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Selecting Suppliers the use of Post Tender Price Negotiation John Constance MSc in Project Management, University of Liverpool

l Abstract Whilst it is true there is nothing corruptible or wrong for bidders to price their bid to maximise profits; or for a buyer to challenge quoted prices to minimise expenditure; there should not be an anxiety to conduct post tender negotiations during the tender stage. Before indulging into Post Tender Negotiation or PTN, the buyer should ensure post tender negotiation is justifiable and acceptable; and approved by senior management. To what extent the PTN will be conducted should be determined; and the PTN should be compliant to other requisite government regulations. Price is the apparent focus for PTN, but the negotiation intends to seek the most profitable arrangements and favorable solution and not simply accepting the lowest price or technical compliant offered. This means PTN usually comes into use when the acquisition is for a high value (profits) or for complex services (solution) and is a purchasing strategy benefits for both the buyer and seller. However, PTN is prohibited in the UK National Health System (NHS) public procurement process and procedures. Outside the condition that PTN evades certain ethical considerations and the fact that most NHS contracts Is accordance with Directive 2004/18/EC and Regulations of the Public Contracts Regulations 2006, the NHS contracts are rather quality of services than cost of services a key focus of the PTN. The NHS is responsible to provide all-inclusive health service to permanent residents in the UK. Its objective is to make accessible the highest standards of safe, quality health care, effective and focused on the principles and values of patient experience which is focus on quality services and not cost which is the focus of post tender negotiation. Introduction Central Unit on Purchasing H.M. Treasury Guidance Note (1986) post tender negotiation is a technique used by buyers to minimise their expenditure and improve their value for money. According to the guidance PTN is the provision to indulge in amoral and dishonourable buying practice but rather looking beyond the price on the bottom line. PTN, a process quite different from tender clarification, is a process that brings the buyer and bidders together to refine and improve tender to make sure prices, delivery or related provisions of the contract are viable. PTN does not of itself yield the most favourable results. To achieve this procurement all in all must be embarked upon in a carefully-in detailed professional manner; with skill and attention to detail to every activity in the procurement cycle; and with the best appropriate ethical negotiating procedure and strategy and value for money. The PTN is a process conducted to clarify certain points in the tender; but its main objective is to improve value for money. This therefore makes it a very important requisite that the process be professional and ethical.

The NHS on the other hand is a system financed by public tax with the mission to provide or deliver accessible high standard health services throughout the United Kingdom. The NHS usually has its targeted budget for each tender and seeks suppliers for quality delivery. The NHS is obligated to the EU Public Procurement directives (EU Directive 2004/18/EC) and the UK Public Contracts Regulations 2006. The NHS can use post tender negotiations if and only if there is no overwhelming evidence the final bid evaluation is not for one specific supplier; there exist doubt to the tender specifications; or there is the need to clarify terms and conditions and joint agreement; and price reductions are required. This paper will explain the prerequisite and processes for using post tender negotiation. The discussion will show that current UK public procurement legislation prohibition of post-tender price negotiation for the NHS is necessary as the system is mainly about quality and not price. The conclusion will show that although PTN is valuable tools for maximising value of money it should not be obligatory in the NHS because the system is about quality of service; and the entire PTN process if not conducted with the qualified professionals and ethics can bring to question the ethical integrity of the NHS. Post Tender Price Negotiation According to post tender negotiation is a process conducted after formal tenders are received and just before contracts are made. It is conducted with bidders that submit the best value for money offers with the objective of getting improved content. PTN cannot be used to put distort competition; put other bidders at a disadvantage, or have an adverse impact on the fairness and transparency in the tender process. PTN principles require the process be carried out within the requirements of the EC Procurement Directives; it must be controlled and documented; have a transparent audit trail. The PTN must take on the form of an unfair trade between tenderers by seeking reduction in time or costs to obtain the lowest tender. This means that in the use of PTN genuine reason for improving value for money; justification of the resource costs; must be subjected to prior approval by senior management; there must be available well trained and experienced procurement or negotiating staff to conduct negotiations; and the negotiations be completely documented in support of a clear audit trail. These conditions along with applied government regulation sanctioning justify the use of the PTN as part of the procurement tender process. The UK National Health Services The UK National Health Service is all-inclusive public-health service system obligated to provide free high quality health services including dental and general practitioner, hospital and specialist, and local health authority services. The overall objective of the UK-NHS is to provide the best systems of health for UK permanent residents through established international standardized criteria. This mean high quality health services based on standardization and patient experience that leads to improved health care delivery. Cost is important in the National Health Service plan, but the main purpose of the plan to make accessible standard high quality health care.

