Approved by Cabinet 10-07-02

DONCASTER MBC

Procurement Best Practice Guide

ACHIEVING OUR FULL POTENTIAL Choosing the best options to achieve Doncaster’s goals and priorities 17-05-02

CONTENTS

Page Introduction…..…………………………………………………………………… 3 The Procurement Process………………………………………………………………..………….… 4 1. Assessment of Need……………...…………………………………………... 4 2. Markets………...…………………………………………………………….…. 5 3. Option Appraisal……………………………………………………….... ……. 7 4. Contract Strategy…………………………………………………….….. ……12 * Partnerships & Partnering…………………………………….………………. 18 5. Green Procurement……………………………………………………… ….. 24 6. Local Suppliers………………………………………………………………... 27 7. Tender Evaluation…………………………………………………………….. 31 8. Project Management…………………………………………………………. 34 * Risk Assessment & Risk Management……………………………………… 39 9. Contract Management…………………………………………………... ……42 Summary……………………………………..…………………………………… 43

Appendix 1 Key Project Activities………………………………………………………………44 Appendix 2 Essential Elements of the Procurement Process………………………………45

INTRODUCTION

This document outlines the major issues to consider when procuring in accordance with best value principles. It covers areas of the procurement process in a best value environment and provides guidance on current best practice. The issues apply equally to the decision-making process for all procurements undertaken by the Council. This guidance should also be used to inform the options appraisal undertaken as part of a Best Value Review. It should be read in conjunction with the Council’s Procurement Strategy, and will be developed further to take account of emerging issues. It will ultimately become a comprehensive manual for use by anyone involved in procurement activities within Doncaster MBC.

Consideration should always be given to how the proposed procurement will contribute to the achievement of corporate objectives and transformational goals. supplies or services. ASSESSMENT OF NEED Is there a need for some form of Procurement? 1.3 . As part of the Best Value review process. For other strategic procurements.1 The essential prerequisite to any procurement process being initiated. the need should be identified through the comparison and challenge elements of the review. is an assessment of the need for the proposed works. This applies equally to Best Value services and other strategic procurements. and also take account of the statutory nature of the goods or services and any legal constraints on how they should be provided. 1.THE PROCUREMENT PROCESS 1.2 1. the need should be demonstrated in the Strategic Procurement Plan. The corporate policy on consultation should be complied with to ascertain the “need” for the procurement as judged by stakeholders.

The steps to be considered (in accordance with paragraph 41 of DTLR Guidance 10/99) to create conditions in which new providers might take root or existing suppliers might become more competitive include: ♦ basing requirements on outcomes to encourage innovative methods of provision – don’t be unnecessarily prescriptive about the way something should be done grouping activities to reflect prospective market competencies ♦ . and also any suggestions as to alternative provision or procurement methods which may be more attractive to the market and hence obtain better value for money for the Council. The Council has a “Strategy for Developing Markets” where none is found to exist. who could supply the goods/services in the way envisaged by the procurement plan. the Council is required to demonstrate that where a market is not apparent. Their views should be sought on the proposed packaging of the procurement. steps have been taken to encourage a market to develop. and the steps contained in that strategy should be followed to encourage providers in that particular area. publications (including the Internet).1 One of the requirements of Best Value is to analyse the structure of supply markets for the different goods or services. The results should be used to inform the proposed procurement process. This may be via interviews/discussions.via professional bodies. questionnaires or organisation of a briefing session. and other public bodies. and the way in which they are developing. adverts should be placed in appropriate publications/venues to invite interested parties to express interest in being consulted. market consultation .2 Under Best Value. Market intelligence should be acquired via the following routes: ♦ research .2. To enable this process to take place. the views of those interested should then be sought by the most appropriate means. into whether there are currently a number of providers in that particular market. trade organisations. MARKETS What can the Market Provide? 2.potential providers of the works/supplies/services under consideration should be consulted as stakeholders in this particular procurement process. ♦ 2.

in other. composition and length of contracts. in some areas of activity larger packages may generate more interest than smaller ones.g. Early discussions with prospective providers can assist in shaping the optimum size. ♦ ♦ .♦ packaging work appropriate to the market. the opposite may be the case). regardless of the sector they operate in developing an understanding of the potential sources of supply. whilst ensuring the fairness and transparency required.the Council must make it clear if it wants a long term relationship with potential suppliers. (E. and demonstrate a genuine interest in using the best provider. being clear about intentions .

The choice has to be made irrespective of whether the final result is improved in-house services. The Council therefore has to adopt new ways of thinking about its services and new ways of managing them (whether provided in house. We have to make a strategic choice about what services we require (the specification). but not a duty) creation of a public-private partnership. through a strategic contract or joint venture company transfer or externalisation of the service to another provider market-testing of all or part of a service (where the in-house provider bids in open competition against the private or voluntary sector) restructuring of the in-house service re-negotiation of existing arrangements with current providers where permissible joint commissioning or delivery of the service (joining with other public bodies to jointly provide or purchase services. where the Council has a power to do something. Practical steps have to be taken to make the most of existing skills and experience in the public sector.2 The statutory guidance on Best Value lists (the minimum) seven options for service delivery: ♦ ♦ ♦ ♦ cessation of the service (withdraw from the activity. an external provider or a mixture of both. ♦ ♦ ♦ 3.1 The objective of Best Value is to ensure that local citizens get the best possible services from Local Authorities. the private sector and the voluntary sector.3. and how we will work with the people who deliver the services (the relationship). Service Delivery Options 3. OPTION APPRAISAL Obtaining the Best Possible Services 3. through contracts or through other arrangements). Choices have to be made to develop a framework for local service delivery.3 Each option will be appropriate in particular circumstances. Thus we will achieve the Best Value service option. recognising that neither the public nor the private sector can deliver the best quality and cost effective local services on their own. pooling of budgets. working with other agencies or arrangements with not for profit organisations). This can include delegation of powers to another authority. including: . The choice of option will be influenced by a number of factors.

