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Smarter Buying Guidelines
2.1.b Analysis of Commodity Procurement Spend User Guide
WHY ANALYSE?
Agencies buy commodities ranging in price from very expensive items (like tractors) to very low priced items
(like pens and pencils). In this document commodities refers to both goods and service purchases.
Expensive items are usually sent out to competitive tender and are covered by internal procedures and
processes that guide staff. The purchase of low priced items however may not be as well controlled.
Recent analysis of one agencys spending revealed that although the purchases they made for under $100
made up less than 1% of their total spend, it represented 33% of their invoices an inefficient approach to
buying.
Analysis of commodity based procurement spend in your agency may reveal examples of this sort of buying.
Where possible, agencies should seek to rationalise the number of suppliers they do business with and
reduce the amount of purchasing done in a piecemeal fashion. By aggregating their spend with fewer
suppliers agencies will enjoy savings through volume discounts. By standardising the range of items
purchased these benefits can be even further enhanced
HOW DOES IT WORK?
Conducting the analysis of commodity based procurement spend is relatively simple. Everything that is
bought by your agency is paid for in some way and details of such payments are recorded somewhere within
an agencys financial systems. For smaller agencies there may be just one system that holds this
information but larger agencies may have a number of systems that capture information at a transaction level
and pass the information upwards in a summarised format. The information required to feed the commodity
analysis is most likely to come from the agencys finance systems.
THE STEPS TO ANALYSIS
1. Start with the Chart
The agency Chart of Accounts, that is. Obtain a copy of your agencys chart of accounts and identify
the accounts that primarily relate to your goods and services spend. These accounts will cover the
commodities that you will be analysing. Leave out the accounts relating to payroll-related expenses
and any other accounts that do not relate to the goods and services spend.
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2. Categorise the Commodities
Based on the accounts used for goods and services, the next step is to categorise the commodities
your agency uses into high-level groupings. For example, does the account cover information
technology or fleet related purchases? This will capture the total spend in high-level groups and will
indicate which categories are likely to lead to the greatest potential for savings.
For the purpose of the analysis, and the resulting report, it is suggested to group the selected
commodities based on similar purchase types. This can be achieved by grouping the financial chart of
account information into categories. Some suggested categories are outlined below:
- Construction and Infrastructure
- Facilities Management and Maintenance (Buildings, Road & Rail)
- Property Related
- Transport of Goods and People
- Technical, Scientific and Specialist
- Information Technology and Telecommunication
- Corporate Goods and Services
- Other
Suggestions for allocation of goods and services within these categories are provided in Appendix A:
Mapping of Account Codes to High-Level Goods and Services Groupings. However, agencies should
adapt these categories to reflect their own purchasing profile, particularly in categories such as
Technical, Scientific and Specialist. It is also recommended that agencies use the Other category
only when every other option has been exhausted.
3. What you Need from your Financial Management Information Systems (FMIS)
You will need to capture information at the transaction level. FMIS reports should include the following
fields as minimum data requirements and the reports should be at a line item or similarly detailed level:
- Supplier Name and other details, including the suppliers location, where available. The
suppliers details are a key component of the analysis within an account or commodity group.
- Reference Number this may be the purchase order or invoice number recorded in the FMIS.
Producing report at transaction level will assist in identifying the number of invoices or purchase
orders sent to a supplier.
- Account Codes to establish what is being purchased and to assist in grouping commodities
in categories.
- Cost Centres to identify who is making the purchase.
- Expenditure ($) how much was spent? It is suggested that you use the GST exclusive
amount.
- Transaction Date this will help to identify if there are seasonal or other trends in purchasing a
commodity or from a particular supplier.
Additional information, such as description fields, project codes or contract numbers, will be useful if
available.
Refer to Appendix B: FMIS Report, including some basic analysis for an example of the analysis that
can be performed using the information from the FMIS report format described above.
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4. Run the FMIS Reports
Now that the information required from your FMIS has been defined, select a time period for the
report. Consider the following issues when selecting a time period:
- The period for analysis should be recent.
