To make informed decisions on whether to spend time and money investing in tendering, and ultimately to win contracts, it is essential to gain an understanding of the tender process and the system by which the public sector procures its supplies and services. This guide provides a brief outline.
Public sector procurement and the tender process
The relevant EU public sector Directive is 2014/24/EU, with separate Directive 2014/23/EU for works contracts. Both Directives are published in the Official Journal of the European Union (OJEU) 28/03/2014. These EU Directives are implemented and regulated in England, Wales and Northern Ireland through The Public Contracts Regulations 2015 (SI 2015/102) and in Scotland through The Public Contracts (Scotland) Regulations 2015 (SSI 2015/446). As the UK public sector is accountable to us, the UK tax payers, these are the rules by which they must adhere when undertaking procurement of supplies and services, thereby providing the framework through which all public sector tendering is undertaken.
The EU Directives set out the relevant contract value thresholds that apply. If any public sector authority, e.g. Local Council, NHS Trust, Housing Association, Police Force, University etc wishes to undertake procurement above this threshold, then the EU procedures will apply:
In the main*, the thresholds FROM 1 JANUARY 2018 are:
- Supplies: £181,302 (EU221,000)
- Services: £181,302 (EU221,000)
- Works: £4,551,413 (EU5,548,000)
The legislation is primarily in place to ensure that a systematic process is applied to all public sector procurement, to avoid inconsistency, bias and corruption. All bidders should be treated equally, without discrimination and contracts should be awarded transparently. The regulations specifically forbid public sector authorities and their personnel from splitting up contracts to keep them below the above thresholds.
“Section 3.1 The purpose of the EU procurement rules, underpinned by the Treaty principles, is to open up the public procurement market and to ensure the free movement of supplies, services and works within the EU. In most cases they require competition. The EU rules reflect and reinforce the value for money (vfm)3 focus of the Government’s procurement policy. This requires that all public procurement must be based on vfm, defined as ‘the best mix of quality and effectiveness for the least outlay over the period of use of the goods or services bought’, which should be achieved through competition, unless there are compelling reasons to the contrary.” – CCS Guide to 2014 EU Public Procurement Directives (Oct 2016).
A systematic process for tendering
More recently, public sector organisations have undertaken pre-tender ‘market engagement events’ with the aim of engaging with suppliers to explore service options, discuss the complexities of their requirements and to get ideas on what goods and services are available from the market. The intention is that by engaging with suppliers at an early stage, it leads to a more refined procurement exercise that is more assured to be fit for purpose. Early engagement events are an excellent opportunity to speak to buyers directly and find out exactly what they are looking for from you, the supplier and what their criteria are for selecting the best bidder.
All public sector procurements above the EU thresholds must legally be publicised through the Official Journal of the EU (OJEU). This is the central contract notice board for all EU member states and as such, you can view live contract opportunities in these countries as well as across the UK. Below the EU thresholds, it is still required for contracts to be advertised on the government website Contracts Finder. The threshold for this requirement is £10,000 for central government authorities and £25,000 for the rest of the public sector, including NHS Trusts. Both of these noticeboards are combined into a comprehensive free tender listings service here: https://www.completetenders.com/open-tenders/
As the notification process operates across the whole of Europe, a standardised system has been developed that all countries must follow to ensure non-discrimination and transparency. Consequently, all OJEU tender notices follow the same format. As some procurement exercises can be much larger and more complex than others, the amount of information can differ greatly; however, there should always be the following key information to assist with your decision to bid.
What to look out for:
- Name and details of contracting authority
- Where to register and access the tender documents
- Scope and descriptions of the procurement exercise
- Place of performance (i.e. where the contract is)
- Estimated contract value
- Contract duration and dates
- Conditions for participation
- Procedure for tendering and the submission deadline
Tender information is presented in a standard format. However, there are in fact 22 different types of tender notice, ranging from contract notice and contract award, to design contest and works concession. The key terms are outlined as follows:
- PIN: Prior Information Notice. This is a pre-tender notification giving potential bidders a heads up that a procurement exercise is imminent. It provides an estimate of the requirements and can therefore be useful for businesses to add to their sales prospects list, along with getting a head-start on preparing any anticipated material.
- EOI: Expression of Interest. Usually the first stage of the call for competition. Bidders would typically express an interest to access the tender documents. Interest can then be declined if on reading the tender material you decide the opportunity is not appropriate.
- Contract Notice: This is the formal call for competition, providing all the standard information on the specific contract opportunity and the criteria for bidders to be selected to be invited to tender. This notice is used for Contracts, Framework Agreements and DPS. Details of the next steps are provided and where to freely access the tender documentation, usually with a web-link. This may be to a central procurement portal, the Buying Organisation’s own portal, or to a specific contact via email.