• • • . This can be used more effectively to deliver a high standard of service at an economical cost Innovation . Through access to management and support services via more efficient use of assets. it may be able to deliver better levels of service.another organisation may be larger than the existing supplier. Economies of Scope .♦ ♦ ♦ 3.where investment in capital assets is necessary to deliver a Best Value service.4 the legal framework corporate values and objectives results of a Best Value Review This Guide outlines the approach to making the choice/appraising the options. and the final decision is firmly based on evidence of a thorough appraisal process. What are the benefits of delivering the service through another organisation? Possible benefits could include: • Economies of Scale .another organisation may have a way of doing things which is so different that the existing supplier will not be able to learn. Access to Capital . restrictions on Local Authority borrowing may force this option. to ensure that all practical options for future service delivery are considered. KEY ISSUES TO CONSIDER AT THIS STAGE: a.another organisation may have specialist skills and expertise that the existing supplier cannot afford.

these are the costs of using the market. What are the elements of uncertainty and risk? These are issues about the level of uncertainty between the objectives of a service and its delivery. c.some of the costs above will be necessary to control or reduce costs later. the more likely it is that in-house provision. What are the costs of delivering the service through another organisation? • Transaction costs .b. There always needs to be a balance between the cost of going out to the market. The costs can occur before a contract is awarded: ♦ ♦ ♦ ♦ creating the specification obtaining market information consulting customers choosing the right contractor or partner Or they can happen after contract award: ♦ ♦ ♦ ♦ the Council pays too much for the work or service the Council has continuing costs of monitoring and dealing with the contractor’s failure there are increasing costs over time if the winner of competition becomes a monopoly supplier Process Costs . and the savings available from doing so. and any organisation which uses competition to choose who supplies works. In general terms.. the more uncertainty there is (because of the nature of the requirement or because of the environment in which the service is delivered). There should be an attempt to ensure that the benefits of using competition are considered to outweigh the risks of having to meet these process costs. They are the unavoidable costs of using the market. or a modified contractual relationship is the Best Value option. . Each procurement decision will have to be aware of the options which might increase transaction costs and the ways in which these costs may be reduced or controlled. and are known as process costs. goods or services will come up against them. the uncertainty is between issuing an instruction and its execution.

any implications for other parts of the Council?). which people are involved. partnership approach. or to pull out of providing the service at all. What are the anticipated costs and benefits of externalisation (long term. Most also involve the competitive selection of a service provider. except for a decision to retain the service in house. all the basic options concern externalisation (or potential externalisation). any assets. what could it be stimulated to offer. short term. there needs to be clarity and forward planning regarding: ♦ What is planned to be externalised (the whole or part of an existing service. risk factors?) What are the options available (what does the market currently offer.Questions to answer for each Service Delivery Option: Make or Buy? 3.5 The options appraisal process is an essential part of the Procurement Strategy because. what are the alternatives to market transactions?) What kind of relationship is being sought with the contractor (traditional contract. Therefore. non-contract approach?) Who will be responsible for managing the contract/relationship with the external supplier? ♦ ♦ ♦ ♦ .

efficiency and effectiveness. 4. 3. 7. 5. Is there any policy reason for eliminating this option? Is there any legal reason for eliminating this option? Is there any financial reason for eliminating this option? Are there any other reasons for rejecting this option? At this point some of the options may be eliminated.The following series of questions should be applied to each option. 6. more options may be eliminated. and the answers should be expanded from a simple yes or no. why and how: 1. What is the experience of other Councils who have used each option? How does this option contribute to Best Value for them? At this point. 2. to what. what is the nature of the gap. If more than one option remains. in what ways can each option help us to bridge the gap? At this point. options that are not appropriate to the Council’s objective of bridging the gap may be eliminated. What is the gap between our existing service and where we want to be. 9. and extent of failure? . and to the achievement of corporate and service objectives? What is the risk to the Council in terms of likelihood of service or function failure. What is the contribution to economy. each one should be assessed in terms of contribution and risk to the Council: 8.

and correspondingly there are different types of contractual relationship which may result. there is one winner.4. Consider all options for a competitive process and select the most appropriate. any organisation can apply. More appropriate where: • the procurement is easy to specify & monitor • relationship can be dealt with by standard terms & conditions • there is an active.1 The kind of relationship envisaged between the Council and another organisation as a result of the procurement/externalisation is identified as one of the outputs from the option appraisal process. competitive market Less appropriate where: • the procurement is difficult to specify & monitor • Council wants a close relationship with supplier • Council will use standard criteria to reduce risk. CONTRACT STRATEGY 4. some tenderers may be wasting their time by making a bid . OPTIONS FOR A COMPETITIVE/EXTERNALISATION PROCESS Open competition The Council invites tenders. justifying your choice – a file note showing the full decision making process should be made a. There are obviously a number of competitive processes available. The main options relating to the competitive process and relationships which result are outlined below.

Suppliers chosen when needed.Restricted Competition Suppliers have to meet certain criteria before they can bid for work. competence & reliability. More appropriate where: • Council only wants to deal with suppliers who meet specified technical. competence or management standards • relationship with supplier will be important for the success of the contract • evaluation of bid likely to be complex & time consuming Less appropriate where: • supply/service easily specified & monitored • evaluation of bids will be simple • established market for standard products/services Spot Purchasing Standard service package provided by supplier who can demonstrate cost effectiveness. More appropriate where: • service packages relatively small & can be easily described or negotiated within a few parameters • law requires suppliers to be registered to deliver the service/product • Council’s relationship with suppliers based on contract mechanisms • cost is most important factor for Council Less appropriate where: • service difficult to specify & monitor • suppliers do not need to be registered • service packages relatively large (above Council threshold for competitive tendering) • balance between cost and quality is complex • relationship with supplier is important .