- The analysis should span a sufficient period to allow the detection of trends. A 12 month period
is preferable to capture a complete annual cycle of purchasing.
- Be aware of any unusual buying behaviour during the analysis period and consider this during
the in-depth investigation. If this is not known ahead of time, it will become apparent in the
report results.
Once the FMIS reports have been run, transfer or copy the results into an Excel spreadsheet. Use a
separate spreadsheet for each commodity group or category. This will provide a convenient platform
for sorting, arranging and analysing the results. Create a table where the columns are headed with
the data fields defined above. In order to keep track of the work and provide a ready reference, create
a separate spreadsheet to list the accounts in the categories and the associated expenditure.
5. Cleanse the Collected Data
Review the financial reports or spreadsheets for each category to identify any obvious errors. This
includes payments incorrectly posted to the wrong account. This step will help in the analysis process
by removing anomalies that may contaminate the final reports. Keep track of these changes and,
where possible, allocate the changes to the correct category.
6. Rank the Results
Its time to prioritise the commodities for analysis. It may be that looking at the reports at this stage will
suggest further opportunities for grouping by commodity categories. Sort the categories by looking for
commodities with a high spend, a large number of suppliers and/or a large number of invoices. Select
these commodities for analysis first, as they tend to offer a higher potential to aggregate expenditure,
reduce administrative processes, minimise risk and rationalise suppliers. Also, the larger the number
and range of commodities analysed the greater the opportunities for identifying savings.
7. Analyse the Procurement Activity
The next step is to analyse the information for a specific commodity. This involves examining the data
in several different ways to develop a detailed view of the procurement activity for the commodity. Use
of the Pivot Table facility in Excel will help in the process. The following are the suggested queries
that will assist in the analysis:
- Suppliers The supplier field is the primary field used to sort and analyse the commodity
information. Check to see if duplicate entries exist for a supplier. Add the total number of
suppliers for the commodity and calculate the average income received by each supplier.
- Expenditure For each supplier add a field to calculate the total amount received by the
supplier as a % of the total spend on this commodity.
- Invoices For each supplier total the number of invoices and calculate the average invoice
value. This will identify opportunities for rationalising the number of supplier invoices and will
indicate if the supplier is issuing a lot of low-value invoices. This result suggests that are a large
amount of piecemeal purchasing is occurring.
- Location Examine the supplier data to determine the number of regional vs. metropolitan
suppliers and the amount of expenditure on regional vs. metropolitan suppliers.
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8. Profile the Spending on the Commodity by Supplier
Now that the initial data analysis is complete, the supplier information for the commodity is profiled.
This involves preparing a table to identify the key suppliers and those that are only being used
sporadically. Create a copy of the original commodity spreadsheet for use in the subsequent analysis
exercises.
The suggested format for the profile is to rank the suppliers by their total expenditure for the
commodity. A useful standard to use is to rank the suppliers accordingly:
- Top 1% Supplier Group
- Top 5% Supplier Group
- Top 10% Supplier Group
- Top 20% Supplier Group
- Remaining 80% Suppliers
That is, where a commodity has a 100 suppliers, the supplier with the largest amount of spend is in
the Top 1% Supplier Group. The next four suppliers make up the Top 5% Supplier Group, and so on.
Examine the supplier profile table for the commodity. Is the spend for the commodity shared between
a few suppliers, or spread across many? What percentage of the spend is received by the top
supplier groups and what do the remaining 80% supplier group receive? Do the results suggest
aggregation opportunities?
Keep track of the suppliers in the top supplier groups. You may discover that several commodities
within a particular category or group of categories may be available through one supplier. This may
present an aggregation opportunity by supplier rather than by commodity. Refer to Appendix C: FMIS
Report, including some basic analysis for an example of an in-depth analysis.
9. Analyse Spending Activity by Cost Centre
The objective of this exercise is to show the distribution of the expenditure on the commodity across
the agencys cost centres. You will need to decide if it is more appropriate to analyse the commodity
business unit or project or division.
Similar to the supplier analysis, rank the spending by cost centre (or business unit, etc.). This will
indicate who is procuring the commodity and whether the purchasing is centralised or evenly
distributed between a number of cost centres, etc. The facts gathered in this and the previous step
