BUSS5378 Assignment Solutions on Strategic Procurement

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Executive Summary

Procurement of goods and services is one of the complex processes to organizations and state governments. The following report explores the procurement practices, which can be considered by the local government in Adelaide Hills Council. The report initially describes the ongoing issues being faced by the government, which has lead to the finding that high annual expenditure and a large number of public sector employees are main issues. Further, a strategic plan has been developed in the report, which includes strategies such as the bulk purchase in procurement activities and so on. Actions about launching the procurement office in the local community can be taken to implement the strategic plan.

Further, various theories and concepts concerning the procurement activities are also discussed in the report to justify the selected strategy. It is found that practices of enhancing supplier-buyer relationships, developing a procurement life cycle, and many more can be considered. These theories also justify the strategies chosen for the local council. At last, the report includes recommendations such as the use of technology for procurement activities.

Introduction

Procurement activities play an important role in determining the efficiency of a local council. It is found in many studies that Australia has 537 councils, which can be classified into various categories such as the remote council, rural as well as regional (ALGA, 2020). These different councils have different facilities and services to the local people, which immensely depend upon the strategies, which are used by the regulatory authorities for procurement. Procurement refers to the activities corresponding to the purchase of services and goods by an organization, which may also include councils or government bodies.

Adelaide Hills Council is one of the most known councils of South Australia, which was established in the year 1997. The area of the council is nearly 50 square kilometers, which include wide stretches of road networks, natural resources and many more. In a study conducted by Australian Local Government Association, it was found that the total annual expenditure on the services and goods in Adelaide Hills Council was $38.8 billion for the year 2018-19 (ALGA, 2020). Further, the study also indicates that major sectors in which the expenditure was made by the local government are transportation, environmental protection and religion. Not only this but, the local government in Adelaide Hills Council faced a replacement cost of $457 billion in the same year for non-financial assets (ALGA, 2020).

The purpose of this report is to present a strategic plan for consolidating the expenditure on procurement in Adelaide Hills Council of Australia. The report helps understand the current issues, which are being faced by the local government of the council. Along with this, a suitable strategic plan is also presented in the report, which could be considered by the local government to consolidate the procurement cost. The strategic plan is supported with different theories and concepts such as procurement life cycle model, Kraljic procurement model, network theory, e-procurement and many more. In addition to this, certain recommendations are also made in the report, which can be useful to the local government in Adelaide Hills Council to manage the procurement. This way, a feasible strategic solution is provided to address the procurement challenges in the identified local council.

Evaluation of the Supply Strategy

The supply strategy that can be considered by the Adelaide Hills Council in Australia can be that of consolidating the procurement cost (Georgopoulos et al., 2017). Also, it can be said that the cost saved by the local government of the council through consolidation in one area can be used to enhance the conditions of other areas. It can be one of the astounding supply strategies, which may allow the local government to use the available funds adequately and improve different conditions.

Current Issue Related to Procurement and Supply

Significant issues, which are currently pursuing in Adelaide Hills Council are analyzed in the following way.

Intense use of people from the public sector

One of the major issues related to supply and procurement in Adelaide Hills Council is the intense need for the workforce from public-funded departments. It is found in the study that the local government in the council utilises more than 194000 people from the public sector to manage different activities such as transportation, waste management, electricity and many more (ALGA, 2020). Deployment of people from the public sector in such a large quantity to maintain the council has put the local government under great pressure. The study suggests that nearly 10% of the total public sector employees in Australia are utilised by the local government in Adelaide Hills Council for supply and procurement purposes. On the other hand, it is also found that in terms of tax contribution, the Adelaide Hills Council has a contribution of 3.4% only (ALGA, 2020). It can be analysed that despite the deployment of a large amount of the workforce from the public sector, the contribution of the local council in the national taxation process is significantly low. This scenario describes the inefficiency of the local government in utilising the available resources such as finance, manpower and so on.

High procurement and supply cost

Along with this, it is also found from the study that the local government in Adelaide Hills Council is required to spend a considerable amount of capital on managing the supply and procurement within the council. As discussed earlier, $38.8 billion expenditure was reported by the council in the year 2018-19 only, which indicates the excessive waste of capital in return of small improvements in public properties and infrastructure such as roads, airdromes, public parks and many more (OECD, 2017). For this reason, another significant issue corresponding to the supply and procurement in Adelaide Hills Council is the excessive expenditure by the local government, which is proving out to be inefficient.