More appropriate where: • a single supplier may not have all necessary skills & resources • Council requires flexibility without full tendering process each time • demand for service unpredictable • service delivered as a number of discrete projects • Council wants close relationship with suppliers Less appropriate where: • a single supplier can meet all Council’s requirements & deliver economies of scale • demand relatively predictable over life of contract Management Contracts The management part of the service is subject to competition but delivery remains with the existing provider More appropriate where: • a BVSR has identified serious management weaknesses • external management contractors can be co-ordinated with internally employed staff • there is a commitment to using in-house labour for front line service provision Less appropriate where: • management functions cannot be easily separated from service delivery • full externalisation would deliver better value .Call-Off Contracts More than one supplier chosen to have a licence to do work according to specification. Details of work and allocation dealt with on a day by day or project by project basis.

Budget-Based Bidding Bidders compete on the quality they can offer within a set budget More appropriate where: • the Council has a clear idea of the budget available • the Council can specify the outputs & outcomes it requires Less appropriate where: • there are key inputs & processes the Council must specify • the Council does not have a clear view about what would constitute a Best Value bid • potential service providers do not understand how the process will work Segmented Contracting Contracting-out services in a specified geographical area used as a benchmark for in-house provision More appropriate where: • service suitable for dividing on geographical lines • spur of competition from the externalised service will improve the in-house service • contractors are willing to provide information to enable benchmarking of inputs & processes as well as outputs Less appropriate where: • the gap between in-house & external providers is too large for the in-house provider to improve in a reasonable time • the service needs to be managed as a whole to take advantage of economies of scale & scope .

the approach to the relationship with the chosen contractor/supplier also needs to be considered. E. justifying your choice. The preferred relationship with the chosen supplier will affect the kind of contract which will be the most appropriate. OPTIONS FOR A CONTRACTUAL RELATIONSHIP In addition to the competition/externalisation choice above. Options in addition to the traditional forms of contract include the following: Continuous improvement contracting The contract has built-in commitments to improvement in service and shared benefits.Now consider all options for a contractual relationship and select the most appropriate. one way to build in financial improvement is not to have any index-linking to the price paid More appropriate where: • the Council is planning to improve service delivery in stages over a number of years rather than in one go • service providers are willing to agree to open book accounting & to share performance information • both the Council & the service provider want a relationship based on trust & mutual benefits rather than a traditional contract approach Less appropriate where: • most significant improvements can be made in the short term • a standard service is required on a continuous basis • there is a danger that incentives may lead to inappropriate behaviour . b.g.

Partnering arrangements A variety of contract forms that can include ‘relational’ contracts which are developed where the service cannot be predicted.2 Less appropriate where: • smaller or less significant contracts. and the partners have to rely on each other more than on the courts for dispute resolution More appropriate where: • the Council wants to use competition/externalisation. However. . where the process costs of setting up the partnering agreement outweigh any benefits • standard services that are easy to specify & monitor The Council has Officers within the Legal Department who should be requested to advise on the most appropriate type of contract in each particular circumstance. the responsible procurement officer should consider the type of relationship with a provider which he/she feels would provide the best value service provision. but still wants a close relationship with the provider • the contract is for a large (financial) or significant (political risk) aspect of the Council’s services 4.

It has been said that “a best value authority is willing to work with other organisations in partnership to deliver services” (Beverley Hughes. Partners should each contribute to best value performance indicators and so build innovation and continuous improvement into their day-to-day work. the core processes necessary for the creation and maintenance of a successful partnership. It fits in with Best Value . Agreement of resources such as organisation. • • • • • . Each partner’s contribution is planned.3 Partnership is a concept now widely accepted in both central and local government. would consist of following elements:• Two or more parties co-operate and work together. Partnership in its widest sense is about working to common goals with shared values and responsibilities. along with what is expected of them and how they will benefit. It results in synergy by pooling of resources. efficiently and effectively. A partnership or partnering arrangement may grow out of an existing contractual relationship or be specifically developed.implementation is as important as plans.“putting service users centrestage”.4 Many activities attract the label of “partnership”. There is effective leadership of the joint action . 19/6/00). Decision-making processes respect the needs of all partners. There are shared compatible ends. no dominant partner.*PARTNERSHIPS & PARTNERING 4. Commitment to agenda for joint/coordinated action by both parties. There is genuine consent. It achieves outputs/outcomes to meet the demands of the local community. Definition 4. • The process brings together and uses resources more economically. finance and skills. especially since the advent of Best Value. and therefore integral to partnership working. Whatever the formal arrangement. each willing to influence and be influenced and releasing some element of control.

• Specific goals are set and the success of the partnership is evaluated against them. Issues to be addressed when considering partnerships/partnering • 4. WHY? There are a number of reasons for local authorities exploring the possibility of partnerships: ♦ ♦ ♦ to share risk to access new resources and specialist skills to review service delivery options The relationships which develop and are sustained as part of effective partnership working should be based on the following principles: ♦ ♦ ♦ ♦ ♦ shared understanding of aims and objectives of the partnership commitment to the development and success of the partnership open relationships and an atmosphere of trust. WHAT? A contractual partnership is a finite business relationship which brings together two or more organisations which have different statutory powers and duties. b. The Council needs to consider how best to achieve such clarity and how to give it effect through a considered approach to procurement. limited both in scope and time. different skills and needs. but share a mutual interest in collaborating to achieve specific objectives. a. enabling partners to share information effective leadership to ensure the partnership maintains momentum and focus regular communication between partners and within each partner organisation .5 Partnership working requires clarity about the contribution expected from each of the partners at different stages of policy development and implementation. There must be continual assessment of the partnership’s function is the work still relevant to evolving community needs and priorities. Permanent revisionism brings a capacity for continuous improvement.

