CONTRACT STANDING ORDERS
Purpose and status
These Standing Orders are made and approved by the Council to regulate and ensure probity in all its dealings with suppliers and contractors. They are part of the internal control mechanisms that exist to ensure that spending on goods, works and services takes place within the budgets approved for the purpose and within the limits of authority incorporated in the Scheme of Delegations. All orders or contracts for goods, works and services should follow the principles set out in the Council’s Procurement Strategy, available on e-link. Other than in emergencies, for which provisions are defined separately in the Rules for Financial Governance, exceptions to their provisions are only permitted as described in sections 3.3 and 10 Compliance with these Standing Orders is mandatory for all staff employed by or on behalf of South Norfolk Council and failure to observe them without good and sufficient reason will be treated as a disciplinary issue. Staff letting or managing contracts must ensure that all contractors are aware of their provisions and comply with them.
Suppliers and Contractors
The basic details required from ANY supplier before orders can be placed or payments made are set out in the form available on e-link or from the Payments Control Team. The form must be fully completed by all prospective suppliers prior to placing orders or entering into contracts, whatever the value of goods works or services involved. For any contract involving supplies other than at one time or where guarantees and/or after sales service are likely to be an issue, the standing, suitability and reliability of potential suppliers and contractors should be assessed before entering into any commitment. The degree of assessment necessary should be proportional to the risks involved should the supplier or contractor fail, be subject to take-over or otherwise become unavailable during the life of the contract or goods acquired. For contracts involving major expenditure, specialist skills or significant risks, more detailed and rigorous evaluation of potential suppliers and contractors is required. This will normally take the form of a specific pre-qualification process, designed for the job involved. The Corporate Procurement Officer can provide any help or advice you need.
Orders for Goods, Works and Services 2.1 Integra-RSS (POPCA)
Before placing any order, seeking quotations or inviting tenders, you should first always check to see if what you need could be supplied under any of our existing corporate arrangements. A list of these is available on e-link or from the procurement staff, (firstname.lastname@example.org). Remember also that the Eastern Shires’ Purchasing Organisation (ESPO) can supply many commonly used items under arrangements already tested in competition and this can save you both time and effort. The normal method of ordering goods, works and services is through the electronic purchase ordering module of Integra, the Council’s financial management and information system. Orders will be transmitted electronically wherever possible, either directly to the suppliers system or by e-mail in an official Council format. This system is simple and straightforward to use and makes sure that orders are placed only by those authorised to do so against budgets where the provision exists for the expenditure. It registers commitment of the expenditure at the time the order is placed to improve budgetary control and accounting and ensures that, where corporate contracts or other arrangements exist that the Council obtains best value for money by using them. It also prevents staff time being wasted in costly research.
Paper-based official orders
03/04/2008 RulesFinRegApBContract StandingOrders.doc
Paper-based orders using the former official order books will only continue to be used until
Page 1 of 9
such time as all services are linked to and trained in the use of the Integra purchasing module. At that stage all of the current order books will be withdrawn and only the methods described in these Standing Orders will be used.
Corporate VISA cards
Where necessary and/or appropriate, orders can be placed and paid for using the Council’s corporate VISA cards. There are currently two such cards, one for the use of the Chief Executive and Executive Directors, which is held by the Chief Executive’s PA, and one for general use, which is held by the Corporate Procurement Officer. The Rules of Financial Governance allow Directors to hold their own Visa or other forms of purchasing cards, subject to the compliance with the Council’s policies and procedures as set by the Corporate Procurement Officer. This method is ideal for use where payment is required in advance of delivery or to secure a booking for courses, accommodation or transport. It is also useful for telephone or Internetbased orders where this is the supplier’s normal way of doing business or where earlier delivery can be arranged by doing so.
Other forms of order
Other forms of order are not permitted other than in the following circumstances. In cases of real urgency, orders can be placed by telephone or by fax but must in all cases be confirmed through Integra as soon as possible and in any case within five working days. Where it is clearly in the best business interests of the Council to do so and with the specific authority of the Director of Finance, Property and IT, orders can also be placed over the Internet or by e-mail. Payment can be made at the time of order using the corporate VISA cards. In all other circumstances, the commitment must be registered through Integra as soon as possible and in any case within five working days.
Internal and Budgetary Control
Note that the provisions in the Rules for Financial Governance for maintaining effective internal and budgetary control (summarised in sections 9 and 10 of these Contract Standing Orders) apply to all orders, however they are placed. The necessary controls are built in to Integra and orders placed this way will automatically comply but individuals placing orders in other ways,, including those placed using credit cards, need to take particular care to observe these provisions.
