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Competitive Tendering

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					Value for Money Guidance Notes No.1

Competitive Tendering

Issued by: The Value for Money Committee October 1999

Competitive Tendering - Guidance Notes No.1
Introduction
At the latter end of 1998 a small number of purchasing specialists formed a Purchasing Officers Group whose purpose was to identify ways of introducing measures which would lift purchasing standards generally throughout the departments of Government. The Group sought and received the support of the VFM Committee for the work it intended. One area identified as needing formal guidance was in the field of competitive tendering. Although there are tendering and contract specialists scattered around Government, they are few and far between and generally involved in estates works or purchasing management. Many however see competitive tendering as a black art which from time to time they may have to be involved with. This work is intended for them. The Guidance Notes are intended to help the lay person put together a basic tendering package. For the more complex tender documents or where the goods or services to be purchased are of a significant value it is always advised that you should present your draft tender package to the Attorney General’s Chambers for approval prior to inviting tenders. Additional copies of the Guidance Notes can be obtained from the Secretary of the Value for Money Committee at: Internal Audit Division Heywood House Ridgeway Street Douglas IM1 1EW Tel: 68-6564 Fax: 68-6587 e-mail: internalaudit@gov.im

The Committee intends to publish further guidance notes on varying subjects as and when a need is identified. J D Midgley Secretary Value for Money Committee October 1999

Competitive Tendering
1. What is competitive tendering?

It is simply a means for buyers to make best use of competitive market forces to obtain the best offer that can be obtained from the market at that particular point in time. 2. When should we seek competitive tenders?

Competitive tenders should be sought when there is more than one source of supply available and the value of the purchase to be made is of sufficient value to warrant this procedure. Financial Regulation FD8 sets out instances where competitive tenders must be sought, which are: • When the value of a particular purchase is likely to exceed £25,000* in value • Where a repetitive service is required e.g. Window Cleaning Contract, Daily/Weekly/Monthly Catering Service etc. • Where goods have to be specially made and are likely to cost more than £10,000*, such as fitted furniture, information brochures, curtains etc. Tenders can of course be sought for purchases of smaller values than those indicated above but care should be taken to ensure that the administrative costs of the tendering procedure, to both the purchaser and seller, do not outweigh the objectives of the exercise, which is to secure the best deal on the day.

*The values indicated are given only as a guide and are subject to change. Financial Regulation FD8 should always be referred to for current values.
3. What information do we need to provide to potential tenderers?

We need to provide sufficient information and instructions to ensure that both we and potential suppliers are absolutely clear as to the requirement. Therefore we need to create a tender document or, more properly, the Conditions of Tender. The Conditions of Tender provides potential tenderers with a statement of our requirements (SOR) and should contain all the detail necessary to ensure the correct goods or service will be provided at the time and venue specified. A key element in the tendering procedure is the production of a clear, concise product and/or performance specification. In many instances the intended purchase will be for market standard goods or services such as office furniture, motor vehicles, personal computers etc. In such instances the manufacturers’ handbooks or advertising literature would probably contain all the relevant detail that would need to be included on the tender form. However, where items have to be specially made, are complex or a service is to be provided, a full and comprehensive specification must be included. The complexity of the specification would obviously depend on the nature of the requirement. The technical specification for a prototype aircraft engine would be very complex whereas the specification for a set of curtains should be relatively simple. Besides ensuring that suppliers will have a clear understanding of our requirements the Conditions of Tender provide the base document for tender evaluation. The Conditions of Tender should: • be clear, concise and unambiguous • be written in such a way so as not to favour one supplier over another (for instance we should not be seeking tenders for a blue right handed widget if it is known that only one company supplies the item in blue and when in reality the colour is immaterial) • not include jargon • not be unnecessarily complicated • not seek terms which could be deemed unreasonable

Besides the requirement itself prospective tenders will need to know the terms and conditions that will apply to any resultant contract, such as: • duration of contract • frequency of delivery of goods or services • delivery locations • contract price a) Firm price - no variation for contract term b) Fixed price - allows for variation in price (conditions should be stipulated e.g. in line with increases in Retail Price Index) c) Costs plus formula for profit d) Costs plus a fixed fee etc. etc.

