Procurement Journey · Web viewHave procurement been involved in the development of the business case to help cost options, enable flexibility, minimise risk and/or inform decisions

THIS ARCHIVED VERSION OF THE PROCUREMENT JOURNEY IS APPLICABLE

ONLY TO PROCUREMENTS WHICH COMMENCED ON APRIL 17 TH 2016 OR

EARLIER.

Procurement Journey

Route 3

Contents – Please click on the name of the chapte

THIS ARCHIVED VERSION OF THE PROCUREMENT JOURNEY IS APPLICABLE ONLY TO PROCUREMENTS WHICH COMMENCED ON APRIL 17 TH 2016 OR EARLIER.

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Introduction 77

Route 3 - Start 77

Route 3 - Develop Strategy 79

Route 3 - Develop Strategy - Stakeholder Identification 79

Route 3 - Develop Strategy - Profiling the Commodity 82

Route 3 - Develop Strategy - Profiling the Commodity - Contract Status & Spend Analysis 82

Route 3 - Develop Strategy - Profiling the Commodity - Sustainable Procurement 84

Route 3 - Develop Strategy - Profiling the Commodity - Commodity Characteristics 86

Route 3 - Develop Strategy - Profiling the Commodity - Supply Market Analysis 87

Route 3 - Develop Strategy - Profiling the Commodity - Shaping the Requirement 93

Route 3 - Develop Strategy - Initial Opportunity Assessment 94

Route 3 - Develop Strategy - Develop Commodity Strategy 95

Route 3 - Develop Strategy - Procurement Route 99

Route 3 - Develop Strategy - Procurement Route - Open 101

Route 3 - Develop Strategy - Procurement Route - Competitive with Negotiation 101

Route 3 - Develop Strategy - Procurement Route - Negotiated Proc Without Prior Publication 102

Route 3 - Develop Strategy - Procurement Route - Innovation Partnership 102

Route 3 - Develop Strategy - Commodity Strategy Executive Summary 102

Route 3 - Develop Documents 103

Route 3 - Develop Documents - Specification 104

Route 3 - Develop Documents - Selection, Award and Exclusion Criteria 109

Route 3 - Develop Documents - European Single Procurement Document ESPD (Scotland) 115

Route 3 - Develop Documents - Pre-Qualification Questionnaire (PQQ) 120

Route 3 - Develop Documents - Invitation to Tender (ITT) 121

Route 3 - Develop Documents - Contract Notice and Advertising 123

Route 3 - Supplier Selection 124

Route 3 - Supplier Selection - Publicising the Contract 124

Route 3 - Supplier Selection - Issuing Pre-Qualification Questionnaire (PQQ) 125

Route 3 - Supplier Selection - Assessing Responses 126

Route 3 - Supplier Selection - Limiting number of potential suppliers 126

Route 3 - Issue ITT 127

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Route 3 - Issue ITT - ITT Administration 127

Route 3 - Issue ITT - Open Suppliers' Meeting 128

Route 3 - Issue ITT - Questions from Suppliers 129

Route 3 - Open & Evaluate Tender 129

Route 3 - Open & Evaluate Tender - Receipt of Tenders 130

Route 3 - Open & Evaluate Tender - Opening of Tenders 131

Route 3 - Open & Evaluate Tender - Technical Evaluation 132

Route 3 - Open & Evaluate Tender - Price evaluation 133

Route 3 - Open & Evaluate Tender - Evaluation Tools 135

Route 3 - Post Tender Clarification 135

Route 3 - Post Tender Clarification - Tender Clarifications 136

Route 3 - Post Tender Clarification - Post Tender Negotiation 137

Route 3 - Contract Award - Remedies Directive 139

Route 3 - Contract Award - Notification of Contract Award Decision 140

Route 3 - Contract Award - Standstill 140

Route 3 - Contract Award - Debriefing 141

Route 3 - Contract Award - Challenges During Standstill 142

Route 3 - Contract Award - Award 143

Route 3 - Contract Award - Contract Award Notice 143

Route 3 - Contract Award - Points to Remember 144

Route 3 - Contract Implementation 145

Route 3 - Contract Implementation - Communication 146

Route 3 - Contract Implementation - Content Management 148

Route 3 - Contract Implementation - Buyer/End User Information Packs 148

Route 3 - Contract Implementation - Supplier/Buyer Events 149

Route 3 - Contract & Supplier Management - Planning & Governance 152

Route 3 - Contract & Supplier Management - Managing & Improving Performance 161

Route 3 - Contract & Supplier Management - Admin & Tools 168

Route 3 - Contract & Supplier Management - Exit Strategy 173

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ROUTE 3

IntroductionRoute 3 is designed for use by Procurement Officers. If this does not apply to you, please contact your Procurement Function or Centre of Expertise.

This Route of the Procurement Journey provides guidance for high value/high risk/strategic procurements as determined by the Decision Matrix.

The main objectives of the toolkit are:

To provide a step-by-step guide to conducting a strategic procurement exercise for high value/high risk requirements

To provide a set of guides and templates that can be used to collate and analyse the data required when conducting the procurement exercise

To standardise the public sector procurement process across organisations To highlight the minimum legal and policy obligations involved at each stage

of the process

In any procurement process, the key roles of budget holder and Procurement Officer should not be performed by the same individual. For more information please see the Scottish Procurement Policy Handbook.

Consideration must be given to Planning and Risk Management throughout the Journey and records should be kept for audit purposes. It should be noted that purchases of goods and services are routinely the subject of Freedom of Information requests.

Please be aware that where the term 'commodity' is used, this can equally refer to services.

Now you are ready to begin your Route 3 Procurement Journey.

Please ensure the guidance is used in conjunction with the internal governance, policies and procedures for your Organisation.

Route 3 - StartIn these unprecedented economic times, good procurement is obviously not just about buying well but it's about buying less or, indeed, not buying at all.