will assist in developing recommendations for the commodity.
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10. Look at the Existing Formal Buying Arrangements
The Department of Finance (Finance) manages some sixty common use arrangements, ranging from
fleet vehicles, personal computers and stationery to air travel booking, waste management and
records storage services. Common Use Arrangements (CUAs) are whole-of-government standing
offer arrangements, awarded to a single or a panel of suppliers for the provision of specific goods or
services commonly used within Government.
In addition to the CUAs, larger agencies may have established their own contract for a commonly
purchased commodity.
Look for existing formal arrangements that are applicable to this commodity:
- Agency Specific Contracts Is the contract established by the agency being used correctly?
What is the extent of off-contract purchasing?
- Common Use Arrangements Information on the existing CUAs is available from the DTF
website, including the contracted suppliers. Compare the list of Common Use Arrangements
suppliers for the commodity with the report to see the extent of the contract usage.
- Analyse how the remaining procurement is being done. For example, is the purchasing
mainly piecemeal, or was the purchasing for this commodity a one-time event.
11. Talk to the People Who Know
Review the findings of the analysis and consider recommendations for improving the buying behaviour
for the commodity. Some tips are outlined below. But be sure to consult with your agency specialist
of procurement people prior to finalising any list of proposed actions if you havent before. They will
help to provide a reality check on any proposals and are sure to have useful suggestions of their own.
12. Make Recommendations for Each Commodity
For example:
- Maximise the use of existing agency specific or government-wide CUAs.
- Establish new standing offer or period contracts for those things that are purchased repeatedly.
- Formalise contractual arrangements with large spend suppliers (or an alternative). This may be
for an individual commodity or a number of different commodities sold by the supplier.
- Implement invoice rationalisation mechanisms. Invoicing could be simplified with a regularly
used supplier if a monthly account is established.
- Where it makes sense (probably for the lowest spend suppliers) explore opportunities to
aggregate the supply of the commodity through fewer suppliers. It may also be possible to buy
a number of different commodities through one or two suppliers leading to other aggregation
opportunities.
- Try to standardise the range of different models purchased for the same commodity. Moving to
an agency-wide standard for purchasing some items, such as business machines, can deliver
additional benefits such as maintenance and training costs.
- Encourage buying behaviour to move from low-value, piecemeal transactions to planned bulk
purchases of the commodity.
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WHAT NEXT?
The financial information has been collected and sorted. The major suppliers for commodities have been
identified. Recommendations have been developed for commodity groups. What next? Strategies specific
to your agency are now required to implement the recommendations. Set a target for each commodity and
develop a mechanism to measure progress. The following are suggested steps to get the best result from
the analytical work.
i. Establish a Project Group
Although achieving the savings targets is every managers responsibility, its suggested that agencies
appoint a champion to co-ordinate and monitor progress. Establishing a project group with
representatives from across the organisation can further facilitate this. One approach to tackling the
challenge is to improve buying behaviour on a commodity-by-commodity basis or for all purchasing
across a directorate. Regular meetings will provide opportunities for knowledge sharing and a
discussion forum.
ii. Develop an Action Plan
J ust as an early step of the analysis work was to prioritise the commodities, developing a plan to
implement those actions is a priority. The development of the action plan can be co-ordinated through
the project group.
iii. Set Savings Targets and Regularly Monitor Progress
Keep in mind that there will be different savings potential for different commodities. Set a stretch
target, in order to maximise the benefit of the savings for the agency. The next challenge is
monitoring progress and there are a number of options for this. One is to set a target at the level of
commodity group and regularly report on the expenditure by account. Apart from cost savings,
another objective is to rationalise suppliers to reduce piecemeal spending. A method for reporting
piecemeal spending is detailed at Appendix D: Monitoring Piecemeal Purchasing.
iv. Let Everybody Know
Make everyone aware that better buying behaviour is an agency priority. Keep them informed of the
progress of the project team. Finance has developed an extensive information resource for agencies
on smarter buying behaviours. This includes training through the Professional Procurement Series
and regular reports on agency Buying Behaviour.
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Appendices
APPENDIX A: Mapping of Account Codes to High-Level Goods & Services Groupings

