Frequently Asked Questions
What is a Preferred Supply Arrangement?
Preferred Supply Arrangements are specified groupings of suppliers that have been pre-qualified and appointed by WALGA to supply a category of goods or services to Local Governments. This follows a rigorous public procurement process that is fully compliant with legal and best practice purchasing requirements.
The Arrangements are established using aggregated or group purchasing to ensure superior value for money to Members.
Under the Local Government (Functions and General) Regulations 1996, a Tender exemption applies to Preferred Supply Arrangements. So Local Governments can purchase any value of goods or services from a Preferred Supplier without going to Tender.
What is aggregated purchasing?
Aggregated or group purchasing involves a group of organisations combining their buying power and collectively going to market for goods or services to achieve better procurement outcomes. Combining the expenditure requirements of individual organisations (small customers) into an aggregated offer (big customer) achieves better pricing and supply conditions for participants.
WALGA’s Preferred Supply Program uses aggregated purchasing to harness the significant buying power of the entire Local Government sector in WA to leverage superior pricing and supply conditions. This delivers best value for money to all Local Governments.
What are the benefits of using a Preferred Supplier?
- Streamlined Procurement – faster and easier to purchase any value of goods and services without the need to Tender.
- Regulatory Compliance - full purchasing compliance ensures that the risks of non-compliance and anti-avoidance are mitigated.
- Best Price Guaranteed - Preferred Suppliers are legally required to provide their best prices and conditions of supply to Members procuring goods or services through a WALGA Arrangement.
- Ability to Negotiate – Local Governments are able to negotiate with Preferred Suppliers on items such as scope, deliverables, value adds, pricing and terms to ensure best value for money.
- Quality Suppliers – WALGA Contracts with the best suppliers of goods and services and provide direct access to the brands that Members want.
- Tailored to Local Government – built around the specific needs and requirements of Local Governments in Western Australia.
- Independence and Probity - separating the Contract Principal (WALGA) from the Supplier and the Customer (Local Government) reduces the propensity for procurement fraud and corruption.
- Professional Contract Management – all Preferred Suppliers are subject to ongoing contract management by WALGA to ensure compliance, high performance and to protect Members from contractual disputes.
How does WALGA establish Preferred Supply Arrangements?
The process used by WALGA is:
- Planning/Consultation: comprehensive research and analysis involving consultation with Local Governments and relevant industries. This ensures that Preferred Supply Arrangements are contemporary, relevant and align with Member needs.
- Risk Assessment: extensive research and analysis to identify and effectively mitigate procurement risks.
- Procurement Plan: provides the end-to-end framework for the procurement process which complies with best practice.
- Tender Specifications: comprehensive specifications which are contemporary and relevant are developed using professional expertise, Members, sector/industry input and legal advice.
- Tender Documentation: best practice Tender documentation is utilised in line with WALGA’s Procurement Toolkit.
- Public Tender: the public procurement process is fully compliant with the Local Government (Functions and General) Regulations 1996. Local Governments are involved in the evaluation of Tenderers, including assessing compliance, capability, resources and expertise followed by a value for money assessment of the offer. The evaluation process also includes an independent audit of financial and operational capacity, risk profile, legal status and company structure.
- Contract Management: every Preferred Supplier is assigned a dedicated Contract Manager who is responsible for ongoing compliance and performance management. Specific activities undertaken include:
- Establishment and monitoring of Key Performance Indicators.
- Ongoing compliance and risk management audits.
- Quarterly Contract Management engagements.
Why do WALGA Arrangements not include all suppliers?
The philosophy used in structuring the composition of Preferred Supply Arrangements is geared towards:
- Ensuring only suitably pre-qualified suppliers are on WALGA Arrangements, based on qualitative strength and full compliance;
- Providing Members with access to the brands they want;
- Providing Members with sufficient choice of suppliers;
- Driving optimal value for money; and
- Providing a sustainable, economically viable and diverse range of suppliers that meet the broad range of Local Government needs.