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Depending on the specifics of the procurement exercise, the types of question you might ask of your stakeholders prior to commencing the procurement could include the following (these should already have been answered in the decision matrix prior to commencing the journey):

Have alternatives to procuring being considered and discounted and do you have a budget?

Is there a robust documented business case supporting this procurement? Will this expenditure stand up to public scrutiny? Have procurement been involved in the development of the business case to

help cost options, enable flexibility, minimise risk and/or inform decisions regarding the route forwards?

Are you aware of opportunities to buy your specific requirement through existing collaborative contracts and do you know how to access them?

Consideration must also be given to planning and risk management throughout the Journey.

There are natural break points within the Procurement Journey that can be used as review points for sign off and approval to proceed to the next stage of the process.

Suggested review and sign off points are:

At project initiation After initial opportunity assessment For approval of strategy including budget For approval of Contract Notice, PQQ and/or ITT At contract award stage At implementation stage

Throughout the Journey you will see reference to these sign off points at the relevant sections. Any review and agreement to the project plan should be subject to your organisation's governance arrangements.

Route 2 Strategy Development is a much lighter version than the Route 3 Strategy Development. The Strategy Development stop is therefore displayed as a 'linked station' on the main route map. You can however supplement the Route 2 documentation with any guidance or documentation from Route 3.

You should use lessons learned from previous contracts/procurement exercises to inform your new strategy. As you progress through the Journey you should constantly re-inform your strategy with any new information.

Route 3 - Develop StrategyThis part of the Procurement Journey is to help you develop commodity and category strategies. The guidance to profile the commodity can equally be used to profile categories.

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A strategy is always required for Route 3 procurements. The strategy however should be proportionate to risk, value and strategic importance of the commodity to the Organisation. Consideration must also be given to Planning and Risk Management throughout the Journey.

The individual stops under Develop Strategy provide guidance to assist you in completing the Strategy Development Pack. To save templates in a version that you can edit yourself you should click the appropriate template hyperlink, right mouse click over the "Open File" link and select the option "Save Target As".

Strategy Development Pack

Route 3 - Develop Strategy - Stakeholder IdentificationTo ensure stakeholders requirements are met and maximum compliance is achieved, a cross-functional team, or User Intelligence Group (UIG), should be established. The UIG will assist you when developing the commodity strategy, assist with tender evaluation and the ongoing activities of contract/supplier management, monitoring, implementation, compliance and benefits tracking.

This group should have representation from key stakeholders within the participating organisation(s) and should include procurement and business/technical/customer representatives.

Depending on the nature of the procurement, this UIG could consist of only two members e.g. the Procurement Officer and the end user.

You should undertake appropriate research prior to the first meeting, for example:

Gain an understanding of the market for a commodity from desktop research, e.g. via the internet

Speak to supplier or industry representatives Meet with individual key stakeholders and end-users Review historical spend patterns if appropriate Gather information from other public sector contacts, such as Centres of

Expertise Read previous tenders or commodity strategies

This research will help you gain an initial understanding of the commodity, the organisation's requirements, market conditions and some of the risks, issues and barriers to success they may face. It will also help highlight any contracts which you may be able to access for your requirement without the cost, time and risk of developing your own contract.

Stakeholder Mapping

The benefits of establishing a UIG are:

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The ability to draw on the cross-functional expertise within the group Ensures stakeholder views are considered in the decision making process Clear communication channels can be established Presents 'one face' to suppliers Formalises the governance arrangements and identifies the decision makers Clarifies roles and responsibilities Facilitates the generation of ideas Facilitates buy-in and compliance Stakeholders should work together to understand and overcome any the

barriers to success, to embed best practice and to support the implementation of continuous improvement processes to safeguard the future of public service for future generations, and to bring together the ideas and insights of these groups to obtain a holistic view.

Stakeholders should work to: o Embed best practiceo Encourage and sponsor continuous improvemento Encourage innovationo Understand and remove any potential barriers to sucess

Where there are a large number of stakeholders, for example a collaborative contract, it may not be possible to have all stakeholders represented on the UIG. Stakeholder mapping is a useful tool to help identify who should be represented based upon their likely impact upon the success of the project. You must also ensure you understand your organisation's policy or requirements regarding engaging with end users/customers of the commodity or service and whether they should also be involved in the UIG.

Depending on the specifics of the procurement exercise, the Procurement Officer may ask stakeholders the following questions prior to the commencement of the procurement exercise (these questions should already have been answered at the Decision Matrix stage of the process):

Have alternatives to procuring been considered and discounted and do you have a budget?

Is there a robust documented business case supporting this procurement exercise?

Will this expenditure stand up to public scrutiny? Are you aware of opportunities to buy your specific requirement through

existing collaborative contracts and do you know how to access them?

Stakeholder Map & Degree of Engagement

Blank Stakeholder Map

For the procurement exercise to be effective it must meet the reasonable expectations of stakeholders and end users therefore a clear understanding of stakeholder and end users' views is essential. In order to obtain this understanding there must be effective engagement and you must take into account all views of your stakeholders. Many stakeholders will be positive and supportive however, it is also

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important that you consider the reasons why stakeholders may not be fully supportive.

In order to manage this you may wish to consider some of the following:

Ask your colleagues whether they know of any strong views stakeholders may hold to gain an understanding of any issues that may arise and reasons for these

Meet with stakeholders on a 1:1 basis in advance to understand their views and concerns

Ensure stakeholders are encouraged to contribute fully Ensure a good governance structure is in place which should include

identifying and addressing any conflicts of interest

The stakeholder map is a useful tool for the UIG to plan communications to stakeholders who are not UIG members. Some of the key characteristics of a successful UIG are shown in the attached slide.

You may wish to issue the attached UIG Welcome Pack which covers Roles and Responsibilities, core competencies, business conduct, gifts and hospitality and a Stakeholder Declaration of Interest. A UIG charter should be agreed and an example is provided.