The following is a suggested grouping of financial accounts

Construction
& Infrastructure
Construction and demolition materials and services
Land administration charges
Maritime infrastructure
Site supervision services
Transport infrastructure

Facilities Management
& Maintenance
Air-conditioning systems
Maintenance and repairs to buildings and premises, roads and rail, etc.

Property Related Cleaning services and materials
Gardening and land maintenance
Environmental services
Waste/rubbish disposal costs

Transport of
Goods & People
Aircraft, vessels, motor vehicles and related expenses
Fleet management
Fuel & oil
Freight, cartage and courier
Travel, accommodation and meals
Postage and postal services
Taxi fares
Towing

Technical,
Scientific & Specialist
Agriculture, horticulture, plants and animals
Educational products, publications and training
Health and medicine goods and services
Law, order and safety goods and services
Food and tobacco supplies
Catering

Information Technology
& Telecommunications
Information technology expenses, including equipment, consumables,
maintenance, software, licences and services
Telecommunication goods and services
Electronic and electrical products

Corporate
Goods & Services
Advertising, marketing and promotions
Professional services
Events, functions and programs
Stationery, office equipment, furniture and fittings
Memberships
Printing, binding and copying charges
Uniforms, clothing and footwear
Departmental hospitality and entertainment

Other This category should only be used only when every other option has
been exhausted.