• payment details • penalty clauses for failure to deliver goods or service as per contract • packaging standards • Progress Reports – frequency • Loss or Damage to goods - ownership - reporting period The above points are for guidance only and they are by no means exhaustive. Accompanying the Conditions of Tender would be a Form of Tender which the tenderer would complete and sign to make the formal offer. Examples of a Conditions of Tender and a Form of Tender are at Appendix B and Appendix C. More complex tender documents could be in the form of schedules, especially where tenderers may bid for parts of the business rather than the whole. 4. Who should we invite to tender?

This depends on the nature of the goods, materials or services required, their probable cost and the sources of supply available to you. It is Government policy that local suppliers should be favoured where price differentials are marginal. The Council of Ministers has directed that for smaller contracts, local firms should be favoured where the price proffered by them is up to 10% greater than an off-Island company. This would be reasonable for business up to say £2,000 but for sums greater than this the margin should be decreased. For example for an order worth £50,000 a 5% difference may be more appropriate. 5. How should we invite tenders?

Where the goods or services required are of a general nature and the sources of supply are plentiful, such as Commercial Vehicle suppliers or Window Cleaning services a public notice should be placed in the press advertising the requirement and advising interested parties to apply for tender documents from a given address or contact number and by a given date (see example at Appendix A). Where the goods or service are of a more specialised nature, such as a Chartered Air Service or for a Marine Biology Service, the advertisement should be placed in a relevant trade journal or specialist magazine. Where it is known that there is a limited number of suppliers of a particular commodity it may be more cost effective to forward the tender documents directly to those suppliers and invite them to submit bids by a given date. Included with the tender documents should be a self addressed envelope clearly marked “TENDER” or for better identification, the generic description of the type of tender e.g. “STATIONERY TENDER”. The tender document should specify that tenders are to be returned in the envelope provided or in a plain envelope clearly marked “..................... TENDER”.

Experience may dictate that although there are a number of suppliers of a particular commodity or service only a limited number of them might have the scale of operation capable of meeting your needs. In such instances a select list of such suppliers should be maintained and tender documents should only be forwarded to those on the select list. However, circumstances do change and periodically the market should be tested to ascertain if those on the list can still meet your needs or, more importantly, if any of those firms originally excluded or newly established firms now qualify for inclusion on your select list. 6. What additional information may we require from potential tenderers?

Basically we need to assure ourselves that companies submitting tenders have the wherewithal to supply the goods or service in the quantity, quality and times specified in the Conditions of Tender. The following is indicative of the information we may require: • financial standing (especially where cost is likely to be substantial) - seek copies of audited accounts for at least the previous year; • when was the company established? (it could be that a business has been established purely to win this order); • previous experience of this particular service; • previous experience of individuals to be assigned (consultants, trainers etc.); • qualifications of individuals assigned (consultants, trainers etc.); • number of outlets; • number of employees (especially if providing large volume specially produced goods or a car hire or taxi service etc.); • number of vehicles (car hire, taxi hire, stationery supplier etc.); • hours of business; • provisions for out of normal hours service, contact numbers etc.; • references from previous customers ; • details of maintenance support (whether on-Island support available etc.); • copies of public liability and other insurances. It is Government policy that local companies tendering for Capital Schemes must be up to date with their payments of: • Income Tax Instalment Payments (ITIP); • national insurance; • VAT. If, for instance, we are seeking a local stationers to supply stationery to all Government Departments and bodies on request, we need to be assured that those bidding for the business have a scale of operation capable of providing the service. Therefore in the SOR we could ask for information on staff numbers, vehicle numbers, hours of business, weekend working etc. Where the cost of the goods or service is likely to be substantial and we are unlikely to have much knowledge of potential bidders, we should also seek details of each company’s financial status by asking for a copy of their last audited accounts. Information on a company’s financial standing can also be obtained from companies such as Dun and Bradstreet and Experian Ltd who specialise in providing credit management information on a wide variety of companies. Further information and assistance on how to make contact with such companies can be obtained from the Treasury’s Financial and Budget Management Section, telephone number 68-5603.

