Procurement manual: guide to procurement within BERR. Section E: managing the procurement process - part 3
URN No: URN 08/1509/A7
Department for Business, Enterprise and Regulatory Reform procurement manual section E: part 3 - managing the procurement process
E. MANAGING THE PROCUREMENT PROCESS
E.9 Frameworks
E.10 Quotations
E.11 Tendering
E.12 Tender Evaluation
E.13 Debriefing
E.14 Post Tender Negotiation
E.9 FRAMEWORKS
E.9.1 Contents
Introduction
Benefits of Frameworks
Types of Framework Arrangement or Agreement
Negotiations on prices in Framework arrangements or agreements
Undertaking a Procurement Exercise to Purchase a New Framework
- Selecting the Scope (Extent) of an Arrangement or Agreement
- Selecting the Term of an Arrangement or Agreement
- Supplier Selection
- Specifications
- Terms and Conditions of Contract
- Tender Evaluation
Managing a Framework Arrangement or Agreement
Completion Report
Termination of an Arrangement or Agreement
E.9.2 Introduction
The European Commission has recognised the need for framework agreements in their Consolidated Directive of 31 January 2006. This Directive has placed a structure on framework agreements. The maximum length of a framework agreement let under the new Directive is four years. There are two types of framework agreement, single or multi supplier. A single supplier Framework agreement places one supplier to do any work that is generated over the length of the framework agreement on a call off basis. A multi supplier framework will contain a selection of suppliers. When work is generated, all suppliers on the agreement must be invited to submit proposals in the form of a mini competition. A supplier on the framework agreement can only be excluded from the mini competition if they do not have the relevant competency to carry out the work.
Framework Definition: Frameworks are agreements to provide goods, works or services on specified terms.
There are two types of Framework:
• Framework Arrangements: Contain no contractual commitment on either side for the provision of any particular quantity. Framework Arrangements involve no commitment to purchase, although they commonly specify the terms and conditions of the eventual contract that would apply if and when goods, works or services are purchased.
• Framework Agreements: Incorporate a contractual commitment to purchase a particular volume or value of goods or services.
Framework Arrangements and Agreements have a number of applications, including the following:
a. to negotiate and promote best value for money centrally within the Department or nationally for common goods and services which can be purchased as and when required by individual management units;
b. to give individual management units access to providers of specialist services as may be required from time to time, thus relieving users of the need to conduct individual tendering exercises - such arrangements may offer a panel of providers from which the end user can select or may give one provider preferred supplier status;
c. to set the terms for works or services, e.g. maintenance, where the volume cannot be reliably set in advance.
BERR management units are strongly advised to take advantage of the range of established BERR Framework Arrangements and Agreements. Use of these Framework Arrangements and Agreements will, of course, have the benefits as described in Section E.9.3 - Benefits of Frameworks below.
Orders for goods, works or services covered by Framework Arrangements or Framework Agreements are commonly referred to as "call-offs". Consequently, the arrangements themselves are variously referred to as "call-off contracts".
E.9.3 Benefits of Frameworks
Frameworks offer a number of advantages:
• they offer the value for money advantages of centralised procurement without the commonly associated level of bureaucracy
• a single tendering exercise over the life of the arrangement reduces administrative effort and cost for the Department
• the initial tendering process will have identified competitive suppliers, who should then offer more competitive prices on the basis of the expected value of business
• quality assurance and legal requirements such as the Health and Safety at Work Act, etc., will have been dealt with at the outset
• call-offs are covered by BERR Standard Terms and Conditions combined with special terms and conditions appropriate to the items being procured and will, in general, provide better protection than individual small purchases under the supplier's standard conditions
• the agreed range of items or services should be at short notice thus reducing or avoiding stock holding for goods and reducing down-time on equipment maintenance and repairs
• the supplier benefits in terms of planning stock levels and continuity of supply
• a mutually beneficial longer-term working relationship can be established with suppliers
E.9.4 Types of Framework Arrangement or Agreement
There are three main types of Framework Arrangement or Agreement:
a. Fixed term - commonly used for the supply of goods and services. They normally provide estimates of the volumes or total value of items to be supplied. The main considerations are the selection of an appropriate term for the arrangement or agreement to run and the selection of the items to be covered. For guidance on the selection of items to be covered see Section E.9.6.1 - Selecting the Scope of an Arrangement or Agreement. For guidance on the selection of the term see Section E.9.6.2 - Selecting the Term of an Arrangement or Agreement.
b. Fixed quantity - provides the supplier with greater assurance that the estimated quantities will actually be called off. These can be developed into ‘standing orders' with a fixed quantity and frequency of delivery. For example, such arrangements can be used when buying low-cost consumables for which demand does not vary, and for certain types of service contracts, e.g. window cleaning, office equipment maintenance.
c. So-called "insurance" type - which typically fix the annual cost of a service irrespective of the number of times the service is required. This is particularly applicable to equipment maintenance contracts, where a long-term fixed price maintenance agreement can be seen as a significant benefit when selecting a supplier of capital equipment.
E.9.5. Negotiations on Prices in Framework Arrangements or Agreements
a. The EC has produced an interpretation that the award of individual contracts (under the umbrella of Framework Arrangement) can only be made on the basis of the terms and conditions (including the pricing mechanism) established in the Framework itself. No negotiation of price or the pricing mechanism already established in Framework Arrangements can take place at call-off - including Catalist (See Section F.3) and other Framework Arrangements available for Government Departments and Agencies to use (See Section F.5 - Other Sources of Framework Arrangements and Agreements).