Non Goods & Services Expenses unrelated to procurement
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APPENDIX B: FMIS Report (including some basic analysis)
The report shown below is based on FMIS data and forms the basis of the more detailed analysis of this
sample commodity.
This sample is based on a summary of an agencys expenditure on cleaning materials over a twelve-month
period.
No
Supplier
Group Range
Trading Name
Total
Expenditure
% of Total
Expenditure
No of
Invoices
% of No of
Invoices
Location
Average
Invoice
Spend
1 Top 1 Group Bunzl Limited $147,137 19.63% 207 12.91% Metro $711
2 Top 5 Group Boise Office Solutions $81,309 10.85% 411 25.62% Metro $198
3 Top 5 Group J asol Australia $44,000 5.87% 46 2.87% Metro $957
4 Top 5 Group South West Distributors $43,044 5.74% 17 1.06% Regional $2,532
5 Top 5 Group Northern Paper Distributors $35,988 4.80% 64 3.99% Regional $562
6 Top 10 Group Goldfields Cleaning Supplies $35,072 4.68% 37 2.31% Regional $948
7 Top 10 Group Amcor Packaging (Australia) P/L $34,638 4.62% 17 1.06% Metro $2,038
8 Top 10 Group J ohnson Diversey $34,179 4.56% 45 2.81% Outside WA $760
9 Top 10 Group Midwest Chemical & Paper $32,030 4.27% 81 5.05% Regional $395
10 Top 10 Group Klen International $25,793 3.44% 52 3.24% Regional $496
11 Top 20 Group Broome Progressive Supplies $23,358 3.12% 96 5.99% Regional $243
12 Top 20 Group Peerless Emulsion (WA) PTY LTD $18,061 2.41% 33 2.06% Metro $547
13 Top 20 Group ABCO Products $17,307 2.31% 32 2.00% Metro $541
14 Top 20 Group Chemform $15,104 2.02% 28 1.75% Metro $539
15 Top 20 Group Food Packaging Australia $12,013 1.60% 14 0.87% Metro $858
16 Top 20 Group Foodlink Food Service Pty Ltd $11,545 1.54% 14 0.87% Metro $825
17 Top 20 Group Southway Distributors $11,421 1.52% 14 0.87% Regional $816
18 Top 20 Group Dyson's Packaging Pty Ltd $9,793 1.31% 19 1.18% Metro $515
19 Top 20 Group Bunnings Building Supplies Pty Ltd $7,442 0.99% 20 1.25% Metro $372
20 Top 20 Group P&R Edwards $6,846 0.91% 9 0.56% Metro $761
21 Top 20 Group Statewide Cleaning Supplies Pty Ltd $6,588 0.88% 17 1.06% Metro $388
22 Remaining Group Great Southern Packaging Supplies Pty Ltd $6,175 0.82% 11 0.69% Regional $561
23 Remaining Group Parrys Merchants.Com $5,827 0.78% 17 1.06% Regional $343
SUB-TOTAL $664,670 88.68% 1,301 81.25% N/A $510
Suppliers Number 24 to 96 have been removed from this report for ease of reading.
No
Supplier Group
Range
Trading Name
Total
Expenditure
% of Total
Expenditure
No of
Invoices
% of No of
Invoices
Location
Average
Invoice
Spend
97 Remaining 80% J im Kidd Sports $64 0.01% 1 0.06% Metro $64
98 Remaining 80% The Farm Shop (WA) 1999 PTY LTD $55 0.01% 1 0.06% Metro $55
99 Remaining 80% K Mart Australia Limited $40 0.01% 1 0.06% Metro $40
100 Remaining Group Maddisons Store $28 0.00% 1 0.06% Metro $28
101 Remaining Group Retravision $25 0.00% 2 0.12% Metro $12
102 Remaining Group Betta Electrical $24 0.00% 1 0.06% Metro $24
103 Remaining Group Paper Plus Office National $22 0.00% 3 0.19% Regional $7
104 Remaining Group Roebourne Supply Mart $18 0.00% 1 0.06% Regional $18
105 Remaining Group Coles Supermarkets Australia Pty Ltd $17 0.00% 1 0.06% Metro $17
TOTAL $749,495 100.00% 1,604 100.00% N/A $467.27
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APPENDIX C: FMIS Report, including some basic analysis
Below is an example of an in-depth analysis, including the resulting recommendations, for an agencys
expenditure on printing and publication.
Printing and Publication
An analysis of Agency Xs expenditure on printing and publications was undertaken as the data revealed a
medium spend in these account codes and a high number of lower value payments. The following Agency X
account codes are included in this spend area:
Printing and publication printing contract
Printing and publication publications
Printing and publication other
Spend on this Commodity
Agency X has spent $881,446 in the review period on printing and publications. A total of 499 invoices were
issued during this period, which equates to an average invoice spend of $1,766.
The Average Invoice Spend per Supplier Category is shown below. The Average Invoice Spend falls sharply
from $8,547 for the Top 1 Supplier Group to $682 for the Remaining Suppliers
Average Invoice Spend per Supplier Category
Supplier Category
Total
Expenditure
% of Total
Expenditure
Number
of Invoices
Average
Invoice Spend
Top 1 Supplier Group $273,498 31% 32 $8,547
Top 5 Supplier Group $501,585 57% 123 $4,078
Top 10 Supplier Group $630,576 72% 235 $2,683
Top 20 Supplier Group $757,921 86% 318 $2,383
Remaining Suppliers $123,525 14% 181 $682
TOTAL $881,446 100% 499 $1,766

Average Invoice Val ue per Suppl ier Percentile Category
$8,547
$4,078
$2,683
$2,383
$682
$-
$1,500
$3,000
$4,500
$6,000
$7,500
$9,000
Top 1 Supplier
Group
Top 5 Supplier
Group
Top 10 Supplier
Group
Top 20 Supplier
Group
Remaining
Suppliers

