Dr Rovel Shackleford public sector managing the tender process july 2011

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Managing the Tender Process DIY guide by Dr Rovel Shackleford

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Dr Rovel Shackleford public sector managing the tender process july 2011

  1. 1. Strategic ProcurementGuideManaging the TenderProcessObjectives of the Strategic Procurement Guides(Dept. to complete)Final Draft
  2. 2. Who should use this Strategic Procurement Guide?(Dept. to complete)How is this Strategic Procurement Guide to be used?(Dept. to complete)Dr Rovel Shackleford Final Draft 2
  3. 3. ContentsWhat is tendering? pageThe tender process pageThe tender team page A team approach Knowledge, experience and skills in managing the tender processBefore calling tenders page Tender documents The tender evaluation planCalling tenders page Who will be invited? Advertising Staged tendering Other issues to considerThe tender period page How long should the tender period be? Issuing the tender Clarification of questions Receipting Closing time for tenders Late tenders One and two envelopes Opening tendersEvaluating tenders page Recalling tenders Post tender negotiations Procurement recommendationAward of tenders pageSummary pageAppendix 1 – Key evaluation criteria pageWhere can I get more help? pageDr Rovel Shackleford Final Draft 3
  4. 4. What is tendering?When an item or a group of items (or a service) is of such value, involveslarge volumes, is sensitive or is being procured by an organisation for the firsttime, or the buyer wants to test the market, the organisation may decide to goout to tender.Tendering can provide advantages for both buyer and supplier, including:  Best value for money through competition,  Fair distribution of work opportunities,  Support of ethical standards, and  The encouragement of innovative results and creative solutions.Briefly, a tender can be defined as an offer for acceptance or an offer inwriting to do certain work or supply certain items at a certain sum of money orrate. The outcome of the tendering process is the signing of a contract.Whilst tendering is a highly visible and potentially costly means of procuringgoods and services, it is not the only procurement strategy available tobuyers. Organisations will need to select a procurement strategy consistentwith their specific needs and guided by the principles of procurement. Further details regarding selecting procurement strategies is contained in the Dept. Strategic procurement Guide - Market Strategies. Further details regarding the principles of procurement are contained in Government of South Australia Procurement Reform Strategy – Purchasing Strategically: the policy framework for reform dated May 1998.The tender processThe tender process is a complex series of tasks involving many individualsfrom within the organisation. Relative to the complexity of the purchase, itmay be necessary to involve others such as representatives from theappropriate Accredited Purchasing Unit (APU), Dept., Crown Law and otherspecialists, and industry bodies.This guide sets out the normal and accepted ways of managing a tenderprocess. Whilst the focus is on the tender process, the methodology andissues apply equally as well to managing all other procurement strategies.Properly applied, it establishes a process that can justify a high degree ofconfidence that the tender process will be fair and proper. However, theremay be exceptional circumstances that require a departure from the usuallyaccepted process.Dr Rovel Shackleford Final Draft 4
  5. 5. If the buyer believes that it is appropriate to depart from the usual process, advice and support should be immediately sought initially from more senior procurement staff from within the organisation, or if necessary from the appropriate APU or Dept..It is important that a well thought through tender process is followed as it willminimise the possibility of claims by tenderers for lack of due process whichcould result in a recall of tenders and/or damages claims by unsuccessfultenderers.Remember that the tender process should be structured so that it:  Enables the buyer to provide information to tenderers in a fair, equitable and ethical way,  Gives all suitably qualified tenderers an opportunity to submit information,  Enables the buyer to receive information from suppliers in a confidential way, and  Enables the buyer to evaluate tenders and select the best value for money option.The following diagram identifies the key steps in the tender process. Identify a need Identify an appropriate procurement strategy Appoint the tender team Collect all available information Develop and approve a business case Develop and approve an acquisition plan Develop and approve a tender evaluation plan Develop, approve and release tender documents to tenderers Evaluate tender responses/select successful tenderer/notify other tenderers Negotiate key issues with selected tenderer Develop, approve and sign contract Manage contract Measure and evaluate supplier Develop and implement supplier development plansDr Rovel Shackleford Final Draft 5