1. Where, in either Framework Arrangements or Contracts, there are multiple suppliers and a mini-competition is mounted between them, it follows that the competition must not involve negotiation on the prices and pricing mechanism already established in the Framework Arrangement or Framework Contract. The award criteria for these mini-competitions should be a combination of (i) quality/methodology and (ii) resources/costs. During the mini-competition suppliers will have the opportunity to state the type of resources they would deploy and the daily rate or fixed price that they would charge to undertake the proposed task. The quoted price must relate to the rates in the relevant Framework but may take into account any price mechanism (e.g. discounts) established within it. OGC have confirmed that negotiation on price outside these parameters is not permitted, even if offered by suppliers.
E.9.6. Undertaking a Procurement Exercise to Purchase a new Framework Arrangement or Agreement
E.9.6.1 Selecting the Scope (Extent) of an Arrangement or Agreement
In selecting the scope for an Arrangement or Agreement look for price, delivery or administrative cost advantages. The selection is a trade-off between the savings achieved, on the one hand, by obtaining a lower price for a large number of items placed with one supplier and the administrative convenience (and savings) of dealing with this single supplier, and on the other hand the likelihood that the selected supplier may not always be the lowest-priced for every item within the Agreement.
Where the intention is to cover a range of commodities for which the expenditure pattern is well known, do not assume that use of a single supplier is inevitable. Identify the items and forecast demands individually within the tender documents and request individual prices, but ask in addition what the impact on prices would be if a number of the items were taken from the same supplier. (If precise information on forecast throughput is difficult to obtain, seek advice from major users.)
Tender analysis should identify the total cost from each prospective supplier (based on the quoted item price and forecast demand) and rank prospective suppliers against each item. Apply an appropriate range of ‘what-if' scenarios (such as the total cost if the cheapest quote is selected for each item and the cheapest combination using more than one supplier) to then determine the best bid or sub-division of bids overall.
Pay careful attention to the bids of those suppliers offering the best prices for the highest value (price x volume) items. The objective is to find an overall commercially sensible solution rather than just the lowest price per item. Also bear in mind that the initially tendered prices are likely to drop if you offer a supplier a significant share of the business.
There are no hard and fast rules for getting the best deal, but consider the following points:
• a single supplier is often the best answer (Framework Arrangements are difficult to administer if an item range is divided between suppliers) so, before splitting an Arrangement or Agreement between suppliers, ensure that overall value cannot be obtained from a single supplier
• geographical factors (e.g. delivery performance across a range of sites) can mean splitting an arrangement between sites or regions may be beneficial
• do not overlook other commercial factors such as delivery costs (preferably should be zero), minimum order quantities, payment terms, etc.
For Arrangements covering a wide range of items (commonly based on a trade catalogue) individual prices are often not negotiated. The form of tender in these cases is a set discount off the list price. To evaluate such tenders, the list prices have to be considered along with the discount offered. It will often be impractical to consider all the items in such an analysis. In those cases take a ‘shopping basket' approach, selecting a typical mix of items from the range representative of the forecast volumes. In addition, undertake a sensitivity analysis to determine the effect of variations in the volumes of the highest expenditure value (price x volume) items.
When re-tendering bear in mind that circumstances can change with time. Just because one approach proved cost-effective previously does not mean that it is still the best. Remember that the objective is to obtain best value for money overall. Quality and satisfactory service need to be taken into account.
E.9.6.2 Selecting the Term of an Arrangement or Agreement
In setting the term for an Arrangement or Agreement to run, there is a trade-off between the savings achieved through a lower price for a longer-term agreement, and the volatility of the market, which may make the selected supplier less competitive over a long period. The maximum time for a framework agreement to run is four years.
One-year Arrangements or Agreements are common for goods, but may need to be even shorter if item prices are highly volatile. Longer-term Arrangements or Agreements offer price stability but need to be justified by securing a price reduction.
Services benefit from the commitment involved in longer-term Arrangements or Agreements, which also minimise disruption and expense arising from the "learning curve" of a new provider.
E.9.6.3 Supplier Selection
For some Framework proposals large numbers of suppliers are prepared to bid. Take into account the range of suppliers already used for the product or service. Consider accumulating any demands that are currently uncoordinated to provide an opportunity to move up the supply chain.
Refer to Chapter E.4 - Sourcing and Supplier Appraisal for general advice on identifying and appraising suppliers. Remember that:
1. an element of supplier pre-selection can reduce time spent on tender preparation - a telephone discussion with a supplier outlining the type of products, likely volumes, number and location of sites for delivery and any special requirements, can help to identify whether a supplier is sufficiently interested in or capable of getting the business;
2. for some types of items, product samples will have to be obtained for approval by users before considering the supplier for tendering; and
3. pre-qualification references may be required.
E.9.6.4 Specifications
For Arrangements and Agreements covering standard products a simple specification is usually sufficient. Ensure that the specification includes information such as the number and location of sites for delivery, delivery frequencies, quantities, etc.
Arrangements and Agreements for services commonly require more complex specifications which cover the work to be carried out, locations and frequencies, quality standards and work excluded. It is often important to invite prospective suppliers to view the locations and facilities where the service is required and to allow them to develop their own ways of meeting the specification, which can then be critically examined and amended.
E.9.6.5 Terms and Conditions of Contract
While Framework Arrangements do not themselves create a contractual obligation, call-offs under those arrangements do. It is therefore important for the Arrangements to set out the terms and conditions of the contractual relationships that will arise from call-offs.
BERR's Standard Terms and Conditions of Contract for Supplies or for Services, as set out in Forms PF31 and PF32 respectively, will apply. Call-offs under frameworks will be subject to the applicable terms and conditions of the framework under which they were let. For Framework Arrangements or Agreements for works refer to Section D.2.16 - General Conditions for Works Contracts.
Special terms and conditions should be included whenever appropriate to cover such items as assurance of price stability and service levels.