Members of the UIG should not underestimate the amount of time and commitment involved in being a team member. Although the team itself may typically meet only fortnightly or monthly there will be work to be completed in-between meetings and members should come to meetings fully prepared. The UIG Membership Template can be used to record UIG membership and contact details.

Stakeholders should always be open to new ways of shaping the requirement by sounding out the market and identifying what the market is able to provide. They should give consideration to the options for shaping the market, encouraging the market to develop in such a way that it can meet organisations’ future requirements. There should be an assessment of future demand of the commodity, based upon the knowledge and expertise within the team and upon information obtained from communications with non-team members. Engaging the market provides an opportunity to ensure that the services provided are at the forefront of those available. Market sounding should also take in account the knowledge held by other buying organisations, trade bodies and business support organisations e.g. Federation of Small Businesses and Chambers of Commerce etc.

Any documents you need are listed below:

Blank Stakeholder Map Document (file type: ppt)

Stakeholder Map and Degree of Engagement Model (file type: ppt)

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Route 3 - Develop Strategy - Profiling the CommodityThe profiling the commodity stage will help you to:

Understand and scope requirements to help ensure that they achieve the optimum combination of whole life costs and quality to meet the end user(s) requirement.

Identify any current contracts in existence and estimate the relative spend on the goods/services in question.

Use a sustainability checklist to consider the potential social, economic and environmental impact associated with the requirement and the proposed procurement process.

Consider and investigate the extent to which fair work practices are relevant to the scope of requirements, and ensure inclusion in accordance with Statutory Guidance

Assess the current state of the market and identify key players who could meet the requirements.

Understand and integrate the current and future needs of the participating organisation(s) into the approach to market.

Identify any early opportunities to explore and provide options for meeting the requirements.

Route 3 - Develop Strategy - Profiling the Commodity - Contract Status & Spend AnalysisCurrent Contract Status

You should work with the UIG to review and understand the current contractual situation for the commodity to determine if there will be any issues in relation to the need to phase in new contracts over a period of time, or to investigate whether early termination of existing contracts is both possible and desirable.

You should collate details of the existing contract(s), such as the product specification, end users and other information which can be incorporated into the analysis of key commodity characteristics as described in the next section.

You may wish to use the Current Contract Status Template to record this information.

Spend Analysis

A detailed understanding of the current spend and likely future requirements of participating organisations is key to commodity strategy development.

To assist with spend analysis many Scottish public sector organisations can access information on historical commodity spend via The Hub, which contains many pre-defined reports and data that can be exported into MS Excel format. The data in the

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Hub is not at line-item level. This means that detailed spend information will still need to be obtained from suppliers, or where available, from purchase order systems. The Hub can be used to identify possible transactional savings and collaborative opportunities.

Some suggested areas for analysis are:

Total Expenditure and Volume Expenditure by Commodity and Sub-Commodity Expenditure by Division or Department or geography Expenditure by Supplier Future Demand projections where possible Collaborative Opportunities Benchmarking Profile of suppliers (large, SME etc)

Spend Analysis Example as generated using information from The Hub.

It is good practice to ensure that suppliers are contractually required to provide line item spend details as part of the contract to support

benefits analysis contract and supplier management supplier development future procurement activities/renewals

You should work with the UIG to make an assessment of future demand for the commodity, based upon the knowledge and expertise within the team and upon information obtained from communications with non-team members.


Current Contract Status Template (file type: pptx)

Spend Analysis Example Document (file type: ppt)

Route 3 - Develop Strategy - Profiling the Commodity - Sustainable ProcurementWhen developing the commodity strategy, User Intelligence Groups should make reference to sustainable procurement. Sustainable procurement means taking into account social, economic and environmental considerations as part of the procurement process. This needs to be considered in the total cost of ownership, to ensure future proofing and in the promotion of innovation. When evaluating tenders, considerations on sustainability must be relevant and proportional to the procurement.

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This may affect the direction of the procurement exercise and influence the options available to them. As a matter of good practice sustainability needs to be built in to the earliest stages of the Procurement Journey, when requirements are being identified and specified. You should use the government buying standards (formally Buy Sustainable Quick Wins) best practice specifications where appropriate.

The Scottish Sustainable Procurement Action Plan (SSPAP) provides guidance on how to achieve to successful sustainable procurement in the following three areas:

Social Economic Environmental

Social Aspects

You should familiarise yourself with the social issues in procurement guidance and consider:

The usability of the product or service for all who will be affected by the contract

Whether the requirement can be procured as a reserved contract Scottish Procurement Policy Note SPPN 10/2010

How fair work practices, including the Living Wage, can be incorporated into the scope of requirements in accordance with Statutory Guidance

Using community benefits clauses in specifications (where relevant and appropriate)

What market engagement or communications could best influence competition, encourage consortia where appropriate or the creation of innovative supply chains

Whether diversity and equality issues have been addressed Whether the terms and conditions are appropriate for the nature of the

contract and any associated risk If the procurement is for social care ensure you comply with the relevant

guidance SPPN 08/2010

All of this can assist organisational commitments on diversity and equality and encourage interest from a diverse range of suppliers.

Economic Aspects

You should:

Advertise the requirement so as to maximise participation and increase supplier diversity

Make the tender documentation and procedure as simple and as accessible as possible

Encourage the support of the six simple steps and the suppliers charter within your organisations and within suppliers' organisations to encourage the right behaviours in the supply chain. The latter can be facilitated when setting supplier expectations at supplier events or in tender documents (i.e.

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requirement to pay sub-contractors within 30 days) Scottish Procurement Policy Note SPPN 08/2009

Environmental Aspects

You should:

Use the government buying standards (formally Buy Sustainable Quick Wins) best practice specifications

Specify sustainable options wherever appropriate Adopt a total cost of ownership approach to your price evaluations

Taking Sustainability Into Account

Government Procurement Services in conjunction with Scottish Procurement have developed a total cost of ownership calculator for PCs, laptops and monitors, the principles of which could be applied to other goods.

