You are on page 1of 22

The Procurement

Process

Edward Farquharson
James Ballingall
March 2011
Agenda
Procurement Process
• Principles
• Steps
• Best use of competition
• Evaluation
• Approvals
• Lessons

2
Principles
• Select a bid
• Maximize the benefits of competitive tension between bidders
• Deliver the best bid from the most competent bidder
• Minimize time and cost
• Stand up to scrutiny

=> balance these different objectives

3
Project Launch

Pre-qualification

Negotiation/
dialogue
Number Depth of
of Bidders Request for Final Information
Proposals flow

Selection of Final
/ Preferred bidder

Financial Close
UNCLASSIFIED
4
Competitive Dialogue Procedure

“a procedure in which any economic operator may request to


participate and whereby the contracting authority conducts a
dialogue with the candidates admitted to that procedure, with
the aim of developing one or more suitable alternatives
capable of meeting its requirements and on the basis of
which candidates are invited to tender”

Public Contracts Regulations 2006 (SI 2006 No 5)

5
Progressing through the process
• OJEU notice
– Specify that competitive dialogue process will be used
– Intention to reduce the number of bidders at certain stages
– Needs and requirements (can also be included in a descriptive document)
– Pre qualification questionnaire issued (PQQ)

• Invitation to Participate in the Dialogue


– 37 day clear days between despatch of OJEU to return date for expressions of
interest
– Minimum of three bidders that meet the PQQ selection period
– IPD: mature document which bidders can price. Need to have stakeholder
support for its content

6
Evaluation criteria example: PQQ Level 1

Weighting Minimum Pass Score

Legal/Eligibility n/a Pass/Fail


(Pass/Fail Only)

Technical Ability 75% 50%

Economic & Financial 25% 50%


Standing

7
Evaluation criteria example: PQQ Level 2
Level 1 Criteria: TECHNICAL ABILITY 75 100
Level 2 Technical Capacity, Ability & Experience 60
Criteria
Assessed through questions:
C1, C2, C3, C4, C5, A11, A12, C6, C7, C8, C9, C10, C11
Level 2 Experience of Working on Similar Projects 12
Criteria
Assessed through questions:
D1, D2
Level 2 Method of Working 12
Criteria
Assessed through questions:
E1, E2, E3, E4
Level 2 Quality Management, Environmental Management and Sustainability 6.5
Criteria
Assessed through questions:
G1, G2, G3, G4, G5
Level 2 Health & Safety 6.5
Criteria
Assessed through questions:
H1, H2, H3, H4, H5, H6, H7, H8, H9, H10, H11
Level 2 Equal Opportunities 3
Criteria
Assessed through questions:
I1, I2, I3, I4, I5, I6, I7
8
Dialogue Phase
• Aim is to “identify and define the best means suited to satisfying
[the contracting authority’s] needs
• Phase should continue until the contracting authority is satisfied
that it has identified and defined its requirements with sufficient
precision to enable Final Tenders to be submitted
• May be conducted in “successive stages” – no limit to the number
of stages provided that at the end of the dialogue there are
sufficient bidders to allow for a genuine competition (usually a
minimum of two)
• Dialogue continues until the contracting authority identifies the
solution or solutions to meet their needs
9
Progressing through the process
• Call for final tenders
– Bidders to submit their tenders based on solutions identified in dialogue phase
(comparable to submission of final ITN responses where no BaFO stage or a
request for BaFO submission if this stage included)
– Suggest that request is submitted in writing. If the specification has been
updated or revised then this should be issued

10
Submission and evaluation of Final Tenders
• Must contain “all the elements required and necessary for
the performance of the project”
• Final tenders can be “clarified, specified and fine tuned”
provided that this “does not involve changes to the basic
features of the tender or call for tender, variations which are
likely to distort competition or have a discriminatory effect”
– e.g. pricing changes

• Issues should be resolved before Preferred Bidder stage

11
Evaluation criteria example: Second Stage
Criterion Name at PQQ ISOS ISDS ISFT Weighting
Say 6 - 8 Weighting say Weighting 1
3-4 say 2
A Legal / Contractual 5.0% 10.0% 15.0%
A1 Legality 1.0% 2.0% 3.0%
A1.1 Legality 1.0% 2.0% 3.0%

A2 Contractual, Commercial Acceptability and Risk 3.0% 6.0% 9.0%


Transfer
Etc
B Financial 15.0% 50.0% 50.0%
B1 Cost 5.0% 40.0% 40.0%
B1.1 Price 1.0% 30.0% 30.0%
B1.2 Payment Profile 1.0% 2.0% 2.0%