♦ ♦ c. management and review. trust) PFI strategically co-ordinated services 4. . to ensure that there is a consistent council-wide approach to their initiation. clearly understood objectives and responsibilities for each partner demonstration of progress and contributions WHO? The Council’s partner may be: ♦ ♦ ♦ ♦ ♦ a voluntary organisation a community enterprise/trust a private contractor/developer another public sector body a local authority company d. HOW? There are also a variety of structures for a partnership arrangement: ♦ ♦ ♦ ♦ ♦ contractually based (not PFI) joint ventures not-for -profit joint entity (e. Officers should also have regard to the Council’s Financial Procedures Rules (F. Partnership Protocols 4.6 The DTLR guidance on these matters states that we should have a policy or code of practice for partnerships.31) which provides that Executive Directors are responsible for ensuring that all partnership arrangements are reported to the Executive and approval gained for the proposed relationships and monitoring procedures.g.7 The key elements of the Council’s partnership policy can be found below to give broad guidance to officers when considering partnership as a method of procuring and providing works/supplies/services on behalf of the Council.

management arrangements. Ensure the partnership is developed in accordance with corporate objectives. Formalise the structure of partnerships to assist the development of new partnerships including the definition of roles and responsibilities. Achieve the strategic aims of the Council. The partnership works to an agreed standard. Ensure service providers work in line with the Council’s core values and Directorate standards. Objective of the individual partnership arrangements To provide quality services efficiently and cost effectively.addresses the objectives.9 . linked in with the Council’s decision-making structure Specification of measures of performance. to promote economic prosperity for the local community.Issue to be addressed by establishing the partnership Protect the interests of the community and ensure the highest quality service is provided. membership. and accountability. and is used in conjunction with a formal contract to clarify the relationship between the partners. Ensure common practice in the evaluation of partnerships. Agree terms of reference. shared objectives. The formal partnering contract should set out the intended relationship between all parties involved.the Memorandum of Understanding or Partnering Agreement. the key objectives and parameters of the partnership need to be established at the outset. It should be framed so as to promote: ♦ ♦ ♦ an appropriate exchange of information on a regular basis arrangements for regular meetings shared arrangements for dealing with customers where appropriate. targets for service delivery and implementation timetables. A formal document . membership. such as improving the environment and achieving Best Value.8 Whatever arrangement is considered to be the most appropriate. Implications for contracts 4. both quantitative and qualitative. including communications and complaints handling 4. values and responsibilities of the partners.

an equitable sharing of the risks involved in performance of the works/service. ♦ 4. balanced by provisions for sharing the benefits of good performance overall. to give them legal effect. a Partnering Agreement (often a single page setting out the overall aims of the collaborative working) is often adopted and signed by representatives of all parties involved in the partnership in order to demonstrate that the behavioural aspects of the arrangement have been adopted by all concerned. The constraints on partnership working can be both external and internal to the organisation: ♦ ♦ EU procurement legislation. requiring particular procedures to be followed for contracts over a certain value particular problems where a private sector company seeks an exclusive relationship with a Local Authority that will result in a contractual relationship which would normally be subject to the requirement for competition (seen as a “cosy relationship”) cultural difficulties (Members.10 In addition to the inclusion of these elements in the formal contract where necessary. partner organisations) problems of measurement .benchmarks against which to judge performance 4.11 These should be taken into account when a partnership or partnering arrangement is suggested by the option appraisal and contract strategy processes as being appropriate. staff. Typically.12 ♦ ♦ . the private sector encounters some difficulty in persuading Local Authorities to enter partnership arrangements because of propriety problems related to public sector competition rules. Advantages and disadvantages of partnerships 4.♦ ♦ clear performance targets and standards an equitable system for dealing with poor performance. service recipients. The current market situation for the particular service/supplies/works area must be assessed to determine whether the partnership would be viable.

The partnership ideals need to be contained within the contract and monitored by managers on both sides. or indeed all parties involved in provision of a particular service. The key principles contained in this best practice guide and the Procurement Strategy relating particularly to option appraisal. . and can be summarised as: ♦ ♦ ♦ ♦ improvements leading to best practice reduced duplication of effort improved access to resources ability to take advantage of networking 4.14 Partnership can therefore be viewed as shorthand for a collaborative approach between client and contractor. The extent of cultural change necessary within organisations to implement effective partnerships successfully. suggest that it would be sensible to introduce the concept only after carrying out a detailed analysis of procurement options in each individual case.13 The recognised benefits of partnerships have been mentioned above. contract strategy selection and ethics and probity must be referred to in order to address the potential problems with a partnership approach and take advantage of the benefits on offer.4.

easily upgraded and repairable are reusable and markets and the infrastructure exist for recycling the product at the end of its life are supported by additional information to demonstrate their environmental preferability.enables public bodies to build sustainable development and environmental factors into their contract specifications and to look beyond the initial cost to take account of longterm cost savings from. 8. while contributing to the Council's objectives on environmental matters.1 Greener public purchasing is about specifying environmentally preferable products and services. 5. 4. 5. 6.with its emphasis on whole life costs and quality to meet customers' needs . are fit for the purpose and provide value for money are energy and resource efficient use the minimum amount of virgin materials make maximum use of post-consumer materials are non. for example. This reference to "quality to meet the customer's requirement" enables departments to specify what they need to meet their own operational and policy objectives. 7. lower operating and disposal costs. Buyers must. Among other things they: 1. 2.3 .5. 5. satisfy themselves that specifications are justifiable in terms of need. Environmentally preferable products are defined as ones which are less harmful to human health and the environment when compared with competing products which serve the same purpose.2 The requirement to achieve value for money . of course. 3. GREEN PROCUREMENT Environmentally Preferable Purchasing 5. cost effectiveness and affordability.(or less) polluting are durable. Value for money in procurement is defined as "the optimum combination of whole life cost and quality (or fitness for purpose) to meet the customer's requirement".

