Procurement is a term used to describe the process of buying goods and services, usually by a local authority or public sector body. Although the process can sometimes be quite complex, many SMEs earn money this way as a supplier to the UK government so it's worth considering for any new business.
At all stages of an agreement, it is essential for organisations to fully understand when and how they will:
- Do the work and to what standards
- Get paid
- Be allowed to negotiate changes
- Complete the requirements
- End the service
There are usually 2 parts to a contract. The first part is the general terms and conditions, something that can’t really be changed. The second is the specification or contract brief which will lay things out like:
- The requirements and standards to be met
- Liaising, monitoring, resolution, termination processes
- Definitions of service – what has to be delivered
- Measurable deliverables or outputs
- Performance indicators for the contract including milestones
- Timescales and payments provision
There are 4 key drivers that you need to be aware of:
1. Value for Money – you must be able to clearly outline how you offer best value for money, and note that this is not always the lowest price!
2. Affordability and sustainability – making money go further. Companies will look at costs over the whole life of the contract which may mean annual reductions not increases or you delivering improved performance over the period. You will also have to show how you will meet sustainable demands by changing and adapting your services to meet changing demands and compliance requirements.
3. Efficiency – the search for efficiency means that many companies may collaborate, for example in consortia, to reduce the cost of buying the same service.
4. Community Benefits – these are becoming increasingly important drivers for many companies. If this is in the tender criteria, make sure you highlight what you will do as pertains to this, as it is likely to be part of the evaluation process.
There are 3 types of tender:
1. Open (to anyone)
2. Negotiated (when something needs to be done quickly)
3. Restricted (invitation to tender and suppliers filtered out)
Pre-Qualification Questionnaire (PQQ) – used to check the suitability of suppliers and shortlist the ones they will invite to tender.
Invitation to Tender (ITT) – a formal communication from a company to a supplier, inviting them to submit a tender. The ITT will usually also include a specification for the contract, instructions for submitting an acceptable tender, and the terms and conditions which will govern the contract once it’s active.
Framework agreement – an arrangement where a purchaser selects suppliers and fixes terms and prices for a period in advance (often 3 years), and then calls on the suppliers to deliver as and when required.
Framework – these are agreements lasting no more than 4 years for goods or services on a call off situation. Note that you may not be the only supplier within the framework so cannot be guaranteed a set amount of work and will be in competition. However, during the life of the framework no other organisation can get into the framework. Frameworks are likely to become more prevalent owing to new EU directives and the cost and time savings they bring.
Winning Contracts – How To Exceed Their Expectations
- Organisations that go above and beyond to please the client. ‘Good’ should be the minimum for both internal and external customers.
- It is important to ‘futurise’ the contract. You should plan beyond the original project plan. What happens next?
Alliances and Collaboration
If a contract is too big for one organisation, it is sensible to collaborate in partnership or sub-contract to others to deliver products or services. It is important to develop relationships with others, preferably before opportunities have been advertised, so you can test relationships and identify partners who you know you can work with in the future.
If you are going to be a sub-contractor then you should be aware of the detail of the main contract and know your obligations and responsibilities. Always look at contracts to see if your part of the service is critical. If it is, then why not approach the principal that was awarded the contract – there’s nothing stopping you working with more than one bidder.
Key things to remember when working in a consortium
- One organisation must act as the lead organisation in the project and the others must accept and respect this.
- There should be a legal binding agreement.
- Make sure there is a governing document which will regularise the arrangements in which everyone is involved.
- Don’t forget any employment legislation for staff who may be working on the joint operation. Who will manage and supervise them?
- Check all insurance arrangements such as injury and liability.
- Be clear on Intellectual Property Rights that are being created – who owns what and for how long? i.e. designs, logos, product names, services, materials, etc.
Source: Lecture 'Understanding Public Procurement', 19/10/2006, Longhirst Hall, Morpeth, Northumberland.
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