It can be more difficult to apply a monetary value to some other aspects of sustainability but it is possible to link the requirements of the procurement to the operational and policy objectives of the organisations in an optimum combination of Life Cycle Impact Mapping and quality.

All aspect of sustainability should be considered throughout the Procurement Journey. You should use the considering economic impact checklist, which outline steps which can legitimately be taken at the various stages of the journey, and attempts to link these activities to delivery of the government's overarching purpose of increased sustainable economic growth.

A sustainability test is provided to help you identify and prioritise the sustainable aspects and impacts of your requirement for further consideration during strategy development, the procurement exercise and contract and supplier management.


Considering Economic Impact Checklist

Route 3 - Develop Strategy - Profiling the Commodity - Commodity CharacteristicsThe purpose of this section is to determine the requirement, agree what is in/what is out of scope and consider eCommerce implications with the User Information Group (UIG) and other key stakeholders.

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You should start by breaking down the requirement into its sub-commodities and identify the specific products/services within each sub-commodity. Use one of the templates below to assist in this process.

At this stage you may also want to give consideration to how the products/services are provided e.g. electronic purchase orders, purchasing card, consolidated invoices and self billing. For further information please see buyers guide to technology reform. Also you may want to consider whether or not the commodity you are buying is catalogueable or not. This simple 'Guide to Making Content Decisions' at the bottom of the Catalogue Content Management page will guide the buyer in the right direction. If the commodity you are buying is catalogueable, this electronic content must be provided via Catalogue Content Management (CCM) for the contract commencement. Further guidance is provided at the notification of contract award decision stage.

Classifying a Commodity

Classifying a Commodity - Blank

Example Commodity Tree

Guide to Making Content Decisions

At this stage you may also want to give consideration to how the electronic ordering and invoicing process. For further info please see buyers guide to technology reform

The key characteristics for each sub-commodity can now be identified and agreed by using the Key Commodity Characteristics template.


Classifying a Commodity Example Document (file type: ppt)

Classifying a Commodity Blank Document (file type: ppt)

Example Commodity Tree (file type: ppt)

Key Commodity Characteristics Template (file type: pptx)

Route 3 - Develop Strategy - Profiling the Commodity - Supply Market AnalysisA supply market analysis should be undertaken to enable the User information Groups (UIG) to develop a detailed understanding of key trends, major players, and overall market dynamics that could influence the development of the commodity strategy e.g. route to market, lotting strategy.

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At least one of the market analysis templates provided should be used to assist in this exercise. You will probably wish to read the guidance below prior to completing the templates. At the end of the analysis you should provide a market summary of your findings. You may find the market summary example useful.

You should give particular consideration to the potential for third sector involvement and supported businesses.

External sources for supply market data

The supply market sources document is a list of suggested external sources for supply market data which may provide useful information required to develop commodity strategies. Please note that you may require a licence or there may be a fee to use some of these sources. For future reference, make a note of the sources consulted in the external data sources template. The use of external data should be appropriately referenced throughout the process. The inclusion of a link to an external website or publication does not constitute any kind of endorsement by the Scottish Government.

Market sounding

Any discussions on costs at this stage should be indicative only, and this needs to be made clear to suppliers.

In many circumstances it may be more appropriate to ask the market what solutions are currently or potentially available prior to advertising a contract (as explained in the ‘Stakeholder Identification’ station).

This can encourage suppliers to be creative in the potential solutions they develop, which will in turn inform the decisions of organisations as to when and how to procure the best available solutions for their particular needs. Market sounding can be beneficial as a long term strategy, even where the Procurement Officer does not intend to carry out a procurement exercise in the immediate future.

There is no formal process for market sounding, but activities typically include researching and analysing the market as a whole and meeting selected suppliers for discussion. Care should be taken to engage with a good cross section of suppliers to best inform your strategic options i.e. the views of a Small and Medium sized Enterprise (SME) compared with a large or multi-national supplier may be different. Supplier interest can be generated by publishing advance notice of likely requirements, for example through Prior Information Notices (PINs).

Market sounding brings learning into the public sector that is useful in a broader sense. UIGs may need to gain a better understanding of the relevant markets to develop the commodity strategy, both in terms of how they operate currently and how they may operate in the future (i.e. changing technology, market entrants etc).

Early engagement with potential suppliers can be critical to success and it is vital to understand the key issues before starting the procurement process, however, it must be undertaken with care and in such a way as does not distort competition. It is vital

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that any discussions on costs at this stage should be indicative only and you must make this clear to suppliers. It is important to determine desired outcomes, risks and issues and to permit suppliers to provide feedback on how the outcomes might be achieved, along with feedback on timescales, feasibility and affordability.

The Procurement Officer should always be present at meetings with suppliers. From the supplier side, someone who understands your requirements and can offer innovative solutions and constructive advice should be present. The right attitudes must be adopted: respecting confidentiality, maintaining flexibility and openness.

The UIG should:

Be open to new ways of shaping your requirement based on what the market may be able to provide

Consider the options for shaping the market: encouraging the market to develop in such a way that it can meet your requirements in the future. Engaging the market provides an opportunity to ensure that services provided are at the forefront of those available

The overarching theme of early engagement is to identify the desired outcomes, risks and issues and permit suppliers to provide feedback on how the outcomes might be achieved, the risks and issues as they see them, along with feedback on timescale, feasibility and affordability. All discussions should flow from this theme.

Market sounding should also take into account the knowledge held by other buying organisations, trade bodies and business support organisations e.g. Federation of Small Businesses, Chambers of Commerce, etc.