7.

The selection process

Tenders should remain sealed and be kept securely in a locked cabinet until they are due to be opened, which must be after the time and date stipulated in the tender documents for the final receipt of tenders.

The Conditions of Tender document should be clearly marked with the final time and date for submission of tenders and should state that offers received after that time and date will not be considered.
The tenders should be opened by the Accounting Officer, or another officer so authorised by the Accounting Officer, in the company of at least one other senior officer. On opening the tenders, the following details should be recorded: • the names of the companies tendering • each companies offer • the names and signatures of persons opening the tenders Each tender should be checked to make sure that all the information requested has been provided such as the company’s last audited accounts, copies of insurance policies etc. (see section 5 above). Those companies that have not provided the relevant information should be excluded unless an acceptable explanation for the non compliance has been provided. If all the conditions of tender have been satisfactorily and correctly met then the final selection should be based on the lowest quote. If, for some reason, the selection panel wishes to award a contract to a company other than that providing the lowest bid, then its decision must be endorsed by the Department, prior to a contract being awarded. 8. Post Tender Negotiation

If, after the bids have been opened, the selection panel wishes to discuss certain aspects of tenderers’ bids with the companies concerned it will enter into Post Tender Negotiation. There could be many reasons for wishing to discuss the bids further including: • failure of any of the bidders to meet all the conditions of tender; • proposals from one or more of the bidders which were not considered by the purchaser but which may provide an enhanced service; • knowledge of the market suggests that the offers could be improved; • the bidders consider one or more of the conditions of tender to be unrealistic or unworkable; • the bidders express difficulty understanding the exact requirement. Although post tender negotiating can be entered into on almost every occasion tenders are submitted it can be a costly exercise for both parties and should therefore only be considered if a marked improvement in the cost or service is likely. Also if main suppliers are aware that post tender negotiation is standard practice they could load their initial bids in order to shave a little off later, with no real benefits ensuing. 9. The Contract

In most cases all that will be required to form a binding contract, following a competitive tendering process, is for a Department to signify its unqualified acceptance of an offer in writing by simply including the statement “we hereby accept your tender” in its tender acceptance letter. There will of course be exceptions where because of the complexity of the tender, other arrangements may be necessary.

Appendix A
Case Study 1 A Department wishes to purchase two Trucks with Lorry Mounted Cranes for loading and unloading heavy items of portable pumping equipment at various sites. As a limited number of vehicle makers provide such vehicles a letter will be sent to each inviting them to tender.

The Department of Works
PO Box 26, East Quarry Estate, Tenderton, Cumbria PX3 2RT The Manager Vehicle Company Address Post Code

Our ref: Date: 12 January 200X

Dear Sir, The Department of Works wishes to purchase two medium sized drop side trucks each with a lorry mounted crane as specified in the Conditions of Tender attached. If you wish to tender for this business I would be obliged if the Form of Tender document, which is also attached, could be completed and returned to this office, in the envelope provided, by 12.00 noon on the 16 February 200X. Yours faithfully

Sheila Johnson Senior Contracts Manager enc. a) Conditions of Tender b) Form of Tender

The Department of Works
PO Box 26, East Quarry Estate, Tenderton, Cumbria PX3 2RT

TENDER
For the Supply of two (2) Medium Dropside Trucks with Lorry Mounted Cranes

