Background and overview of procurement process
There are rules and procedures that govern public sector tendering - the extent and complexity
of the procedure is governed by the value of the goods and services being bought,
also known as tender thresholds.
Let’s look at some typical milestone contract values and the processes that Welsh public
sector organisations must follow:
It is important to understand that tender thresholds vary between organisations.
Each organisation will have its own financial
rules which set out its procurement thresholds.
These are often available on the organisation’s website or in general tendering guidance
issued by the organisation.
Generally, for most contracts with a value of £5000 or less, the buyer is just required
to prove that they have obtained value for money for example through comparison of one
or more quotes.
The next band, often between £5,000 and £25,000 will require the buyer to issue an RFQ (Request for Quotation),
usually to a minimum of three suppliers who will be required to submit a
formal response without going through a full tender procedure.
The next band will require the buyer to undertake
a tender exercise (for example: anything with an overall contract value of £25,000 or over)
Any contract with a value above €135,000
must be run as an OJEU tender exercise.
The financial thresholds in pounds can vary as the limits are issued in euros, but if
you think of €135,000 you will not be far out.
OJEU stands for the Official Journal of the
European Union and for all tenders that come under this directive, strict minimum timescales
and other rules become a mandatory part of the process.
This is to ensure a fair and consistent approach
is being taken.
In Wales the Welsh Government requires ALL public sector organisations to advertise contracts
with a value of £25,000 or over on Sell2Wales.
Considerations when finding opportunities.
The time and effort needed to put in a fully compliant tender needs to be offset against
the chances of winning the bid and how attractive the work is to your business.
For example, you need to devote a fair amount
of time, resources and effort to get your bid to the right standard and there is a hidden
cost in staff and time to this.
If the contract offers security of work for 3-4 years, would boost your credibility, has
fair on time payment terms and means you can further invest in your business, then the
hard work at the onset is worth it.
PQQ/ITT
We have already mentioned the different rules for how tenders have to be managed dependent
on the value of the contract.
Here you can see the various stages of those rules.
The Open procedure means anyone can submit
a full tender, and the document issued by the buyer will be called the ITT or RFQ.
You give a price for the goods and service
but will also need to prove your capability to deliver on what you promise.
When it gets to the OJEU threshold, around
the €135,000 mark, there are generally two processes that are followed.
If it is an open procedure, anyone can submit
a full tender.
What is key to remember is that you will be provided with the specification of what is
required, and you will need to self-assess whether you are in a suitable position to
compete for the contract.
At this stage, many buyers may instead opt to run what is known as a “Restricted Procedure”.
This is when the application processes is
split into two parts. The first stage is known as a PQQ - Pre Qualification Questionnaire.
The PQQ is intended to establish all the information
about your business and asses your suitability to proceed to the second stage of the process.
Only a select few of the highest scoring are
invited to the second stage of the process known as the ITT - the Invitation to Tender.
It is worth noting that even in an open procedure,
not broken into two separate stages, the form itself is likely to contain the questions
usually found on a PQQ.
Sometimes, you may see that a contract tender is being done via a Competitive Dialogue Process.
This is quite a complex procedure and is only normally
used when a buying organisation is not quite certain of the requirements.
For example, if a specialist piece of software
is needed, the buyer may not know the exact specification and how to develop that software.
They will select a few shortlisted bidders,
who will work with the buyer to develop the exact capabilities and functions of the required software.
Once this is done, the full specification is then issued to those shortlisted bidders
for them each to cost against the final requirement.
There is a typical tender process that you will see followed, so let’s look at it now:
At the first stage, the buyer will put together
a specification describing the goods or services required, the period over which the contract
will run, plus any possible contract extension, as well as any other relevant detail to inform
suppliers of exactly what they are looking for.
The specification is the buyer’s ‘wish
list’ and it is important to show in your tender that you have completely understood
what it is they require.
At this stage the buyer will also identify any special terms and conditions to be applied
to the contract, in addition to their standard terms and conditions.
They will decide how the tender will be evaluated,
price only or on a price & quality basis. If choosing to include quality, they decide
on the cost/quality ratio e.g. 60% quality 40% price, and they will identify specific
quality criteria and weightings.
All this information will be included in the tender so that suppliers understand how their
tender is going to be evaluated.
The buyer will decide on the type of procurement procedure to follow.
If suppliers are to complete a questionnaire
to assess their suitability (either a PQQ in a Restricted Exercise or a questionnaire
in an Open Exercise) then the buyer will identify key questions to be included that address
all risks associated with the procurement.
In addition to asking for basic information about your company (legal status, company
registration/VAT numbers etc.) the questionnaire may include some or all of the following sections:
Financial, Capacity and Capability, Sustainability, Equality & Diversity and
Health and Safety.
The buyer may also include additional specific questions relating directly to the requirement.
The questionnaire will ask you about what
you have done in the past and how you did it, it will include questions on things like
the number of staff, your experience of delivering projects of a similar nature, insurances you
have, and your policies and procedures etc.
We will address this in more detail in module 3.
You will be advised whether responses are
for information only, will be pass/fail or scored.
If you are completing a PQQ then you will need
be advised how many suppliers the buyer is hoping to take to the next stage, the Invitation
to Tender, and what the minimum score threshold will be.
Whereas the questionnaire takes an historical
look at your company’s performance, the Invitation to Tender looks forwards, it is
your opportunity to tell the buyer how you will meet their requirements.
Through your responses to the questionnaire
you will hopefully have satisfied the buyer that you are capable of taking on the contract
at little or no risk to them.
Through your ITT responses you will be persuading them of your ability to do the job better
than anyone else - sell yourself!
If you are an existing supplier and know the buyer well, please remember not to assume,
but to take the attitude that the buyer has never heard of your company before. This will
help you focus on the quality of your responses.
You will need to say how you will deliver the contract, staff that will be involved
and why they are the best people for the job, what your implementation plan will be, how
you manage the process and how you monitor quality and sustainability of the requirement.
You will also of course be required to provide your cost.
Once the ITTs have been submitted, a full evaluation of the responses will be undertaken.
This is in accordance with the strict evaluation criteria published in the tender document.
On some occasions this may also include a
presentation to the buyer.
After the scoring is done, the winning bid will be identified, however, before a contract
can be awarded, on all OJEU value contracts, there has to be what is known as
a standstill period.
All bidders are notified of the intended decision, with details on how they scored.
Then there is a 10 day standstill period known as the Alcatel period.
This allows any bidder the opportunity to
challenge the decision if they believe that there are valid reasons to doubt the decision
making process.
If no challenges are lodged then the contract is officially awarded to the winning bidder.
The last stage is feedback from the buyer.
It is one of the most important parts of the process but often overlooked.
Make sure that the feedback you receive is
meaningful and useful.
If the written feedback does not provide enough information contact the buyer and explain
that you would like to know how to improve and refine your response for the next time,
and detailed feedback is gratefully received.
Even if you win the bid, it is always good to know what it was that gave you the edge,
so that you can capitalise on that in future bids.