It is government policy that normally prices should not be varied over the first two years of a contract. This policy also applies to Framework Arrangements and Agreements. Arrangements or Agreements for longer periods may provide for an annual review or have a price adjustment clause built in. Price adjustment clauses can also be used to provide for future prices (particularly for services) to benefit from efficiency savings.
Pricing methods that vary from those set out in BERR's Standard Terms and Conditions must be covered by special conditions under a variation of price clause.
E.9.6.6 Tender Evaluation
For general guidance on tender evaluation refer to Chapter E.12 - Tender Evaluation
Tender evaluation for Framework Arrangements and Agreements can be complex. There can be several permutations by which suppliers are given products and the effect volumes of business have on item prices for each supplier. It may not be practicable to investigate all the options and in most cases some form of simplification must be considered. The following general guidelines should cover most situations:
1. enter tender responses on a spreadsheet to assist data manipulation and what-if analysis (such spreadsheets can be additional to Form PF 50 or can replace Form PF50 as the record of tender opening if properly certified - see Section E.11.9 - Opening of Tenders)
2. consider the total cost difference between using the cheapest supplier and using more than one supplier - if not greatly different, consider negotiating with one or two suppliers for additional discount based on giving one of them the entire business;
3. if one tenderer is generally more competitive for one type of product within the contract, and another supplier for another type, consider proceeding on type basis rather than dealing at item level - it is much easier to manage an Arrangement or Agreement if there is a logical link between the items supplied;
4. compare tender prices with general market prices - if there is little difference between ‘spot' and tender prices do not proceed with a Framework approach unless the other benefits such as reduced administration costs are substantial;
5. ensure the arrangement is commercially sensible - dealing with many different suppliers may apparently achieve a lowest-cost solution, but the hidden costs of having to maintain communication (write more contracts, process more invoices) with so many suppliers can be significant; and
6. avoid accepting unrealistically high minimum order quantities or minimum order values put forward by suppliers offering low prices.
E.9.7 Managing a Framework Arrangement or Agreement
Framework Arrangements and Agreements should be monitored routinely. A formal review system, whose coverage is appropriate to the nature of the Arrangement or Agreement, should be put in place for each Agreement or Arrangement. It should normally include information from which the liaison officer can:
• compare expenditure with forecast, both overall and by individual item
• assess the extent to which the supplier has met agreed performance standards (e.g. on delivery or customer satisfaction)
• determine the extent and nature of any user problems
• assess the extent to which items available on Arrangement are purchased from other suppliers
The information collected by the routine monitoring system should be assessed at regular intervals to identify any trends in supply patterns or changes in supplier performance that need to be addressed in liaison or negotiation meetings or taken into account at review or renewal.
Routine monitoring is not the most effective way of dealing with pressing problems. A parallel reporting (complaints) system for users is usually needed to ensure timely action on urgent issues to ensure they are effectively addressed.
While many Arrangements or Agreements run their course with no need for change, others, for the benefit of one side or the other, may need to seek change on some aspect of the Arrangement
If a supplier requests a price increase that is not allowed for in the Arrangement, proper justification must be provided. Even if the reason is that demand is lower than forecast, the supplier should be asked to show the incremental cost to them of such a change. If the issue is a change in cost base they should be asked to provide a detailed cost breakdown for representative items within the range. It can be useful to make an informal approach to suppliers who were unsuccessful in the original tender to obtain an updated price that will indicate the strength of your negotiating position.
Increases in price sought by the supplier as a result of poor demand are not normally permitted unless allowed for in the Agreement. The wording of the Arrangement or Agreement should be specific on this point.
If BERR seeks a price change, e.g. as a result of significantly higher demand than expected or a perceived change in cost base, then the supplier should be asked to justify his prices and again the prices in the market should be tested on an informal basis.
If it is necessary to address quality or delivery problems formally with a supplier, it should be made clear to them that a failure to improve may lead to the Arrangement or Agreement being terminated (see also Section E.9.9. - Termination of an Arrangement or Agreement ).
E.9.8 Completion Report
It is good practice at the conclusion of an Arrangement or Agreement to prepare a completion report. This does not always need to be a comprehensive review. A summary of key points, covering the following, can be useful:
• usage vs. forecast
• level and nature of user complaints
• supplier performance
• start and finish prices of key items
• summary of negotiation history
• expenditure outside Arrangement (reasons for and recommendations for dealing with this expenditure)
• benefits (financial and non-financial)
• cost of set-up and management
• recommendations for any new Arrangement or Agreement, e.g. change scope, quality.
E.9.9 Termination of an Arrangement or Agreement
If an Arrangement or Agreement is to be terminated ensure that the supplier is given the requisite notice. Particular care should be taken with Framework Agreements (as with any other contractual Agreement) to ensure that the Department’s contractual obligations are properly met.
It is also important to ensure that alternative procurement Arrangements are put in place for the goods, works or services covered by the Arrangement or Agreement. The timescales for putting such Arrangements in place need to be carefully taken into account when negotiating the termination of an existing Arrangement or Agreement.
E.10 QUOTATIONS
E.10.1 Contents
Introduction
Procedures and Thresholds
Obtaining Quotations
Records
E.10.2 Introduction
For purchases up to £10,000 in value, you may invite Quotations from suitable suppliers, following the procedures in this section of the Manual.
For purchases over £10,000, formal competitive tendering must be used unless there are convincing reasons to the contrary (see Section E.5.4.g - Contract Types - Single or Competitive Tender).
E.10.3 Procedures and Thresholds
Purchases up to £5000 can, in general, be made after obtaining a single quotation or through direct negotiation and the purchase can be made using the Government Procurement Card (see Section E.15.3 - Ordering Using the Government Procurement Card).
