INTRODUCTION

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INTRODUCTION

  1. 1. PROCUREMENT CODE FRAMEWORK Approved in accordance with Standing Order 4 April 2010 Procurement Code Framework LDALIVE#
  2. 2. PROCUREMENT CODE FRAMEWORK CONTENTS 1. INTRODUCTION.....................................................................................................3 2. DEVELOP PHASE...................................................................................................4 2.1 Introduction........................................................................................................4 2.2 Budgetary constraints/approvals........................................................................4 2.3 Strategies and procurement routes.....................................................................4 2.4 Procurement routes.............................................................................................6 2.5 Aggregation .......................................................................................................7 2.6 Exemptions.........................................................................................................7 2.7 Commitments in writing.....................................................................................9 2.8 Payment terms....................................................................................................9 2.9 Records management.........................................................................................9 3. PROCURE PHASE.................................................................................................11 3.1 Introduction......................................................................................................11 3.2 Preparation Stage..............................................................................................11 3.2.1 Conditions of contract.................................................................................11 3.2.2 Statement of requirement (specification)....................................................12 3.2.3 Approaches to specifying ...........................................................................12 3.2.4 Performance standards................................................................................13 3.2.5 Attributes of a good statement of requirement............................................13 3.2.6 Getting it wrong...........................................................................................14 3.2.7 Evaluation criteria.......................................................................................14 3.3 Procurement Stage............................................................................................17 3.3.1 LDA procurement approaches and supplier sourcing.................................17 3.3.2 Corporate purchasing arrangements............................................................19 3.3.3 LDA Framework Agreements ....................................................................19 3.3.4 LDA Quotation Process...............................................................................20 3.3.5 LDA Tender Process...................................................................................22 3.3.6 EU Tender Processes ..................................................................................27 3.3.7 Late quotations and tenders.........................................................................32 3.3.8 Summary of tender periods for LDA tenders and EU tenders....................34 3.3.9 Continual improvement...............................................................................34 4. DELIVER PHASE..................................................................................................35 4.1 Introduction......................................................................................................35 4.2 Entering into a contract....................................................................................35 4.3 Managing the contract......................................................................................36 5. TABLE OF APPENDICES.....................................................................................37 ©London Development Agency Page 2 of 37 19/08/2010
  3. 3. PROCUREMENT CODE FRAMEWORK 1. INTRODUCTION This document is the LDA's Procurement Code Framework and supplements Appendix 10 of the Procurement Code. This framework sets out procurement at the LDA and covers the approval for and responsibilities for the purchase of goods, works and services. It replaces the LDA’s previous Procurement Code Framework, published in 2008. The Procurement Code Framework (Revised 2010) covers each relevant phase of the commissioning framework life cycle and identifies the considerations that help to achieve wider social, economic and environmental objectives of the LDA and ensure that the LDA’s procurement activities have a positive impact on Greater London’s economic development. This framework is a generic document that should be used for all procurements, including those involving third sector organisations and grant partners. It specifically excludes individual employment contracts because these should be handled by the human resources team. Contracts with employment agencies, however, fall within the scope of this code; managers should seek advice from the procurement team and/or the legal team on how to procure these types of contract. The Single Programme Guide procedure is to be followed for all non- competitive grants. All changes to this Procurement Code Framework must be approved in accordance with the LDA's Standing Orders and in particular, Standing Order 4. Please note that should you have any queries about this Procurement Code, including who is responsible for what, then contact the LDA’s procurement team. ©London Development Agency Page 3 of 37 19/08/2010
  4. 4. PROCUREMENT CODE FRAMEWORK 2. DEVELOP PHASE 2.1 Introduction This section describes the activity required before the procurement process starts (see Diagram 2.1 below). It also highlights the need for the procurement strategy to be embedded within the business case for each project. Diagram 2.1: Commissioning Framework Process – Develop Phase Process Phase Develop Procure Deliver Strategic Contract Supplier Evaluation Knowledge Data Analysis & Strategic Options Develop Procurement Workshops Initiation Generation Review Options Evaluation & Contracting Approach Monitoring Relationship / Lesson Development & mgt mgt learned Investment Gateway A B C D E Procurement Activity Following the development of the Investment Gateway A Concept Proposal, the key procurement objectives from this phase to assist in the development of the Investment Gateway B Business Case include: a. confirming budget availability/approval b. consulting the procurement and legal teams about the project and agreeing the level of support to be provided by them c. confirming a high level statement of requirements, as described in the Concept Proposal d. identifying and quantifying project and procurement risks, including the application of state aid e. confirming the health and safety requirements and competency required f. confirming the procurement strategy/route to be used g. confirming project timeline and key milestones h. confirming the nature of contract to be used i. Understand what drives suppliers, what kind of delivery model fits beneficiaries best and what a successful delivery model could look like j. developing a communications strategy for the Procure phase k. adding the contract opportunity to the LDA's contracts register (utilising the Contract Register Service) A more comprehensive list of tasks/outputs comprising the procurement project lifecycle is set out in Appendix 2. 2.2 Budgetary constraints/approvals No procurement project should be started until the budget holder has confirmed the funding for the project and the availability of funds within the approved budget and any other required LDA approval is secured. This approval should be in writing (for example, email), along with written confirmation that the budget holder has enough authority to proceed. The approval must be kept in the project file. If the subsequent prices quoted exceed the approved amount the procurement project should not proceed without further written approval. 2.3 Strategies and procurement routes The Develop phase is where first thought should be given to how to achieve the project’s objectives. This thought process should drive the debate on whether to deliver the project directly using LDA staff and resources, or whether to buy in the necessary expertise from a third party; which would require a procurement strategy to be developed. The procurement ©London Development Agency Page 4 of 37 19/08/2010