Conditions of Tender
1. The Department of Works (the Department) requires two (2) medium dropside trucks with lorry mounted cranes as per the following specification: a) CHASSIS/CAB • Turbo Diesel engine with a minimum capacity of 2800cc and a power input of 110 bhp. Engine to be compliant to Euro 2 specification. • Minimum carrying capacity 2.5 tonnes • Kerb weight of complete vehicle, (excluding fuel & driver) 3050 kg • Five speed gearbox • Power steering • Two man passenger seat with seat belts to all seats b) BODY • All steel dropside truck body • Minimum interior length 4.2 metres (14 feet) • Double dropside, removable corner and centre pillars and including steel wings, rope hooks, side marker lights and rear panel reflective markers. • Underfloor of body to be treated with an anti-rust protective coating prior to painting c) CRANE • Full hydraulic lorry mounted crane chassis mounted behind the cab. • Minimum performance, at short reach, to be 2.0 tonnes @ 1.5 metres but preference would be given to a larger unit if fitting can be achieved within kerb weight limit d) GENERAL • Complete exterior of vehicle to be painted in Golden Yellow (BS356) • Rotating Amber Beacon to be fitted to roof of Cab • Fire Extinguisher and First Aid Kit to be fitted 2. The following additional details should be provided: a) Estimated date of delivery to the Department at the address above b) Warranty details of main vehicle body c) Warranty details of crane

3. Your tender should be returned in the stamped addressed envelope provided or in a plain envelope clearly marked “Tender - Crane Mounted Trucks” and must arrive at this address no later than 12.00 noon on 16 February 200X. Tenders received after this time and date will not be considered. (Tenders will be treated in the strictest of confidence) 4. Upon delivery and acceptance of the Trucks the Department undertakes to make payment no later than the end of the month immediately following the month that your invoice is received. 5. The Department will notify the acceptance of a tender to the successful tenderer within 21 days of the final time and date for the receipt of tenders. 6. The written acceptance of a tender by the Department shall, upon being posted to the tenderer constitute a binding agreement on the terms and conditions appearing in these Conditions of Tender. 7. The Department does not undertake to accept the lowest or any tender.

Issued on behalf of the Department of Works by:

Signed: ........................................ Sheila Johnson Senior Contracts Manager 12 January 200X

The Department of Works
PO Box 26, East Quarry Estate, Tenderton, Cumbria PX3 2RT

Form of Tender
To: The Contracts Manager, The Department of Works, PO Box 26, East Quarry Estate, Tenderton, Cumbria PX3 2RT (the Department) From: Company Name: .............................................................................................. having a Registered Business Address at: .............................................................................................. .............................................................................................. ................................................ Post Code............................. Tel. No. ................................................ Fax. No. .................................................... HEREBY OFFERS if this Tender should be accepted in writing by the Department, to sell supply and deliver to the Department two (2) Trucks with Lorry Mounted Cranes as specified in the Conditions of Tender attached Hereto at the following price: ..................................................................................Pounds (Ex VAT) £............... Delivery Charges......................................................Pounds (Ex VAT) £............... £................ VAT

Total cost ................................................................Pounds £................ I/We enclose product brochures with full technical details of our vehicles and the fitted cranes. I/We include a .......... months full parts and labour warranty for the main vehicle bodies I/We include a ..........months full parts and labour warranty for the lorry mounted cranes The estimated date of delivery of the complete vehicles is ........./........./....... Signed: .................................................. (Authorised representative of the Company)

Printed Name: ........................................ Position: .................................................. Date: ......../........./.........

Appendix B
Case Study 2 The Department of Works seeks tenders every three years inviting printing companies to tender for the production of the Department’s quarterly staff magazine Working Together. A public notice will be placed in regional newspapers with a brief description of the requirement and inviting interested parties to contact the Department for further information.

Public Notice No. 348/11

The Department of Works
PO Box 26, East Quarry Estate, Tenderton, Cumbria PX3 2RT

Production and Printing of Works Department’s Staff Magazine

The Department of Works invites tenders from printing companies to produce and print the Department’s quarterly staff magazine. Companies interested in tendering for this business should, in the first instance, seek further information and tender documentation from : Sheila Johnson Senior Contracts Manager (at above address) Tel: 01229 717717 Fax: 01229 333333 E-mail: DoW@norwest.gov

The final time and date for acceptance of tenders will be 12.00 noon on Monday 15 March 2000

The Department of Works
PO Box 26, East Quarry Estate, Tenderton, Cumbria PX3 2RT

TENDER
For the Production and Printing of the Department of Works Staff Magazine ‘Working Together’

Conditions of Tender
1. 2. 3. 4. 5. 6.