For purchases valued between £5000 and £10,000 normally a minimum of three written quotations should be obtained to demonstrate value for money. Exceptionally, direct negotiation with a single supplier can be justified if there is clear evidence that the particular product or service cannot be obtained economically elsewhere. The reasons for single tender action (STA) for purchases above £5000 must always be documented.
E.10.4 Obtaining Quotations
Invite quotations by letter, telephone or fax, or by using the Invitation to Tender/Quotation Request form (PF30, accompanied by PF31 or PF32). Oral quotations should be confirmed in writing (faxes and e-mails are acceptable) to provide an audit trail.
The date for return of quotations (as indicated in the appropriate place on Form PF30 or in any invitation letter) is for the guidance of bidders and is not necessarily a formal closing date for the receipt of quotations. Quotations may be opened on receipt but must be treated as ‘RESTRICTED - COMMERCIAL’ and under no circumstances can details be relayed to other competing companies.
Tenders and quotations must remain valid for the period specified in the Invitation to Tender (PF30) or letter of invitation. A bid for a shorter period may be rejected. The specified validity period should normally fall between 5 days and 90 days.
Although a quotation is an offer by the seller to supply on his terms and conditions, BERR, as a matter of policy, will not normally accept on those terms and conditions but will "offer to purchase" on BERR terms and conditions. Follow the procedures in Section E.14 Post Tender Negotiations to ensure the supplier acknowledges and accepts BERR Terms and Conditions. (See also the advice in Section D.2 - Contracts).
However, when purchasing off-the-shelf or standard low-cost products, it may be appropriate (for the sake of expediency) to accept the supplier's terms and conditions, provided that the risks relating to product quality, return of goods, delivery, spare parts and the like are negligible.
E.10.5 Records
All actions and decisions relating to obtaining quotes or direct negotiations for procurement must be recorded on file. In particular:
a. when purchasing on the basis of telephone quotations, create a record of the quotes obtained in a file and both confirm the quotation and clearly specify the goods or services to be supplied when placing an order;
b. when purchasing using written quotations keep the correspondence on file with a short note justifying the choice of supplier;
c. provide a written explanation if the lowest quote is not accepted; and
d. provide written justification for single tender action (STA) for purchases over £5000.
E.11 TENDERING
E.11.1 Contents
Introduction
Pre-Qualification
Terms & Conditions of Contract
Invitation To Tender Form (PF30)
Issuing Invitations to Tender (ITTs)
Receipt Of Tenders
Late Tenders
Opening Of Tenders
Evaluation
E.11.2 Introduction
Tenders must be invited and should be used in preference to quotations in the following circumstances:
• for all orders/contracts of a value greater than £10,000, exclusive of VAT;
• for smaller purchases when adherence to BERR stipulated conditions is essential;
• where service or performance standards are built into the specification (for example cleaning or catering); and
• for potentially contentious purchases where the clearest possible management (audit) trail is necessary for public accountability.
Exceptionally, formal tender action can be dispensed with in favour of direct negotiation (single tender action) but only if there are compelling reasons (see Section E.5.4.g Contract Types - Single or Competitive Tender) and the EU Procurement Directives do not apply.
Any departures from these requirements must be approved by the Head of the Management Unit (HMU) for the Directorate or Agency and must be properly documented, with full reasons recorded in writing.
In addition all non-competitive procurements (“Single Tender Actions” or STAs) of professional services with a likely value of £50-250K, must be sent to the responsible Director General or Agency Chief Executive for approval. For more details see Para E.2.5.a - Professional Services
E.11.3 Pre-Qualification
Pre-qualification involves research and/or communication with potential tenderers. Further guidance on conducting a pre-qualification exercise is given in Section E.4.7 - Pre-Qualification. In summary, the level of pre-qualification analysis should ensure that:
• a sufficient number of interested, competent, and financially sound suppliers with adequate capacity to undertake the work are identified (may require a financial and business appraisal - see Section E.4.16 - Conducting a Financial Appraisal );
• the Department avoids the waste of time resulting from disqualifying a supplier after receipt of tenders for reasons that could have been identified earlier;
• the number of potential suppliers is reduced to a manageable proportion (generally 3-6 suppliers);
• the selected procurement strategy, including overall timing, is viable and achievable by the market; and
• tenderers do not incur unnecessary costs in bid preparation.
Records should be maintained of all work in relation to pre-qualification.
E.11.4 Terms & Conditions of Contract
The inclusion of BERR Standard Terms and Conditions (Ts&Cs) of Contract for Services or BERR Standard Ts&Cs of Contract for Supplies in an ITT demonstrates that the Department wants to do business with the successful supplier under those Ts&Cs. Notwithstanding the Declaration on the ITT form that the Department's Ts&Cs apply, if a supplier includes in their tender return their own terms and conditions of contract this is a "counter-offer" (variant bid) that the contract between the supplier and BERR will be under the supplier's Ts&Cs of contract. In such a circumstance under contract law the Supplier's Ts&Cs of contract will prevail. It is not possible to avoid this situation by formally accepting the tender while in the same letter excluding the supplier's conditions as such a statement would not legally affect the counter-offer situation.
If using a framework such as Catalist or another Government Department’s framework the terms and conditions of that agreement must be used with each call off contract.
It is essential, therefore, that procurement staff and users check that there is no suggestion that tender returns, the acceptance of orders, delivery notes and invoices include any alternative terms and/or conditions or amendments to BERR's standard terms and conditions of contract. If in doubt, always ask the company concerned to withdraw their conditions in favour of the Department's standard Ts&Cs and obtain their written acceptance of the position. Failure to be vigilant in this respect could result in difficult and costly mistakes or potentially complicated and time-expensive contractual disputes.
Copies of BERR Standard Terms and Conditions of Contract for Services (PF31) and BERR Standard Terms and Conditions of Contract for Supplies (PF32) can be found as part of the BERR website documents.