Strategic Plan

The strategic plan, which can be considered by the local government in Adelaide Hills Council of Australia, needs to focus on the prominent issues identified above. For this purpose, the following approaches can be developed and implemented within the council for procurement and supply.

Bulk purchasing of goods and services by the local government

One of the major strategies that can be considered by the local government in Adelaide Hills Council of Australia can be that of bulk purchasing. It can be analyzed from the case that the government is facing issues related to high expenditure in procurement and supply areas. It could be because of the practices to purchase every good or service separately by the government (ALGA, 2020). Various studies conducted on procurement management suggest that organizations may reduce their annual or specific term expenditure by adopting the practices of bulk purchase (Arrowsmith and Anderson, 2011). It can be analyzed that the bulk purchase of the goods and services by the local government can be greatly effective in controlling the escalating cost of procurement. Every year, the national government of Australia grants a specific amount of capitals to different councils.

In this manner, issues of escalating cost due to separate purchase may raise questions over the efficiency of the local government. For this reason, bulk purchases may allow the local government to acquire huge subsidies. These subsidies can be used to fund different aspects of development in Adelaide Hills Council such as transportation, development of public parks, healthcare programmers, administration of airports, airdromes, street parking and electricity and many more (ALGA, 2020). It can be understood that approaches of placing bulk orders for services and goods fascinate the suppliers, which may improve the efficiency in public procurement in the local council. In this manner, huge cuts in the annual expenditure in Adelaide Hills Council can be implied, which may optimism the procurement processes.

Use of fewer staff or public sector employees

Another noticeable and effective approach that the strategic plan of the local government in Adelaide Hills Council must include is the reduction in the number of employees from the public sector. The case study helps understand that the council utilizes the largest workforce among all the councils in Australia. In return, the percentage share of the council in the national taxation system is significantly low (ALGA, 2020). For this reason, the local government is required to reduce the share of the public sector employees. Therefore, the private sector can be promoted by the government to indulge in the activities of council development. These practices may allow the privately-owned construction firms and enterprises operating in the Adelaide Hills Council to manage the projects such as healthcare campaigns, infrastructure and many more (ALGA, 2020). The local government may develop contracts or turnkey projects with these organizations in which they will be supposed to deploy their workforce to accomplish the projects.

Not only this but, roles and responsibilities of the public sector employees can also be increased by the local government in Adelaide Hills Council of Australia. These strategies can be greatly effective in achieving similar growth and development by utilizing minimal workforce (ALGA, 2020). Also, the approaches of managing procurement and supply with such tactics can be effective in reducing the immense cost, which is spent by the local government on public procurement and supply.

This way, it can be said that the strategic plan of the local government in Adelaide Hills Council may comprise of approaches to reduce the number of public sector employees, motivating the efforts of the private sector and bulk purchases.

Actions to be taken for procurement

The above-described approaches of the strategic plan can be implemented feasibly by the local government of Adelaide Hills Council in Australia by launching more regional offices for procurement purposes. The government in the council may open two new procurement offices by July 1st, 2021. Employees working in the office may source feedback and information from the societies about the services and goods required. Not only this but, provisions for the purchase of commodity and local procurement can also be considered, which may be effective in reducing the annual expenditure statistics.

Key performance indicators

To evaluate the performance of the local government in Adelaide Hills Council; key performance indicators can be defined. In this manner, a reduction in the number of public sector employees in the council to a value of 120000 can be considered. At the same time, the increasing contribution of the private sector through the development of contacts with the local government may also indicate that right efforts are being deployed and strategic plans are implemented properly.

In addition to this, key performance indicators for the reduction in annual expenditure through bulk purchases can be the reduced demand orders for procurement. It can be analyzed that bulk purchases of services and goods will prevent the local government in Adelaide Hills Council from making frequent demand orders. The government will be having enough goods and supplies to fulfill the needs of societies in advance. Hence, a decline in the number of placed orders will suggest that the targets of reduction in the annual expenditure can be achieved.

Application of Theory and Concepts

The two approaches, which are described above in the strategic plan of the Adelaide Hills Council government for procurement and supply, can be justified through the following theories.

Procurement Life Cycle Model

It is a useful model to identify the species in Adelaide Hills Council related to procurement and acquire goods and services properly. These are several steps, justifying the strategic plan to the local government, which are given in the following manner.

• The local government in Adelaide Hills Council should provide authority to the project in which there is a focus on enhancing the efficiency of procurement (Barraket et al., 2015). For this purpose, there should be detailed discussions with the individuals, which regulate the practices of supply and procurement.

