Management and accountability - Purchasing and assets management
Purchasing
DVA is one of the largest purchasers of health services in Australia. These services are purchased through arrangements with public, private and non-profit organisations, including large companies, small and medium enterprises and individual owner-operators.
Support services including information and communication technology, audit, travel and office supplies are provided through strategic arrangements with public and private sector organisations. Contracts are let for commemorative projects, including significant wartime anniversaries such as the Anzac Day services at Gallipoli.
DVA’s purchasing activities are coordinated through the Contract Advisory Unit (CAU), which provides specialist business and legal advice to all areas of the Department engaged in procurement. This includes providing procurement training and workshops, contracting templates, better practice guides on all aspects of the procurement cycle and contract management advice. The CAU is also responsible for departmental procurement policy, in accordance with government guidelines.
DVA’s Contracts and Indemnities Register On-line (CaIRO) records contracts entered into by DVA and assists with monitoring and reporting the agency’s contracting activities. Improvements and enhancements continue to be made to CaIRO to better meet DVA’s internal and external reporting obligations.
Performance against the Commonwealth Procurement Guidelines
During 2005-06, the ANAO identified a number of flaws in DVA’s reporting on procurement. The CAU is working to improve training and support and procedures to address the issues identified by the ANAO. This includes the on-going review of templates used for procurement and advice for procedures for requests for tender.
DVA published its Annual Procurement Plan for 2006-07 on 3 July 2006. The plan describes the Department’s procurement profile and identifies expected major and strategic procurement for 2006-07, as required under the Commonwealth Procurement Guidelines – January 2005.
International obligations
The Department fulfils its international obligations (World Trade Organisation, Australian and New Zealand Closer Economic Relations Trade Agreement, Australian and New Zealand Government Procurement Agreement, Australia-United States Free Trade Agreement, Singapore-Australia Free Trade Agreement and Thailand-Australia Free Trade Agreement) in accordance with the Commonwealth Procurement Guidelines.
Small and medium business enterprises
The majority of enterprises contracted to the Department are small to medium businesses. The requirements of small and medium enterprises are considered when developing tender and contract documentation and DVA is committed to offering opportunities to these businesses.
Contracted services
DVA spends more than $4.5 billion annually on veterans’ health care through a variety of arrangements with the Australian health industry, including state and territory governments, private hospitals and day procedure centres, as well as other health providers. These arrangements involve more than 60 000 health care providers, including a significant number of small and medium business enterprises and individual practitioners. Medicare Australia acts as DVA’s payment agent for most health services, paying for more than 17.8 million services annually.
A range of administrative and corporate services are also under contract. DVA has contracts with the private sector relating to projects commemorating our wartime history and supporting Office of Australian War Graves activities.
Consultants
DVA engages a number of consultants to provide professional, independent and expert advice. During 2005-06, 41 new consultancies were entered into, involving total actual expenditure of $2.6 million. In addition, 57 previously let consultancy contracts were active during the year involving total actual expenditure of $2.5 million.
| Financial Year | Cost $ (millions) |
|---|---|
| 2003-04 | 6.9 |
| 2004-05 | 6.46 |
| 2005-06 | 5.1 |
Please see Appendix D - Engagement of external consultants for a list of external consultants engaged during 2005-06.
Competitive tendering and contracting (CTC)
CTC activity in this context relates only to the contracting out of the delivery of government activities, previously performed by an Australian Government agency, to another organisation. The activities may be undertaken for either goods or services.
All DVA contractual arrangements have in place a facility for the Auditor-General and all accountability personnel to access contractual material.
Major procurement activities in 2005-06 included tendering for community nursing, private hospitals and in-home care. In addition, services relating to ICT infrastructure support were tendered for and the Department is currently evaluating responses. Another two previously let contracts of more than $100 000 were active.
| Organisation | Activity | Total Value $ | Period (years) |
|---|---|---|---|
| KPMG | Provision of internal audit services | 5 500 000 | 3 |
| IBM Global Services | ICT infrastructure support | 100 000 000 | 5 |
| PeopleSoft | Human resource management services | 641 000 | 5 |
| CITEC | Bank account reconciliation services | 140 000 | 2 |
Note: This table refers only to services provided to DVA, and not to members of the veteran or defence force communities.