E.11.5 Invitation To Tender Documentation
The Invitation to Tender (ITT) documentation comprises the following:
• Invitation to Tender letter (PF34)
• Instructions to Tenderers (PF35)
• Price & Delivery Schedule (PF36)
• Formal Declaration of Offer (PF37)
• Statement of Non-Collusion (PF38)
Procurement staff should familiarise themselves with the Instructions to Bidders. The ITT for (PF30) can be found as part of the BERR website documents.
E.11.6 Issuing Invitations to Tender
The scope of the ITT depends upon the complexity of the procurement. The ITT documents are designed to meet most requirements. For complex requirements, a bespoke ITT may be appropriate and, in this case, it should be drawn up in consultation with your Directorate's solicitor.
In addition to the ITT documents detailed at E.11.5 above any ITT should normally comprise:
• the specification
• the relevant Standard Terms and Conditions of contract (for supplies or services: Forms PF31 or PF32)
• any supplementary or special conditions
• any accompanying documents, patterns or samples listed in any schedule of requirements
• a Supplier Information Form (AP1a). The AP1a form is available from the Mentor forms site on BERRnet
• a tender label (PF40). The PF40 is available from PPS
Fairness requires that all prospective bidders be treated equally. All ITTs should be issued simultaneously and the same date for return of tenders should be applied to all bidders. In the case of any administrative oversight, an ITT may, exceptionally, be sent to an additional tenderer after despatch of ITTs to other tenderers. In such cases, the original closing date and time should apply.
Where there are good grounds for extending the deadline for return of tenders, they should be documented and all tenderers notified of the new deadline.
ITTs must not be dispatched to additional tenderers after the closing date as this could lead to accusations of impropriety.
Companies cannot demand to be included in a tender list and selection or non-selection of those invited does not need to be justified to potential suppliers although the Treasury or EU may request selection criteria justification. It is therefore important that adequate records are kept.
Names of companies invited to tender should not be circulated among tenderers as it may encourage collusion (which would contravene the provisions of the Restrictive Trade Practices Act 1976). However, this restriction does not apply to naming the organisations invited to pre-qualify before the issue of the ITT.
For ITTs not sent by courier or recorded delivery, acknowledgment of receipt of the ITT should be requested from the tenderer. This is particularly important for high value contracts and ITTs sent overseas.
You should seek to obtain, at a minimum, three responsive tenders where possible.
Companies invited to tender may be invited to a "bidders' conference". Alternatively, it might be considered more suitable to meet prospective bidders individually to protect the identity of tenderers and reduce the risk of collusion. If a bidders' conference is appropriate, it should be arranged soon after the issue of the ITT and not later than 6 days before the closing date for receipt of tenders. If prospective tenderers are seen individually any new information given to any one of them must also be supplied promptly to all others
E.11.7 Receipt Of Tenders
Sealed bid procedures must be followed carefully to avoid accusations of impropriety.
Record the time and date of receipt of envelopes bearing the tender label immediately upon receipt. Where there is no precise mechanism for recording time, the estimated time of arrival on BERR premises should be noted. This is important when determining whether or not a tender is late (see Section E.11.8 - Late Tenders).
Opened but unlabelled envelopes containing tenders must be resealed, date and time stamped, marked with the ITT number and initialled by the officer responsible. They will then be re-opened at the appropriate date and time.
Tenders received by fax before the closing date and time and subsequently confirmed formally by letter after the deadline should be treated as valid, provided the texts of the fax and the confirmation are identical. These must be enveloped and treated in the same way as an opened unlabelled tender. No copies may be taken prior to the opening date and time.
It is good practice to add a sequential reference letter to the receipt record (A, B, C, etc., in order of receipt) to be able to identify circumstances when tenders "go missing" after receipt.
Keep tenders securely under lock and key until opening.
E.11.8 Late Tenders
If a tenderer gives warning before the deadline that his tender will be late and the grounds are considered reasonable the closing date and time for all tenderers may be extended. Note that it is not obligatory to extend the tender deadline due to a late supplier. An extension will be at the departments discretion after considering if this will offer a better representation of the market.
Otherwise, tenders received after the due date and time are invalid.
All tenders arriving later than a few minutes after the deadline (allowing for delays of delivery within BERR), should be disqualified - unless there is clear evidence (e.g. a postmark) that the completed tender documents had been dispatched in time to arrive by the closing date and time - because the Department does not accept "force majeure" as an argument.
Invalid tenders should be returned as soon as possible to the tenderer, preferably unopened, with a covering letter explaining why they have been rejected.
E.11.9 Opening Of Tenders
A tender opening board must be convened to oversee the opening of the secure cabinet that contains the tenders, the opening of envelopes (due for opening on that day) and the listing of the received bid values.
The tender opening board should comprise a minimum of 2 officials, at least one of Pay Range 5 or above. The end user may be a member of the board but, as a general rule, and always for purchases exceeding £50,000, there should be at least one official with no direct involvement in other aspects of the procurement.
The Summary of Tender Opening form (PF50) should be completed with the names of all the companies invited to tender, including those companies that did not reply or declined to tender. Financial details must be recorded and the form signed by each member of the board. The original should be retained on a tender opening file and a copy forwarded to the purchaser with the tenders.
EU directives require that tenders which result from advertisements in the Official Journal (OJEU) must, if so requested, be opened in the presence of a tenderer, their representative or an impartial witness, and arrangements must be made accordingly. The opening procedure does not differ in such cases and questions or comments by the invitees should be recorded but not answered at that time.
