Tender Guidance
Government Payment Terms
The Government’s payment terms for dealing with suppliers.
Contents
Introduction 1
Tendering Thresholds 2
Notice Types 2
Different Tendering Procedures 3
The Need for a Diversity of Suppliers 3
Pricing 4
Choosing to Bid 4
Structure of Tender Documents 5
Preparation of Tender Documents 6
Asking Questions 6
Useful Points 6
Preparing Information on your Company and its Services 7
Subcontracting 8
Requesting Copies of Successful Tenders Under the Freedom of Information Act 8
Complaints’ Procedures 9
Conclusion 9
Additional Guidance and Policy Templates 9
Credits and Copyright Notice 10
Introduction
Successfully locating, completing and winning tenders is a vital aspect of being a public sector supplier. For companies that wish to compete only for very small contracts understanding the tender process may not be necessary, but for those that want to secure public sector work as a significant percentage of their company’s business it is absolutely imperative. But too often many organisations seeking to become government suppliers do not effectively acquaint themselves with the tendering process, and so even if on one occasion they win a tender, they are unable to repeat the process on another occasion. And yet, the tendering process is actually quite logical; it is a structured sale governed by the legal requirements of public sector buyers. With the right planning and the right effort any company that has a quality service to offer can win a tender. It may be necessary to educate oneself in the needs of the public sector marketplace – and the first attempt may not succeed – but it can be done.
In this short document I will provide information on the nature of tenders themselves, the structure of tender documents, the requirements made of companies presenting a bid, guidance on how to meet those requirements, common failings in dealing with the tender process, useful tips to gain an added advantage, and how to procurecopies of successful, fully completed tenders in order to see how other companies have won business in the past. I have drawn together information from many different government sources to provide a concise outline of the tender process, without the need for developing an elaborate understanding of European legislation and its effect on the implementation of procurement in the United Kingdom. More detailed information can be found on the procurement portal of the European Union, which is located at the following web address: http://simap.europa.eu/.
Tendering Thresholds
Contracts must be put out to European tender (that is, advertised in Tenders Electronic Daily, the official contracts’ journal of the European Union) if they meet or exceed the following levels:
For Goods and Services: £156,442
For Works’ Contracts: £3,927,260
If contracts are below these thresholds then public bodies can advertise them locally or nationally, according to their requirements. A large organisation will have an internal threshold of £50,000-£75,000, for which contracts must be dealt with centrally by the Corporate Procurement Division of the respective body; orders of a contract value below that level may be dealt with via a less formal tendering process on an individual departmental basis (with fewer stipulations from the suppliers) or by a Request For Quote (RFQ) – the nature of which process is self-explanatory. Smaller companies generally target this market, only occasionally making official tender bids.
Notice Types
- Prior Information Notice
This will indicate that a tender is due to be advertised during the next 12 months. It is not an official contract, but an expression of intention. It may be used by buyers to ‘test the market’, to find out if there is likely to be significant interest in the contract due to be advertised, and to locate potential suppliers.
- Contract Notice
The specific tender advertisement. It will not contain all the tender specifications; these will be available in the ITT documents (Invitation To Tender). The means by which the ITT documents can be obtained will be detailed in the advertisement. Suppliers will need to contact the buyer or the buying department by telephone, fax, or e-mail, or by visiting a web page, registering an interest (that is, stating officially that the company would like to bid for the tender) and then downloading the documents electronically. The Contract Notice will offer a general overview of the tender, by which commercial organisations can make a decision on whether or not to pursue the business.
- Contract Award
The Contract Award Notice will be published no later than 48 days after the tender has been awarded. It should state which company has won the tender, how many companies competed for the contract, and both the minimum and maximum prices put forward by the different companies bidding for the tender. It should be noted that it is optional on the part of the awarding body to include all of this information, though it will be available under the Freedom of Information Act (unless governed by the Official Secrets Act, in the case of some MOD contracts).
Different Tendering Procedures
- Open Procedure
A tender that is open to competition from any organisation. Any organisation can register an interest and submit tender documents under the Open Procedure.
- Restricted Procedure
Companies must first qualify in order to be invited to tender. After an expression of interest has been made, the competing companies are supplied with a Pre-Qualification Questionnaire, which is then assessed to determine which ones should progress to the next stage. Those that satisfactorily meet the criteria of the purchasing body are then issued with the Invitation To Tender documents. The ITT documents must then be completed as per the standard tendering process.
- Negotiated Procedure
A procedure used only in exceptional cases, in which the buyer invites pre-qualified suppliers to negotiate the terms of the contract. Once a contract specification has been agreed on, the suppliers are then judged by the criteria of the specification. It is normally used only in the case of complex tenders, when the specific requirements cannot be defined without supplier input, or when there are only a very limited number of companies in the marketplace that can meet the needs of the tender.