B1.3 Sensitivity Testing under Different Assumptions 3.0% 8.0% 8.0%


etc Financial Quality Criteria……. 10.0% 10.0% 10.0%

12
Evaluation criteria example: Second Stage cont…
Criterion Name at PQQ ISOS ISDS ISFT
6-8 Weighting Weighting Weighting
3-4 2 1
C Technical 62.0% 33.0% 28.0%
C1 Technical Solution 32.0% 16.5% 14.5%
C1.2 Performance against Targets 6.2% 3.2% 2.8%
Etc
C2 Operation and Contract Management 5.0% 3.0% 2.5%
Systems etc etc
D Environment & Sustainability 15.0% 5.0% 5.0%
D1 Environment 15.0% 5.0% 5.0%
D1.3 Mitigation of Environmental Issues 5.75% 1.9% 1.9%
etc….
E Bid Integrity 3.0% 2.0% 2.0%
E1.1 Consistency of Technical, Financial, Legal 1.5% 1.0% 1.0%
and Sustainability Proposals etc…..
100.0% 100.0% 100.0%

13
Progressing through the process
• Appointment of Preferred Bidder
– Bidder offering economically most advantageous tender
– Criteria: Technical, Financial, Legal, other e.g. deliverability

• Key issues
– Methodology
– Informing Bidders
– Flexibility

14
Approvals
• Staged Approach
– OJEU
– IPD
– PB

• Matters to consider
– Requirement (time, cost, performance)
– Affordability
– VfM

15
Opportunity to Influence Project Outcome
100%
Gate 5
Benefits
Gate 4 Evaluation

Readiness
Gate 3 For Service
Expenditure
Whole Life

Investment
Gate 2 Decision

Procurement
Gate 1 Strategy

Business
Gate 0 Justification

Strategic
Assessment
0%
Confirm Competitive Contract Confirm
Confirm Strategy In-Service
Justification Procurement Award Benefits

Time
16
Lessons: Gateway Review Process Lessons learned

Policy Design Policy Implementation Policy Maintenance Policy Review

Procurement projects

Develop
OGC Gateway Business
Review 0 Define Case
Business OGC Gateway
Strategic Programme
assessment Develop justification Review 1
Procurement
Strategy
Procurement OGC Gateway *
strategy Review 2
Competitive
Procurement
OGC Gateway Execute
Review 0 Programme Investment
decision
OGC Gateway *
Award and Review 3
Implement
contract
Repeat as Readiness OGC Gateway
necessary for service Review 4
Manage
contract
OGC Gateway
Close OGC Gateway
Benefits
Review 0 Programme realisation Review 5
Closure

Contributes 17
Procurement Lessons: Gateway Reviews
• Effective stakeholder • Robust business case
communication (approvals)
• Benefits realisation process
• Sound financial controls
• Pre-agreed Critical Success
(affordability)
Factors
• Good Market knowledge and
• Ongoing risk management
procurement advice
process
• Adequate skills and resources
• Clearly defined roles and
responsibilities

18
Lessons Learnt: The Project Manager’s
View
• Plan ahead but be flexible – things inevitably change
• Set a prudent budget – investing at this stage can yield long term savings
• Advisers – name key personnel
• Advisers – fixed price for clearly defined work packages
• Things will change – look at potential for variations when assessing
advisers fees and resources.
• Project Governance and approvals – communicate and manage
expectations – shocks don’t go down well.
• Link back to the core business – good communication links
• Transition plan – knowledge transfer to contract management team
• Financial Close – it is not the end – it has only just begun!
19
Lessons Learnt: The Advisers’ View
• An experienced project manager and a clear remit give confidence
• Too many advisers and advisers managing advisers leads to confusion
on roles, increases costs, leads to delays
• Clients who are willing to listen often achieve best results
• Unrealistic timescales affect quality of service
• Suitable resources are not always readily available
• Best projects have experienced client fronting all bidder meetings
• Financials – advisers are there to make money
• Partnership ethos – advisers will often go the extra mile
• Reputation issues – future work
20
Lessons Learnt: The Bidders’ View
• What does the client really want?
• Who are the key decision makers and influencers?
• Does the project have a deliverable solution?
• Is there a level playing field in terms of competitors?
• Can I offer a USP that differentiates my consortium?
• What are the external stakeholder issues (planning)?
• Level of approval to date (affordability, vires, etc)
• Extent of risk transfer
• Are the timescales realistic?
• Forecast Bid Costs
• Supply chain, local resource and inflationary pressures
• New v mature market with standard procedures
• Other projects in the market – which has best chance of success?

21
Questions and Discussion

22

You might also like