The NHS and PTN

The UK public procurement laws rule out post-tender price negotiation for the UK- NHS. According to the legislation, in order to ensure professionalism and ethical conduct in the provision of high quality health services as the key objective of NHS service delivery. Mike Phillips (2007) said NHS procurement is more challenging than in the procurement in the private sector. The author reiterated the NHS is a more demanding environment because the focus is on both the supplier and the customer. These relationships are fundamental to success. By tradition of the NHS had been focused tends on the supplier to ensure a negotiated best price; and effective delivery. However, today, the NHS is more focused on the customer or end user or patient. With the amalgamation of patient experience, world health requirements and EU procurement law for competitive tender, the customer relationship has become critical in all NHS procurement of contracts therefore, the contracting authority is constrained by Community law, to not award a contract in the absence of any competition. According to the UK OGC, the following must be considered using PTN: Use only to lower prices and make better other required submissions. Undertake when one or two tenderers offer the best tender under the indicative award criteria Undertake when the process includes the buyers head of procurement in the preparation of the process before starting the tender Use by recording and keeping detailed record of the PTN process; justification as to why the need for negotiations; the negotiations themselves and the eventual outcome ensuring the records can be made public if a unhappy bidder makes a successful complaint. All these condition are far from the objective of the NHS. The NHS does not seek lower prices as its main objective but rather quality health care delivery services. The NHS is never limited to one of two tenderers. The need for ethical conduct and integrity of the process there is a need to remain open, fair and transparent, making even the participation of the head of purchasing not a requirement but just a mere requisite; and no matter the negotiations the records of the process must be made public to convince end users the process to achieve high quality health services was not in consideration of cost but quality delivery.

Argument and Support Reasons

It is right and appropriate there exist current laws that prohibit the NHS from post tender price negotiation; and the rule should continue to be enforced and not to be relaxed based on the following reasons supported through the specification in the North Bristol Integrated Community Hospital tender. Section II.1.5 (Short description of the contract or purchase(s)) provides in detail what the specific services the North Bristol NHS Trust (the Trust) wishes to obtain. This makes the request for information and proposal or solution quite descriptive. Section II.2.1 (Total quantity or scope) describes in detail the estimated value of services the North Bristol Integrated Community Hospital tender will fund. This means the essence of negotiating prices is not the objective of the tender

Sollish, F., Semanik, J., Morris, P.W.G. ed. & Pinto, J.K. ed. (2011) recommends make-or-buy decision involve deciding on investigation, data gathering, deciding to make or buy, execution and follow-up. The authors also recommend tender evaluation should occur early on in the project life cycle, after the completion of a defined procurement requirements and development of a project contracting plan. The author went on to suggest that the best way to request a suppliers response is through a request for information (RFI), request for proposal (RFP) and request for quotation (RFQ). When cost is well defined and descriptive in the contract notice the need to negotiate for solution becomes limited to the bidders ability (through experience and expertise) to bid based on quality of delivery. This is completely the objectives of the NHS and therefore makes it right that legislation prohibit the use of post tender price negotiation.

_____________________________________________________________________________________ References OGC (2011) Post Tender Negotiation [Online] Available from: (Accessed: 25 February 2010). Mike Phillips (2007) Procurement is harder by far in the NHS [Online] Available from: Contract notice Services North Bristol NHS Trust, Trust Headquarters, Frenchay Hospital, Beckspool Road, Frenchay o_include_Frenchay_Community_2011_Belfast (Accessed: 25 February 2012).
Sollish, F., Semanik, J., Morris, P.W.G. ed. & Pinto, J.K. ed. 2011. Planning and administering project contracts and procurement. Laureate Education, Inc., custom ed. Hoboken: John Wiley & Sons.