  5. 5. PROCUREMENT CODE FRAMEWORK strategy is therefore a key component of the business case. It should be noted that the procurement strategy is not simply about the outcome of the procurement, but rather how the outcome can be achieved while ensuring that: i. good procurement practice is exercised to ensure best value and the proper use of public funds ii. every effort is made to work with local businesses, small enterprises, BAME enterprises and third sector organisations to help support equality of opportunity iii. the process complies with the GLA’s Group Responsible Procurement Policy The procurement strategy should be developed in consultation with the procurement team. These consultations would include a debate about the suitability of existing LDA framework agreements, corporate purchasing arrangements, other available frameworks, such as those managed by other GLA functional bodies, or the Office for Government Commerce Buying Solutions frameworks. The discussions could also include how the LDA should go about collecting restricted market intelligence from suppliers who may be interested in the work.1 The procurement strategy should: i. give potential service providers a clear understanding of the standards expected of them and provide timely information at all relevant stages of the process ii. provide all potential suppliers with the same information and ensure each is subject to the same demands in order to ensure fair competition and equal treatment iii. work to avoid narrowing the view of how the service should be delivered as this may limit options and deter potential providers iv. ensure that providers are fully aware of how they will be evaluated and that the entire procurement process can withstand formal audit (this will ensure that the LDA can demonstrate that the procurement process has been undertaken in an open and transparent manner) v. further our statutory duty to promote equal opportunities The procurement strategy must also describe the general approach to be taken to: i. inviting tenders openly after a general invitation is issued ii. inviting tenders from a restricted list of suppliers, such as from an LDA framework agreement or from another framework belonging to another government organisation iii. inviting tenders after a ‘competitive dialogue’ iv. negotiating a single tender with a single supplier (only to be used in exceptional circumstances because it is more difficult to prove value for money and because such action may fall within the scope of the state aid rules and because it will be necessary to consider whether such course of action is justified under the EU Procurement Directives) The strategy should also define milestones in the procurement process and describe how to evaluate each scheduled procurement outcome. The overall procurement approach should be based on the individual level of risk (high, medium, low, etc) to the LDA. The total risk associated with each project should be determined using LDA risk management tools (available on the LDA intranet). Examples of typical risks associated with procurement include: i. failure to obtain appropriate expert advice 1 On some occasions it may be useful to obtain a supplier’s perspective on the attractiveness of a procurement opportunity in order to ensure that the project it is structured properly and can therefore deliver positive results at the end of the procurement phase. This work may involve inviting suppliers to comment on the project structure and/or the procurement strategy. This input must be treated sensitively and tempered to ensure that it does not place other suppliers at a disadvantage by distorting the project and therefore the competition. If you intend to carry out any such market sounding, speak to the procurement team first to ensure that you do not mistakenly distort the procure phase of your project. ©London Development Agency Page 5 of 37 19/08/2010
  6. 6. PROCUREMENT CODE FRAMEWORK ii. damage to the LDA’s reputation should the project either fail, deliver an inappropriate result or have negative health and safety reports iii. not enough suppliers interested in competing for the work iv. selecting suppliers that do not have the capability or capacity to do the work v. vague specifications of the goods, works or services required leading to misunderstanding and poor delivery vi. an inexperienced project team, or insufficient staff time, to manage the procurement process efficiently vii. insufficient resources to cover costs viii. poor quality of goods or services ix. failure to meet our procurement objectives or corporate objectives x. inability to meet health and safety competency criteria As soon as particular risks are identified, action should be taken to assess and mitigate them, for example by: i. identifying the budget from the start ii. involving the procurement team and the legal team at the outset iii. developing a clear and realistic timetable at the beginning of the project iv. appointing a dedicated project team with relevant expertise v. working to ensure that there is a good understanding of the potential supplier market, including extending invitations to tender to wider competition vi. appointing technical experts (where appropriate) vii. ensuring new and existing staff get relevant training viii.developing a clear specification and pricing schedule ix. undertaking legal, financial and health and safety checks on the preferred supplier(s) 2.4 Procurement routes The choice of procurement route is primarily governed by the value of the contract .Table 2.1 sets out the minimum requirements for procurement projects that fall within certain financial thresholds. These thresholds exist to help deliver value for money and promote good procurement practice. They assess the value of each procurement project and relate to the estimated total lifetime cost of the procurement activity (excluding VAT). For example: i. If it is estimated that the procurement involves paying a supplier £55,000 a year for three years, the total lifetime cost is greater than £156,442 and will therefore exceed the EU Procurement limit and a full EU procurement will be required. ii. Oral quotations should be avoided whenever possible; however, for small value goods, services or works (for example, worth less than £5,000) some suppliers may not want to supply written quotations. Therefore, if there is no alternative to taking oral quotations, these must be fully documented. iii. If the procurement involves an estimated purchase of £75,000 for a service, then written tenders should be obtained following a shortlisting exercise on CompeteFor – these should be based on a written statement of requirement that is issued to all suppliers at the same time and contains a clear deadline for providing a written response In order to be confident of meeting the minimum number of quote/tender returns, you should consider requesting quotations from more organisations, depending on the likely level of interest. ©London Development Agency Page 6 of 37 19/08/2010