  6. 6. Review, measure and evaluate tender process Review and update organisation’s procurement profileA number of the steps in this complex process are the subject of this Guide.Specifically this guide focuses on tender issues not covered in detail in otherGuides. Other steps are covered in more detail in other Dept. Strategic Procurement Guides including - Acquisition Planning, Evaluation of Tenders, Contract Development, Contract Management, Performance Measurement for Procurement, Procurement Profiling, and Supplier Development. Further details regarding tendering and contracting are contained in Government of South Australia Procurement Reform Strategy – Purchasing Strategically: the policy framework for reform dated may 1998, the State Supply Board Policies and guidelines Contracting processes and approvals dated November 1998, and the Government of south Australia Draft Tendering Guidelines for use by Government agencies dated July 1999.The tender teamThe buyer is responsible to the organization for the purchasing activity, whichincludes managing the tender process. The buyer should manage andcoordinate information and develop clear and logical tender documents.However the buyer cannot undertake this task alone and ideally should seekinput from a wide range of people and sources including representatives fromthe appropriate COA, Dept., Crown Law and other specialists.A team approachCritical to the successful management of tendering, is the selection of thetender team. The buyer has responsibility to ensure that an appropriate,usually cross-functional team is identified. Key considerations a buyer shouldfocus on include:  What does the tender team need to do – is it responsible for the development of:  the specification,  a business case,  an acquisition plan,  the tender evaluation plan, and  the tender documents?  Who do I need on the team – customers, legal, finance, engineering, representative from the COA or Dept. (if appropriate),Dr Rovel Shackleford Final Draft 6
  7. 7. and others who may be involved in the development of the requirement, the evaluation of tender responses, or the management of the contract?  What experience do they need/do they have – if the necessary level of experience is not available, who can provide assistance?  Does the team, or any of its members need training?  What resources are required to manage the tender process?  When should the team meet?  Do responsibilities need to be defined?  Will the team also evaluate the tender responses?  Will the team also conduct negotiations with the potential supplier?  Will the team have responsibility for the on-going management of the contract? Who manages the tender process in your organization? Is it the buyer, or is someone appointed?Knowledge, experience and skills in managing thetender processIt is becoming evident that organisations need to identify and secure staff withspecific knowledge, experience and skills in managing complex tenderprocesses. The knowledge, experience and skills required include:  Interpersonal experience and skills – communications and negotiation experience and skills, project management skills, and  subject specific knowledge, experience and skills – relevant industry knowledge, experience and skills; high-level procurement experience and skills; financial skill; human resources skills; and legal knowledge.Organisations need to:  recognise that the required knowledge, experience and skills may not be available,  determine the knowledge, experience and skills ‘at hand’ and those needed, and  obtain the necessary levels of knowledge, experience and skills. Does your organisation have the necessary level of knowledge, experience and skills to manage complex tender processes? If the buyer does not have the necessary level of knowledge, experience and skill required, advice and support should be sought, initially from senior management within his or her organisation, then from the appropriate APU or Dept..Dr Rovel Shackleford Final Draft 7
  8. 8. Before calling tendersBefore calling tenders it is important that requirements are defined and aclear intention to proceed is established.Tender documentsThe quality of the tender document is critical to successful tendering. Theyare the basis of the contract and must accurately reflect the scope of workand the financial, contractual and time parameters. Poor tenderdocumentation exposes the buyer to risks including:  receiving diverse proposals making comparisons and evaluation difficult,  increased costs,  unnecessary variations to the contract, and  an outcome that does not meet the needs of the customer.The buyer should nominate a representative who has the knowledge andunderstanding of both what is required and the tender process and who mustbe available to answer questions during the tender period.Production of tender documents. The production and collation of tenderdocuments, specifications, technical drawings and plans is expensive.Requesting a non-refundable deposit for all documents issued can offsetthese costs. This reduces and eliminates requests from tenderers that do nothave a genuine interest and these charges can help defray the operatingcosts of the organization’s buying team.The tender evaluation plan (TEP)Before calling tenders, the buyer must establish specific evaluation criteriaand decide the relative importance of each. A weighting needs to be given tothe criteria. Although buyers should indicate the evaluation criteria in thetender documentation and possibly their order of importance, the actualweighting of the criteria need not be disclosed.Key evaluation criteria could include:  Technical,  Financial,  Contractual/Legal, and  Business. Further details of potential criteria are included at Appendix 1.It is also important that the buyer plan how the evaluation is to take place.The two key stages of planning the evaluation are:Dr Rovel Shackleford Final Draft 8
