Successful Tendering Procedures for Public Sector Contracts:
The contracting authority planning the public procurement prepares the call for tender and sends the invitation (through appropriate publication services) to candidates to recognise relevant documentation and to issue their tender. In short, it provides notification of tenders to the suppliers.
The tendering or bidding phase:
Covers the preparing of an offer by a tenderer and its submission to the contracting authority. In short, the response to the contract notification. This will normally only take place after strategic thinking and planning, it is the result of a marketing approach to the public sector.
Contract Awarding phase:
This phase begins with the opening of the tenders. After checking the contents of tenders, the winning tender is selected.
Contract Execution phase.
After the contract is awarded, the contract shall be executed by both parties the contracting body and the successful bidder.
Which procedure has to be followed by the contracting authorities before the contract is awarded?
The contracting authorities must choose between three different procedures for the awarding of contracts. These procedures are a statuary legal requirement of all public sector agencies and are laid down by the Eurpoean Commission and incorporated into English Law.
All interested suppliers, contractors or service providers may tender. Anyone interested in tendering who submits a compliant tender to the contracting authority within the appropriate time limit, in response to its invitation to tender, must be considered for the contract.
Unlimited amount of offers, therefore unlimited competition. Relatively quick.
Risk of huge pile of paper, all to be examine by the contracting authority.
Only those suppliers, contractors or service providers invited to participate by the contracting authority may submit a tender.
The tender process has two distinct stages.
After a call for expression of interest or invitatyion to tender has been made in the Official Journal, applicants must submit their requests to tender within a specified period. The contracting authorities then considers these expression of interest and excludes non-compliant tenders, these include all tenderers who are unable to fulfil the technical specifications or who fail to meet the eligible criteria.
The shortlisted candidates must then submit their tenders before a second deadline.
Preliminary selection of candidates based on qualitative criteria. By reducing the number of candidates there is less paperwork to examine.
Longer and sometimes more complicated procedure.
Higher risk of complaints and court action.
Direct discussions and negotiations take place between the contracting authority and one or more suppliers, contractors or service providers of its choice. The negotiated procedure mostly applies to the utility sector
Hardly any procedural rules. Possibility to choose candidates without pre-selection procedure.
Can only be used in exceptional circumstances. As there is no objective pre-selection, there is a higher integrity-risk.
The contracting authorities can choose which procedure they will use. All the Directives encourage the use of the open or restricted procedure, specifying situations where the negotiated procedure is permitted.
Sources of Information
Where and what kind of information is available about Public tenders?
One of the key elements of the public procurement regime is that all contracts caught must be advertised in the Official Journal. All public contracts are published in the "Supplement to the Official Journal" (S series) and available on the internet: if you have currently have access to the internet you can click this link to see examples OJEC Journal
Public Sector Contract Notices:
The four most important notices are described below:
Periodic indicative notice (PIN): most contracting authorities are required to publish a PIN setting out details of future contracts. In the public sector a PIN is simply a method of providing advance warning to tenderers of future contracts.
Notice on the existence of a qualification list:
this notice only applies to contracts regulated under the Utilities Directive. Utilities using a pre-qualification system must publicise the system annually where the system is to run for more than three years, or once if it is for a shorter period
this is the most important of the procurement notices, advertising individual contracts to be awarded by contracting authorities. A pre-information notice is an early indication of a tender to be published at a later date.
Contract award notices:
once a contract has been awarded the contracting authority must publish the result in the Official journal. The notice must contains details of how and to whom the contract was awarded including the date of the award, the award criteria applied, the number of tenders and the final contract price.
Request for proposals:
Outlines a general framework and invites you to make proposals for the type of product or service which you could offer. It is typically used to encourage project participation within the framework of a specific EU-Programme. Usually the co-financing is to a maximum of 50%, and the product or service developed remains the property of the company to whom the contract is awarded.
Calls for expressions of interest:
Ask you to express your interest in supplying a certain type of product or service. For specific contracts the EU will then contact all companies which have previously expressed their interest.
Invitations to tender:
Ask you to submit a bid for a specific product or service. They are typically used for concrete products and services sought, e.g. printing, cleaning, studies, computer supplies. The product or service is paid for 100% and becomes the property of the European Union.
How can enterprises be sure not to be discriminated against during the procurement process: The Selection and Qualification Criteria?