Exempt contracts
During 2005-06, one contract in excess of $10 000 (GST inclusive) was exempted by the Chief Executive from being published in AusTender. This contract was with Benfield (Australia) Pty Ltd for the provision of re-insurance broking services to the Defence Service Homes Insurance Scheme. All pricing information was agreed to be confidential.
Information technology
During 2005-06, DVA paid $38.4 million to IBM Global Services (IBM GS) for ICT infrastructure services and support and $11.2 million to other ICT suppliers. This compares to expenditure in 2004-05 of $33.4 million and $10.6 million respectively (these figures do not include GST).
Internal audits
KPMG provides general audit and IT audit services to DVA. The contract with KPMG commenced on 4 January 2005 and is due to expire on 3 January 2008, with a two-year option to extend.
Statistical services
DVA continues to maintain a strategic alliance with the Australian Institute of Health and Welfare. The institute provides the Department with expert statistical advice and has input into a number of research projects, primarily in the health area, such as cancer incidence and mortality studies.
Actuarial services
In 2005-06, the Department used the services of the Australian Government Actuary (AGA) to estimate the liability for each of the next 10 years (both for known and unknown claims) under the Military Compensation and Rehabilitation Act and the Safety, Rehabilitation and Compensation Act. The AGA also updated the methodology for the calculation of the outstanding treatment account system liability as at 30 June 2005.
Legal services
The role of the Legal Services Group is to provide accurate, timely and cost-effective legal advice and services to the Minister, Department, Repatriation Commission and Military Rehabilitation and Compensation Commission. The services cover the full range of legal matters including legal advice, developing legislation, conducting litigation, preparing legal instruments and contacts and conducting legal awareness training.
Legal services are provided using a mix of in-house resources and the purchase of external specialist legal services on a case-by-case basis. The majority of external legal services are purchased from the Australian Government Solicitor. These arrangements are under constant review to ensure that the most accurate, timely and cost-effective legal services are provided to clients.
War Graves
Where cost-effective, the Office of Australian War Graves contracts out the horticultural maintenance of war cemeteries and grave maintenance throughout Australia. Contracts for the construction and maintenance of graves and production of bronze commemorative plagues are let to organisations and individuals with relevant expertise. In Papua New Guinea, security services at each of the three war cemeteries are provided by contractors. The design, construction and maintenance of new official memorials overseas is also contracted out.
Assets management
The requirement to report financial results in accordance with the Australian Equivalent International Financial Reporting Standards for the period ending 30 June 2006 will impact on DVA’s internally developed software. All software not valued at cost (based on the cost of development) will be de-recognised (effectively written off as of no financial value). This impacts on DVA’s software, which was valued using function points rather than cost price prior to 30 June 2000. The full impact of this is disclosed in the financial statements at Appendix K.
The balance of asset holdings is effectively maintained and stock takes are conducted annually. Impairment and obsolescence tests are part of the stocktaking process. DVA considers its asset management program to be effective.
Accommodation
DVA is implementing a Strategic Property Management Framework to ensure business activity planning is incorporated into current and future commercial property management in all capital cities and regional areas.
Negotiations are under way to co-locate outlying ACT office staff and it is expected that some leases in the Canberra area will be relinquished as a result. The South Australian office is currently evaluating the market with leasing and consolidation to be finalised by October 2006. The New South Wales office evaluated the market and as a result has exercised an option on its current lease.
Performance against core purchasing policies and principles
The purchasing policies and principles of the Department are in line with the Commonwealth Procurement Guidelines for purchasing services and assets management. This assures DVA’s client groups of receiving the most appropriate services and the Department of achieving value for money. The Department applies continuous improvement through a process of review of its procurement strategies.
Department overview