taxation. a buyer of a car for mainly urban use may wish to place greater emphasis on reducing emissions harmful to health than say the buyer of a vehicle for mainly inter-urban use where a higher priority is to achieve more miles per gallon with a consequent reduction in carbon emissions which contribute to global warming. a buyer can reduce the demand for water. That is.thus protecting wildlife. 5. There are.9 .than a less environmentally-preferable product or service.even after taking account of whole life costs . hurting lower income groups more. habitats and social amenities. For example.6 Social performance is about the impacts of an organisation on society. however. because environmental costs are born disproportionately by the poor.8 5. on people outside the organisation. so helping to safeguard streams and rivers . Raising environmental standards through procurement and other activities helps to address social inequality. education and foreign aid. We might also be using procurement to effect changes which could be more effectively brought about by. with the result that costs escalate and services suffer. Ethical performance is about internal business processes.4 It is possible when developing a business case for a contract to give added weight to a particular quality so that it has a greater influence over the outcome. Green Premium 5. For example. Social and Ethical Implications 5. Purchasing can therefore have an impact on social issues through appropriate use of specifications and by basing award decisions on whole life costs and quality. This extra cost may be justified if the purchase is necessary to conform with Council policy to buy or not to buy a particular substance or material on environmental grounds. This should be reflected in the evaluation model for that particular tender.Building environmental aspects into evaluation models 5. consistent with value for money for the taxpayer and are best procurement practice. whether on a global scale or within the UK. legislation.7 5.5 The specification of a particular environmental requirement may occasionally result in a purchase which costs more . For example. some social and ethical issues which buyers can consider where they are relevant to the contract. There is always a danger that taking into account "social" and "ethical" issues in the procurement process may dilute the overriding requirement on buyers to achieve value for money. This could also be built into a scoring system for evaluating bids where the quality is relevant to value for money to the contracting authority. how an organisation deals with its suppliers or customers. by specifying water efficient appliances. say. and water supplies during droughts.

building energy. Don't 1. and any environmental considerations which are relevant to the purchase must be included in the specification. Any invitation to tender or quote must include a specification which clearly describes requirements in sufficient detail to enable the submission of competitive offers. paper and print. IT equipment. 80% of these arise in offices from: business travel and commuting.not afterwards. Try to do everything at once! Concentrate on the most significant impacts. 2.Key tips Do: 1. Think of the environmental issues before getting quotes and tenders . water and waste. new build and refurbishment. Address environmental concerns at the specification stage of the buying process. .

schools.2 "Buy Local" policies must be justified on grounds of competitiveness. .1 The Council’s Procurement Strategy states that where possible. However. Enterprise Agencies.Encourage other local large buyers to work with you in developing the local supply base. There are many potential partners to work with: ♦ Local Suppliers . e. and comply with Procurement Directives and other regulations. ♦ Regional Supply Networks .Encourage them to extend the local supply chain by doing their purchasing locally or encouraging start-ups around their own business. e. At the end of the day it is the end-user who will be the real judge of value and quality.Work with local suppliers in developing their business. economy or efficiency.g. Utilities etc. why you are using local suppliers and get their commitment to the policy. ♦ Other Buyers .g. Despite that and the restrictions that surround the question of buying locally in the public sector. What can be done to develop the local market? 6. Chambers of Commerce. Developing a local supplier base need not be and should not be a solitary exercise.6. which is supported by the Department of Trade and Industry. we should actively support and encourage local suppliers to become best value providers. there are many things that can be done to encourage local companies to compete. it should not be a one-way street but true partnership with benefits accruing to both parties. ♦ Users/Customers . and amongst other things give support to local supply chains and businesses involved in them.These are a product of Business Link. Development Agencies.g.Explain to your users/customers. e.Work with other organizations to help develop the local supply policy. LOCAL SUPPLIERS Partners in Developing Local Suppliers 6. Health. not only within the local economy but also possibly in the wider national or global market. ♦ Suppliers . ♦ Partners . Business Link.

5 Developing the local marketplace is not. these adverts are hidden away in that most boring and least-read section of the local paper . just a matter of advertising in the right place.g. e. Other public sector partners could join in. etc. Business Link.g. Police. etc. Making sure consumers are aware of local availability and who the local suppliers are. it is also important to think of other ways of working with local suppliers to develop their capacity to supply you and other potential buyers. Organizing "Meet the Buyer" events. Developing a guide to Supplying Goods & Services to the Council Using the tenders page on the Council’s website and making sure local businesses are aware of its existence Making local firms aware of your requirements in advance through a Prior Indicative Notice (similar to the requirement for the OJEC). Holding supplier briefings for local companies about selling to the Council. Working through the local Chamber of Commerce. .6. local suppliers cannot position themselves to supply you if they do not know what you want to buy. however. More often than not.3 Developing local suppliers and working with them to develop their own business should also add to the competitiveness of the local authority. The Council should become far more proactive in approaching local marketplaces and making its own requirements more transparent by: ♦ ♦ ♦ ♦ ♦ Advertising in more accessible places. Health Authorities.the Public Notices page. however. Most local authorities do advertise their requirements in the local papers and media as well as appropriate trade magazines.4 Firstly. Working with existing local suppliers to achieve continuous improvement "Best Value" in the products or services they supply. in the Business Supplement of the local paper. There are some fairly easy ways to achieve this in the first instance: Publicity and Advertising 6. Developing Local Capacity ♦ ♦ ♦ ♦ 6. e. Enterprise Agency.