To prevent the contracting authorities eliminating suppliers, contractors or service providers on grounds that are discriminatory the Directives list two major categories of qualification requirements: legal; economic and technical.
|| is bankrupt
||is subject of proceedings for a declaration of bankruptcy
||has been convicted for an offence concerning his professional conduct
||has been guilty of grave professional misconduct
||has not fulfilled obligations relating to social security contributions
||has not fulfilled obligations relating to the payment of taxes
The definition of a contractor wishing to submit a tender for the award of a public contract comprises any legal or natural person involved in supplies, construction and services activities. It also includes private consortia, as well as private consortia, as well as joint ventures or groupings.
Contracting authorities may impose a requirement as to the form and the legal status of the contractor that wins the award.
In principle there are automatic grounds for exclusion when a contractor, supplier or service provider
Financial and economic standing:
Evidence of financial and economic standing may be provided by means of:
Technical capacity: The technical knowledge and ability of a contractor:
|| appropriate statements from bankers
|| the presentation of the enterprises balance sheets, or extracts from the balance sheets
||a statement of the enterprises annual turnover
In construction projects, the references which the contractor may be required to produce must be specified in the notice or invitation to tender.
They include for example:
The technical capacity of the a supplier:
||the contractor's educational and professional qualifications, or those of the staff
||a list of the works carried out over the past 5 years, accompanied by certificates of
||a statement of the tools, plant and technical equipment
||the average annual manpower
In supplies contracts, the references which may be requested must be mentioned in the invitation to tender, and are the following:
a list of principal deliveries effected in the past three years, with the sums, dates and recipients,
Public and / or private involvement:
Facilitating SME's access to public procurement:
||a description of the undertaking's technical facilities
||samples, descriptions or photographs of the products to be supplied
||certificates drawn up by official quality-control institutes or agencies
Small and medium-sized enterprises are a unique source of innovation and competition in the internal market and account for 99.8% of the total number of EU enterprises.
The European Commission has always paid particular attention to them. By facilitating their access to procurement opportunities, EU procurement policy allows those firms to strengthen their competitiveness and enables them to contribute more towards growth, employment and competitiveness in the European economy.
Commission action has mainly been focused on creating a level playing field where bids from firms, whatever their size or origin, have similar chances of success. Since the early 1990s, measures have been focused specifically
on SME's' needs in terms of simplification, information, services support, and promoting cooperation between SME's on public contracts.
Improvement of the SME access with the New Legislative Package
Although there is some evidence that the current directives have a positive impact on public procurement markets and on SME participation, there are still some concerns that those markets are not yet sufficiently open and competitive. In order to respond to those challenges, the European Commission put forward proposals in May 2000
for a new legislative package that aimed to make the existing texts clearer and simpler and to adapt them to modern administrative needs and to the new economy.
This package was approved in early 2004.
It is meant to further increase procurement opportunities and transparency, reduce red tape, bring transaction costs down, reduce entry barriers to the market and finally to ensure that contracting authorities and bidders can save time and money by using new technology to manage the tendering process.
Barriers to SME's and the reasons for not participating to tender procedures
Recent studies have shown major obstacles for SME's on the public procurement market.
In the Sixth Report (2000) of the European Observatory for SME's, a chapter was included on this subject.
SME's are subject to a number of constraints on their competitiveness in public procurement markets. Many of the constraints result from the relative effects of fixed costs on SME's to conduct public procurement relative to the effects of fixed costs on large businesses.
Contract Procedure Costs to SME's
There are two types of cost that SME's, and firms in general, incur. variable costs
are costs that change with production of a good or service.
For example, most firms hire labour to deliver specific outputs. Labour is in this context a variable cost.
A fixed cost,
on the other hand, is one that a firm must incur in order to maintain its existence
Fixed costs must be paid in order for the firm to stay in operation, even if the firm produces nothing. Fixed costs and variable costs comprise the total costs of the firm.
Standard Industrial Terms & Definitions
Fixed and Variable costs are standard definitions in the industrial organization literature. The effect of fixed costs on SME's may be a relatively greater burden on SME's than on large firms. Fixed costs may comprise a larger proportion of the total costs incurred by SME's. The fixed costs of large firms, on the other hand, tend to be relatively lower and less of a burden
on the large firm. In sum, the costs of just "getting in the game" tend to be much greater, in relative terms, for SME's than for large firms
The significant constraints are the following:
Lack of information allowing suppliers to bid for contracts. Good and easily available information is vital in exploiting procurement opportunities.
