The NSW auditor-general has found that the state's agencies aren't complying with e-procurement reforms laid out in 2006, with many ignoring the systems they are supposed to use, while others use them only as a reference.
The NSW Government made $23 billion worth of purchases from the private sector in the year to 30 June 2010, and is expected to make many more this year.
The State Contract Control Board (SCCB) negotiates with suppliers for a range of commonly used goods and services, which are referenced in an e-procurement system called Smartbuy. Smartbuy also collects information on agency purchasing pattens. This information is used by the SCCB to negotiate better state contracts.
A Premier's Memorandum from 2006 requires agencies with expenses over $400 million per annum to use Smartbuy for e-procurement, unless they have an alternate system approved by the government's CIO.
However, according to the NSW Auditor-General Peter Achterstraat in his Volume One Report to Parliament for 2011 summarising common themes from audits and performance reviews, only a small amount of procurements are carried out electronically.
"Overall, there was very poor compliance with the Premier's Memorandum. Some agencies had not implemented any systems, policies or procedures to ensure compliance, despite the reforms being announced five years earlier. Many other agencies only complied with the requirements occasionally," the auditor said.
His report looked into the e-procurement at 19 agencies, and the result was bleak.
"Of the 19 agencies reviewed, only four agencies complied with the requirements of this Premier's Memorandum in all material respects. All other agencies did not comply or did not consistently comply with the requirements and will receive adverse or modified review reports accordingly."
Mistakes made by the agencies included making purchases from non-SCCB suppliers because their systems weren't able to integrate to access current contracts, ignoring requirements to purchase products manually, and only using Smartbuy as a purchasing guide.
Some systems, from vendors such as SAP and Oracle, had the ability to be able to integrate with e-procurement systems, but this hasn't been explored, according to the audit.
Some agencies said they were using manual purchasing because they were able to negotiate a price that was lower than the price negotiated by SCCB and listed in Smartbuy. However, this was a "self-perpetuating" problem, according to the audit, as these purchases weren't being listed in the system, which meant SCCB didn't have the right information for negotiations, hindering it from achieving low prices.
Another issue was that Smartbuy hadn't been popular when it was first launched, with agencies resisting the implementation of compliant systems. The audit report said many of the issues had been fixed, but staff were still resisting. A Smartbuy optimisation project was currently underway to address some of the remaining issues.
Electronic tendering was also examined in the audit report. E-tendering has to be used for purchases over $250,000 that aren't available through SCCB contracts.
Of the 19 agencies reviewed, 12 agencies were considered to be compliant. Some of the issues noted in the audit included agencies using selective tendering rather than e-tendering due to supposed confidentiality concerns which the audit office didn't consider to be valid, and failing to publish projects on the e-tendering website.