You should consider the following questions:

Is there doubt over the existence of a market for the identified business need? Are there doubts over its capacity, capability, maturity or competitiveness? Is first-hand in-house knowledge of the market superficial, incomplete or

simply absent? Is there uncertainty about the level of suppliers' interest? Is the desired outcome likely to involve significant business change? Is it

unprecedented? Is there a need to manage expectations of the project? Is the requirement very unusual? Is there an innovative solution? Is the solution required to provide the service to diverse groups across

society? Are there carbon reduction targets? Is there uncertainty about the technological/eCommerce capabilities of the

market? Has economic development been considered? Has accessibility and 'designed for all' been considered? Are more sustainable outcomes available?

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As regards the procurement of innovative goods and services, the UIG can facilitate improvements in the quality and delivery of public services and contribute to growth in the economy by encouraging suppliers to invest in and deliver pioneering solutions to support current and future public service needs.

Questions to consider

Enquiries at market sounding usually fall into particular areas. These are not questions to ask of suppliers, but rather questions that the UIG should seek to answer for themselves through dialogue with suppliers.

Maturity: is the market ready to deliver what's required? Is it evolving or diversifying with suppliers entering or exiting the market?

Feasibility: will the market be technically capable of meeting the requirement? Technical/product innovation: technological advancements or product/service

developments expected and how can requirement be future proofed to take advantage of these?

Competition: how many suppliers provide what is required? Will there be effective competition?

Capacity: are there enough suppliers, with sufficient capacity, to meet the requirement?

eCommerce: is the market ready to embrace the electronic suite of tools that are currently utilised within the Scottish public sector?

Working together: will the requirement bring suppliers from different subsectors together in a new way? How will this work?

Geographical: do supplier operate differently or provide different goods or services in different geographical areas e.g. in another country?

Traditions and prevailing attitudes: why are they in this market? How will they affect the project?

Sustainability: can suppliers provide solutions to sustainability issues?

The UIG should always be open to new ways of shaping their requirement. They should look for opportunities to shape the market by encouraging the market to develop in such a way that is able to provide. There should be an assessment of future demand of any particular commodity or category, based upon the knowledge and expertise within the team and upon information obtained from non-team members. Engaging with suppliers provides an opportunity to ensure that the services provided are at the forefront of those available. This should also take account of the knowledge held by other buying organisations, trade bodies and business support organisations e.g. Federation of Small Businesses and Chambers of Commerce etc.

Discussions with suppliers

Talking to suppliers is at the heart of market sounding. It is crucial to talk to the right suppliers - ideally, those who have achieved outcomes of a similar nature and scale.

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Great care must be taken to ensure that those contacted are not given an advantage over other potential suppliers. It is equally important to ensure specifications are not written in such a way as to favour any particular supplier(s). If either of these approaches are not adhered to you could breach EU legislation and the procurement itself could be challenged.

Some possible questions to open productive discussions with suppliers include:

Are you interested in this opportunity? If not, why not? Is the business model realistic? Are the business aims realistic? Is the business attractive? What do you see as the risks? Can you give an early indication of cost, what are the major cost drivers and

how can these be minimised? Can you give a broad indication of the likely timescales? Are there other, better approaches? What added value in terms of sustainability could the supplier provide related

to the subject matter of the contract? Discussions on how suppliers can provide added value on sustainability and

other issues over and the requirements of the regulations Can you share examples of good or bad practice in terms of how others have

tried to secure these products or services and what can we do to ensure clarity and improve the tendering process for suppliers?

You may also wish to discuss aspects of eCommerce with suppliers such as:

Provision of content in the required format e.g. an eCatalogue or transactional punch-out site

Ability to accept cXML purchase orders and / or invoices Use of PCS-Tender for tendering and potential e-Auctions

Further market analysis

The purpose of analysing the environment is to take into account in more detail the external and internal factors affecting the commodity and supply. The various tools below can help you in this activity. The results should lead to the identification of opportunities and risks which will inform strategic options to consider.

Every template here does not require completion. (Grammar?) Not every template here requires completion?

Please consider the complexity of the commodity and procurement exercise. Once the analysis is complete you need to consider how you can use this information to inform strategic options.

Supplier profile analysis

The supplier profile analysis tool can be used to paint a picture of the main players in the market.

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Competitive advantage - porter's 5 forces

Porters 5 forces constitutes a framework which demonstrates buyers/suppliers' relative power in the market place.

SWOT analysis

The SWOT Analysis examines environmental factors internal to the organisation (usually classified as Strengths or Weaknesses), and those external to the organisation (classified as Opportunities or Threats).

PESTLEE analysis

The PESTLEE analysis is a framework that assesses the external environment which may have an impact on your requirement.

Supplier market share

The supplier market share provides an insight into the positioning of the main players within the market, such as industry attractiveness, competitive pressure and degree of market concentration/fragmentation.

Understanding supplier cost drivers

The supplier cost drivers checklist provides guidance to complete a typical supplier cost driver example.

Supplier cost drivers example

Supplier cost driver example 2

Some tips on how to obtain supplier cost drivers:

Sources of information

There may also be opportunities for the buying organisation to make its own internal processes more efficient. Some of the key areas to consider during procurement process are:

Use of PCS-Tender The transactional procurement process: requisitioning, authorising, raising

and sending purchase orders, goods receipting and invoicing and payment

Total cost of ownership

Total Cost of Ownership (TCO) is the initial acquisition cost plus ownership/operation and disposal costs. Understanding this will help in identifying areas for improvement internally within the organisation and externally with suppliers. The following

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guidance slide will help you to consider the wider costs associated with the procurement of the requirement.

TCO considerations

A blank TCO slide is provided for you to populate with details specific to your requirement.


