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Determining the process

The area of your organisation responsible for procurement will be able to advise you on the process to follow when sourcing goods and services and then managing any contracts/agreements. This will vary depending on the type and value of the goods or services required. The Victorian Government website buyingfor.vic.gov.au is the authority on goods, services and construction work procurement and provides valuable advice and information.

 

Recordkeeping obligations

Records must be created and properly managed during the sourcing (planning, approach to market, tendering, offer selection) and contract management phases, in accordance with Standards set by PROV. PROS 24/01 Operational Management Standard states the mandatory requirements, with the Operational Management Standard Implementation Guide providing advice on how to implement them. 

It should be possible to reconstruct the entire sourcing and contract management processes from records, while they are still in business use and for their minimum retention period. The head of the public office is responsible for ensuring these obligations are met. 

Suppliers (private or not for profit sector) are NOT bound by the Public Records Act 1973, so do not have to comply with the PROV Standards. This means the public office needs to:

  • Include any recordkeeping requirements in the contract (for example, if the supplier will be creating or receiving information/records which need to be handed over to the public office)
  • Monitor performance against the recordkeeping requirements, as part of contract management
  • Factor in the costs of the supplier fulfilling any recordkeeping responsibilities.

 

Why are sourcing and contract management records important?

Records documenting the sourcing phase provide evidence of how the selection of a supplier(s) was carried out and how and why decisions were made and approvals given. Records are needed to demonstrate that decisions were based on obtaining value for money as required under the Financial Management Act 2004 Standing Directions 2018 S. 4.2.1.1 (e). It is not uncommon for sourcing decisions to be queried - by unsuccessful suppliers, the media and during audits (internal and external).

Contract management records provide evidence that government has received the services and goods it has paid for and that taxpayers money has been used properly and effectively. Conflicts can arise when obligations and deliverables are not clear or not met. Disputes can be costly, time-consuming and damaging, particularly if they result in legal proceedings. It is recommended that public offices seek legal advice before entering into a contract with a supplier, particularly for high value or complex services, programs or products. 

Good recordkeeping through the entire sourcing and contract management phases protects the interests of all parties and deters corrupt conduct. Full and accurate records defend staff and the public office against complaints or challenges. To achieve this, the records need to form an audit trail, which fully explains what happened, when, why, how and with whose authority.

 

Recordkeeping clauses for contracts

Requirement 6.1 of PROS 24/01 Operational Management Standard states that:

"When contracting a provider to deliver services or products to them, public offices must ensure recordkeeping requirements are included and properly discharged."

Section 5 of the Operational Management Standard Implementation Guide sets out some recordkeeping considerations when contracting a supplier(s) to:

  • Deliver a service or product to the public office; or
  • Deliver a service or product on behalf of the public office.

Section 6 Appendix of the Guide has some examples of possible wording for recordkeeping clauses. These are provided for guidance only and can be adjusted for different scenarios.

 

Outsourcing government functions

It is common for public offices to contract a supplier(s) to deliver a government function on their behalf. This is often referred to as "outsourcing" the delivery of a program or service. For example, a not-for-profit organisation might be contracted to deliver counselling services to public clients or a private company to deliver a licensing program to businesses, on behalf of a public office.

When a government function is "outsourced" and delivered by a supplier, the records created and received as part of delivering that function must be designated as "public records" and managed in accordance with PROV Standards. This includes ensuring that:

  • Government can access any information it needs
  • Records are retained for their lawful minimum retention period and not destroyed unless authorised
  • Records which are not yet eligible for destruction are returned to government when the contract ceases
  • Permanent value records are identified and transferred to PROV at the agreed time
  • Resources for properly creating and managing the necessary records are factored into the cost of the contract.

Creating, managing and disposing of records

During the sourcing phase, important records include:

  • Procurement Plan including the business need, governance, key activities, roles and responsibilities and schedule
  • Details of Evaluation Panel Members and Conflict of Interest Declarations
  • Specifications
  • Market Approach Plan including market analysis, any engagement with suppliers and proposed market approach
  • Invitation to supply, including the draft contract
  • Approval to approach the market
  • Any communications with suppliers and any information/clarification provided to them
  • Details of the received tenders/proposals, with the actual submissions and any supporting documentation and details of any late tenders/proposals, with a record of the decision made as to whether to accept them
  • Records detailing how the evaluation was undertaken (criteria, weighting etc.), of the assessments and decisions made and approvals of the evaluation decision outcomes
  • Communications to and from the suppliers who have submitted a tender/proposal, including any debriefings given
  • Contract negotiations and the actual contract/agreement made by authorised officers.

Once the contract has been agreed to and commenced, it will need to be administered to ensure that obligations are delivered to the required standard and within set timeframes. Supplier performance against the recordkeeping requirements will need to be actively monitored to ensure obligations are being met.

Important contract management records include:

  • Conflict of Interest declarations
  • Details of any contract variations and evidence that they were agreed to by both/all parties
  • Details of options to extend and approvals for any extensions
  • Communications between the public office and the supplier(s)
  • Contract reviews
  • Reports, meeting minutes or notes documenting progress, actions, decisions and agreements
  • Details of goods or services which have been delivered and of acceptance/non-acceptance that they meet the required standard or timeframe - in cases of non-acceptance, details of any remedial work required/agreed to
  • Disputes/escalations
  • Details of milestones achieved and invoices/payments
  • Arrangements and agreements for the completion/closing of the contract
  • Disposal plans and activities.

 

The records documenting sourcing and contract management activities need to be full, accurate, reliable and trustworthy. This means they need to:

  • Include enough detail to ensure that context, actions and decisions can be fully understood - who, when, why, how and with whose authority - so that the entire procurement and contract management process can be reconstructed
  • Be held in such a way that they can't be inappropriately accessed, altered or tampered with
  • Have proper version controls applied to them - this is particularly important if specifications or contracts are varied over time.

The records need to be captured into the correct agency system, with the necessary descriptive information (metadata). If the records are not created within the system, they need to be added as soon after creation or receipt as possible.

Contracts can be in place for some time and the staff managing them may change. New staff will need to rely on the records created and captured by their predecessors to successfully manage the contract and ensure all obligations are met.

It is critical that sourcing and contract management records are held securely and protected from unauthorised access. A great deal of the information provided by potential suppliers is likely to be commercially sensitive.

The minimum required retention periods for sourcing and contract management records is specified in PROS 07/01 Retention and Disposal Authority for Common Administrative Records. Generally speaking, sourcing and contract management records do not need to be kept for a long time - but are critically important for the minimum period of time they must be retained. See PROS 07/01 for further details on retention.

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