Optimal value for money cannot be achieved by simply replicating the market. This offers no real incentive to suppliers because there is no service benefit for them. However, best value for money can be ensured by selecting an exclusive group of suppliers that:
- Is large enough to give Members sufficient choice between suppliers;
- Ensures that the brands that Local Governments want are available;
- Demonstrate outstanding capability and quality;
- Balances the level of supply and demand within a constantly evolving market; and
- Includes suppliers that will guarantee superior pricing and conditions of supply because of the market share that is available to them as a Preferred Supplier.
This ensures that there is sufficient competitive tension within the market of Preferred Suppliers that are appointed to the Arrangement, encouraging optimal performance and ensuring best value for money. Nonperforming suppliers risk being removed from a Preferred Supply Arrangement and being replaced by other suppliers that are not currently on the Arrangement.
Do Preferred Supply Arrangements ensure best value for money?
Achieving best value for money should be the basis of all procurement decisions. However, best value for money is often mistaken for meaning the lowest priced good or service. Extensive research confirms that often the cheapest priced good or service will not represent best value for money.
There are a number of factors that must be considered by Members in determining value for money from their purchasing:
- The supplier’s proven capability, which includes their relevant experience, expertise and performance history.
- The quality and technical merits of the good or service offered.
- The risks associated with purchasing from the supplier.
- Whole of life costs (eg purchase price, installation costs, maintenance and repair costs, disposal costs, disposal value and any transition costs).
- Extent to which the good or service meets the Local Government’s needs.
- The extent that ongoing maintenance, service and support is costed into a quotation to complement the supply of goods.
- Timeframes and allocation of resources.
Value for money underpins every Preferred Supply Arrangement. This is achieved as Preferred Suppliers:
- Are pre-qualified using a robust evaluation process to ensure that they possess the requisite experience, proven technical expertise and suitably qualified staff, and have a record of delivering high quality products or services.
- Must demonstrate that the goods or services they supply meet or exceed the technical requirements stipulated in the Tender Specification for the Preferred Supply Arrangement.
- Are subject to an extensive due diligence process to ensure that risks associated with purchasing from the supplier are mitigated. This includes an independent financial viability assessment; reference/referee checking; credit rating assessment; and check of certifications, licenses and memberships to professional bodies.
- Have their tenders assessed including (where applicable) a detailed assessment of whole of life costs relating to the provision of a good or service to ensure optimal value for money.
- Are legally required to provide their best price and conditions of supply to Members. This provides the assurance to members that they are getting the best value for money available.
- And their Preferred Supply Arrangements are designed to meet the specific needs and requirements of Local Governments.
Importantly, members can negotiate with Preferred Suppliers negotiate to maximise value for money, and can leverage additional discounts on the basis of the volume or value of items they are purchasing. Such an approach cannot be used by Local Governments within a public Tender process.
How are financial savings quantified?
Aggregated purchasing through the Preferred Supply Arrangements delivers a wide range of significant discounts, cost savings and other procurement benefits to Members.
Financial savings are determined by requiring Preferred Suppliers to confirm the discount off normal market rates that they will provide exclusively to WALGA Members. Pricing and discounts offered will vary between suppliers appointed to a Arrangement. Preferred Supplier pricing can be obtained as commercial in confidence information by logging into eQuotes.
We compare the cost of WALGA’s pricing with normal market prices to ensure there are savings to Members. This delivers superior pricing across the Local Government sector.
The Tender exemption for Preferred Supply Arrangements also enables Local Governments to engage directly with pre-qualified suppliers to secure even better value for money in their purchasing. That’s because Local Governments can use the competitive nature of the quotation process to yield further price reductions, additional goods/services or other benefits such as extended warranties or discounted maintenance/servicing costs. Leveraging greater benefits may be achieved through buying multiple items, offering a fixed period of supply or giving a minimum spend commitment.
How does WALGA deal with performance issues?
All Preferred Suppliers are subject to ongoing Contract Management by WALGA’s Contract Managers. This includes regular compliance audits/reviews, quarterly meetings/contacts to review supplier activity and ongoing monitoring of supplier performance against contractual KPIs. To do this, WALGA needs to be made aware of any problems or performance issues that Local Governments may be having with a particular supplier. If we don’t get told of any issues, we can’t intervene and help resolve a dispute or performance issue.