E.11.10 Evaluation
Evaluation of tenders should be carried out by an evaluation panel (which may comprise the end-user, outside experts, the Procurement Officer or other officers as appropriate). The evaluation panel will be responsible for evaluating the tenders on commercial, technical and financial grounds and for recommending which organisation, if any, should be offered the contract. (Detailed guidance on tender evaluation is given in Chapter E12 - Tender Evaluation)
If the evaluation panel feels none of the tenders is satisfactory, the competition must be re-run (i.e. start over again at the beginning of the process).
E.12 TENDER EVALUATION
E.12.1 Contents
Introduction
Equal Treatment
Criteria For Evaluation
Commercial Evaluation Criteria
Technical Evaluation Criteria
Financial Evaluation Criteria
Financial Evaluation - VAT
Comparison Of Tenders
E.12.2 Introduction
This advice should be read in conjunction with the OGC guidance contained in the Successful Delivery Toolkit on the evaluation of bids. Skilful tender evaluation is essential to securing best value for money.
The procurement's business case will have set out the end-user’s requirements in general terms and these will have been further developed in the specification. Throughout the tender evaluation process, from setting the criteria through to the final decision stage, do not lose sight of the overall objective of the particular procurement.
E.12.3 Equal Treatment
When carrying out tendering procedures, all suppliers must be treated equally and fairly and have exactly the same opportunity to prepare their bid using all the same information. Should any of the tenderers seek clarification on the specification than any additional information provided to them will need to be given to all other bidders.
If the procedures have to be changed or adapted during the tender process, there must be no discrimination against any one tenderer. For example, as a last resort, it is sometimes appropriate to ask separate bidders to work together, combining the best part of each bid. Before following that route it must be considered whether the specification is being changed to another suppliers’ disadvantage and also whether other tenderers could combine.
E.12.4 Criteria For Evaluation
The criteria for evaluating bids should be established before an invitation to tender or quotation request is issued to ensure effective and transparent evaluation.
For all purchases that are carried out as a tender exercise, the criteria for evaluation should be included in the tender documentation for the information of tenderers.
The objective is to compare, in commercial, technical and financial terms, the offers from tenderers with the mandatory and optional requirements of BERR. These assessments are compared in order to identify the tender that offers best value for money. Reasons for selecting or rejecting tenders should be documented to ensure transparency.
In the case of quotations, the criteria are likely to be relatively simple - availability at the lowest total cost of a given commodity. However, for items and services subject to competitive tendering, the criteria will become more detailed as the complexity and value of the purchase increases.
For complex tenders group criteria under the following three headings:
• commercial
• technical
• financial
and categorise each individual criteria as mandatory or optional.
If mandatory criteria are not met, the tender will have to be rejected. If optional criteria are not met, the evaluation panel can exercise some measure of discretion.
Where it is difficult to quantify technical and other criteria in monetary terms, the use of a merit points or weighting system should be used. These must be documented before the opening of tenders.
E.12.5 Commercial Evaluation Criteria
Commercial evaluation criteria could include:
• compliance with the invitation to tender (ITT)
• acceptance by the tenderer of BERR Terms and Conditions of Contract
• compliance with delivery requirements
• compliance with tender validity period
• acceptance of payment arrangements
• ownership e.g. in the case of a training course
• length of time that product range/design will be on the market (affects continuity of range and spares - should be part of specification if critical).
Those tenders that pass the commercial evaluation go forward for the technical evaluation.
E.12.6 Technical Evaluation Criteria
The scope of the technical evaluation will vary according to the type of goods, services or works required and the value. The criteria may include consideration of:
• performance and productivity standards
• quality (fitness for purpose)
• inspection requirements
• operational and maintenance costs
• professional competence (for professional services)
• technical/professional support
• standardisation
• after-sales service
• cost and availability of spares and/or consumables
• provision of manuals and training
• sample testing
• warranties
Tenders that pass the technical evaluation should be ranked in order of technical or professional excellence and go forward for financial evaluation.
E.12.7 Financial Evaluation Criteria
In carrying out the financial evaluation of tenders, the evaluation panel should compare all the costs and benefits that can be quantified in money terms. Whether such comparisons should entail the use of investment appraisal techniques will depend on the complexity and/or value of the procurement.
Financial evaluation criteria should include:
• life cycle costing comparisons (where appropriate);
• quantifiable financial benefits arising from the technical provisions (e.g. speed, fuel or electricity consumption, coverage, shelf life etc.) where the specification or description is not specific or permits tolerances;
• fixed or variable pricing;
• cost of components, spare parts, consumables and servicing;
• financial qualifications to fulfil the contract;
• any potentially winning bids, quoted in foreign currency, should be adjusted before award and reconfirmed or rejected if the exchange rate (published by the UK clearing banks) has varied too unfavourably during the validity period; and
• risk analysis and financial appraisal (for major contracts of strategic importance, especially those of an innovative nature).
E.12.8 Financial Evaluation - VAT
Tender prices should be assessed and compared exclusive of VAT. If VAT is included in the evaluation of one bid and excluded from another competition will be distorted and value for money for the Department as a whole not obtained. For example, VAT on bought-in services can be reclaimed, thereby eliminating the discrepancy between bids from in-house teams and outside service providers. VAT on goods that are incidental to the supply of a service is also eligible for a refund.
VAT should always be reclaimed on eligible goods and services to ensure that the overall effect of VAT payment at Departmental level is neutral. In situations where goods or services can be purchased via two routes, one of which is VAT exempt (for example buying a publications package, compared with buying the writing, design and print elements separately), VAT should still be excluded from the tender evaluation to obtain best overall value for money for the Department.
E.12.9 Comparison Of Tenders
Tender evaluation is not always possible as a solely paper exercise. For example, site visits may be needed to obtain a better insight into a company’s manufacturing processes, quality control arrangements and management arrangements. In other cases, or sometimes in addition to site visits, short-listed bidders may be invited to make presentations to the evaluation panel to clarify the panel's understanding of the bid and to assess the competence of those responsible for delivery.