External Data Sources Template (file type: ppt)

Market Summary Template Document (file type: ppt)

Market Summary Template Example Document (file type: ppt)

PESTLEE Analysis Document (file type: ppt)

Porter's 5 Forces Document (file type: ppt)

Supplier Cost Drivers Sources of Information Document (file type: ppt)

Supplier Cost Drivers Example 2 Document (file type: ppt)

Supplier Cost Drivers Checklist (file type: ppt)

Supplier Cost Drivers Example Document (file type: ppt)

Supplier Market Share Calculator Document (file type: xls)

Supplier Profile Analysis Document (file type: ppt)

Supply Market Sources Document (file type: doc)

SWOT Analysis Document (file type: ppt)

TCO Considerations (file type: ppt)

TCO Considerations Blank Slide Document (file type: ppt)

Route 3 - Develop Strategy - Profiling the Commodity - Shaping the RequirementYou should ensure that all research conducted is collated and reviewed as a whole. A poorly scoped and researched requirement can present major risks to the project.

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The following areas are key:

Ensuring customer requirements are met and balanced with affordability Challenging the end users requirement to ensure that an optimum

combination of whole life costing and quality is achieved Keeping your options open: avoiding the tendency to 'zero in' on particular

options; allowing suppliers the freedom to suggest ways forward Considering business models: looking at all the options for how the

arrangement between customer and supplier might work e.g. organisationally, financially and in relation to risk management

Considering how the wider supply chain might affect the project Considering whether requirements should be grouped in a specific way to

reflect market structure. e.g. procuring computer hardware desktop/laptop separately from maintenance; breaking down a cleaning contract into geographical lots rather than procuring a single National contract. This should be reflected in your lotting strategy

Incorporate sustainability requirements from the outset, e.g. building sustainability into the specification and considering a whole life costing approach

Ensure that you consider whether it is relevant and proportionate to include a question on fair work practices as part of the competition

Consider demand management: consider options for demand, do you actually need the requirement and if so is there an alternative that will allow you to reduce demand and cost

Consider how demand fluctuations will be managed, forecast and how (if possible) it can be reduced. More extensive demand management guidance can be found here.

Route 3 - Develop Strategy - Initial Opportunity AssessmentThe objective of this stage is to identify high-level opportunities based on the data gathered in the previous stages which may be achieved with or without the creation of a contract.

Strategic sourcing highlights opportunities in three key areas:

Purchase Demand Management Supply Base Management Total Cost Management

The above are portrayed as the three sides of the 'Best Value Triangle'. For each of the potential opportunities on the triangle, the commodity team should assess and highlight those opportunities that could be exploited and determine how they could be applied to the commodity in question, bearing in mind any risk assessment considerations.

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The assessment of high-level opportunities should be carried out in conjunction with the Sustainable Procurement Test previously identified for the requirement.

A blank Best Value Triangle is provided for your use. Alternatively you may wish to use the tabled version of the triangle.Sustainability Opportunities should also be captured for inclusion in your strategy.

This exercise should be proportionate to the complexity of your requirement and you are not always expected to address every aspect of the best value triangle.

Checkpoint - are there early opportunities?

Early Opportunities are defined as cost savings or total cost improvements which:

Can be implemented within 90 days Realise the benefits within six to twelve months Are aligned to the Government buying standards for sustainable procurement Are relatively easy and straightforward to do Are often tactical and short-term in nature and must support strategic plans

Opportunity Assessment

There are many factors to consider for implementation of all opportunities as well as early opportunities:

Time to deployment Cross-functional complexity Number of geographical locations/business units involved Regulatory, safety, criticality, legal, specification changes Use of external technology Acceptability to the customer Business Unit readiness - 'pull' Supply market challenge Skills & knowledge Number of people involved in deployment Clear decision owner(s) Results of the risk assessment

The Opportunity Assessment Template is an aid to quantifying and prioritising the opportunities which will be included in the commodity strategy.


Best Value Triangle Document (file type: ppt)

Best Value Triangle Table Document (file type: ppt)

Blank Best Value Triangle Document (file type: ppt)

Opportunity Assessment Document (file type: ppt)

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Sustainable Opportunities Document (file type: ppt)

Sustainable Procurement Test Document (file type: xls)

Route 3 - Develop Strategy - Develop Commodity StrategyBased on the opportunities already identified the strategy will be developed incorporating information gathered in previous stages. The strategy produced should be proportionate to the value, complexity and strategic importance of the commodity.

Key components of a strategy with the suggested minimum requirements are listed in the Commodity Strategy Index.

Strategic Positioning of Commodity

The aim of strategic positioning is to consider the commodity from both a buyers' and suppliers' perspective in relation to:

Importance of the commodity to the business The complexity of the requirement The relative power of the buyer/supplier in the marketplace The attractiveness of the business to the supplier Risks to the business The Strategically Positioning the Commodity slide considers the above

aspects from the buyers' perspective against both business impact and supply market challenge. Understanding the Supplier's View of the Buyer considers account attractiveness and relative value of business to the supplier.

You should also consider the current and possible future state of relationships between the Buyer and Supplier to demonstrate how you intend to develop any relationship with a supplier going forward.

Having considered the above you should be able to identify the position of your commodity as either Leverage, Strategic, Routine or Bottleneck. The Strategic Positioning Action Plan provides guidance as to the procurement approach you should adopt in each of these circumstances.

The suggested approaches are designed to provide the commodity with a starting point. They must be further defined in the context of the specific commodity and opportunities identified using the Best Value Triangle.

The Duty of Best Value in public services is as follows:

To make arrangements to secure continuous improvement in performance whilst maintaining an appropriate balance between quality and cost; and in making those arrangements and securing that balance

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To have regard to economy, efficiency, effectiveness, the equal opportunities requirements, and to contribute to the achievement of sustainable development

The are many characteristics to Best Value that public service organisations are expected to demonstrate:

Purchase Demand Management o Reduce consumptiono Consolidate spendo Improve specification

Supply Base Managemento Restructure relationshipso Increase competitiono Restructure supply base

Total Cost Managemento Optimise total supply chain costso Reduce total life cycle / ownership costso Reduce / eliminate transactions

Compliance Issues and Strategies

As part of the commodity strategy you should consider how you will ensure compliance to the contract. Compliance requires involvement from all parties concerned throughout the Procurement Journey. Governance arrangements, management and budget holder behaviours within local organisations will be key.