Working Together, hereafter referred to as the magazine (see sample attached)

The Department of Works invites tenders for the production and printing of its staff magazine entitled

The contract for the magazine is for a three (3) year period from 1st April 200X to 31st March 200Y The magazine to be produced quarterly in January, April, July and October of each year with the first issue due to be issued before the end of April 200X. Each edition of the magazine will consist of 24 A4 pages of text, photographs and graph The magazine will consist of black and white print with a spot/shadow colour (alternate quarters of blue, red, gold and green, commencing with blue in the April issue) The Department will determine front cover articles, those articles it wishes to be given prominence and will require certain pages to be reserved for regular recurring features such as crossword puzzles. Otherwise the format of each page will be largely at the discretion of the printer including layout, artwork, type specification and typesetting. The quality of paper to be as per the attached sample or as otherwise agreed jointly. The material for each magazine will be supplied by the Department to the printer by the 15th day of the month immediately preceding the month of issue. A black and white proof of each edition will be approved by the Department prior to the print run.

7. 8. 9.

10. Each of the quarterly print runs will be one thousand seven hundred and fifty copies (1,750). 11. The magazines are to be batched, labelled and delivered to the following Works Depots and Sections (full address details will be supplied): 450 copies - Works Maintenance Depot (Craghill) 360 copies - Works Maintenance Depot (Staplefield) 260 copies - Works Engineering & Plant Repairs Unit (Boltonend) 150 copies - Transport Pool (Martins Croft) the remainder, as follows, to be delivered to the Department at the address at the letterhead: 180 copies - Engineering Design Section 190 copies - Administration and Clerical Section 60 copies - Finance Section

30 copies - Chief Executives Office 30 copies - Laboratory 40 copies - Security _____ Total 1,750 copies 12. The recipients, as per the addresses at paragraph 11 above, shall inspect the magazines immediately upon delivery. The magazines shall be deemed to have been accepted unless within 14 days after their delivery, the recipients notify the contracted printer that the magazines were found not to be of the quality or quantity stipulated within the Conditions of Tender herein. 13. Payment for the goods shall be by the end of the month following the month in which the goods are invoiced. Invoices should be forwarded after each print run to the Head of Finance at the Department.

14. Tenders must be submitted in the envelope provided or in a plain sealed envelope clearly marked Tender - Working Together” and must reach the Department at the address at the letterhead by 12.00 noon on Monday 15 March 200X. 15. The Department and/or the contracted printer may terminate this agreement by providing one month’s notice, in writing, if the other party is not complying with the terms and conditions herein. 16. The Department will notify the acceptance of a tender within 21 days of the final date for the receipt of tenders. 17. The Department does not undertake to accept the lowest or any tender.

Issued on behalf of the Department of Works by: Signed: ........................................ Sheila Johnson Senior Contracts Manager 23 January 200X

The Department of Works
PO Box 26, East Quarry Estate, Tenderton, Cumbria PX3 2RT

Form of Tender
To: The Contracts Manager, The Department of Works, PO Box 26, East Quarry Estate, Tenderton, Cumbria PX3 2RT (the Department) From: Company Name: .............................................................................................. having a Registered Business Address at: .............................................................................................. .............................................................................................. ................................................ Post Code............................. Tel. No. ............................................... Fax. No. ................................. 1. HEREBY OFFERS, if this Tender should be accepted in writing by the Department, to produce and print each quarter of a year, commencing in April 200X, 1,750 copies of the Department of Works staff magazine “Working Together” in accordance with the terms and conditions of the Department’s Conditions of Tender attached hereto at a charge of: per quarterly print run ..............................................pounds VAT @ 17.5 % ...... ........................................pounds £........ £......... (exclusive of VAT) £........

Total ...............................................pounds

The above charge includes packaging and delivery to the addresses shown in the Conditions of Tender. 2. The charges at paragraph 1 above will remain fixed for the duration of the three year term unless otherwise agreed jointly by both parties in writing. Signed: ............................................. Printed name: ................................... Position: ........................................... Date: ............................................


				
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