On occasion it may be helpful to apply a merit points technique for weighting the evaluation factors. The tender scoring the highest number of points would, in theory, represent the best value for money.
The evaluation panel might see benefits under bid clarification to open negotiations with the best 3 bidders in an attempt to gain any further quantifiable benefits/value for money (see Section E.14 Post Tender Negotiation). Care needs to be exercised, particularly under EU procedures, to ensure that competition is not distorted. Prices written into tender proposals of a tender exercise cannot be altered. Provided the supplier has included a breakdown of costs unnecessary services and their respective costs can be negotiated out of the bid.
It is important that tenderers accept the Department’s Standard Terms and Conditions of Contract to ensure that English law prevails (see Section D.2 - Contracts for further information on Terms and Conditions of Contract).
If faced with a situation where the Invitation to tender’s(ITT’s) were issued on the basis that BERR Standard Terms and Conditions of Contract apply but a tender is submitted on the basis that the supplier's Terms and Conditions of Contract apply then that tender should be noted as non-compliant and not considered further for approval.
It is the Government's view that customers should demand a quality product but that they should not necessarily insist that suppliers have BS EN ISO 9000 certification. To do so might restrict competition and rule out smaller companies who might otherwise provide good value for money, for example if a supplier had an effective quality process but certification would not be cost effective for that supplier. Where the decision between competing bidders is extremely close, preference should be given to those certified to BS EN ISO 9000 or equivalent.
E.13 DEBRIEFING
E.13.1 Contents
Introduction
Objectives
Responsibility
Debriefing Technique
Reasons for Rejection
E.13.2 Introduction
This Section of the Manual should be read in conjunction with the OGC Guidance "Supplier Debriefing".
E.13.3 Objectives
It is Government policy to improve the competitiveness of suppliers. Debriefing unsuccessful candidates and tenderers enhances the Department’s reputation as a best practice purchaser and promotes better value for money in the longer term. You should offer all unsuccessful tenderers the opportunity of a debriefing.
In addition, unsuccessful candidates and unsuccessful tenderers have a right to know the reasons for the rejection of an application for inclusion on tender lists or, if invited, the tender under the EU Public Procurement Directives.
Subject to EU Public Procurement Directives requirements, the benefits of debriefing need to be balanced with the effort involved. On minor contracts, full debriefing may be more difficult to justify but remember the process is often of most value to smaller and newer firms.
The benefits include:
• assisting suppliers to improve their performance - during the debriefing interview the perceived weaknesses of the unsuccessful bid (for example in terms of organisation, procedures, people etc.) should be diplomatically indicated - sensible suppliers will rectify these deficiencies so that the Department can expect to receive a better tender from them in the future;
• offering unsuccessful candidates and tenderers some return on the time and money they have expended in preparing their tenders;
• establishing a reputation as a strictly fair, honest and ethical client, which is not only valuable in itself but ensures that the "best" suppliers (or contractors) are keen to submit tenders and their tenders are fully responsive to the enquiry documents and hopefully their best offer first time around.
E.13.4 Responsibility
The person responsible for specification and evaluation normally carries out the debriefing. Debriefing requires skill and should not be carried out by the unprepared.
E.13.5 Debriefing Technique
While following a few basic ground rules, debriefing must be tailored to each tenderer:
• debriefing interviews must not be held before the contract is signed or otherwise satisfactorily concluded and all unsuccessful tenderers have been formally informed;
• suppliers must not be encouraged to believe that the debriefing process can be utilised to change the Department's decision on the choice of supplier;
• prior to the interview, it is essential that the tenderer understands that the interview is being carried out on an informal basis with the object of mutual longer term benefits and that the company will be told, honestly (and diplomatically!) of perceived weaknesses, but that argument will not be entertained as to whether the perceptions are right or wrong;
• it is vital that, at the start of the interview, the tenderer understands that the weaknesses to be mentioned are not those perceived by one person only but by the tender evaluation team as a whole;
• it must be made clear to each tenderer that only their tender will be discussed and that there is no direct comparison with the tenders of their competitors;
• under no circumstances should such things as the commercial terms, innovative ideas, etc., put forward by one tenderer be disclosed to another;
• debriefings should normally be handled by interview - tenderers may want to take notes during the interview but requests for formal minutes should be refused;
• above the EU threshold, tenderers may require written reasons for rejection;
• letters may also be more appropriate for overseas based organisations;
• any written debriefings must be carefully constructed.
• in concluding debriefing interviews, it is both courteous and can be very illuminating to ask the unsuccessful tenderer to comment on the invitation to tender documentation;
• record the results and conclusions of debriefing interviews on the contract or supplier file for future reference.
E.13.6 Reasons for Rejection
A tender may be rejected for basically two reasons:
• during the evaluation process, a mandatory requirement of the invitation to tender is not met; or
• a tender passes the evaluation but is not ranked as offering the best value for money, i.e. not ranked first.
In either case it is likely that some parts of the bid are favourable though not all. The points which debriefing cover therefore may include:
• production schedules that are too long
• design deficiencies
• unacceptable delivery period
• unsatisfactory organisation and administration
• inadequate experience
• inadequate personnel
• equipment not up-to-date
• poor sub-contracting control
• inadequate cost and schedule controls
• industrial relations uncertain
• inadequate quality management
• suppliers contract terms and conditions being imposed
• poor after-sales service
• uncertain financial standing.
E.14 POST TENDER NEGOTIATION
E.14.1 Contents
Introduction
The Meaning of Negotiation
Negotiation Techniques
Purpose of Post Tender Negotiation
Scope of Post Tender Negotiation
Control of Post Tender Negotiation
Training
E.14.2 Introduction
This Section of the Manual should be read in conjunction with the Office of Government Commerce (OGC) guidance on Post-Tender Negotiation.