The components of a compliance strategy should encourage optimum uptake of a new contract. Members of the UIG should champion the contract and commitment for users should be obtained for the proposed strategy options.

Commodity Strategy Options

There will be a number of delivery options which are applicable to any commodity. You may wish to refer to A guide to the appraisal of possible options for further guidance. These will vary with the type, size and complexity of the requirement but are likely to fall within the range of options indicated. In all cases, you should consider a 'Do Nothing' option as a benchmark.

The commodity strategy should take full account of applicable guidance, policies and legislation. For example, commodities acquired from the private sector may need to be advertised in accordance with the organisation's policies and/or with EU public procurement law (see EU Public Procurement Guidance).

The commodity strategy should include a summary of options that clearly details the benefits, costs and risks associated with each option and demonstrates compliance with any legal obligations. This should enable the objective selection of the commodity strategy to be pursued in the short, medium and long term.

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Information on estimating benefits within a commodity area can be obtained from sources such as benchmarking, market testing, market trends, past discounts and past experience.

Costs to implement sourcing strategies include contract switching costs, supplier switching costs, manpower investment, communications and roll out and cost of going to tender.

The Options Appraisal summarises the various delivery options considering the benefits and risks of each before selecting an option for recommendation.

The recommended option must satisfactorily meet the requirements, be affordable, viable and agreed with the UIG.

Contract Implementation/Contract and Supplier Management

There are separate stops on the Procurement Journey on Contract Implementation and Contract and Supplier Management, however your approach must be considered during this 'Develop Commodity Strategy' phase. Consideration must be given to how the proposed options will operate throughout the life of the requirement. For example, if you decide to utilise an existing contract or framework agreement the contract implementation and management aspects of the arrangement will be covered in the framework terms and conditions and must be complied with in full.

You must think about how the new goods or services will be introduced into the organisation or requirements migrated from your existing arrangements to the new arrangements. You should also consider your transition or exit strategy for when this new contract or framework agreement comes to an end. Once fully operational you will want to manage and develop the contract and supplier(s) to ensure the desired outcomes are delivered now and in the future. Consideration must be given to the resource requirements to implement and manage the contract or framework agreement as a designated contract manager must be identified. Additional guidance can be found here.

The contract and supplier management requirements should be detailed in the contract or framework agreement terms and conditions to ensure both parties are clear on the contractual obligations. The contract should then be managed in accordance with these terms and conditions.

The level of contract and supplier management required depends on the risk, value and complexity of the contract. You will find guidance to help assess the potential level management of C&SM required in the Contract and Supplier Management / Planning and Governance station.

Generally, "Routine" contracts will require a lower level of management than "Leverage" and "Bottleneck" (medium level), and "Strategic" which will require the highest level.

Comprehensive guidance can be found in the Planning and Governance station.

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Appraisal of Possible Options Document (file type: pdf)

Best Value Triangle Document (file type: ppt)

Commodity Strategy Index Document (file type: ppt)

Components of a Compliance Strategy (file type: ppt)

Options Appraisal Document (file type: ppt)

Relationship of the Buyer and Supplier Document (file type: ppt)

Strategic Positioning Action Plans (file type: ppt)

Strategically Positioning Commodity Document (file type: ppt)

Supplier's View of the Buyer Document (file type: ppt)

Route 3 - Develop Strategy - Procurement RouteThe selection of the procurement route to be taken will be dependent on the value and nature of the requirement. You must ensure that the procurement route you choose is consistent with the requirements of the Public Contracts (Scotland) Regulations 2012 before you embark on your procurement. Decisions on compliance with the Regulations may require specialist knowledge. If you are in any doubt you should seek specialist professional procurement or legal advice and guidance. Further information is available in the EU Public Procurement Guidance.

The first issue to be addressed is whether the total value of the requirement exceeds the threshold for advertising in the Official Journal of the European Union (OJEU). If your requirement does not exceed this threshold you must still consider whether the requirement needs to be advertised in order to meet a general obligation derived from EU law of demonstrating open competition, equal treatment, non discrimination and transparency.The Public Contracts Scotland portal is a website available to the public sector in Scotland for advertising all contract opportunities and follow a competitive procedure. The portal also encompasses functionality to publish OJEU Contract Notices.

European Court of Justice and National Caselaw

Decisions of the European Court of Justice and the national courts provide interpretation of the requirements of the EC Treaty and the EC Procurement Directives and can establish precedents which must be observed. Caselaw, by its nature, is constantly evolving and can have significant effects

Meeting Legal Obligations

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The legal framework is not static, it evolves through new/amended legislation, through European Commission decisions/guidelines and through court judgments. Every organisation should therefore ensure that it has appropriate arrangements in place to ensure that staff involved in procurement activity are kept up to date with developments in the legal framework and are equipped to meet their legal obligations. Where appropriate, the Scottish Procurement and Commercial Directorate (SPCD) will issue guidance on changes to the legal framework via Scottish Procurement Policy Notes or Action Notes (see section 18).

Organisations should bring any complex legal issues to the attention of SPCD and the relevant Centre of Expertise. This will allow SPCD to determine if wider dissemination across the procurement community is appropriate.

If your requirement exceeds the threshold for advertising in OJEU you should determine whether you may be exempt from the full application of the rules. See Determining whether the Regulations apply for further information.

Your commodity strategy will assist in determining whether you should opt for a single contract or adopt a framework agreement approach.

You may also wish to consider the associated timescales for each of the procurement procedures. There are several approaches you may take in terms of the procurement route for your requirement.