  9. 9.  Establish an evaluation framework  Note the complexity of the requirement and the specification.  Determine the extent to which alternative offers are to be considered.  Identify the input required from technical, financial, legal specialists and customers.  Determine the method of evaluation.  Identify and agree the evaluation criteria.  Identify the effect of policies and procedures.  Develop the evaluation plan  Document the management and conduct of the evaluation.  Identify the objective of the evaluation.  Identify any unique features.  Identify how ethics and fair dealing are to be maintained.  Identify the evaluation criteria together with weightings.  Identify the evaluation team and their responsibilities.  Detail the reporting and approval processes.  Detail the evaluation schedule.  Detail the evaluation methodology.  Identify arrangements for debriefing of supplier’s. Who produces the tender documents in your organisation? Do you normally develop a tender evaluation plan at this stage of the tender process? If not, why not?Calling tendersTenders can be invited by either:  a single stage tendering process using public advertisement or direct invitation,  selecting from a register of qualified tenderers, or  a two-stage tendering process through registrations of interest. Further information regarding these strategies in contained in the State Supply Board Strategic Procurement Guide – Market Strategies.Who will be invited?Tenders can be invited from tenderers who have met certain criteria via a pre-qualification process. Alternatively a limited number of tenderers may beinvited to tender or tenders can be invited by public advertisement withoutrestriction on the number of tenders sought. Further information regarding these strategies in contained in the State Supply Board Strategic Procurement Guide – Market Strategies.Dr Rovel Shackleford Final Draft 9
  10. 10. Most buyers will have, over the years, developed a profile of both thesuppliers used and potential suppliers, identifying areas of expertise andcapability. From this profile the buyer will be able to list all relevant andtenderers. Further details regarding procurement profiling are contained in the SA Government Strategic Procurement Guide - Procurement Profiling.AdvertisingAdvertising of State Government tenders takes many forms, includingannouncements in local, regional and national newspapers as appropriate.Large tenders and those impacting on regional areas are advertised in thegovernment block of the tender section in Monday’s edition of TheAdvertiser. A comprehensive list of current tenders is also accessible viaInternet site at www…………. Additionally, most large organisations have abulletin board or tender file at the reception area available for inspection.Details normally included in the advertisement include:  Organisation name and logo,  Heading, for example Tender/Expression of Interest,  Details of the Tender,  Location of the place of work,  Closing time and date,  Address of the place of lodgment, including postal address,  Whether a deposit fee is payable,  Contact name and number for additional details,  Details of briefing sessions, and  Authorised person and title.AIS MEDIA has the current government contract for non-campaign mediaadvertising. AIS MEDIA engages Iceberg Media to produce the governmentblock of tender advertising. This process ensures a consistent approach togovernment advertising. How does your organisation call tenders? When were the methods used reviewed?Staged tenderingSingle stage tendering. Single stage tendering is used for low to mediumvalue, low to medium risk procurement whereby tenders are sought frompotential suppliers in one process.Two-stage tendering. The aim of a two-stage tendering process is to createa short list of tenderers with demonstrated capacity to satisfy the identifiedrequirements of the customer. The two stages are:Dr Rovel Shackleford Final Draft 10
  11. 11.  an assessment of the potential suppliers by calling for Registration of Interest (ROI) and the development of a list of prospective tenderers, and then  an invitation to those on the short list to submit tenders against detailed specific criteria.The initial assessment of the potential tenderers is determined by assessingthem against known, established qualification criteria such as:  technical,  financial,  performance, and  experience related to the provision of specific goods or services.It is common to use a two-stage process for high value, high risk, complex orunique procurement.Other issues to considerPreparing a tender can be a time consuming and costly and time-consumingexercise for both buyers and tenderers. To avoid adding unnecessary cost ortime, buyers should consider:  avoid inviting an unnecessarily large field of tenderers,  avoid asking for tenders on multiple options,  avoid costing by tender, and  avoid repeated rounds of tendering. When did your organisation use a two-stage tender process? What were the circumstances? Did it add unnecessary cost to the tender process?The tender periodThe tender period is the time allowed between the initial advertisement orinvitation and the closing date for tenders.How long should the tender period be?During the tendering period, tender documents are issued and responsesprepared. This period needs to be long enough to prepare accurate andcompetitive tenders. If the period is too short it may result in either overpricedtenders to cover unforeseen risks or under-priced tenders completed withoutdue care. Whilst a period of between 14 and 28 calendar days is usuallysufficient, a response to a complex tender may take 3 months to complete.To prepare an adequate response, tenderers will typically need to:  measure the scope of work,  obtain prices from their own suppliers,Dr Rovel Shackleford Final Draft 11