g. it does not need to be a negative one. e-Commerce and Best Value. trading standards and economic development. Creating a Supplier Association to help suppliers help themselves. e. Encouraging larger suppliers to use local suppliers and distributors. The concept of Strategic Procurement has seen the introduction of Supply Chain Management. the Council should consider: ♦ ♦ ♦ ♦ ♦ ♦ ♦ ♦ Establishing a partnering arrangement to develop a particular product or service. This also has an impact on the development of local suppliers.European rules permitting.6 There have been substantial changes in the way in which all organizations now go about their buying or procurement activities. Involving local businesses in developing Council activities. . Working with local economic development and regeneration teams. all of which have had a substantial impact on the way we go about our business. Specifying local materials where appropriate. ♦ Modern Procurement 6. Investigating ways in which local companies can gain advantage from any developments the Council is involved in with regards to e-commerce and e-government. Identifying gaps in the marketplace which local suppliers may be able to meet with some development of their business capacity. education . each other and the Council Working with other buyers in the local marketplace in developing local supply chains.

to tackle social exclusion. for example. These opportunities to enter the supply chain are often easier for local suppliers to access than as the prime supplier and the spin-off can be significantly greater in terms of benefits derived from the prime supplier's own wider customer base.7 In terms of Supply Chain Management. working with minority groups. Local companies do not necessarily have to be the deliverers of the product or service. . the Council can help by keeping them informed of opportunities to enter the supply chain at the appropriate position. if local authority buyers better understand their supply chains and their component parts it actually becomes easier for them to determine where local influence can be brought to bear between the point of consumption and the earliest point of its production. assisting the prime supplier in their delivery of the end product or service. However.8 The guidance from Central Government as regards the power to promote or improve economic. social or environmental well being (Part I Local Government Act 2000) means that there is significant scope to use the duty of well being to help develop the local supply base This could be achieved by developing local suppliers as part of the promotion of neighbourhood renewal. It must however still be subject to the general duty of Best Value and legislation such as the European procurement directives. The Duty of Well Being 6. including ethnic or disabled business owners.6.

750 30:70 10.000 75.000 112. If the estimated cost of the contract is £250k.000 90:10 225.2 Quality/Price Ratio 7. TENDER EVALUATION Priorities and Emphasis 7. and all tender documentation should be designed to ensure that appropriate responses are received to feed into the model. The quality/price model should be established before any tenders are invited.143 40:60 16.500 75. There are basically two stages involved in building up an evaluation model: • • Establishing the quality/price ratio (i.000 50.333 116. Different ratios will produce different prices to be paid for avoiding a reduction in quality.000 300.000 200.250 12.000 60:40 37. transparent and ultimately fair evaluation process to be demonstrated.g. The criteria will be price or quality related. the following table would be the calculation of costs attached to quality: Max. and their relative importance in their respective categories.429 32. and which can be scored for each tender submitted.500 70:30 58.000 50:50 25. the quality/price ratio would be 50:50.000 675. we will already have recorded the criteria that are important to us in this particular case. the calculation below should be carried out and recorded: E.1 Tender evaluation models are the means by which we can assess which of the bids submitted in a competitive exercise offers the best deal for the Council.7. the relative importance to be placed on price and quality in this particular contract).667 33. and Establishing the components of quality and price.3 If quality and price have equal importance for your contract. and enable an open.000 80:20 100.000 . 7.e.714 21. In order to make this judgement. £ extra willing to be paid to avoid a reduction in quality of: Q/P 10% 20% 30% Ratio 20:80 6.000 450.500 18. In order to demonstrate how the quality/price ratio has been selected for each tendered contract.667 175.333 50.

the higher the ratio should be. In general terms. even if it was the best scoring bid in price terms.000 and a Quality/Price ratio of 50:50. Quality and Price Weightings 7. Quality criteria should be grouped under main headings and weighted. the calculation exercise above should still be undertaken in order to confirm the costs associated with setting a higher ratio. Suggested headings and weighting ranges are: Quality Criteria Capacity to resource the contract Potential to “add value” Previous experience Approach to the contract Others 7. the more complex the procurement. .000 to avoid accepting a bid which was 10% worse in quality terms. you would be willing to pay an extra £25.6 Suggested Weighting Range 25-45% 20-30% 15-25% 15-25% 10-15% 7.4 The price element of the model should reflect the tendered prices and also any extrapolations to take account of whole life costs. (Formula: Estimated cost x reduction in quality to be avoided x quality/price ratio). Indicative ratios are: Type of Project Feasibility studies/investigations Innovative projects Complex projects Straightforward projects Repeat projects Indicative Quality/Price Ratio 85/15 80/20 70/30 50/50 20/80 However. and the greater the degree of innovation and flexibility likely to be required.This shows that if your contract had an estimated price of £250.g. 65 out of 100).5 A quality threshold should be established (e. The Council’s Procurement Strategy states that all procurement exercises should reflect these long term costs and hence the evaluation model should incorporate them as a matter of course. Tenders may have to achieve this minimum quality score before final interviews are held and prices considered.