  7. 7. PROCUREMENT CODE FRAMEWORK If EU grant funding is involved, it is quite possible that the funding conditions may require a tendering procedure to be followed under the EU procurement directives regardless of the financial value of the project. Any EU grant funding conditions should therefore be checked very carefully. Above EU thresholds EU tender procedure to be used Minimum of three formal tenders required from at £70,001 to EU thresholds least five organisations invited to tender using CompeteFor £20,001 to £70,000 Three quotes required using CompeteFor One quotation – ensure value for money using Up to and including £20,000 CompeteFor registered suppliers Table 2.1: Determining the most appropriate procurement route 2.5 Aggregation EU procurement rules on aggregation must be applied to any purchase that is subject to the EU procurement directives. When determining whether the EU rules apply because a contract is over the relevant EU threshold, you must add together the value of all individual contracts anticipated for similar goods, services and/or works. Where the requirement is ongoing, then similar recurring contracts for the same goods, services and/or works must also be added together, irrespective of existing commitments. If the requirement is not ongoing, just add the value of the contracts being awarded at that point. The value of a project should be determined by adding together all similar goods or services required by the LDA in that period (usually one year), irrespective of who is currently supplying them. This total should include all parts of the LDA using these goods or services. LDA managers are responsible for providing information on their projects to the procurement team at the start of each financial year. For ongoing requirements, actual expenditure for the previous 12 months can be used to estimate requirements for the next 12 months. The LDA’s contracts register may also be useful. However, you should seek help on aggregation from the procurement team because the rules are complicated and they will have a better understanding of the bigger picture. Under no circumstances should you separate purchases simply to avoid the application of the EU rules or LDA thresholds. Similarly, you should not add purchases together just to bring them within the scope of the rules. Aggregation is compulsory for application of the EU thresholds. However, the rules do not mean that only one contract may be awarded for aggregated goods or services. Several contracts may be awarded as long as the rules are applied to each one individually. When deciding whether to award one or more contracts, you should consider how best to include SME and BAME businesses, businesses owned by people living with disabilities and other LDA target organisations, such as LGBT owned businesses and third sector organisations. 2.6 Exemptions Single Tender Actions (STA), also known as an exemption from financial thresholds. There may be circumstances in which only one supplier can provide the LDA with the required goods or services. In these cases, seeking competitive quotes or tenders will add no value. Seeking a quote from a single supplier and awarding the contract without any ©London Development Agency Page 7 of 37 19/08/2010
  8. 8. PROCUREMENT CODE FRAMEWORK competition, or without abiding by the LDA’s financial thresholds and minimum requirements set out above, is known as a single tender action. It is only allowed under rare and specified circumstances and for all instances consideration must be given as to whether such action is permissible under EU public procurement rules. Applicable exemptions include: a. An exceptional emergency not of LDA’s own making. This could be an unforeseen event likely to cause immediate danger to people or property, such as flooding. Urgent expert technical or legal support may be required for a Mayoral or government project. However, urgency caused by previous delays or poor planning should not trigger this exception. b. Specialist services and/or supplies. Some goods or services may only be available from a single supplier or a specialist consultant, such as a single provider of stands at a conference, or use of specialist counsel. Appropriate evidence should be retained to support the lack of providers. Lack of knowledge about suppliers is not sufficient reason to use this exception, nor is appointing a supplier simply on the basis that they have worked for the LDA before. (The supplier must be a proven and unique expert.) c. Compatibility with existing services or products. This would cover equipment that needs additional parts from the same manufacturer, or additional consultancy work which depends upon the results of a previous assignment and therefore could not be carried out by another organisation. You should be aware of potential aggregation difficulties that may arise with this exception and seek advice from the procurement team. This exception must not be used to extend existing contracts for mere convenience or to avoid the thresholds by splitting requirements. It should also be noted that familiarity with the LDA and/or its projects is not a sufficient ‘compatibility’ reason for single tender action. A supplier who may have already completed a consultancy project may be well qualified to do any follow-on consultancy but their familiarity with the LDA and/or the project does not in itself give enough cause to re-appoint them in an STA. It should be noted, however, that the existing supplier may have an advantage over other suppliers because of its better understanding of the LDA’s requirements. If it is impossible to secure enough quotations, or if fewer than three tenders are returned and you are able to evidence that every effort has been made to meet the minimum requirements, then an exemption is not required. For example, if the first six suppliers approached for quotations only yield two quotes, then you must discover why the others did not respond, provide your evidence to the LDA’s procurement team and gain their approval to proceed. Where one exemption genuinely applies you should complete an ‘application for exemption from financial thresholds’ (Appendix 1) and obtain legal advice from the LDA’s legal team. The above exemptions will not automatically apply to contracts over the EU value threshold. In such cases you should seek advice regarding the applicable exceptions under EU procurement rules from the LDA’s Procurement team. Your application to the Procurement Team should include the case for exemption and evidence that the approval will not undermine the procurement code. You should also include data about the nature, value and duration of the contract, the proposed supplier, and how you have achieved value for money, along with any alternative procurement actions taken. You need to ensure that your application falls within at least one of the exceptions described above. If this is not the case, you will be told so by the Procurement Team. You must then ensure that your completed application form is signed off by the relevant Project Officer, the Director of Procurement and your Group Director before the contract formally begins. Where contracts are worth more than £100,000, the application form must also be signed by the Chief Executive or Deputy Chief Executive. You should then give a copy of this form to the legal team, along with the supporting documents and your completed pro-forma instruction form so that they can draft the contract ©London Development Agency Page 8 of 37 19/08/2010
