Guidance for officers and members
Steps in the Procurement Cycle
Each key step of the procurement cycle is outlined below:
(i) Identifying Needs
Needs may be recognised in a number of ways such as a demand
from Members, the identification of weaknesses through
Comprehensive Performance, Best Value reviews or inspections, the
end of an existing contract or the failure of a contract.
(ii) Developing the Business Case
The business case is essential for project success. It provides
justification for the procurement in terms of its alignment with
the objectives of the authority; it also provides the basis for
managing the delivery of the project on time, within budget and to
agreed quality standards.
The following questions are explored at each stage of business
case development:
strategic fit - how well does the proposed way
of meeting the requirement support the authority’s objectives and
current priorities? Does the scope need to change?
options - has a wide range been explored,
including innovation and/or collaboration with others? How do they
compare in terms of benefits, costs and risk?
achievability - can this project be achieved
with the authority’s current capability and capacity (such as other
projects with a high priority that must be delivered at the same
time)?
value for money - can this be obtained from
proposed sources of supply such as current suppliers? Does the
project need to be made attractive to a wider market?
affordability - is the budget available to
deliver what is required? If not, can the scope be reduced or
delivery extended over a longer period of time; or funding sought
from other sources?
A more detailed option appraisal will be undertaken during the
definition of the procurement approach. The National
Procurement Strategy for Local Government (NPS) describes the
options that English authorities should consider in the context of
Best Value Reviews and similar strategic reviews of services (the
“make or buy” decision).
• In-house
• Public sector consortium (e.g. Kent Buying Consortium)
• Tactical contracts (multiple contracts to deliver the required
outcome)
• Non-profit-distributing organisation
• Local authority company
• Joint venture company
• Partnering contract
• Framework agreement
• DBFO (PFI)
• Concession or franchise
• Closure or disposal of asset or cessation of service
• Mixture of the above
(iii) Defining the Procurement Approach
Market Sounding
This is an essential process and enables the Council to
communicate with suppliers throughout the
procurement process to create a dialogue (taking
care not to show favouritism or provide representatives with an
unfair advantage).
The Council may choose to consult the market via publication of
a Prior Information Notice in the Official Journal of the EU (OJEU)
for a particular project (see Advertising below) or during
a best value review or through Forums (or similar) for suppliers.
Market sounding is particularly important when developing the
option appraisal and the procurement approach but needs to be
engaged throughout the whole procurement cycle
(see below) for the following reasons:
a) it is unlikely that Officers will have the knowledge and
expertise to produce the optimum approach to procurement in
isolation;
b) Officers must also ensure that there will be interest from
the market in the approach they choose (such as supplier
willingness to accept the risks the authority wishes to transfer to
them through the contract);
c) if the Council is regarded by the market as a
poor client they are unlikely to
receive the number or quality of responses required to achieve best
value;
d) the Council will have opportunity to be proactive in
addressing any shortcomings and let the market know they have been
addressed through this
dialogue.
Procurement Approach
The procurement approach defines the type, size
and phasing of the procurement. Detailed
planning of the procurement timescales and resources necessary are
undertaken. In the light of information received from market
sounding (see above) the procurement approach defines:
• the optimum allocation of risk between the
supplier/s and the authority;
• the splitting of requirements across a number
of suppliers;
• the bundling of requirements with a reduced
number of suppliers e.g. through setting up framework
agreements;
• incentives that may improve performance to
the authority’s advantage;
• payment periods;
• the optimum length of contract;
The draft contract and specification and draft OJEU Notice are
also prepared by the Client and Procurement Department during
this
period.
Compliance with Procurement Law
Compliance with legal obligations is essential and
advice should be taken from the Procurement
Unit. If the contract is covered by the procurement
regulations, authorities have a choice of three
procedures:
• open
• restricted
• negotiated
The restricted procedure is recommended for
general use. Use of the negotiated procedure (with
or without advertising) must always be justified under the
procurement regulations and is open to challenge.
All procurements should aim to achieve best value
for money for the authority. One of the
keys to achieving this is through competition. On larger or more
complex procurements advertising, followed by an initial assessment
to identify a shortlist, and tendering are the recommended
competitive tools.
Managing Change.
If the project involves transferring staff to the supplier, then
the authority will need to plan in advance how it will
manage the change, in addition to
complying with its legal obligations on TUPE, pensions, new
starters and other workforce matters. There is statutory obligation
to consult staff who might transfer. However, staff in the contract
management team and other services will be affected by the change
as well as those transferring. HR professionals
will need to be involved from the beginning of the project if there
is a likelihood of a staff transfer.
Supplier Selection & Tendering
Advertising
Advertising provides an important link between the authority and
suppliers. Contract notices should aim to attract
an adequate number of suitable suppliers and therefore they should
be carefully worded and the publications used should be project
specific. The Procurement Unit will always assist in drafting
contract advertisements. For contracts covered by the procurement
regulations, there are clearly defined rules on advertising and the
number of suppliers to be invited to tender. In most circumstances
prior information notices (PIN) should be posted
annually to notify the market of future potential requirements (on
scheme approval for works projects) and a contract
notice placed as each project arises. The cycle is
completed with a contract award
notice. These should all be placed in the Official
Journal of the European Union (OJEU).
The procurement regulations also contain rules
on the form and content of notices (which can and should be
submitted electronically where possible).
Selecting Suppliers
Where a large number of replies are expected an early sifting
(pre-qualification or supplier
assessment) exercise, based on information requested in
the advertisement, will help to provide a manageable number to
invite to tender. The criteria used at this stage normally concern
financial risk and technical capability of the supplier. Criteria
should be carefully chosen to avoid unnecessary ruling out at this
stage of suppliers who might be suitable to provide the
requirements. For contracts being awarded under the procurement
regulations (open, restricted and negotiated procedures) there are
rules on the information that can be sought to assess the financial
risk capacity and capability of suppliers and on the minimum number
to be invited to tender or negotiate.
Inviting Tenders
Once suppliers have been identified as suitable for further
consideration, they may be invited to tender. Invitation to tender
(ITT) documentation typically comprises four main parts:-
• ITT itself, including tendering instructions;
• specification (drafted by client or project owner);
• contract;
• pricing schedule;
All of the above, with the exception of the Specification, will
be prepared by the Procurement Department.
Tendering Instructions: This section provides
advice on the timescales and administration of the procurement
process and conditions for tendering.
Developing the Specification
The specification provides potential suppliers with a statement
of the authority’s requirements and will form an important part of
any contract with the supplier. It will also provide the
information on which suppliers will base their pricing and resource
structure and therefore must be comprehensive and clear. The
importance of getting the specification
right should not be underestimated.