- Competitive Dialogue
Competitive Dialogue is a new procedure introduced on 31 January 2006 as an alternative to the Open and Restricted Procedures. It is applicable when both of these are considered unsuitable for producing the best results. It offers a means by which the buyer and the prospective suppliers can discuss all aspects of the contract prior to the contract award, which is what distinguishes it from the Open and Negotiated Procedures. It is expected to be reserved for extremely complex tenders, when the purchasing agent cannot clearly define their organisation’s requirements, or cannot be certain of other important aspects of the tender – eg financial or legal – without further information and guidance from the potential suppliers. The name of the procedure should be borne in mind – though the discussions are initiated to expand the knowledge of the buyer to increase his or her capacity to define the nature of the contract, it is still a Competitive Dialogue.
The Need for a Diversity of Suppliers
The public sector is always looking to increase the diversity of suppliers in the marketplace. Diversity equals better value for money and fewer aborted tendering exercises. It guarantees competition and minimises the necessity of relying on a small number of suppliers for a large number of contracts. For that reason public bodies try to encourage companies of all sizes to bid for work that can be won by them; there is no prejudice against small enterprises in the public sector marketplace. On the contrary, very significant changes have been made to government purchasing over the past 6 years to increase the number of SMEs supplying to public bodies – for example, the abolition of the Compulsory Competitive Tendering policy, the introduction of Best Value, the establishment of the Small Business Concordat, legal alterations to enable small businesses to bid for higher level contracts, the passing of the Freedom of Information Act, and many others have all contributed to helping create a level playing field on which all competitors have more or less the same chance of being successful.
Pricing
Commodities are usually the only things for which – all things being equal – the lowest price is regarded as enough to win a contract. With the abolition of the Compulsory Competitive Tendering policy and the introduction of Best Value, whole life costs have to be taken into account when any purchasing decision is made. The cost of a product, any servicing or maintenance required by the product over the lifetime of its use, and the disposal of the product make up its true price. Of course, suppliers with an expert knowledge of their own products may have an in-depth knowledge of the whole life costs of what they have to sell, and public sector buyers may not, so it is always going to be incumbent on the supplier to effectively demonstrate the overall cost of those products during the presentation of tender documents. If the true cost of a product is proved over the lifetime usage of the product, it needs to be communicated explicitly and not simply accepted that the buyer will perceive the point without appropriate direction. For that reason the bidder needs to check the ITT documents carefully in order to assess the due weight given to cost as part of the tender process (cost may compose only 25% of the weighting score, service and other factors may make up the remaining 75%). The role of price in determining which company is to win a particular tender is usually clearly spelled out in the tender documents themselves; suppliers should therefore accommodate themselves to the stated requirements of the contract, and not try to impose their own personal views of what buyers ought to purchase while over-riding what they have unambiguously said they will purchase.
Choosing to Bid
In some cases an enormous range of contracts may be advertised over the course of a year in one particular category. Literally hundreds may be put out to tender. If a large volume of contracts are regularly advertised in a key area the supplier needs to exercise discrimination, and only bid for those contracts that might be winnable. Every successful company that works in the public sector has to decide what to bid for and what to ignore. Knowing the strengths and weaknesses of one’s company is obviously a decisive factor in making the decision to choose whether or not to pursue a tender. However, every company has to educate itself in the tendering process if it seeks to secure a significant percentage of its turnover from government bodies, and so there is little point waiting for the ‘perfect’ tender; it is better to follow through on those that offer a realistic chance of success and learn through practise. It’s not unknown for many SMEs to succeed in the tendering process on their first attempt.
Structure of Tender Documents
Tender documents are usually structured in the following way:
- Covering Letter
- Contents Page
- Some Background Information
- Instructions
- Technical Specifications
- Main Response Form
- Pricing
- Terms and Conditions
- Award Criteria
- Appendices
The Instructions will include the deadlines for the Expression of Interest, Submission of Documents, Presentation of Bid (if necessary), the Opening of the Documents, the Award Date, and the Communication with Suppliers (once the winner has been determined). Other information may include details of an appeal procedure – if potential suppliers wish to appeal against the final decision, having determined that the tendering process was either unfair or that they have been discriminated against. The Award Criteria should give a clear definition of the criteria by which the tender will be awarded; that is, specific weightings will be given to relevant issues (eg cost, after-sales care, delivery schedule, etc). It is normal procedure for the criteria to be given in percentages or points. The Appendices may request company information – Accounts, Health and Safety, Environmental, Equal Opportunities and other policies, as well as professional certificates and qualifications gained by the company.