  9. 9. PROCUREMENT CODE FRAMEWORK or consultancy agreement. Keep the original exemption form and give it to the finance department when the agreements have been signed and you are ready to raise a purchase order. Every STA or exemption from financial thresholds will be reported to the GMT by the risk and audit services team on a quarterly basis. There are a few purchases that are deemed to be outside the scope of the procurement code and so do not need exemptions. These include: i. temporary staff fees ii. utility payments (where there is no choice over supplier: for example, water rates) iii. rent iv. subscriptions to trade and professional organisations/journals v. statutory external audit fees vi. individual professional training courses vii. travel costs 2.7 Commitments in writing All procurement must be authorised in writing by a suitable officer (please refer to the scheme of delegations set out in Standing Order 3 - Financial Regulations). In order to register the commitment with finance, you must always raise a purchase order through Athena Finance. These orders should be supported by a formal contract and confirmation letter, an appointment letter or by any other form of legally binding documentation. You must also advise the supplier of the purchase order number and ask them to quote it on all claims for payment. An official order form will be generated by Finance once the purchase order has been authorised; if requested, this can be sent to the supplier but will otherwise be kept in Finance. You should never authorise work to start without a completed contract. Any exception to this rule (which should be extremely rare) must first be obtained from the Director of Law and Governance. 2.8 Payment terms The LDA’s policy is to pay in arrears once the relevant goods or services have been delivered to our satisfaction. We pay within 30 days after the Finance Department has received the invoice. Further details on making payments are covered in the Athena Finance Manual. The LDA’s payment terms should only be changed with the prior approval of the Group Director of Finance. 2.9 Records management Successfully handing over the responsibilities of a project, and the satisfactory completion of the projects, requires good record and file keeping. It is important that you keep good records of your decisions and project activities, particularly given that all staff are responsible for managing information and controlling records in accordance with the LDA’s information and data management policy and procedures. The retention and disposal schedule requires that: i. successful proposals and their respective Pre Qualification Questionnaires (PQQs) need to be retained together for the lifetime of the contract plus 7 years ii. contracts are under seal they are to be retained together for the lifetime of the contract plus 12 years iii. unsuccessful proposals and PQQs need to be retained for 2 years from award of contract iv. exemption from Financial Thresholds Forms (STA) need to be retained for 2 years from the end of the contract period ©London Development Agency Page 9 of 37 19/08/2010
  10. 10. PROCUREMENT CODE FRAMEWORK 2.10 EC Treaty requirements In the case of every procurement by the LDA, due consideration will need to be given to the impact and requirements of the EC Treaty. The LDA procurement and legal teams should be consulted, as appropriate. Essentially, the European Court of Justice ("ECJ") and the European Commission have held that the award by a public body (such as the LDA) of a contract for the procurement of works, services and/or supplies is subject to the overriding EC Treaty obligations even if the contract in question is otherwise exempt from the EC Procurement Directives and Regulations by virtue of its being, for example, a below value threshold contract, a "Part B"/non-priority services contract, or a services concession contract. The EC Treaty obligations would only not apply in the event that the public body could demonstrate that the contract would have no relevance to the functioning of the EC Internal Market or, put another way, that there would be no potential providers in other Member States which might be interested in the relevant contract. This will not be easy to show and most contract awards would generally be considered to have a Community dimension and, as such, be subject to the EC Treaty requirements. The EC Treaty imposes obligations on public bodies to act in accordance with fundamental principles of transparency, equal treatment, non-discrimination on grounds of nationality, proportionality, and mutual recognition. In broad terms, these principles have been interpreted by both the ECJ and the Commission as requiring prior advertisement of a proposed contract award and, in general, the subsequent holding of some form of open and non-discriminatory competition. The contract advertisement need not necessarily be placed in the Official Journal of the European Union ("OJEU") but should be placed in a medium (or a combination of media) which will be accessible by potentially interested providers. Depending on the particular circumstances, this could include voluntary publication in the OJEU or advertisement on the LDA's eTendering system or other suitable websites, and/or advertisement in specialist trade publications. Typically, some form of open, non-discriminatory and transparent competition should follow. For contracts exempt from the EC Procurement Directives (such as below threshold value contracts and Part B services contracts), the competition would not be subject to all the prescriptive requirements of the Directives but the nature of the competition should be proportionate to the nature and value of the contract in question. ©London Development Agency Page 10 of 37 19/08/2010
  11. 11. PROCUREMENT CODE FRAMEWORK 3. PROCURE PHASE 3.1 Introduction This section deals with the procure phase of the commissioning framework process (see Diagram 3.1 below) and will commence following an approved Business Case (Investment Gateway B). To aid the reader this section is split into preparation and procurement stages. Diagram 3.1: Commissioning Framework Process – Procure Phase Process Phase Develop Procure Deliver Strategic Contract Supplier Evaluation Knowledge Data Analysis & Strategic Options Develop Procurement Workshops Initiation Generation Review Options Evaluation & Contracting Approach Monitoring Relationship / Lesson Development & mgt mgt learned Investment Gateway A B C D E Procurement Activity 3.2 Preparation Stage The preparation stage will help you decide what type of contract you should use to manage the relationship between the LDA and its suppliers. It also describes how to develop the LDA’s detailed project specification, or ‘statement of requirement’. This describes what we are seeking to procure and involves resolving issues regarding the preparation of the evaluation criteria. The key procurement activities for the preparation stage include: i. agreeing evaluation criteria and weightings for pre-qualification questionnaires (PQQs) ii. agreeing evaluation criteria for invitations to tender (ITTs) – including weightings iii. preparing statement of requirements, terms and conditions of contract, ITTs and advertisements iv. confirming procurement project responsibilities and contact details (for example, email addresses) v. confirming deadlines for the return of the PQQ and tender documents vi. placing advertisements – for example, on the OJEU website, LDA’s eTendering system or CompeteFor vii. agreeing the process for evaluating the PQQ and ITT responses (for example, location and date) viii.A more comprehensive list of tasks/outputs comprising the procurement project lifecycle is set out in Appendix 2. 3.2.1Conditions of contract The conditions of contract record the contractual relationship between the LDA and each supplier. The choice of contract is related to the procurement route. For low value/low risk (less than £70,000) procurements the LDA generally relies on the standard terms and conditions produced by our legal team. Medium/high risk projects and projects valued over £70,000 will generally use a long form standard contract selected from the LDA’s suite of standard contracts. High risk projects will generally use the most comprehensive form of standard contract selected from the LDA's suite of standard contracts; alternatively, bespoke contracts may be specially drafted to suit the circumstances of particular projects. ©London Development Agency Page 11 of 37 19/08/2010