  12. 12.  assess the tender and contract conditions,  assess their capacity to undertake the work,  clarify any inconsistencies with the buyer, and  document the offer.Issuing the tenderFrom the procurement profile and response to the calling of tenders, thetender documents are forwarded to potential suppliers. Tenderers may alsochoose to down load details from the Internet site.Clarification of questionsDuring the period between the calling of tenders and the receipt of responses,tenderers may raise questions. Buyers must ensure that a mechanism is putin place to provide answers to suppliers. Indeed it is necessary to ensure thatquestions and their answers are made available to all tenderers. It is alsoimportant that buyers have identified who is able to communicate withtenderers, and on what issues, during this sensitive period.ReceiptingMost organisations have a tender box for the receipt of tender documentsfrom tenderers. The box is usually prominently displayed, either in thebuyer’s location or at the reception area for the organisation. It is locked forsecurity and to ensure the confidentiality of tenderers. To ensure probity,some organisations fit two locks to the box, the buyer holding one key and theother by a staff member not associated with purchasing.Electronic receipt. There is an increasing use of both E-commerce andFacsimile for the transmission of both tender documents and responses.Both buyers and tenderers often encourage this. It can speed up thepurchasing decision process and can reduce the cost of tendering to both thebuyer and the tenderer. Legal advice states that a facsimile document isacceptable in a court of law provided that the original can be produced withina reasonable period of time. Strategies need to be developed to manageelectronic receipting, for example, when to place a document in the tenderbox.Closing time for tendersThe closing of tender boxes must occur at the nominated tender closing time.No individual tenderer should be given the unfair advantage of receivingadditional time for lodging tenders. The Australian Standard Code ofTendering provides generally accepted practice for the closing of tenders:  not before 2pm,  not on a Monday or a day following a public holiday,Dr Rovel Shackleford Final Draft 12
  13. 13.  at least one clear day after a weekend, industry holiday or standard industry rostered day off, and  at least one week after a recognised industry holiday period.Late tendersThe integrity of the tender process should not be compromised by acceptinglate tenders. Tenders that do not meet the date and time deadlines areusually excluded. This policy can vary from organization to organisation. Anytender received after the closing time is to be clearly marked as “late tender”.One and two envelopesTenders may be designed on a two-envelope system. One “envelope” willinclude the usual tender specifications and requirements related to supply ofthe actual goods and services. It will also include criteria and, whereappropriate the weightings that will be applied. The second “envelope”(economic development envelope) will include assessment criteria, such ascapital dollar investment in the State, the number of direct jobs generated andthe involvement of other local industry. The use of the “two envelope” systemis not commonly used.Opening tendersWith the public opening of tenders, the two tender box key holders, removethe tenders at the appointed time and formally record each tender in aregister. It is good practice to provide a receipt of registration to the supplier.If it is appropriate, the sealed envelope may be broken and the buyer recordsthe name of the tenderer and the price tendered. This procedure continuesuntil all tenders are processed.Once all tenders have been registered, the signatures of those staffregistering and recording the tenders are then placed under the last entry andthe register ruled off. How well does your organisation plan and manage the tender period? What problems have arisen? How have they been solved?Evaluating tendersAll tenders, having been recorded, are now subject to the evaluation process.The tender team reviews each document and all relevant information againstthe predetermined criteria detailed in the TEP.Dr Rovel Shackleford Final Draft 13
  14. 14. The outcome of the evaluation process will be a product sourcing decisiondocument that will:  Detail the sourcing arrangements,  Include a brief outline of the evaluation criteria, and  Give sufficient information to support the sourcing decision.The evaluator’s responsibility is to recommend the tenderer(s) that representthe “best value for money”. This means that the recommendation achievesthe lowest total cost to the organisation for a given specification orperformance requirement. Further details regarding the evaluation process are contained in the State Supply Board Strategic Procurement Guide – Evaluation of Tenders. Further details regarding the evaluation process are also contained in a training module supporting the Strategic Procurement Reform Strategy - SA14A Evaluating and recommending Suppliers.Recalling