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Suppliers for this Commodity
There were 109 suppliers for this commodity. The average income per supplier is $8,087. However, the top
supplier received a total of $273,498. Other suppliers in the top 5 Supplier Group received a total of $35,551
to $66,934. By comparison the Remaining Group of Suppliers received between $9 and $2,632.
The data reveals that at least 12 of the 109 suppliers were identified as regional suppliers that received a
total income of $8,226 (1% of total expenditure).
The Average Supplier Income per Supplier Category is shown below. The Average Supplier Income falls
sharply from $273,498 for the Top 1 Supplier Group to $1,404.
Average Supplier Income per Supplier Category
Supplier Category
Total
Expenditure
% of Total
Expenditure
Number
of Suppliers
Average
Supplier Income
Top 1 Supplier Group $273,498 31% 1 $273,498
Top 5 Supplier Group $501,585 57% 5 $100,317
Top 10 Supplier Group $630,576 72% 10 $63,058
Top 20 Supplier Group $757,921 86% 21 $36,091
Remaining Suppliers $123,525 14% 88 $1,404
TOTAL $881,446 100% 109 $8,087

Average Supplier Income per Suppl ier Percentile Category
$273,498
$100,317
$63,058
$36,091
$1,404
$-
$50,000
$100,000
$150,000
$200,000
$250,000
$300,000
Top 1 Supplier
Group
Top 5 Supplier
Group
Top 10 Supplier
Group
Top 20 Supplier
Group
Remaining
Suppliers