  12. 12. PROCUREMENT CODE FRAMEWORK The choice of contract will be determined by the LDA’s legal team after consulting with the relevant project manager and the procurement team. In all cases, instructions must be sent to the legal team to prepare the appropriate contract. There are standard instruction sheet templates to be used by LDA project managers for this purpose. For low value/low risk procurements (less than £70,000), the project manager and procurement team may prepare the first draft of the details to be included on the front page of the purchase order. This is provided that, in all cases, this first draft must be attached to the instruction sheet sent to the legal team, who will complete the contract. 3.2.2Statement of requirement (specification) The ‘statement of requirement’ is the term we use for the project brief or specification. It describes what we require and/or what the successful supplier is expected to deliver. It should include performance targets and provides the basis of the tender evaluation criteria. The statement of requirement is an essential and important part of the procurement cycle. It can determine how successful we are at obtaining goods or services on time, to standard and that represent value for money. It needs to provide enough information for suppliers to deliver what we need while remaining flexible enough to accommodate innovative solutions. It must be prepared using language that suppliers will understand. The specification can vary in length from a few paragraphs to several pages, depending on the strategic importance, political impact, risk and complexity of the project. It can also depend upon the cost of the project. The more expensive or important a project is, the more likely it is to need an extensive specification. However, the more complex and risky the procurement, the more important it is that you get advice from the procurement team. 3.2.3Approaches to specifying Wherever possible, statements of requirement should be drafted in ‘output terms’ – what needs to be achieved rather than how it should be done. Any output-based performance specification needs to be clearly defined. This is to help the evaluation team assess the competing bids fairly and to ensure that suppliers understand fully what is expected of them. They will need to submit method statements within their tender submissions showing how they intend to achieve the outputs. For example, the above types of specification would state the requirement was ‘furniture’ or ‘(x) number of trainees to be trained with 80% being placed in full time employment thereafter’. It would not set out how these targets should be achieved. This approach is very good for putting the burden of proof of expertise on the potential supplier, or where we want to assess new ways to deliver services. Other approaches Other forms of specification focus on input, rather than the output performance of the products and services. i. Technical design specification. This defines the exact physical characteristics of the product; in the case of a service, it gives a detailed description of the execution of particular tasks. In the example above, a technical design specification would state the exact dimensions, materials and construction process for the furniture, or the exact type of training methodologies and work placement activities to be undertaken. ii. Process specification. This is ‘process based’ and is commonly used for services that need to adopt (but not necessarily be prescribed) specific processes. This approach is important to public sector organisations whose methods are often under scrutiny. For example, if the LDA wants training delivered to young people in a local community, we might not prescribe the training content but might state within the specification that the training should be accessible to people with different language requirements or disabilities. iii. Sample or product name. The specification reduces the amount of description required by referring to sample products or product names. In order for this to be fair, all suppliers ©London Development Agency Page 12 of 37 19/08/2010
  13. 13. PROCUREMENT CODE FRAMEWORK need some knowledge of that product or must be told where they can find out about it. For example, this type of specification might be used in a catering contract to ensure a specific brand of coffee is provided. This type of specification should usually be avoided because some suppliers can view it as being anti-competitive and because referring to particular makes/brands/manufacturers' products will usually be in breach of EU public procurement rules relating to non-discriminatory specifications. If it must be used, you should ask the procurement team for advice beforehand. There are advantages and disadvantages to using the above approaches. Overall, however, they are not generally recommended because they can inhibit innovation. If you think that your statement of requirement should be anything but output-based, seek advice from the procurement team first. Budget awareness Depending on the nature of the procurement strategy, it may be inappropriate for potential suppliers to be told the budget for the project because this knowledge could encourage them to submit artificially high bids. By the same token, in other circumstances it may be appropriate to reveal the budget for the project. For instance, the tender may ask suppliers how they would make best use of the available budget. Ask the procurement team for advice before any budget information is shared with potential suppliers. 3.2.4Performance standards Best value requires continuous improvement so there must be measurable performance standards in the LDA’s contracts, along with scope for setting higher targets each year. The performance standards in a statement of requirement should be designed with the specific contract in mind and should identify what will constitute enhanced service delivery. Performance standards can apply to: i. quality of service/product (for example, meets requirements, above requirements, below requirements) ii. quantity produced (for example, for goods) iii. response times (for example, the service shall be provided within specified maximum response times) iv. accuracy levels v. availability and capacity As well as setting standards, the specification should require suppliers to demonstrate that they can achieve them. This can be done through method statements, site visits, presentations or demonstrations and can form part of the evaluation process. The specification must state clearly what suppliers must do to prove they can meet the required standards. 3.2.5Attributes of a good statement of requirement The key attributes of good statements of requirement are set out below. In summary, they should: i. be written in plain English ii. be concise and clear to enable suppliers to give a firm price iii. have a logical structure, be indexed and have a definition section if necessary iv. include any background information about the LDA or our requirements from this contract to help suppliers understand the operational environment in which they will be working v. provide enough information and include any relevant data that will help suppliers understand the full scope and nature of the contract and any operational peculiarities ©London Development Agency Page 13 of 37 19/08/2010