Tendering and Quotations
Tenders and quotations are both offers to supply goods, works and services but vary in the complexity of the documentation involved. Quotations will typically be appropriate where you are looking to buy standard items available from different sources and prices may be expressed in terms of discount on a standard price list. Tenders will normally be used for more complex circumstances when you as purchaser or client need to define in detail exactly what goods or services you want supplied or to specify results to be achieved or works to be done at a particular site, with bidders entering their prices for work against a schedule of separate elements. The procedures to be followed vary with the estimated value of the goods, works or services concerned. It is important to remember that the relevant value is not just the amount of any individual transaction. The value for the purposes of these Standing Orders and for the European Union regulations referred to below is the aggregate value of the all similar goods, works and services to be supplied over at least the forthcoming 12 months or in some cases longer. Essentially, it is the value of all the similar goods, works and services you can foresee ordering. Where you are not contracting for a set period, it is the value of the supply over the first four years of the contract that counts. This value will determine whether you need quotations, tenders and/or OJEU advertising and will also influence what form of contract you should be using.
Page 2 of 9 03/04/2008 RulesFinRegApBContract StandingOrders.doc
Financial Categories and Competition Requirements
3.1.1 Under £20,000 There are no particular requirements for competitive quotations or tenders for goods, works and services of these values. However, the general duty to obtain best value for the Council implies that competitive offers should be obtained wherever possible. These need not be in writing but you should always record the basis of your decision in sufficient detail for the logic to be apparent to anyone subsequently reviewing the circumstances. Formal contracts are not required but may be useful, depending on the circumstances. You should always ensure that there is a written record of the agreement, although a simple exchange of letters may often suffice. 3.1.2 Between £20,000 and £100,000 You must obtain at least three written competitive quotations before placing orders or creating contracts of this value. Formal contracts will normally be required and may be executed under seal depending on the nature of the work and degree of protection required. 3.1.3 Over £100,000 For all contracts in this range, a minimum of five formal competitive tenders are required, based on a detailed specification and an invitation to tender setting out the terms and conditions proposed. Formal contracts under seal are required unless the legal section deem them not to be necessary. 3.1.4 General provisions Bidders for work of any size may choose to offer alternative solutions and prices to those set out in the bid documents. These can be advantageous and should not be discouraged unless the specific provisions of the bid documents are considered essential to the success of the project concerned. Where there is a likelihood of such offers, it may be sensible to say so in the invitation to tender and to specify the criteria which will be applied to any offers received. 3.1.5 Alternatives to Formal Quotations or Tenders Regardless of the value of the supply concerned, in circumstances where the desired outcome is clear but scope exists for alternative approaches to its delivery, a two-stage process, modelled on the Competitive Dialogue Procedure introduced by the EU’s Consolidated Procurement Directive (see Section 5 below) may be appropriate. Directors wishing to use such a process should first agree the details in each case with the Director of Neighbourhood Management and Democratic Services and Director of Finance, Property and IT. 3.1.6 Negotiations on Offers Where any of the following circumstances prevail, a Director may, prior to the formal agreement of any contract, carry out negotiations to clarify offers received or otherwise to agree the prices and other terms of the contract proposed: • Where one or more offers is accompanied by alternative proposals; • Where examination of offers reveals errors, discrepancies or misunderstandings which would affect the contract price; • Where the relevant Director considers that the best offer presented does not represent the best Value For Money that can reasonably be obtained. In all cases, the following provisions shall apply: • All bidders shall receive fair and equitable treatment and shall be given equal opportunity to clarify their offers or to submit alternative proposals; • The relevant Director(s) shall ensure that all negotiations are fully documented and that this documentation and all other evidence of negotiations is collated and filed so as to be readily available for audit or other inspection as required. All such evidence shall be retained in accordance with the Council’s Document Retention Policy;
Page 3 of 9 03/04/2008 RulesFinRegApBContract StandingOrders.doc
At no time shall a bidder be informed of the detail of any other bid.