If there are any performance issues or problems with a Preferred Supplier, please contact the relevant WALGA Contract Manager, who will assist you to resolve the dispute. Serious or ongoing performance issues that are not rectified may result in a supplier being suspended or terminated and losing their Preferred Supplier status.
Do I have to use a Preferred Supply Arrangement?
The use of Preferred Supply Arrangements is not mandatory. Local Governments can undertake their own purchasing arrangements or procure from aggregated supply contracts such as State Government Agreements (where permitted to do so).
There will be occasions where Members need to procure independently, particularly for goods and services that are locally or regionally based. However, it is recommended that Local Governments check to see if a WALGA Arrangement is available before Tendering, particularly when they are purchasing from suppliers that are already pre-qualified.
Unnecessary Tendering frustrates Preferred Suppliers who have already guaranteed best pricing and conditions of supply to Local Governments. Responding to individual Tenders requires them to incur costs which could be avoided by procuring through a Tender exempt WALGA Arrangement.
Does WALGA support Buy Local?
Yes - WALGA supports the use of local suppliers to ensure that local economies remain sustainable. Use of WALGA Preferred Supply Arrangements in conjunction with local suppliers can deliver dual economic benefits and need not conflict with Buy Local or Regional Price Preference policies.
WALGA seeks to include local and regional suppliers on applicable Preferred Supply Arrangements by widely advertising all of our Tenders and providing for suppliers to register (at no cost) to receive notifications of Tenders via our online Tender portal (www.tenderlink.com/walga).
WALGA often contracts with a manufacturer at the State or National level which ensures that the entire franchise or dealer network throughout Western Australia is covered. This allows Local Governments to purchase locally or regionally from a dealer or franchise owner and still secure the superior pricing and other procurement benefits from the WALGA Contract. Examples of where this has been achieved include the Preferred Supply Arrangements for Trucks, Agricultural & Turf Equipment, Bulk & Retail Fuel, Landscape Infrastructure, Road Building, Waste Collection, Hardware, Workwear & Footwear, Plant & Equipment, Motor Vehicles and a range of Consultancy Services.
Where local and regional suppliers respond to a WALGA Tender, they are required to meet the qualitative and compliance requirements set by WALGA and must be prepared to offer their best pricing and conditions of supply through the WALGA Arrangement arrangement. Where these outcomes can be guaranteed, WALGA will generally include these suppliers on a Preferred Supply Arrangement.
Are Preferred Supply Arrangements legally compliant?
Yes - regulation 11(2) of the Local Government (Functions and General) Regulations provides the basis for WALGA establishing Preferred Supply Arrangements. This permits Members to purchase any value of goods and services over any time period through WALGA Arrangements without going to Tender. This is because WALGA has already undertaken a fully compliant public procurement process on behalf of the whole sector.
Preferred Supply Arrangements also fully comply with national competition laws, including the provisions of the Competition and Consumer Act 2010 (Cth).
How is the Preferred Supply Program funded?
WALGA establishes and manages a large number of Preferred Supply Arrangements on behalf of all Local Governments WA covering a wide variety of goods, services and market structures.
All Preferred Suppliers pay a small administration fee and/or an appropriate contract management rebate to WALGA. This is fixed for the term of the Contract.
As a not-for-profit organisation owned by Local Governments, WALGA re-invests all fees and/or rebates from Preferred Suppliers into recovering the costs of procurement, contract management and other services that directly benefit Members. These fees and/or rebates are relatively insignificant when compared to the usual costs incurred by suppliers in responding to individual Local Government Tenders. In fact, research conducted over the past 10 years has demonstrated that Preferred Supply Arrangements substantially reduce the costs incurred by suppliers in doing business with Local Government.
Under the Terms and Conditions of Contract with every Preferred Supplier, costs relating to the payment of administration fees and/or Contract Management rebates to WALGA are not permitted to be passed onto Local Governments procuring through a WALGA Arrangement. Such costs are to be regarded as the supplier’s cost for doing business with Local Government under a whole-of-sector and Tender-exempt arrangement.