  14. 14. PROCUREMENT CODE FRAMEWORK vi. set out any constraints that might affect the performance of the contract vii. state both supplier and LDA responsibilities to prevent confusion viii. avoid discrimination for or against particular suppliers ix. set out how the supplier’s performance will be measured, monitored and continuously improved for best value x. be clear about the evaluation and selection criteria xi. link to the proposed evaluation criteria to enable a fair comparison to be made between tenders and services offered xii. deliver value for money xiii. provide a fair and equal chance for all potential suppliers to offer alternative solutions to the requirement xiv. conform to legal standards and obligations They should not: i. over-specify the requirement and use terms such as ‘the highest quality’ unless this is essential: this will increase the price ii. be vague: this could lead to disputes later iii. be over-prescriptive: this could increase the price and stifle innovation iv. be anti-competitive or discriminate for or against any potential supplier (whether on grounds of nationality or otherwise) - by way of example, conditions requiring the use of local labour should in general be avoided since such provisions could discriminate against providers from other EU Member States. The LDA legal and procurement teams should be consulted wherever an issue of potential discrimination could arise v. contradict other tender documents, including the contract conditions vi. specify brand names as this is only permissible in exceptional circumstances under the EU public procurement rules on non-discriminatory specifications 3.2.6Getting it wrong If the statement of requirements is wrong, inadequate or overtly explicit it may result in one or more problems, such as: i. preventing a suitable tenderer from bidding ii. wrong or inconsistent interpretation of the requirements iii. unsatisfactory tender submissions iv. difficulty in evaluating bids v. incorrect or unsuitable goods and services vi. failure to achieve value for money vii. considerable costs and losses viii. adverse publicity ix. delay in, or non-delivery of, projects 3.2.7Evaluation criteria It is good practice to publicise, in general terms, how suppliers will be evaluated before inviting quotes, tenders or ‘expressions of interest’, or before asking potential suppliers to complete pre-qualification questionnaires. It is necessary to include the weightings against these criteria and you should ask the procurement team for advice on this point. For example, if you are managing a low value ©London Development Agency Page 14 of 37 19/08/2010
  15. 15. PROCUREMENT CODE FRAMEWORK tender with only two simple criteria of price and quality, weighted 70% for price and 30% for quality, then it would be perfectly acceptable to include the weightings in the documentation. However, for a more complicated tender, which has higher value and/or carries greater risk, the evaluation will include more criteria. In this case, the weightings should be published but the procurement team will need to review these before any documentation is issued. It is also important to separate the pre-qualification process from the tender evaluation process. This is because bidders that have already pre-qualified should not be tested again using the same criteria unless something untoward is discovered. All other tests should relate to the substance of the suppliers’ tenders and should be based on the criteria agreed with the procurement team before the statement of requirement is issued. The evaluation criteria must be applied in a consistent manner throughout the procurement project. If a project is tendered using an open competition and therefore does not restrict the number and types of organisation that can tender then suppliers should not be ignored simply because they have less experience than others. In these circumstances tenders should only be passed over if they do not offer best value according to the LDA’s evaluation criteria. The effect of the above requirement is two-fold: a. Pre-qualification criteria should focus on the ability of potential suppliers to deliver the LDA’s requirements b. More specific criteria are needed to evaluate offers from suppliers invited to submit quotes/tenders. Both sets of evaluation criteria should measure whether the suppliers have the capacity to fulfil the contract and how well their proposed solutions meet the LDA’s specification. This means that the evaluation criteria should be developed alongside the specification. Both should be consistent with the aims and objectives of the LDA. Appendices 17 and 24 provide further advice on developing and applying suitable evaluation criteria. For procurements regulated by the EU Public Procurement Directives and Regulations, the following key overview points should be noted : • The legislation sets out detailed and prescriptive rules in respect of the criteria which a public body such as the LDA can take into account at both (a) the PQQ/qualification /selection and (b) the contract award stages of a tendering competition. • At the PQQ stage, the objective is to assess the competence of tenderers to perform a contract of the nature in hand. Tenders/proposals should neither be sought nor evaluated at this stage. • Instead, the PQQ evaluation criteria will cover certain matters (provided for in the legislation) relating to the position of tenderers in respect of : o Both discretionary and mandatory grounds for exclusion; o Economic and financial standing; and o Technical or professional ability. • The PQQ evaluation may include the setting of minimum standards/threshold requirements (e.g. minimum level of financial turnover) provided that these minimum levels are related to and proportionate to the subject-matter of the proposed contract and are specified in the OJEU contract notice. • At the contract award stage, there are two permitted bases on which a contract may be awarded : o Lowest price; and ©London Development Agency Page 15 of 37 19/08/2010
  16. 16. PROCUREMENT CODE FRAMEWORK o The most economically advantageous offer from the public body's point of view. • Where the latter basis is applied, the award criteria must be linked to the subject-matter of the proposed contract. • It is important not to mix the PQQ and the contract award criteria. • Recent case law has emphasised the importance of being transparent with bidders in respect of disclosure of the evaluation criteria (both at a main and, if applicable, sub- criteria level) and their relative weightings. • Further guidance should be sought from the LDA procurement and legal teams. ©London Development Agency Page 16 of 37 19/08/2010
  17. 17. PROCUREMENT CODE FRAMEWORK 3.3 Procurement Stage This section covers the procurement stage and describes the different ways in which the LDA procures goods, works and services. The value of the procurement and the perceived risk to the LDA should the project fail will help determine which procurement method to use. The key procurement activities for this phase include: i. confirming the composition of the evaluation panel ii. confirming with the procurement team the arrangements for storing the returned tender documentation securely until they are ready for review (this would be automatically managed if using the eTendering system) iii. confirming the details of at least one other member of staff who is independent from the project to be present at the opening (electronically if using the eTendering system) of the pre-qualification questionnaires (PQQs) and tenders iv. issuing the PQQ and evaluating responses v. summarising PQQ scores and sending them to the procurement team vi. notifying PQQ applicants about the result of the short-listing process vii. confirming the arrangements for dealing with questions and answers viii. dispatching the invitation to tender (ITT) to short-listed bidders ix. evaluating the ITT responses x. clarifying any tender issues xi. producing a table of scores, including strengths and weaknesses xii. confirming the start of the 10 calendar day standstill period for EU procurements xiii. arranging feedback and de-briefing sessions for the suppliers (if required) xiv. informing the procurement and legal teams about the decision to contract. xv. notifying the successful and unsuccessful suppliers xvi.publicising the award of the contract and results, via OJEU, the eTendering system, CompeteFor and LDA websites A more comprehensive list of tasks/outputs comprising for the whole procurement project lifecycle is set out in Appendix 2. It should be noted that prior to entering into any agreements with the preferred bidder, no commitment shall be made until an Investment Gateway C Investment Decision has been sought and approval to proceed received. A project can still be stopped for any number of reasons; these might include insufficient budget, lack of market interest or a change of scope. Should your project be stopped for any reason (including a lack of approval from Gateway C) after the LDA has received expressions of interest, you should use the ‘Discontinuation of tender’ letter in Appendix 22 to inform the interested suppliers. 3.3.1LDA procurement approaches and supplier sourcing CompeteFor Since September 2008 the LDA has introduced the use of CompeteFor to improve openness, transparency and efficiency of the sourcing process and therefore this should be used for all sub OJEU procurement where a Framework is not used. Any exemptions to this must be agreed by procurement and use an Exemption from Financial Thresholds (STA) where instructed. CompeteFor should be used for producing a shortlist of suppliers. For requirements of £20,001 and over, this will involve publishing an opportunity and using the web-based tools to ©London Development Agency Page 17 of 37 19/08/2010