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Cost Centre Expenditure on this Commodity
Analysis of Agency Xs cost centres has revealed that 11 cost centres have paid for publications. The
applicable cost centres and the expenditure amounts are contained in the table below.
Agency X Business Unit Description Total Expenditure % of Total Expenditure
Cost Centre 1 $510,993 57.96%
Cost Centre 2 $185,266 21.04%
Cost Centre 3 $76,028 8.64%
Cost Centre 4 $35,034 3.97%
Cost Centre 5 $28,028 3.18%
Cost Centre 6 $28,002 3.18%
Cost Centre 7 $11,203 1.27%
Cost Centre 8 $3,445 0.39%
Cost Centre 9 $3,202 0.36%
Cost Centre 10 $246 0.03%
TOTAL $881,446 100.00%
Based on this data the largest proportion of expenditure comes from Cost Centre 1 representing 58 percent
of spend.
The distribution of the overall expenditure suggests that procurement of this commodity is relatively
centralised, as over 87% of the spend is with only 3 cost centres.
Common Use Arrangements for this Commodity
As of 1 March 2005 a mandatory Common Use Arrangement for printed stationery and photocopying
services was established. This Contract, CUA 8404, includes photocopying and the production of
letterheads, With Compliments slips, business cards and printing onto record files.
Agency Specific Contracts
Upon review of the contract list and the warehouse data it appeared that 12 Agency Specific Printing
contracts were active during the relevant period. These include:
Contract
Number
Contract
Description
Supplier
Total
Contract Price
Contract
Period
RFT 15/04 Publication of Manuscripts Supplier 1 $55,000 01/11/04 01/11/05
RFT 19/04 Printing of public education material Supplier 2 $100,000 01/08/04 12/01/06
RFT 95/05 Design Production and Print
Management of annual business plans
annual reports and strategic plan
Supplier 3 $100,000 19/04/05 18/04/07
RFQ 03/04 Printing of Business Cards Supplier 4 $50,000 12/11/04 17/05/07
It was noted that 4 of the top 20 suppliers provided goods and services under Contracts established through
RFTs or RFQs.
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Remaining Purchases
As there was no Common Use Arrangement available during the period covered by the report and there
were only four agency specific contracts it appears that a large volume of transactions was undertaken on a
one-off basis, indicating piecemeal buying.
Recommendation for this Commodity
The efficient use of the new mandatory CUA will provide significant savings opportunities and assist in
supplier consolidation. Under this new Common Use Arrangement savings will be achieved with the
purchase of the Agencys letterheads, With Compliments slips, business cards and record files.
It is recommended to closely examine whether publications can be produced using photocopying
services offered through the new mandatory Common Use Arrangement 8404 instead of printing
services. Cost savings between 10-20 percent could be achievable through process changes. The
following publications could be considered for photocopying:
- annual reports and business plans
- training course materials
- some of the Agencys PR material
It is recommended that the Agency examine which of their publications can be produced and
distributed as soft copy material to further reduce printing costs. It is noted that other Departments
have used a similar practice to reduce costs. For example, the Department of the Premier and
Cabinet ceased printing all employment opportunities in its Intersector magazine after converting this
publication to an online brochure. It might be possible to print fewer copies of the business plans and
annual reports.
Currently there are a total of 100 suppliers for this commodity. Of this total, 20 are regional and/or
specialist suppliers. However, the remaining 80 suppliers represent opportunities for supplier
consolidation. It is recommended that an Agency Specific Contract be established for all of the
Agencys non- CUA printing including the printing of any publications.
Overall, Printing and Publications is considered as a commodity that offers substantial saving opportunities.
Through the use of the new CUA 8404, changes in business processes (printing instead of copying) and
supplier consolidation savings overall savings in the order of 10-20 percent should be achievable.
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APPENDIX D: Monitoring Piecemeal Purchasing
What is Piecemeal Purchasing?
Piecemeal purchasing is often unplanned purchasing and it can take a number of forms. It can mean
making a one-off or several low value purchases from a non-contracted supplier. It can also mean issuing a
number of low-value purchase orders to a contracted supplier, rather than sending a single purchase order.
In any case, this is not the most efficient way to purchase.
This is particularly the case when the piecemeal purchasing is taking place instead of from a contracted
supplier. A major risk of piecemeal purchasing is that it often involves paying retail rates for items that are
available through established contracts.
Paying a larger number of low-value invoices represents a significant administrative cost to agencies.
Agencies can benefit from reducing the volume of invoice processing they do and they can do this by
reducing the amount of piecemeal purchasing. This can also be achieved by reducing the number of
invoices from regular suppliers. Establishing a regular invoicing cycle with suppliers on a monthly or
quarterly basis can deliver benefits to both agencies and suppliers.
How do I Reduce Piecemeal Purchasing?
The first step is to achieve an understanding of the amount of piecemeal purchasing being made by your
agency. See below on one method to measure and monitor piecemeal purchasing. The second is to use the
recommendations described in the main body of this document to create a framework that will assist to
reduce piecemeal purchasing.
Measuring Piecemeal Purchasing
i. Use the work from the Commodity Analysis Procedure to identify the number of purchase orders
created or invoices paid in the following ranges:
Group A Group B Group C Group D Group E Group F
$0$500 $501$999 $1,000-$5,000 $5,000$9,999 $10,000$20,000 $20,000$50,000
The results of the analysis can be further sorted by commodity. It is likely that some commodities will
have more piecemeal purchasing than others. It may be that the analysis reveals an amount of
unavoidable piecemeal purchasing. A certain amount of piecemeal purchasing is inevitable. However,
if purchases are regularly being made from a non-contracted supplier, the following aggregation
strategies should be pursued:
a. Identify the suppliers receiving the most purchase orders for aggregation in a formal contract
arrangement.
b. Also look for suppliers providing goods and services across a range of commodities. Is it
possible to consolidate these within an agency-specific arrangement? Are these items already
provided under another arrangement?
ii. Now that the extent of the piecemeal purchasing is understood, direct staff to make every effort to
reduce the number of low-value purchase orders sent. This will mostly be the purchase orders in
Groups A and B. To further reduce the administrative costs of issuing purchase orders and sending
invoices, consider the greater use of purchasing cards for low value purchases.
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Smarter Buying Guidelines
2.1.b Analysis of Commodity Procurement Spend User Guide
Procurement Reform Toolkit

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iii. Plan your purchasing. Piecemeal purchases are often unplanned purchases. For instance, make bulk
purchases of office consumables, such as stationery, toner, furniture or paper. Also, consider
changes to internal purchasing practices. Is there a central point or person responsible for ordering
office consumables? Centralising the purchase of common office consumables will reduce piecemeal
purchasing.
iv. Measure the progress made in reducing piecemeal purchasing by running the financial report at
regular quarterly intervals and comparing to the original report. A positive trend will see the number of
invoices or purchase orders in Groups A and B diminish, while the value of purchases in Groups C
and above increases.