• Further, it is also necessary to the local government in Adelaide Hills Council to identify the needs associated with the proposed strategy. For example, the government in the council may focus on the areas where procurement cost can be cut. Likewise, public sector employees, which can be ignored in the council, must be analyzed.

• The local government in Adelaide Hills Council also needs to specify the requirements, which may include defining the number of public sector employees and analyzing the private sector organisations, whose participation can be encouraged (Singleton et al., 2012). Along with this, the council also needs to understand the specific areas where the escalating cost can be cut or controlled.

• After this, it is also necessary to the local government in Adelaide Hills Council to select the suppliers, which could be considered for procurement purposes. In this manner, private sector employees and organisations can be analyzed, which could be provided with the tender to construct roads, public parks, offer low-cost healthcare services and many more.

• Furthermore, practices of negotiation and contract development can be performed, which may allow the local government in Adelaide Hills Council to procure material and supplies at low cost as well as by deploying a reduced number of public sector employees (Flynn et al., 2020).

Kraljic Procurement Model

This is another model in procurement, which can be used by the local government in Adelaide Hills Council.

 Kraljic procurement model can be effective to the local government in Adelaide Hills Council to classify the goods and services as per their need and importance (Arrowsmith and Anderson, 2011). It can be analyzed that the council is targeting to cut the cost associated with procurement through bulk purchase and cutting the number of employees. For this purpose, the Kraljic model may allow the council authorities to categories the goods and services in leverage, non-critical, strategic and bottleneck items. Application of this model will refine the selection strategy in Adelaide Hills Council due to which essential needs and items can be procured. At the same time, non-critical items can be discarded. Hence, the cost associated with the purchase of goods and services can be managed effectively. In this manner, there can be a focus on purchasing only leverage items (Barraket et al., 2015). Similar, criteria can also be applied to reducing the number of public sector employees in Adelaide Hills Council of Australia. This way, Kraljic procurement model may enhance the efficiency of the local government and implement the designed strategies correctly.

E-Procurement

E-procurement refers to the practices of placing orders through the internet for supply and material. In the context of the case study, the local government may consider the approaches of e-procurement to cut the intense cost and acquire efficiency. There can be several components of e-procurement to the company, which are described in the following way.

Figure 3: E-procurement (Pablos, 2012)

• Practices of contract management in E-procurement may allow the local government to acquire the employees from organisations in the private sector easily (Pablos, 2012). This process is highly secured and may present statistical information about procurement orders.

• E-procurement is one of the best practices, which can be considered by the local government of the council. Practices of placing online orders may allow the government to keep the updated records, which may include indents, inventories and many other processes (Georgopoulos et al., 2017). This way, the government may evaluate the factors and areas in which high expenditure is likely to occur. Hence, suitable decisions to cut the cost for the desired material can be taken.

• Also, supplier qualification system is one of the most effective practices, which can be considered by the local government of Adelaide Hills Council in Australia. Different suppliers can be arranged in different categories, and feasible negotiations on bulk purchases can be made.

Hence, e-procurement practices can be greatly effective in implementing the strategic approaches of the local government in Adelaide Hills Council.

Buyer Supplier Relationship

The relationship between buyer and suppliers can be understood with the transactions between the two entities. A win-win situation to the buyer as well as suppliers may indicate that both of them share a good relationship (Lember et al., 2013). It can be said that approaches developed for the strategic plan such as the bulk purchase of the material and many more may improve the quality of the relationship between the local government and the suppliers offering services and goods. It can be understood that good relationship may allow the local government of the council to make effective negotiations with the suppliers due to which the annual expenditure on goods and services in Adelaide Hills Council can be reduced.

The concept of buyer-supplier relationship is also applicable to the other strategy, which can be considered by the local government in Adelaide Hills Council. The government is required to reduce the workforce strength from the public sector, which is deployed to accomplish various projects such as healthcare, public property construction and so on (Flynn et al., 2020). To implement this strategy effectively at the workplace; a keen focus can be depicted in the buyer-supplier relationship. The local government may develop contracts with private organisations of the related field and maintain relationships tactfully. These practices may help the government reduce the strength of public workers by encouraging the participation of private-sector workers, which can be acquired at reduced prices.

Network Theory

The network theory is another concept that can be applied to evaluate the feasibility of approaches of the strategic plan for the local government in Adelaide Hills Council of Australia. As per the network theory, there can be a symmetric or asymmetric relationship between different entities (Knight et al., 2012). Considering the application of the network theory in the strategic plan; it can be said that the local government of the council may have symmetric as well as asymmetric relationships with the suppliers to procure the required goods and services.

