for the proposed procurement. Q12: Is buying from a panel a limited tender (previously direct source) procurement for the purposes of AusTender reporting? A12: No. Purchases made under a panel arrangement must be categorised and reported as the procurement method that was used to establish the panel (generally open tender). This applies whether or not multiple quotes or only a single quote is, sought from the panel prior to raising the purchase order. Document management
0.

Q13: Why do we have to enter all quotes into the MILIS 210 record instead of only the successful ones? A13: ESCM V05S04C02, Paragraph 28 states: On completion of the evaluation process and vendor selection, details of all offers, successful and unsuccessful, are to be loaded to MILIS MSO210Maintain Supplier Information. The recording of all offers enables market intelligence to be maintained on the database record for other purchasing officers to access. When multiple valid quotes are obtained, entering these into the MILIS 210 record is important so that if the preferred supplier can no longer supply the items in question details relevant to all lower ranked suppliers (in particular, the second ranked supplier) can be easily identified to assist with future purchases of those items. Q14: We understand some SPOs are using electronic procurement; do we still need to continue to print out hard copies? A14: There is no mandatory Defence requirement to maintain hard copies if digital copies of records exist and are stored in Objective. Digital copies include scanned documents or electronically generated documents with electronic signatures. However, if your local business rules require the maintenance of hard copies, then the answer is yes; however, any local business rules that mandate the storage of hard copies should be reviewed with a view to being removed as this requirement is not consistent with higher level Defence and Australian Government policy. The Strategic Reform Team encourages the use of electronic documentation as this allows auditors to access the files remotely without disrupting SPO staff. You can request the eBusiness team to configure auto filing to Objective for you. Q15: The Regulation 9 can be signed off electronically; can the Section 44 be signed off electronically too? A15: Not yet. The ESCM is currently being amended to support this practice. The ESCM reference will be sent to relevant staff in order to support the use of electronic signatures as soon as available.

UNCONTROLLED B4 IF PRINTED
Streamlined process
0.

Q16: The time estimates of 85, 45 and 20 minutes for the full streamlined, standing offer and contract processes (respectively) seem rather short; do they include waiting time? A16: No. The quoted times are only an indication of the actual touch time for each process based on the average time taken across a range of sample SPO case studies. These times do not include waiting time (ie waiting for market response, time required for delegate approval etc). Q17: We have a local procurement checklist that we follow with every procurement and which differs from the streamlined process. What implications does the streamlined process have on the existing process? A17: The SMSP has been formally endorsed by the DMO executive, including the BPO for procurement policy, and has been confirmed as fully compliant with all relevant Australian Government and Defence procurement policy and instructions. Existing process checklists, local business rules, standard operating procedures, and bench level instructions that impose additional or different steps or requirements to the streamlined MILIS process will require amendment to ensure compliance with this process. The use of the SMSP has been mandated by DPPI 2/2013. Q18a: If I have a multi-line purchase order where the individual line items are less than $80 000, however, and the total purchase order value exceeds $80 000, is it considered to be a streamlined MILIS procurement below the relevant procurement threshold? A18a: No. If the total purchase order value exceeds $80 000 (AUD GST inclusive), it is not a streamlined procurement candidate to which the SMSP applies. This streamlined process applies only to procurements with a total value of less than $80 000. This includes the value of goods and services, any premiums, fees, commissions, interest, as well as any taxes (including GST) or other charges. Q18b: Can I split a purchase order to come within the relevant procurement threshold? A18b: No. A procurement ($80 000 and above) must not be split or divided into separate parts for the purpose of bringing it under the relevant procurement threshold. This type of practice is wholly contrary to both Australian Government and Defence procurement policy and constitutes a reportable breach for certificate of compliance purposes. Q19: Does the streamlined procurement process apply to foreign suppliers? A19: No. The streamlined MILIS procurement process only applies to Australian commercial suppliers who deal in AUD. Q20: Does the streamlined procurement process apply to ROMAN purchases? A20: No. For the time being the SMSP only applies to purchases in MILIS. However, work is underway to confirm its applicability to other types of simple procurements (eg ROMAN).