The other items in the list should be self-explanatory.
Suppliers responding to the tender will thus have a precise structure in which to provide their response. But in addition to the above information bidders may need to include the following:
- An Alternative Proposal
- References
- Case Studies (where applicable)
- Biographies of Team Members
It may be necessary to ask the buyer if it is possible to present an alternative proposal. A secondary response to the contract will only arise if the supplier thinks there is a better solution for the tender than the one suggested by the purchasing authority. Should that be the case, it is important that the alternative proposal is physically separate from the main proposal, and is clearly demarcated from the official bid. If, after enquiry, a buyer will not accept an alternative proposal then of course one should not be proferred.
References and Case Studies are to be used as a means of convincing the buyer that the supplier has past experience that demonstrates their capability in fulfilling the contract put out to tender. References and Case Studies should therefore give examples of the same work for the same organisation, the same work for different organisations, the same work for private sector companies, or the same service provided for companies that may be different but have presented similar technical challenges. Considered in that light, it is possible for an outstanding reference to do nothing to further the cause of the bidder, while a less impressive one may produce a greater effect. Companies new to the public sector will naturally use private sector experience to validate their expertise. An intelligent use of a range of references can greatly enhance an organisation’s capacity to succeed in the tender process.
Preparation of Tender Documents
Tender documents should always be printed and never handwritten. According to the amount of paperwork entailed in the bid it may be requisite to bind the documents, in order to make them as attractively presentable as possible. The writing style should be precise and unambiguous, without
long-winded explanations that harm rather than benefit the tender bid. A straightforward use of English will always be superior to one that is convoluted and complex.
Asking Questions
One of the key errors committed by many potential suppliers is in failing to ask questions. If something is unclear in the ITT the supplier should contact the buyer for the tender and ask them to clarify the matter. It is best to ask questions in one go, without repeatedly contacting the individual involved – a process which necessitates critically reading through the documents and arriving at the appropriate questions after a due period of consideration. Suppliers need to be aware that any questions asked will be sent to other companies in the bidding process, and therefore should consider carefully what information they are requesting and what facets of their organisation they are making public to their rivals. Asking questions is part of the standard tender procedure.
Useful Points
Envelopes containing tender documents should be unmarked in order to maintain the impartiality of the tender process. They should not be decorated with company or product logos which identify the sender.
The covering letter for the tender should be written on company stationery.
All tenders must be typed rather than handwritten.
One should be careful in ensuring the right number of copies are sent; in some cases multiple copies are required for consideration by a variety of decision-makers.
Deadlines must be met and not exceeded. No matter how good the tender bid, it will be rejected if it does not reach its destination on time. On almost all occasions the deadline is the deadline. However, it is not unknown for buyers to extend the deadline if they consider such a change is beneficial to the tender process. Bidders will be automatically informed of the extension.
Contact personnel must be clearly delineated, with telephone, fax, e-mail and address details. If a team of individuals is managing the bid, one person should act as liaison with the buyer for the sake of simplified communication.
Tender documents need to be organised efficiently, so that the main body of the response and its supporting information are clearly separated and easy to access.
Suppliers should always seek feedback on their tender bids. Those that have been unsuccessful need to identify the reasons why they failed, and those that have won the tender need to be clear on the reasons for their success. It is sometimes easy to misconstrue the reasons for both success and failure. The direct input of the buyers themselves can hasten the learning curve of companies that desire to become proficient in the tendering process. Successful companies also need to set up a contract monitoring system once the tender has been completed and work is underway. Contract monitoring on the part of public sector buyers is conventional practise. The implementation of an internal quality management procedure – to ensure that jobs are done on time and in the most efficient and effective manner, or to deliver a complex project by means that preclude failure and guarantee the full attainment of the tender’s main objectives – will vastly increase the supplier’s chance of securing future business either with that organisation or another.
Preparing Information on your Company and its Services
Government organisations need to know that all suppliers are obeying the law and act within the constraints of current legislation. Essentially, they wish to be certain that the companies they are buying products and services from are good quality businesses that do not discriminate against their employees in any way and that seek to embrace the latest commercial and environmental practises. The main policies required cover the following areas:
Health and Safety
Equal Opportunities
Environmental Issues
Data Protection
Due to the wide-ranging nature of each of these categories I will not define the exact criteria they represent, but will merely point out that each company should have policy documents available that adequately express their corporate stance on these issues. If your company does not have such information ready to hand, we can provide official templates and guidances that will quickly enable businesses to comply with these individual requirements.