(E. Tenderers passing the quality threshold may then be interviewed.9 . The highest scoring bidder will be awarded the contract.7.7 Submitted tenders are assessed for quality by marking each of the quality criteria out of 100. as they are the one which has best met the Council’s priorities in terms of both quality and price. 7.g. the total score is 80 x 70% + 75 x 30% = 78.g. if the quality/price ratio is set at 70/30 and the quality score is 80 and the price score 75.8 7. their quality scores reviewed and their prices examined and marked. and adding them together to give a total score out of 100. a bid 25% above the lowest scores 75). The final quality/price assessment is achieved by multiplying the quality and price scores by the respective weightings set by the quality/price ratio. multiplying each mark by the respective weighting percentage and then adding them together to give a total quality score out of 100. The lowest compliant bid scores 100 and others score 100 minus the percentage figure above the lowest price (e.5).

Each procurement must have a Project Sponsor from the client Directorate. as specified in the ‘Accountability’ section of the Procurement Strategy. Effective Decision-Making 8. To assist in this.3 The CPSG must ensure that the Project Sponsor is assisted by the necessary professional advice throughout the procurement process.2 Professional Advice 8. Service Level and Corporate Procurement Steering Groups will be responsible for management of the procurement process. The essential areas to be considered are outlined below: . This individual will: ♦ ♦ ♦ ♦ possess the skills to manage the client’s role in the project maintain direct access to the people making key decisions be vested with authority to take day to day executive action expect to see the project through to completion 8.8.1 PROJECT MANAGEMENT All procurement exercises should be conducted through effective communication and decision-making processes.

contract terms and conditions .Procurement Strategy .contractor compliance with financial and Health & Safety requirements .appointment of consultants .g. e.4 The PSG will be responsible for approving/signing-off the outputs of each stage of the procurement process: • Business Case (this sets the case for the recommended procurement option.Contract Standing Orders/Financial Procedures Rules/EU compliance • Equal Opportunities .PFI/PPP .monitoring & management of contract .Disability Discrimination .Equal Opportunities .) . after consideration of all relevant factors.E-Government Strategy .• Corporate Strategies/Policies .financial and accounting advice • IT Issues • Contract Administration • Legal Issues • Finance Issues • Personnel Issues • Sustainability/Environmental matters • Risk Assessment/Risk Management Critical Stages of the Procurement Process 8.Race Relations . VFM. environmental impact.financial criteria and assessments .evaluation models .receipt and opening of tenders .TUPE .

including year on year improvements. This will provide the essential components of the strategic brief and establish measures of time. Providers generate methods of delivery.) Risk Management Plan Evaluation Model Shortlists Contract Award Contract Management Plan • • • • • • • Confirming the business case: 8. Performance standards are stipulated.5 Activities here will include: ♦ ♦ ♦ ♦ 8. .6 fixing an initial project budget that includes all relevant costs over the whole life of the project evaluating the benefits that will be delivered drawing up an outline programme which allows realistic periods for essential activities identifying the significant risks in the whole process and establishing how they can most effectively be managed.) Contract Terms Procurement Plan (this sets out the procurement route to pursue.• Output Specification (this is the Council’s requirements expressed in terms of outputs/outcomes required. cost and quality against which the project can be judged as it proceeds. ensuring compliance with Contract Standing Orders and EU Regulations. It also includes a timetable with milestones specified. and Performance Indicators are passed on to providers.

ensuring that either budget provision exists (for Revenue funded procurement) or that projects are included in the Council’s Capital Programme (Capital financed projects). . whilst risk can be transferred to others. In addition. This entails the development of early statements of needs into a strategic brief and then into a full project brief. the client’s attitude to risk is particularly important.8 The Project Sponsor leads the development of a strategy for the project’s execution. The more control a client wishes to have over aspects of the project. if circumstances change so that financial provisions are no longer adequate. In the main. Section 4 above on ‘Contract Strategy’ details the issues to be taken into account when making this choice. cost and quality take account of the costs of the project over its whole life ensure that financial and other resources necessary for the project are available when required monitor progress and performance • • • • • Developing a strategy for the project/contract procurement: 8. quantify them and make financial provision for them clarify your priorities regarding time. the appropriate authority must be sought in order to ensure that budget limits are not breached.Financial Resource Issues 8. as different contract strategies allocate risk in different ways. Systematic risk management should be part of the strategy for executing all major procurements. this will be reflected in their prices.7 The Council’s Financial Procedures Rules and Contract Standing Orders contain a number of clauses relating to the financial control of the procurement process. the more risk they should be willing to bear. these concern the need for adequate forward planning. Key financial resource issues for any proposal include: • spend time at the beginning of the procurement process defining what you want and when you want it . This is a key strategic decision which will set the framework for carrying out the project. Also.it can be expensive to change your mind later understand the risks involved in your project. The first priority is to choose the system best suited to procuring the skills and resources necessary to achieve the outputs required. The Project Sponsor will also consider the most suitable way of carrying out the project. In addition to those factors identified.

and to whom. .g.13 At the contract level. the assessment of risk will depend on factors such as the type and length of the contract. and the risk to the user in terms of cost.10 Risk Management is the process of anticipating risks.9 Risk is any unplanned action or event which threatens the achievement of cost. and at the contract level.11 Risk should be assessed at two levels during the procurement process . Risk Management 8. planning as necessary and carrying out timely actions to cost-effectively reduce the probability and impact of risks to an acceptable level.* RISK ASSESSMENT & RISK MANAGEMENT Risk 8. Risk Identification 8. Service Level Risk 8. It may be that for a particular service.at the overall service level (during a Best Value Service Review). prevailing conditions in the supply market. the level of exposure to the Council acting on its own would be unacceptable. Contract Level Risk 8. by identifying where the risk can best be managed to ensure effective and efficient service delivery. The level of risk must first be determined. major building developments that incorporate commercial activity). quality and the impact of contract failure. The contract manager must consider each of these factors and deal with them in such a way as to manage down risk during performance of the contract. time and performance targets. Risk Assessment 8. and judgement reached on what level of risk is involved.14 An analysis of different sources and types of risk enables a comprehensive list of the risks it is reasonable to anticipate for a particular activity or contract.12 The risk assessment process undertaken during the “competition” phase of a BVSR should show whether a service is appropriate for external provision. whereas the private sector may be better placed to manage the liability (e. the stability of the supply or service.