  18. 18. PROCUREMENT CODE FRAMEWORK evaluate supplier responses. For order under £20,001 then suppliers invited to quote should be selected from the suppliers who are listed in the CompeteFor supplier directory. A summary of this overall process is shown in Diagram 3.2 below. Invitation to quote <£20,001 (minimum 1) Invitation to quote £20,001 - £70,000 (minimum 3) Invitation to tender £70,001 - OJEU (minimum 5) Diagram 3.2: Procurement routes - CompeteFor process and usage Approaches to procurement The LDA has five basic approaches to procurement: 1. LDA corporate purchasing arrangements 2. LDA Framework Agreements 3. LDA quotations 4. LDA tenders 5. EU tenders A bespoke approach may be needed if a project does not fall within these five approaches; the procurement team must approve all bespoke approaches. Each route uses a suitable LDA contract to confirm the business relationship and the responsibilities of each party. The LDA’s legal team decides which contract to use and should be consulted as soon as the project is approved. The choice of procurement route dictates: i. how opportunities to tender should be advertised ii. the minimum number of organisations invited to tender iii. the time advertisements must be left open to allow organisations to respond iv. the time suppliers should be given to respond to tenders ©London Development Agency Page 18 of 37 19/08/2010
  19. 19. PROCUREMENT CODE FRAMEWORK Suppliers will generally be identified after each quote/tender opportunity has been publicised on the LDA’s eTendering system, LDA website, or the Official Journal of the European Union (OJEU), or periodicals and newspapers. On some occasions the LDA will choose suppliers from its select list of framework suppliers (see Appendix 3); these suppliers will be identified by the Framework manager in conjunction with the relevant LDA project managers so that all framework members get reasonably regular opportunities to tender for LDA work. eTendering From April 2010 the LDA introduced an eTendering system to automate much of the quotation/tendering process. Sitting beyond CompeteFor and providing electronic workflow from shortlist to contract award; the system provides: i. Opportunity and automated OJEU notice posting ii. The ability to upload PQQ, ITT, ITPD and ITQ documentation iii. Free supplier registration / use iv. Procurement process/workflow management including Q&A v. An EU compliant secure tender documentation repository vi. Collaborative evaluation of procurement documentation vii. The issue of failure and award notices If you require further guidance and/or training on how to use the LDA’s eTendering system, please contact the procurement team. 3.3.2Corporate purchasing arrangements Purchases made using the LDA’s corporate purchasing arrangements (CPAs) have already been established using the principles in this code. Therefore purchases can be made directly from the supplier without following the quotation, tender or single tender action processes. This is because these purchases are call-off arrangements from existing contracts that have been established using the principles in this code. The LDA has a range of CPAs in place, mainly covering the delivery of facilities management services and stationery, such as: i. couriers ii. IT equipment iii. Cars (hire and pool vehicles) iv. mobile phones v. office supplies and stationery vi. reprographics (printing and specialised copying) vii. furniture and equipment Please contact facilities management for details on how to access and use these contracts. 3.3.3LDA Framework Agreements A framework agreement is a list of pre-selected suppliers whose ability to supply the LDA has already been tested in a tendering process. They are similar to corporate purchasing arrangements in that they provide a framework by which the LDA can order goods, services and/or works as the need arises. Some of the LDA frameworks can also be used by the GLA’s other functional bodies, just as we can use some of the frameworks operated and managed by a number of other public sector bodies (where appropriate). Appendix 3 contains a complete list of LDA Framework Agreements, for other frameworks, including Office of Government Commerce, please contact procurement. Frameworks can take up to a minimum of six months to create or renew as they are subject to EU tender rules and therefore may not always offer the best procurement route. In addition, ©London Development Agency Page 19 of 37 19/08/2010
  20. 20. PROCUREMENT CODE FRAMEWORK there is no guarantee that any particular framework supplier will receive an order during its membership. It should be noted that frameworks should not be used for any single tender action without good cause (see Section 2.6). Instead, they should be used to identify an appropriate list of suppliers. These can then be invited to quote/tender for goods or services, based on the framework’s terms and conditions of contract and the tendered rates in the various contracts. All requirements over £70,000 must be agreed with the Procurement team, Diagram 3.3 provides an overview of the Framework Process. Follow single Undertake a panel written quote mini competition process Y N Follow relevant Call- off supplies / Single written threshold Procurement N services or works Y quote? procurement route from chosen supplier agree? (ITQ, ITT or OJEU) Y Y Y Y N Contract value Contract value Framework Use suppliers Single Are terms precise / Contact Framework below lower N above OJEU N outside of N manager outside N framework N suitable enough to threshold? limit? Framework? select a supplier ? LDA? supplier? Y Y Inform Procurement Procurement Provide advice Diagram 3.3: LDA Framework Agreements Process 3.3.4LDA Quotation Process For procurements up to £20,000 you are required to obtain a single written quote and to ensure value for money, Diagram 3.4 (below) describes the single quotation process. Additional Y quote? N N Compare price with; Search on Request quotation industry rates, CompeteFor and Respond to supplier select a supplier from supplier with questions Receive quote published VfM verified? price breakdown catalogues, rates Y from similar suppliers Ensure quote If CompeteFor is not used to and notes are search for a supplier, the PM kept on the must ensure they are project file registered before proceeding Inform Contracts law Supplier raises Supplier provides team by completing / question(s) quotation sending instruction Pro Formas Request Contracts Procure works / L&G Issue L&G Prepare Raise PO Law team to issue service / goods contract contract contract Diagram 3.4: LDA Single Quotation Process Diagram 3.5 (overleaf) describes how to secure quotations for projects valued below £70,001 and above £20,000. This process typically takes a minimum of five weeks to complete. First, you should prepare a formal and affordable ‘statement of requirement’ (specification) and agree your evaluation criteria which must also be able to measure to what extent each bid can help the LDA fulfil its responsible procurement policy objectives. The statement of requirement will set out in full precisely what the LDA wants to procure and should include any constraints, such as no weekend working. The statement of requirement can be passed ©London Development Agency Page 20 of 37 19/08/2010