Where the amount involved exceeds £20,000, any such negotiations shall be conducted strictly in accordance to the following rules: • They shall take place at predetermined times and places; • The Director of Neighbourhood Management and Democratic Services and the Director of Finance, Property and IT must be notified of the time and venue of all negotiations; • More than one officer of the Council shall be present at all times, including the Director of Neighbourhood Management and Democratic Services and the Director of Finance, Property and IT or their senior representative; • The signed record of all meetings shall be kept on file and a copy supplied to the Director of Neighbourhood Management and Democratic Services, the Director of Finance, Property and IT and the bidder and, in the event of a contract being awarded, the relevant signed records of meetings shall be bound into the contract. 3.1.7 Bid Evaluation Regardless of value, evaluation of bids should take into account the whole life costing of the goods, works or services, including any maintenance requirement and their ultimate replacement where appropriate. Issues around sustainability should also be considered. The decision as to which offer should be accepted should be based on the best overall economic advantage to the Council, which does not always mean the lowest price. The invitation to tender should set out clearly the evaluation criteria proposed which should previously be agreed by the relevant Project Board in accordance with the Council’s Project Management Guide. Refer to the Procurement Strategies or the Corporate Procurement Officer for more information and advice.
This section outlines the basic procedures to be followed but is not designed to provide comprehensive guidance. There is detailed guidance on legislation and on approaches to tendering in the CIPFA Standing Guide to the Commissioning of Local Authority Work and Services, available through e-link, and further advice is available from the Corporate Procurement Officer. 3.2.1 Tender lists Directors are responsible for selecting organisations to be invited to tender, subject to all potential tenderers passing vetting procedures approved by the Director of Finance, Property and IT. Organisations selected using Constructionline or the National Pre-Qualification Service (NPQS) will normally be deemed to have been suitably vetted. The list of organisations to be invited to tender, quote or make proposals shall be approved by: • The relevant Director if less than £100,000; • The Cabinet if the contract value is estimated to be greater than £100,000. 3.2.2 Invitations to Tender and Requests for Quotation You should always allow sufficient time for well-considered bids to be submitted. Only for the simplest of works should you allow a period significantly less than 40 days. All invitations to tender (ITT) or requests for quotation (RFQ) should include: • A list of the criteria to be applied in bid evaluation; • Details of the information required from bidders against each of the criteria; • A full set of contract documentation, including where appropriate the conditions of contract, functional specification and any other document necessary to fully describe and specify the Council’s requirements; • Full details of the timescales and other conditions for return of bids; Further advice is available from the Corporate Procurement Officer.
Page 4 of 9
3.2.3 Forms of Tender or Quotation. Where any Director wishes invitations to tender, requests for quotations or submissions in response to be in any form other than original documents on paper, that Director shall first in each case agree suitable arrangements with the Director of Neighbourhood Management and Democratic Services and the Director of Finance, Property and IT. Any such arrangements must provide at least the same degree of anonymity, security and confidentiality until the scheduled time of opening as the arrangements specifically detailed in these Standing Orders. This provision is expressly designed to facilitate the use and development of electronic tendering procedures where appropriate and beneficial to the Council. Further advice and assistance is available from the Corporate Procurement Officer. 3.2.4 Receipt and Custody of Tenders and Quotations All tenders and quotations shall be returned in sealed envelopes that shall be: • Marked clearly to indicate that it contains a tender or quotation and have no means by which the bidder can be identified; • Endorsed to identify the goods, services or works to which it relates; • In the case of a tender, addressed to the Director of Neighbourhood Management and Democratic Services, or, in the case of a quotation, addressed to the relevant Director who shall keep them unopened in safe custody until the deadline for receipt has passed. 3.2.5 Validity of Tenders and Quotations No tender or quotation can be considered as valid if: • The envelope bears any mark by which the bidder can be identified; • If it is received after the deadline for receipt set out in the ITT or RFQ; • If for any reason the envelope has been opened prior to the deadline; • If for any reason the bidder has failed to comply with any of the instructions contained in the invitation. 3.2.6 Opening of Tenders and Quotations Tenders and quotations shall be opened at one time in the presence of the relevant Director and at least one other officer. For tenders this must be the Director of Neighbourhood Management and Democratic Services (except where the relevant Director is the Director of Neighbourhood Management and Democratic Services where any other Director should be present) and for quotations any service manager not directly involved in the procurement. 3.2.7 • • Acceptance of Tenders and Quotations
Acceptance of tenders/quotations shall be by:The relevant Director if less than £100,000; The Corporate Management Team if between £100,000 and £500,000 (with a retrospective report to Cabinet for information). • The Cabinet if greater than £500,000. Provided that: • Adequate budget provision exists for both capital and revenue expenditure. • All relevant approvals have been obtained in accordance with the Council’s Project Management Guide. • A proper evaluation has been carried out which clearly demonstrates that the tender/quotation in question constitutes the best economic advantage to the Council, taking into account quality, price and sustainability
Exceptions to tendering and quotation procedures
It shall not be necessary to invite tenders tenders/quotations:• • •
Where effective competition is prevented by governmental control or market monopoly; Where purchase is made at public auction; Where procurement is made through a purchasing consortium;
03/04/2008 RulesFinRegApBContract StandingOrders.doc
Page 5 of 9
Where procurement is in conjunction with a third party who has undertaken a tendering/quotation exercise to the satisfaction of the Council. Where it is in the business interests of the Council not to seek formal tenders (eg urgent action is required), agreement from the Corporate Management Team, the Councils section 151 officer, the Monitoring Officer and the Leader of the Council must be sought prior to commissioning works. A subsequent report will be made to Cabinet.