E.14.3 The Meaning of Negotiation
Prices in a tender exercise cannot be negotiated; however negotiation to remove an unnecessary element of a bid and the removal of cost of that unnecessary element is permitted. Bid clarification on the proposal is used when considering quality, delivery, design of the service offered and management of the company to clarify the exact service that will be delivered.
Negotiation can be used to strengthen the procurement process when competitive bidding alone does not appear to offer best value for money. Effective negotiation is a specialist skill and advice should be sought from procurement staff who have undergone the appropriate training.
Particular care is required when the procurement exceeds the EC threshold as negotiations may invalidate the tendering process if they result in substantial change to the specification.
Negotiation is not only about price, but reassessing all pertinent issues to a purchase. Quality, delivery, learning curves, productivity, tooling and set up charges, design, contingencies, allowances, travel, terms and conditions, payment terms, warranties (and warranty periods), and so on may be re-examined. Anything that may add to the whole life cost of the procurement can be included.
Competitive bidding allows the market forces of supply and demand to establish prices (and other elements of whole life cost). Negotiation in a procurement brings into play the action and attitudes of the individual buyer and seller.
Negotiation is not used to counter market forces, but to exploit them and direct them to achieve the BERR objective of "value for money" in procurement.
E.14.4 Negotiation Techniques
The object of negotiation is to obtain contractual improvements without putting other tenderers at a disadvantage, distorting the competition or damaging trust in the competitive tendering process. It is not a mechanism to extract commercially and ethically unacceptable terms. Negotiation should be a means of obtaining best value for money by ensuring that an acceptable finished product or service is delivered to the desired specification at a competitive but fair market price.
Professional procurement staff use negotiation skills to ensure that BERR is not at a disadvantage when dealing with sales people who are often well trained in the art of negotiation. Broadly, this means planning and preparing for meetings carefully which should cover the following:
• preparation - knowing the commodity and its importance, deciding sourcing policy;
• market considerations - knowing the position of the supplier in the market, turnover, policy etc.;
• BERR position - deciding objectives, strategy, listing possible concessions, rehearsing opening gambit, producing an agenda;
• supplier organisation - learning about the company, check trade journals, trade lists, "Who Owns Whom" and "Key British Enterprises" etc.;
• the supplier's personnel - referring to previous notes, noting likes and dislikes, noting authority levels;
• meeting plan - reviewing notes, strengths and weaknesses - recognising tactics of the other side;
• conclusion - reaching a mutually acceptable agreement.
E.14.5 Purpose of Post Tender Negotiation
BERR policy for any post-tender negotiation is to obtain best value for money (not simply lowest price) and to use techniques that are fair, ethical and comply with national regulations and EC Directives.
The post-tender negotiation is a logical step in the procurement process when conducted with professionalism and integrity. It can reduce the overall "Total Costs" of products and services or gain other advantages. It must, however, be carefully planned and managed so that confidence and trust in BERR are retained. Use this guidance alongside OGC guidance on good ethical standards.
Safeguard against negotiation carried out under the ‘open’ or ‘restricted’ procedures of the EC Directives resulting in distortion of competition, particularly on price, or a change in the specification that might invalidate the procurement process. Any significant changes should be notified to all tenderers, thus initiating a re-tendering process.
E.14.6 Scope of Post Tender Negotiation
The purpose of post tender negotiation is the exploration by both parties of the means by which the purchaser can achieve a better deal on a mutually acceptable basis.
Such negotiations should be a normal part of the bargaining process in assessing quotations (up to £10,000). For purchases of major requirements, the cost of negotiating may be high (several man days per tenderer), so a careful judgment needs to be made on the likely value of any benefit which might be gained.
The use of post-tender negotiation should not be only to distinguish between comparable bids. Even if one bidder is clearly ahead of the others in value for money terms, there can still be scope for negotiating further improvement.
Potential areas for negotiation will differ for every contract but typical areas might be as follows:
• terms of payment;
• supply and cost of spare parts;
• earlier delivery or completion dates;
• warranties and guarantees;
• documentation requirements;
• quality - zero defects - right first time;
• progress and inspection procedures;
• training of personnel;
• maintenance, repair or after-sales service;
• compensation for failure to meet specified requirements;
• procedures for remedial action;
• price. Note price is only negotiable outside of a tender exercise.
This list is not meant to be exhaustive. It is a concept of purchasing that "everything is negotiable".
E.14.7 Control of Post Tender Negotiation
Post-tender negotiation must be a controlled and documented process. Prior approval for a negotiation should be obtained from a line manager who must be satisfied that there is a considered and solidly based prospect of improving value for money and can justify the resource costs.
Negotiations should be carried out by trained and experience procurement staff.
Negotiations must be fully documented so that there is a clear audit trail recorded on file, justifying the post tender negotiation and showing that it has been conducted in a fair manner.
The agreed benefits should, where possible, be quantified and entered on the quotation or tender tabulation form. The final ranking and prices can then be established and a recommendation made for awarding the contract.
Any changes agreed with the tenderer must be confirmed in writing (letter, telex or fax) and embodied in the final contract document or order, which will be sent to the successful tenderer for acceptance. E-mail is an accepted method to clarify understanding but should not be used to finalise contracts. Tender exercises cannot be run without secure tendering software.
All tenderers must be advised and invited to re-tender in accordance with the instructions to tenderers if the specification or requirement is changed to any marked degree.
E.14.8 Training
Procurement staff likely to be involved in post tender negotiation can apply for one of the many courses on negotiation techniques presented by the National School of Government and the Chartered Institute of Purchasing and Supply. There are also many videotapes in addition to literature available on the subject. Information on courses and literature can be obtained from your Training Liaison Officer or Procurement Officer.