Information on your company will also need to be supplied. The main categories are:
Accounts
Product and Service Information (including Technical Specifications)
Biographies of Team Members
Copies of Certificates or Accreditations from Professional Organisations
Information on Partners and/or Subcontractors
References
Case Studies (when applicable)
Small companies may not have 3 years’ accounts available. If that is the case, it may be possible to supply 2 years’ accounts; if not 2 years’, then 1 years’. Business plans and financial projections for forthcoming years may be used if the strict criteria of 3 years’ accounts cannot be met. Companies will need to check with the buyer concerned, but in most cases where 3 years’ accounts are not absolutely necessary, additional information may be supplemented to meet the terms of the advertised contract. The vast majority of public sector organisations are happy to deal with SMEs so long as they can demonstrate the ability to fulfil the demands of the contracts which they are seeking to win. It is of course necessary to be able to supply the set products or services of any given contract over the course of time specified in the contract.
Subcontracting
There are a number of different ways in which subcontractors may locate work in the public sector, among which are: Contacting the winners of large-scale tenders through monitoring Contract Award procedures, and through marketing directly to successful suppliers for Government Framework Agreements.
A list of suppliers for current Government Frameworks can be found on OGCBuying.Solutions’ website at the following page;
http://online.ogcbuyingsolutions.gov.uk/suppliers/index.html
An index of suppliers’ listed according to contract type can be found here:
http://online.ogcbuyingsolutions.gov.uk/contracts/index.html
An additional index detailing Catalist Services’ suppliers according to business specialisation can also be found here:
http://online.ogcbuyingsolutions.gov.uk/index.html?slis_checked=1
Construction and construction-related organisations can register on the Constructionline website, which is the official UK register of pre-qualified suppliers for construction tenders and contracts:
http://www.constructionline.co.uk/static/html/static_page/Home.htm
Purchasing consortia and individual organisations frequently operate standing lists of suppliers which are used for identifying potential suppliers, and regularly advertise them requesting companies sign-up to be entered into a database of contacts. These are normally operated on a cyclic basis, but with companies offering their services over a 2-3 year time period. Standing lists may be promoted directly by specific government websites or advertised in the local or national press, as and when the agreements must be renewed.
Requesting Copies of Successful Tenders Under the Freedom of Information Act
Under the Freedom of Information Act 2000 it is now possible for suppliers to request copies of completed tenders from public sector organisations. We have only recently begun to add Freedom of Information Officers to all our databases and so where the relevant contact is not available in the Government Online Database, suppliers should locate the Freedom of Information Officer on the website of the organisation in which they are interested. In making a Freedom of Information request one should be as specific as possible – that is, one should define the exact tender that was advertised, its reference, and the date it was advertised (if possible). Confidential details may be withheld at the bequest of the original source of the information – examples of such data being precise costs for any given contract – but enough of the information should be accessible to make the request well worthwhile. It is an approach of great use for companies that are in the early stages of acquainting themselves with the tender process. An example of a successful tender can help identify strengths and weaknesses in one’s own tender bids, and can remove a significant amount of confusion as regards the exact approach for pursuing the tender process to its end.
Complaints’ Procedures
Tender advertisements may not always specify the existence of an active complaints’ procedure, however in all cases there will actually be a complaints’ procedure. If it is not described in the tender documents themselves (which should certainly be the case), information on it will be accessible via the purchasing officer for the contract in question.
Conclusion
There are a number of general points that may be put forward in conclusion. Suppliers need to systematise the tendering process: that means choosing the right contract, allocating effective resources to the contract, having company, product, policy and reference information prepared, asking questions after due consideration of the contract’s specifications, preparing and presenting the bid, post-result analysis, contract monitoring (if successful), and then utilising both the bid and the award as a means of increasing corporate knowledge in relation to the tender process, and then repeating it when the next suitable contract is advertised. Every company that offers a good quality product and service can succeed in the public sector marketplace, if it marshalls its resources effectively and communicates the advantages of doing business with it in a convincing and attractive manner.
Additional Guidance and Policy Templates
- ‘An Overview of Council Procurement’. Includes the procurement guide for Sefton Council.
- ‘Evaluating Tenders on Quality and Price’. Includes the document of the same name published by Birmingham City Council, as a guide for suppliers.
- ‘Policies -Environmental Policy, Health and Safety, Equal Opportunities, Data Protection’. Includes templates for creating company policies.
Credits and Copyright Notice
Copyright Government Online 2011.
Copyright Instructions: No part of this document may be reproduced in any format without express permission of the copyright holder. Standard copyright terms apply. Requests for additional copies should be sent using the contact details at the end of the document.
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