Today, over 135.000 procurement notices are published each year in the OJEC and it is no easy task for suppliers to identify out of this mass, the specific calls for tender in which they have an interest.
Information is costly
In addition, SME's face considerable barriers to entry because of the costs of obtaining information on goods, works and services being sought by governments. Information costs may be sufficiently onerous so as to preclude SME involvement in public procurement.
Difficulty of Acquiring Information
The difficulty of acquiring information is more significant in the international context. Large firms, especially multinationals, have easier access to information about invitations to tender in foreign countries than do SME's.
There is no single way of finding out about subcontracting opportunities. Public-sector organisations may give you
information about their main contractors or you might identify and contact a supplier who has won a major contract, for example through the OJEU. Make contact with the Euro Info Centre in your region if you want to obtain this information.
Government procedures and practices that favour large businesses
Governments may bundle quantities sought in procurements so that they may lower transaction costs associated with procurement by dealing with fewer contracts and contractors and take advantage of quantity-discounting strategies.
Bundling often makes it difficult for SME's to compete for contract awards. There may be substantial costs for SME's in registering and qualifying as a government supplier. Some registration and qualification conditions may be onerous and lead to exclusion of SME's from various lists maintained by procuring entities.
The regulatory burden associated with the public procurement process and with contract performance may be formidable for SME's. Some regulatory aspects of procurement, much of which is not related directly to selection of the contractor or contract performance, may constitute a significant barrier to entry for SME's.
Fees associated with procurement documentation may be onerous for SME's.
The costs of inspections and contract administration may be relatively more burdensome for SME's. It is often very difficult for SME's to seek legal recourse against the government, and dispute resolution or litigation may entail transaction costs that are unduly burdensome to SME's that lack in-house counsel who are paid fixed salaries. Competition law and sometimes the law on small business programmes themselves may make twinning or joint venturing costly or risky. In some cases, governments may take action to alleviate regulatory burdens on SME's.
Costs of handling public procurement.
The point here is that, in the absence of government intervention targeted specifically to deregulate the procurement process so as to reduce costs and barriers to entry in public procurement, procurement procedures and practices may deter SME's from participating in public procurement.
SME's face high transaction costs in handling public procurement. These are largely fixed costs that do not change much with the value of the contracts. For example, the cost of pre-qualification, qualification and the costs associated with registering as a government supplier do pose greater burdens on SME's than on large firms
Which are the result of restricted availability of capital through formal financial channels. To these are the added extra costs of financing the goods and services supplied until the government pays its dues (governments in general are extremely slow payers).
Too high administrative burdens and unclear jargon used.
The tender documentation provided by the contracting authorities can be either so detailed it provides little opportunity for creative solutions or it can provide too little detail for firms to respond adequately, especially in terms of fixed-price offers.
The Tender documentation
The documentation is also sometimes based on defining a solution where a description of the outcome required would allow some flexibility in the solutions offered.
The Nature and Scope of a Project
Enterprises express their concerns about the difficulty of identifying the nature and scope of a project through the specification document. If a specification document is unclear, it can be difficult to ascertain the size and, therefore, to approximate budget for a project. This makes quoting an appropriate pricing schedule difficult.
Tender Format Response
The format for responses is not consistent. Companies have to provide the same information in different formats each time they tender. Information that is frequently duplicated includes: financials, insurance requirements, company profile and methodology.
Much of this information has been provided earlier.
Tender Document Preparation & Presentation
It is very important that the SME tender documents is professionally prepared and presented, that all related documents that have been requested, have been included, under appropriate headings, that the financila statements, company policy statements, company staff details and all requested regualatory documents are included.
It is equally vitally important that all tender documents be delivered on time - preferrably - before the final date specified in the tender invitation document.
The EC Directives apply to public sector procurements above certain monetary thresholds (for central government, these thresholds are approximately £100,000 for goods and services and £4,000,000 for works). Further details can be found under the Legal and Policy Framework section on the OGC Website.
The Open Procedure is a one-stage procedure where the public sector advertises its requirement asking for tenders to be returned by a given date. This procedure is used a great deal by local authorities.
The Negotiated Procedure is only available in very limited circumstances and like the Restricted Procedure it has two stages. However the second stage allows departments to enter into substantive negotiation with tenders.
The Restricted Procedure is a two stage procedure which involves separate selection and award stages. For further details please see the step by step guide entitled Restricted Procedure.
The Negotiated Procedure is only available in very limited circumstances and like the Restricted Procedure it has two stages. However the second stage allows departments to enter into substantive negotiation with tenders.