tendersAny decision to repeat the tendering process should be made only incompelling and unavoidable circumstances. In particular, do not recalltenders to obtain a better price but negotiate with the initially preferredsupplier. In the event of a recall, the original tenderers should be advised ofthe reason and, as a general principle, be invited to submit a new tender.Post tender negotiationsThere may be occasions when negotiations regarding price or some otherissue may have to be considered. Further details regarding negotiation in support of tender evaluation and contract development are contained in the State Supply Board Strategic Procurement Guides – Evaluation of Tenders and Contract Development.Procurement recommendationBefore contractual arrangements can be formalised, the SSB requires APU’sto ensure that a sufficiently detailed procurement recommendation issubmitted which demonstrates that the acquisition processes and practicesundertaken have been consistent and fair, competently managed and reflecthigh standards of professionalism, ethics and probity. Further details regarding the content, format, submission and approval of procurement Recommendation is contained in the State Supply Board Policy and Guideline - Contracting Processes and Approvals dated November 1998.Dr Rovel Shackleford Final Draft 14
  15. 15. Award of tendersOnce the tender team is confident that a tenderer is capable of fulfilling theterms and conditions of the contract, that the level and quality of performancehas been checked, and that the price is within estimates, an award can bemade.The first step in the award process is often a “letter of intent”, which allows thesuccessful tenderer an opportunity to begin planning prior to the officialsigning of the contract.The contract is then finalised and prepared for signature by the authoriseddelegate. The buyer must ensure that working copies of the signed contractare issued to the relevant areas of the organisation such as finance,engineering and the contract manager. Further details regarding contract development are contained in the SA Government Strategic Procurement Guide - Contract Development.Following written acknowledgement to the successful tenderer, all otherunsuccessful tenderers should be notified in writing.SummaryThe tender process is a complex series of tasks and requires a high level ofexpertise. It involves many individuals from within the organisation andrelative to the complexity of the purchase, it may be necessary to involveothers such as representatives from the appropriate APU, Dept., Crown Lawand other specialists.This guide has set out the normal and accepted ways of managing a tenderprocess. Properly applied, it establishes a process that can justify a highdegree of confidence that the tender process will be fair and proper, allrelevant issues have been identified and actioned and will assist in deliveringthe best value for outcome to the organisation.Dr Rovel Shackleford Final Draft 15
  16. 16. Appendix 1 Key evaluation criteriaThe identification and agreement of the evaluation criteria and their relativeweightings should be completed before tenders are opened at the latest. It isa key element in the evaluation process.The following can be used as a checklist to ensure that all appropriate criteriaare considered.  Technical  Requirements of the specification – technical merit of the proposal, minimum base line, fitness for purpose, compliance with specification  Additional options – extended capability, flexibility, versatility- other uses, performance, systems compatibility  Life cycle cost factors – warranty, backup/support/service/repair, maintainability, meantime between failures  Quality – workmanship, durability, reputation/past performance that must be qualified, for example, request reference sites to inspect.  Financial  initial price  price basis (firm, variable, cost plus etc.)  price validity period  price escalation formulae  delivery costs  transport costs  installation costs  costs of logistics support, for example spares  whole-of-life costings  payment terms/schedule  advanced payments and milestones  discounts  exchange rate  bank guarantees  liquidated damages  discounted cash flow  costs associated with intellectual property rights  recent/current prices for comparison.  Contractual/Legal  compliance with conditions of draft contract  satisfactory delivery arrangements  policy considerations  maintenance arrangements  quality assurance requirements  deviations from the stated requirement both desirable and undesirableDr Rovel Shackleford Final Draft 16
  17. 17.  security aspects.  Business  demonstrated experience  financial stability of the tenderer  reputation in the industry  industrial relations record  capacity  commercial risks  quality assurance status  managerial strengths, resources, facilities etc.Dr Rovel Shackleford Final Draft 17
  18. 18. Where can I get more help?People(Dept. to complete)Materials(Dept. to complete)Training(Dept. to complete)This Strategic Procurement Guide describes a procurement activity referredto as ‘Managing the Tender Process’. This activity is widely practised and anumber of variations exist.In developing this guide, it is appropriate to acknowledge the work of theCommonwealth and other State Governments, the UK Treasury. Theconcepts underlying the activity, however, have been adapted for use in theGovernment.Dr Rovel Shackleford Final Draft 18

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