loss of future funding and adverse publicity. but the risk can still be assessed as High. Probability 8. Past experience again is the best source of information needed to predict the implications of various risks. A more subjective view will be required if there is a lack of previous experience. should be reduced to an acceptable level at the earliest stage of the risk management process. any relevant experience concerning similar events in the past must be considered. in order that only the appropriate amount of time is spent and necessary budget committed to the management of those risks. all the relevant risks. The actual level of risk depends on a combination of the l ikelihood or probability of an event occurring and the consequential adverse impact on the Council. Other indirect consequences may be considered.17 When the probability of an event occurring is assessed. For risks where reasonable accurate historical financial information is available. .16 8. and interviews with those having relevant experience are natural starting points.18 The occurrence of a risk event will have direct consequences with cost and/or time implications. Potential time delays can be assessed using critical path analysis. A way should be found to express all key risks in measurable terms for two main reasons: • • Any proposed risk management action should be judged on whether or not the benefit significantly outweighs the cost.8. Impact 8. for example. and The summary of financial risk exposure will normally influence the size of contingencies within the budget for the procurement. both of a predictable and unpredictable nature. can then be identified. the impact can easily be expressed in money terms. such as the effect on service users. Risk Evaluation It is essential to determine realistically the true extent of potential risk to the Council. Uncertainty arising from a lack of knowledge of technology or trading conditions. Research into similar projects in the past. Medium or Low. Having reduced uncertainty to an acceptable level. expressed in financial terms and summarised to give a total project risk exposure.19 When quantification of both is possible. Risk Factors 8.15 Uncertainty arises from a lack of knowledge or experience of the area under review. the product of the probability and impact for each risk event can be used to give a risk factor.

Risk Control 8. and the risks graded. invitations to tender must make clear the basis on which tenders are to be submitted.21 All risks are then recorded in a risk management plan. For tendering purposes. and that best taken on by the Council by making a contingency allocation in the budget. . it is possible to determine appropriate types and levels of cost effective action to manage and control risk. The types of action to contain or eliminate risks will generally be dealt with under the following measures: • • Insurance Financial Provision Risk Allocation 8. which describes how each risk is to be best allocated and managed.20 Once the probability and impact of risk events has been established. The risk management process should therefore have produced the best possible allocation of risk involved in that particular procurement. A risk action plan should be drawn up for all key risks within an activity or project. The Project Sponsor will have agreed the amount of risk felt best able to be managed (and hence priced for) by the contractor.

2 9. Real benefits should accrue for both parties when a spirit of mutual trust and partnership is encouraged. a multi-dimensional service as opposed to the supply of a single product). (b) Management of the relationship between the client and the contractor. there are two aspects to the contract management function: (a) Performance of the contract . The contract manager should ensure that an appropriate style and behaviour is adopted. to obtain the best service possible. and fulfil them as efficiently and effectively as possible to maximise Best Value for the Council. It is probably the case that under Best Value.3 Different styles will also be appropriate depending on the type of contract (e.the processes and procedures associated with the smooth operation of the contract need to be managed.1 9. Once the contract is in place. .g. as the contract provides the foundation for the relationship between both parties. The Contract Manger will implement the Contract Management plan as approved by the PSG. the actual contract conditions will require continuous improvement and hence continual change.9. who will be a Council officer with responsibility for ensuring that all parties understand their obligations under the contracting process. The advantages discussed above relating to partnering arrangements should be particularly evident in the style to be adopted in managing these type of contracts. 9. This will mean that the contract management style may also need to change throughout the duration of the contract. This includes: ♦ management of relationships ♦ monitoring of costs and volumes ♦ reviewing and reporting on performance ♦ agreeing variations ♦ authorising payment ♦ resolving any disputes ♦ maintaining adequate records and a management trail ♦ assessing and managing risk ♦ maintaining ethical standards ♦ contingency planning ♦ managing change The contract manager will usually be assisted by a team of officers (the Project Team) to ensure that sufficient resource is available to undertake all these activities. CONTRACT MANAGEMENT Contract Manager Every contract is to have a Contract Manager.

either in the form of Best Value Service Reviews or in day to day purchasing decisions.SUMMARY This Procurement Best Practice Guide is a first attempt to produce a comprehensive guide for all those involved in procurement activities. . It will continue to be updated regularly in order to accurately reflect activities within the Council and best practice in the procurement field.

A Key Project Activities Getting Started Defining the Project Assembling the Team Designing & Completing Nominate Project Sponsor Obtain professional advice Appraise options Confirm business case Develop project strategy Select client Project Manager Develop strategic brief Develop project execution plan Decide contracts Select project team Develop the project brief Operate the contract Manage & resolve any problems Review progress & quality .

apply the 9 questions to each option .Essential Elements of Procurement Process Assess Need Consider: Corporate Objectives Consultation Proposal in Strategic Directorate Procurement Steering Group Procurement Plan or Common Procurement Plan? Proposal taken to Corporate Procurement Steering Group Responsibilities assigned and agreed (CPSG) Market analysis undertaken Research & consultation Options Appraisal for Benefits service delivery Costs Uncertainty & Risk .

Determine appropriate What is best method of externalisation? contract strategy Determine appropriate Consider Partnering contractual relationship Compile specification Environmental issues Local sustainability Outcome based Compile Evaluation Quality/Price ratio Model Quality/price weightings Compile appropriate Risk assessment project management plan Establish Contract Management Plan Performance monitoring Managing relationships .

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