Nature of the relationship between the government and the suppliers can be the determining factor to implement the strategic plan. Bulk purchases and other similar practices may lead to fructify the relationship due to which annual expenditure can be reduced (Lember et al., 2013). At the same time, it can also be said that the relationship between the private firms and enterprises may allow the local government in Adelaide Hills Council to enhance the contribution of the private sector.

Recommendations

Based on the analyzed carried out above; the following recommendations can be made to the local government in Adelaide Hills Council of Australia to implement the strategic plan properly.

Use of technology for procurement:

One of the prominent considerations that should be made by the local government while launching the new procurement offices to meet the strategic objectives is the use of technology. The government may use advanced technology to create digital records of the transactions. These practices can be significantly effective in enhancing the efficiency of monitoring of procurement activities (Pablos, 2012). In this manner, the local government may easily analyses the areas in which more capital should be invested. Not only this but, the use of technology may help in evaluating the areas in which the investment likely to be made by the local government in the council can be reduced. For this purpose, there are several technologies in current times, such as Cloud Computing and many more. There should be a keen focus on developing sophisticated software tools, which can be used to regulate the supply and demand of the services and good. This way, strategic plans for public procurement can be implemented tactfully through technology in Adelaide Hills Council.

Development of reporting channels

Another major recommendation, which can be given to the local government in Adelaide Hills Council, can be the formulation and use of reporting channels. Various studies indicate that the government may or may not be aware of the ongoing practices in societies. For this reason, top officials in the local council are likely to bring no changes in the strategies and plans formulated earlier. These plans are implemented as they were at the time of their creation (Flynn et al., 2020). In these scenarios, governments are unable to track the changes emerged and ongoing processes due to which capital investments may not provide desired outcomes. It could be one of the significant reasons why annual expenditure in Adelaide Hills Council is immensely high despite low contribution in taxes. Therefore, it is important to the local government of the council to establish an adequate reporting system.

Conclusion

It can be concluded from the above report that an effective supply and procurement strategy is necessary to the local government of Adelaide Hills Council in Australia. There are many factors behind the need of such strategy, which may include the high annual expenditure of the government on the purchase of goods and services, deployment of a large number of public sector employees and many more. Due to these issues, the cost of procurement of the Adelaide Hills Council is among the highest in Australia. Therefore, it is found that the strategic plan for the local government may include practices of bulk purchasing, reduction in the number of public sector employees by motivating the private sector employees and many more. The government may launch new procurement offices where specific needs related to goods and services can be evaluated, and suitable actions can be taken.

Also, it can be said that various theories and concepts related to public procurement support the strategic plan, which has been developed for the Adelaide Hills Council. These theories may include procurement life cycle model, Kraljic procurement model, E-procurement and many others. It can be said compliance of the strategic plan with these theories and concept enhances the probability of addressing the issues.

References

ALGA, 2020. Facts And Figures – Australian Local Government Association. [online] Australian Local Government Association. Available at: [Accessed 28 October 2020].

Arrowsmith, ‎S. and Anderson, R. 2011. The WTO Regime on Government Procurement: Challenge and Reform. UK: Cambridge University Press

Barraket, ‎J., Keast, ‎R. and Furneaux, C. 2015. Social Procurement and New Public Governance. UK: Routledge

Flynn, ‎M., Buffington, ‎K. and Pennington, R. 2020. Legal Aspects of Public Procurement. UK: Routledge

Georgopoulos, ‎A., Hoekman, ‎B. and Mavroidis, P. 2017. The Internationalization of Government Procurement Regulation. UK: Oxford University Press

Knight, ‎L., Harland, ‎C. and Telgen. J. 2012. Public Procurement: International Cases and Commentary. UK: Routledge

Lember, ‎V., Kattel, ‎R. and Kalvet, T. 2013. Public Procurement, Innovation and Policy: International Perspectives. UK: Springer Science & Business Media

OECD, 2017. OECD Public Governance Reviews Public Procurement in Peru Reinforcing Capacity and Co-ordination: Reinforcing Capacity and Co-ordination. Australia: OECD Publishing

Pablos, O. 2012. E-Procurement Management for Successful Electronic Government Systems. UK: IGI Global

Singleton, ‎G., Aitkin, ‎D. and Jinks, B. 2012. Australian Political Institutions. Australia: Pearson Higher Education AU