  21. 21. PROCUREMENT CODE FRAMEWORK to the procurement team for review/comment to help quality assure its content. If a suitable framework is available, then the suppliers will be chosen from that framework using a mini- competition of all relevant suppliers. Where frameworks are not used, CompeteFor should be used to produce a supplier shortlist. It is possible that not every supplier will respond, so it may be worthwhile inviting more suppliers to quote so that you receive at least three quotations. Ask suppliers who did not submit quotations for feedback and keep this on record to build your knowledge of the market place and of the different suppliers. An opportunity will need to be created within CompeteFor and the eTendering system. The short-listed suppliers should then be invited to submit quotations through the eTendering system. To do this, upload the invitation to quote template (see Appendix 4) and invite the shortlisted suppliers to respond. Any additional information required from the CompeteFor shortlisting should be requested and reviewed as required. If CompeteFor or a framework is not used, approval is required from Procurement prior to shortlisting through the application of the eTendering system and a pre-qualification questionnaire approach (see Appendix 5 for a copy of the modular PQQ). N Finalise ITQ pack ITQ pack Y ready? Contact suppliers and inform them of Inform successful / Request feedback opportunity and unsuccessful from suppliers option to register suppliers Y N Prepare Prepare ITQ pack Respond to supplier Advertise opportunity Contact View supplier long Upload invitation At least 3 Confidentiality shortlisting (Letter, N questions & circulate on CompeteFor suppliers not list and shortlist to quote to Receive quotes quotes Y agreement N questionnaire Specification & suppliers responses to all required? registered? shortlist suppliers bidders received? T&Cs) A Provide Contracts Y & Law team with Request Finance No formal or Allow at Allow service N to undertake due simultaneous least 5 up to Scorer(s) to dilligence opening is requirements suppliers 15 complete needed days confidentiality agreement L&G Provide Finance suitable terms & Indicative L&G Finalise Undertake Y conditions of draft? terms & conditions financial due contract diligence Supplier provides Supplier complete Supplier raises quotation with shortlisting question(s) additional requested questionnaire documentation Negotiate price with Price now Collate evidence Proceed with ITT bidder (s) and / or competition has below N remove requirements route been sought from the specification threshold? N Y Complete Apply for exemption from N Y exemption? financial thresholds form Y At least 3 Bidder agrees Quote Inform successful / quotes Y with standard Y exceeds N unsuccessful received? T&Cs? threshold ? bidder(s) Y Scorer(s) to Evaluate quotes N declare any and determine Able to Select alternative N Inform Contracts Law conflicts of interest preferred bidder proceed? bidder? team by completing / A sending instruction Pro Formas L&G Assess implications of the changes requested Raise PO when both Publish award of parties have signed Request Contracts L&G Prepare the contract on the contract (include Issue contract Law team to issue contract CompeteFor CompeteFor contract reference) Diagram 3.5: LDA Quotation Process Some suppliers – such as SMEs and third sector organisations – may not be able to access the eTendering system or handle emails and/or any attachments, so you should check before any quotation documents are made available. Quotations that meet your needs must be compared with the agreed list of evaluation criteria. It is important to be certain that the quotations received are not estimates as these are not binding in law. To avoid this problem, every quotation should be entitled ‘written quotation’ with the quotation clearly stated. If this wording is missing, write to confirm that what has been received is a formal quotation. Oral quotations should be avoided wherever possible; however, for small value goods, services or works (worth less than £20,000 for example,) ©London Development Agency Page 21 of 37 19/08/2010
  22. 22. PROCUREMENT CODE FRAMEWORK some suppliers may not want to supply written quotations. If there is no alternative to taking oral quotations, then you must document them in full. Although some projects will make it difficult to secure a fixed price quotation, the quotation should at least provide a fixed schedule of day or hourly rates, or a schedule of component costs. This should help you assess the expected cost of the project regarding the delivery of the specified quantities of each product. Both successful and unsuccessful suppliers should be given feedback on their quotations. This can be done in writing by setting out the strengths and weaknesses of their quotations. Unsuccessful tenderers often ask for further information. Rather than entering into a lengthy correspondence, it is often more convenient and appropriate to have a telephone conference call. A member of the procurement team should always be present during these calls and you should make a written record of each call and keep this on the project file. If you do have to enter into further communication then you should use the feedback letter set out in Appendix 13. If the preferred option comes in above £70,000, you should consider ending the quotation process and starting a tender or secure an exemption from the financial threshold. If you receive fewer than three quotations and believe that your preferred supplier will deliver value for money, you will need to provide evidence that competition has been sought to secure the approval from the Head of Procurement. If you do not receive any quotations, you should rethink your procurement options. 3.3.5LDA Tender Process This process typically takes up to eight weeks2 to complete. In common with the LDA’s process for obtaining quotations, you need to start the tender process by writing an affordable statement of requirements and agreeing your evaluation criteria (see Diagram 3.6 below) which must be able to measure the extent to which each bid can also help the LDA fulfil its responsible procurement policy objectives. Each evaluation criterion should be weighted in order of importance. It is important to make sure that the statement of requirements includes all the information requirements to be compared with the agreed criteria. Please see Appendix 17 for further guidance on evaluation criteria and Appendix 18 for a pricing evaluation model. Tenders take much longer than quotations and can be expensive for suppliers. Before inviting formal tenders, therefore, it is worth checking informally in the market place that the statement of requirements is attractive and affordable. The procurement team can help with this process. The statement of requirements is then combined with a contract from the legal team. These documents comprise the main tender documentation. Publicising the procurement project The next stage is to publicise the tender. When using frameworks you do not need to publicise these opportunities outside the list of relevant framework members. All other tenders must be advertised using CompeteFor, the eTendering system and larger or more unusual projects may also need to be advertised in local or national newspapers, the appropriate professional journals and the SME, BAME and third sector press to maximise the chances of finding suitable suppliers. A sample advertisement is set out in Appendix 14. When advertising, allow enough time for potential tenderers to register an interest. To do this they will need to complete the CompeteFor questionnaire to enable you to draw up a suitable short list of potential suppliers. 2 When using an LDA framework this time period is typically reduced by around 3 weeks. ©London Development Agency Page 22 of 37 19/08/2010

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