The basic principles of the EU rules and procedures are set out here. For fuller and further details, please consult the CIPFA Guidance available on e-link or seek advice from the Corporate Procurement Officer.
Higher value goods, works and services
EU procurement rules stipulate that higher value contract opportunities should be subject to additional rules and controls. Any proposed purchase of goods or contract for services where the estimated value exceeds approximately £144,000 or for works where the value exceeds approximately £3,500,000, is caught by these provisions. The terms goods, works and services have precise definitions within the legislation but these broadly follow a common sense understanding. “Works” involves works of design, construction or maintenance to any land or buildings and specifically includes anything normally defined as building or civil engineering work. Further details are available in the CIPFA guidance. If in any doubt, be sure to consult the Legal Services Team or the Corporate Procurement Officer. The detailed provisions are set out in Directives issued by the EU administration which have been incorporated into UK law and MUST be complied with.
Contracts caught by the EU provisions as described above must first be advertised in the Official Journal of the European Union (OJEU). The procedures vary with the nature of the work involved and can sometimes require you to advertise for expressions of interest well in advance of actually inviting tenders. Consult the CIPFA guidance or the Corporate Procurement Officer for details as they apply to your circumstances.
Where tendering under EU provisions is necessary, it may increase the time you need to allow for the process. Consult the CIPFA guidance for details as they apply to you.
A contract can be created in a number of ways but essentially consists of an offer by one party to supply goods or services or to carry out works being accepted by another in return for a consideration. This can take a variety of forms but even what seems simply like a preliminary conversation could bring into being a contractual relationship. When dealing with suppliers or contractors, therefore, it is vital to appreciate what you are saying and to understand how others may perceive it.
Forms of Contract
5.2.1 Oral agreement Whilst this can legally create a contractual relationship, you should never rely on an oral agreement or instruction to create a contract on behalf of the Council. 5.2.2 Exchange of letters The minimum formality required to record an agreement is an exchange of letters setting out
Page 6 of 9 03/04/2008 RulesFinRegApBContract StandingOrders.doc
the terms of that agreement. It can be a very simple note or a more substantial document, for example to accept a written quotation on agreed terms and conditions. Where no other specific terms and conditions have been agreed, the Council’s standard terms will apply. Details are available on e-link or from the Corporate Procurement Officer. Any such exchange should set out clearly the nature and extent of the goods, works or services to be provided and the terms under which they are to be provided, including a clear statement of the price or other consideration to be paid. It should also include reference to the timescale involved and make it clear if time is to be of the essence of the contract. 5.2.3 Standard forms of contract There are many different standard forms of contract, particularly in the construction and engineering industries and for professional services. When obtaining tenders or quotations for goods, works or services, be aware of and make sure you understand the terms and conditions involved. Some examples are those published by the Royal Institute of Chartered Surveyors or Institute of Civil Engineers and available on their respective websites. If in any doubt, be sure to consult the Legal Services Team, the Corporate Procurement Officer or someone else with the appropriate procurement or contracting expertise. 5.2.4 Suppliers terms and conditions You should never accept without critical examination any terms and conditions offered by suppliers or contractors. These can contain provisions which might seriously compromise the Council’s rights should things not go as planned and you should always ensure that the Council’s interests are properly recognised in any terms and conditions you are offered. The Council’s Standard Terms and Conditions, available on e-link, provide the basic minimum default provisions. You should not agree anything less favourable without the specific authority of the Director of Finance, Property and IT. If in any doubt, be sure to consult the Corporate Procurement Officer or the Legal Services Team. 5.2.5 Bespoke contracts From time to time, you may be involved in work for which few or no precedents exist and a bespoke form of contract is required. In any such case, you should always consult the Legal Services team and the Corporate Procurement Officer at the earliest possible opportunity and take their advice on the form of any contractual arrangements necessary. 5.2.6 Equalities and Sustainability All forms of contract need to reflect the Council’s commitment to equalities and sustainability. Copies of the Equalities Standard for Local Government, our Local Agenda 21 Strategy and guidance on sustainable procurement are all available on e-link and all officers involved in preparing contracts or otherwise commissioning the supply of goods, works and services should familiarise themselves with these documents and ensure that their proposals take their provisions into account. All contracts should include a clause requiring compliance with good equalities practice. Specific clauses for inclusion in Council contracts are being developed. Until they are available staff should consult the Legal Section or the Corporate Procurement Officer for advice in specific cases.