- Contract Award Notice: As per the EU regulations, contracts that have been awarded must also be publicised in OJEU. This is in the form of a Contracts Award Notice, providing details of the winning tenderer and must be sent within 30 days. This can be a vital piece of intelligence, providing opportunity to approach recent contract winners with a view to offering your services as sub-contractors. For smaller businesses in particular, this can be an excellent way to get to the first rung on the public sector supplier ladder and open a sales channel that is initially more in scope than competing in the tender exercise itself.
At any one time there may be over 20,000 notifications EU-wide, not including the lower value ones on Contracts Finder. It is therefore important for many companies to develop a system for tracking and reviewing these opportunities to ensure they are not missing out on essential means to grow their business. The importance of tender tracking is discussed in our blog ‘The benefits of tracking tender opportunities.’
Frameworks and DPSs:
Framework agreements and dynamic purchasing systems (DPS) are slightly different arrangements for awarding contracts, rather than being contracts between the buyer and supplier. Typically, suppliers go through a selection process in the same way as that of a direct contract tender process but if successful, will be appointed a place on the framework/DPS. As the small print always points out, this does not guarantee the supplier any volume of work but does limit the award of any specific contract to only those suppliers appointed. A Dynamic Purchasing System is a specific type of framework that remains open (dynamic) for bidders to apply to join throughout the length of the agreement. The application and selection process may sometimes operate in rounds, e.g. every year, or continuously (at any time).
Tender Selection Process
This is the process by which the public sector buyer selects the most appropriate suppliers to go through to the formal tender stage, based on their ability to perform the contract satisfactorily. At this stage, they are not choosing the best offer, only assessing capability. Suppliers are asked a series of selection questions usually via a Selection Questionnaire (SQ) or Pre-Qualifying Questionnaire (PQQ) where a set of minimum requirements must be achieved. Suppliers will be excluded if they fail to demonstrate that they meet the required criteria. Most of the responses during the selection stage are pass/fail, and as such, it is imperative that you tick all the right boxes and submit the required information (e.g. financial info, references) as leaving gaps will give the buyer no choice but to fail you, even before you get to the tender stage.
The rules for selection should be outlined to you in the contract notice and/or in the SQ/PQQ documents. Minimum requirements will be outlined, which responses are pass/fail, and which responses will be given a score. Buyers will evaluate the information you submit and confirm that the minimum requirements have been achieved. Any bidders that do not meet the minimum requirements have a right to feedback, with reasons as to why they were not selected. Obtaining feedback is a critical stage as this will ensure you can amend any sub-standard information and do not make the same mistake twice. All bidders that meet the minimum requirements are selected, effectively forming the shortlist of suppliers to be invited to tender.
Tender Stage Evaluation:
Each tender is different and contracting authorities will use different criteria for evaluating tenders based on the specific requirements of the contract. As such, questions for a construction tender for an NHS contract will be different to questions posed by a Housing Association; and those for construction tenders will be different again from cleaning tenders, recruitment tenders, transport tenders etc. Of course, each buyer/commissioning authority will have slightly different requirements and motivations, even when commissioning the same product or service requirement, so it is vital to approach each tender with a fresh response.
Although each tender is different, questions and evaluation will follow the same principles and will be based on HOW the supplier will perform the contract. Most tenders will include questions on quality assurance, service delivery, implementation, technical details, compliance, staff, resourcing, contingency planning, continuous improvement, innovation, cost effectiveness; and of course, pricing. Given the more recent objectives of public sector organisations, there are also likely to be additional questions on sustainability/environment, social value and supply chain management.
The criteria used to evaluate tenders and any weightings assigned must be disclosed to tenderers. Typically, questions are scored out of 5 or 10, with details on how each score is achieved. Tenders will also be weighted with a split between quality (i.e. the written question responses) and price e.g. Quality 60% Price 40%. All tenders are evaluated and scored according to the criteria and the winning bidder selected based on the best score.
Standstill & Award:
All tenderers must be informed of the outcome by the authority in the form of an award decision notice, typically in a ‘standstill’ letter. This notice provides suppliers with critical feedback, regardless of whether they were successful or unsuccessful. It should include the criteria used for the evaluation, reasons for the decision, relative advantages of the winning tender and the score. Conscientious businesses that want to win contracts must not only obtain and incorporate this feedback into their next bid, but action any criticisms and gaps within their business so that their next submission is even stronger.
Further help from UK Govt – https://www.gov.uk/tendering-for-public-sector-contracts
UE Procurement thresholds as at 1stJan 2018 – http://www.essex.gov.uk/Business-Partners/Supplying-Council/Documents/POLICY_Commercial_Policy_and_Procedures_Appendix_B.PDF
Further advice on the UK Govt Legal Process – https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/560261/Brief_Guide_to_the_2014_Directives_Oct_16.pdf