Costs associated with bid preparation and proposal costs.
These costs are a result of shortage of skilled labor that has the experience dealing with bid preparation. It is also
because public procurement often involves greater bid and proposal costs than those found in commercial contracting.
Unclear Specification Document
If a specification document is unclear, it can be difficult to ascertain the size and, therefore, to approximate budget for a project. This makes quoting an appropriate pricing schedule difficult. The format for responses is not consistent.
Companies have to provide the same information in different formats each time they tender. Information that is frequently duplicated includes: financials, insurance requirements, company profile and methodology. Much of this information has been provided earlier.
Introduction: - Tendering Training Programme for UK Public Sector Contracts
One of OGC’s (Office for Government Commerce) main strategies is to achieve effective competition for government business by simplifying access to the government market place. The aims of SBS and OGC overlap in this area. We both let the small business community know where to find government opportunities, and make sure that small businesses receive equal treatment when competing for contracts.
(Ref. Tendering for Government Contracts – booklet; - SBS publications, (2000/2002) - upd in 2004)
EU & UK Government Research
Government Research Reports has shown that many government departments throughout the UK have and are experiencing difficulties with the quality of work carried out by contractors, which has often led to a flood of complaints with resulting extra cost and bad publicity.
Whilst all government departments are being encouraged by central government to use local SMEs, by inviting them to tender for contracts and thereby increasing the supply base, in the past this practice may have been restricted to only those contractors who can demonstrate that they are committed to providing the highest possible quality of produxt or service, good customer care practices and best value for money - in relation to all contracts that may be awarded
SME Procurement Policy
This training programme umderpins the procurement policy inititatives of public sector agencies who have responded poisitively to government SME procurement directives,
it also alows SME's to demonstrate their commitment to the inclusion and participation phylosophy by tendering for contracts.
Tendering for Contracts Training: - Programme Objectives
Our first objective
Are to prepare the potential contract supplier to be able to submit an acceptable tender document, the training programme has been endorced by (SFEDI)
as fit for the purpose.
Our second objective
aim to eliminate the possibility of wasted resources and extra costs to the contract provider in the tendering and procurement process by ensuring
SME's are able to demonstrate;
Our third objective
||Commitment to the delivery of quality based products and services.
||Competent to perform, manage and deliver the required products and services
||SME's are provided with the required and appropraite level of support to succeed
are to assist the contracting activities of small firms by providing a quality based Tendering for Contracts Training programme that will enable the small to medium enterprise or ethnic minority contractor to be fully competent in their efforts to tender for public sector contracts.
Our fourth objective
is to provide a well structured easy to learn training programme that empowers SME's by improving their ability to contribute to local communities.
Summary: Important Segments of your Procurement and Tendering Activity
What is most important in your proposal? -
It depends on the case, in a normal business plan this is usually the cash flow analysis and specific implementation details. In a contract project the cash flow element is more or less guaranteed - it is the project management, quality and work flow elements that are most important
You need to know your market, customer needs, where they are, how to reach them, etc. Who does what and when - this should not stop here you need to review your progress against the plan at periodic intervals and amend the plan to suit any changes that might occur.
You need to develop an Action Plan and Schedule, emphasis should be made on setting review periods for each of your activities or tasks to help ensure you are on course to achieve your Contract Objectives
Occurs when you focus on a problem only when and where it manifests itself, rather than investing the time and resources to install a long-term solution, which would ultimately prevent the crisis from occurring in the first place.
Implementing Quality Management Systems
But if you purchase the computer in the first place and invest the time to learn how to use accounting software, entering sales activity once not only produces your invoices and statements automatically, it simultaneously creates the revenue portion of your accounting.
What will the SME Learn?
The SME will learn:-
- A summary of Competitiveness Audits (2)
- Implementing Quality Systems
-Marketing Products & Services Strategies (4)
- The Management of Projects.
-Tendering Research, Preparation and Submission.
||Learn how to respond to tender notices
||Learn how ro be aware of tenders available from the public sector
||Learn about Procurement strategies and solutions
||Learn how to Research, Prepare and Submit Contracts Documents
||Learn how to build relationship with potential providers
||Learn how to conduct tendering research for documents
||Learn how to prepare and present tender documents
||Learn how to implement quality management systems
||Learn how and where you fit into the supply chain
||Learn how to manage projects effectively & profitably
||Learn how to market products & services for contracts
||Learn today how to win more business tomorrow