If in any doubt, be sure to consult the Legal Services Team, the Corporate Procurement Officer or someone else with the appropriate procurement or contracting expertise before committing the Council in any way.
Formal contracts will normally be required for all goods, works and services valued at more than £20,000 and can often be helpful for lower value supplies. They fall into two broad categories. The differences lie mainly in the timescales that each party has to initiate action under the contract, governed by something known as the statute of limitations. All contracts where the consideration is valued at more than £100,000 shall be executed under
Page 7 of 9 03/04/2008 RulesFinRegApBContract StandingOrders.doc
seal, which provides for a limitation period of 12 years, unless the Legal Section agree otherwise. Contracts under this value can be executed under hand which provides a shorter period. If in any doubt, be sure to consult the Legal Services Team, the Corporate Procurement Officer or someone with the appropriate procurement or contracting expertise.
For contracts that provide for payment to be made other than at one time, the Director responsible for the contract shall maintain a register showing the state of account on each contract, in the manner specified by the Director of Finance, Property and IT. Payments in respect of such contracts shall be made by the issue of a certificate certified by the relevant Director. The form of the certificate shall be agreed by the relevant Director in consultation with the Director of Finance, Property and IT and shall contain:• The total value of the contract; • The value of work executed or goods or services received to date; • Any retention percentage and amount; • The amount paid to date; • The amount now certified for payment. This register shall also be used to record the payment of any related professional fees.
Internal Control Spending authorisation
Directors have delegated authority to commit the Council to contracts for all but the largest sums or where the authority is specifically reserved by the Cabinet. All other officers have authorisation limits set by their Directors, details of which are held by the Payment Control Team. These limits are used within Integra to control the issue of orders and the need, where appropriate, for countersignatures on orders before dispatch.
Separation of duties
For all but the smallest sums, more than one person should be involved in the transaction. So, for example, the person ordering goods should not be the one to authorise payments. This is intended to protect all parties.
All contracts and orders must be supported by an appropriate form of written evidence including sufficient detail for the logic of the decision to be apparent to anyone subsequently reviewing the circumstances.
Retention of documentation
Documentation for all orders and contracts is subject to the Document Retention Policy available on e-link. Supporting documentation should exist for all but the most minor or routine items and should be retained in an accessible from for the periods defined in the policy. In the case of any formal contract, the minimum retention period shall be six years, extended to twelve years for contracts under seal.
Provisions for budgetary control and monitoring are set out in the Rules for Financial Governance. The principles as they apply to orders and contracts are described briefly here.
Regardless of the amounts involved, budget provision for orders or contracts must exist before the expenditure is committed. For orders raised via Integra, the system will check for adequate funds against the appropriate profiled budget and will not place orders unless the funds exist.
Page 8 of 9 03/04/2008 RulesFinRegApBContract StandingOrders.doc
In all other circumstances, the officer responsible for placing the order or letting the contract must confirm the details in each and every case and ensure funds are in place before committing expenditure.
Use of Integra for orders automatically registers the commitment against the appropriate budget within the general ledger. For most contracts and for orders placed outside of Integra, the process is not automatic and you should seek the advice of the Management Accounting Team on how to register the commitment.
Procedures for virement can be used to move funds from one budget where there is a projected under spend to another to ensure funds are in the right place before commuting expenditure. Refer to the Rules for Financial Governance or contact the Management Accounting Team for further information.
10 Exceptions to these Standing Orders
Except as provided in section 3.3 above, exceptions to these Standing Orders must be approved by Cabinet, acting with the advice of and on the recommendation of the Director of Finance, Property and IT and the Director of Neighbourhood Management and Democratic Services.
Page 9 of 9