If there are potentially many suppliers who could meet your needs, you should choose a procurement route that will minimise the cost of competition for both public bodies and suppliers. Typically this would involve a pre-qualification stage, designed to reduce the number of candidates to a more manageable number (e.g. by using a questionnaire to shortlist tenderers). For above threshold requirements, both the Restricted Procedure and Competitive Dialogue involve a pre-qualification stage.

If your research has indicated that there are few suppliers, that could meet your needs in the market place, you may decide that all suppliers who respond to an advertised opportunity should be sent the full invitation to tender without a separate pre-qualification stage. For above threshold requirements, this is known as the Open Procedure.

The above two processes can only be usefully adopted if you are clear about the specification/outputs you require from the tender exercise.

For above threshold requirements where you are unable to define the technical means by which you may satisfy your objectives and/or you cannot specify the legal or financial make-up of your requirement, you may adopt the Competitive Dialogue procedure. Care should be taken before selecting this route. You need firstly to ensure that you legally satisfy one of the above criteria and also be aware that this process is costly and resource intensive for both Procurement Officer and supplier and is likely to result in a significant increase in procurement timescales.

There are two other procedures, negotiated with a call for competition and negotiated without a call for competition which may be used in very limited and

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exceptional circumstances. You are advised to seek professional procurement or legal advice or guidance prior to adopting either process.

You may wish to consider the potential for an eAuction when you are able to identify your specification in detail and where there is a heavy emphasis on price being the determining factor. eAuctions are normally best used where there is a surplus of supply in the marketplace and the buyer holds the power in the relationship.

If the proper procurement route has not been followed and breach in EU legislation has been identified your fraud awareness team may look to examine the procurement cycle to ascertain to what extent the proper procurement route was not observed. The rationale for action, e.g. the justification for tender waiver, should examined objectively.


OJEU Timescales (file type: pptx)

Route 3 - Develop Strategy - Procurement Route - OpenStation under development. Guidance on the current procedures can found in the Procurement Route station.

Route 3 - Develop Strategy - Procurement Route - Restricted

Station under development. Guidance on the current procedures can found in the Procurement Route station. < Go Back Continue Journey > - See more at: https://www.procurementjourney.scot/route-3/route-3-develop-strategy-procurement-route-restricted#sthash.EpjOMRhW.dpuf

Route 3 - Develop Strategy - Procurement Route - Competitive with NegotiationStation under development. Guidance on the current procedures can found in the Procurement Route station.

Route 3 - Develop Strategy - Procurement Route - Competitive Dialogue Station under development. Guidance on the current procedures can found in the Procurement Route station. < Go Back Continue Journey > - See more at:

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https://www.procurementjourney.scot/route-3/route-3-develop-strategy-procurement-route-restricted#sthash.EpjOMRhW.dpuf

https://www.procurementjourney.scot/route-3/route-3-develop-strategy-procurement-route-restricted#sthash.EpjOMRhW.dpuf


Route 3 - Develop Strategy - Procurement Route - Negotiated Procedure Without Prior PublicationStation under development. Guidance on the current procedures can found in the Procurement Route station.

Route 3 - Develop Strategy - Procurement Route - Innovation PartnershipStation under development. Guidance on the current procedures can found in the Procurement Route station.

Route 3 - Develop Strategy - Commodity Strategy Executive SummaryPrior to finalising the commodity strategy and submitting it for approval, the Procurement Officer should ensure an Executive Summary is included. The purpose of the executive summary is to highlight the key points of your strategy including details of any decisions taken and the justification.

The finalised strategy which has been developed with the User Information Group (UIG) should be approved on PCS-Tender by an appropriate approver, as per your local governance arrangements.

The Example Commodity Strategy includes an Executive Summary for your reference.

Commodity strategy review

Commodity profiling and strategy development should not be an isolated or 'one-off' occurrence. A subset of the UIG needs to be assigned to carry out the ongoing activities of supplier relationship management, monitoring, implementation, compliance and benefits tracking, and a periodic review of the chosen strategic option to validate its applicability for the current/changing environment should also be considered (both internal to the procuring organisation and external to market supply).

There are a number of issues that may trigger a commodity strategy review, these include:

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Market developments e.g. changes in economic environment, technology, regulation

Internal changes to the organisation e.g. significant restructuring, changes in demand

Contract termination e.g. through poor performance Contract expiry


Commodity Strategy Example Document (file type: ppt)

Executive Summary Document (file type: ppt)

Route 3 - Develop DocumentsThis section of the Procurement Journey provides the Procurement Officer with guidance on the following:

Specification Selection and award criteria Pre-Qualification Questionnaire (PQQ) Invitation to Tender (ITT) - including Terms and Conditions

It is best practice to have all of the above documentation created on PCS-Tender before preparing the contract notice and advertising the requirement on PCS-Advertising. If that is not possible and, for example, the notice is published before the ITT is finalised, care must be taken to ensure consistency between the ITT and the contract notice (if, when preparing the ITT you decide that it will need to differ from the contract notice you will usually need to cancel the existing notice and republish, which could result in new suppliers coming forward).

Consideration must also be given to Planning and Risk Management throughout this stage of the Journey.

Route 3 - Develop Documents - SpecificationWhen developing your specification it is important to engage as early as possible with the supply base. This is important in terms of identifying the desired outcomes, risks and issues, as it permits suppliers to provide feedback on how the outcomes might be achieved, the risks and issues as they see them, along with feedback on timescales, feasibility and affordability. It is also best practice to ensure that suppliers are contractually required to provide line item spend details as part of the contract support.

The specification must:

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Clearly describe what is required Focus on outputs required without being prescriptive as to the method the

supplier should use to provide it (output specification) Be sufficiently tight so that the product or service fits the user's needs, but not

so explicit that it discourages the supplier from proposing innovative solutions that optimise Value For Money (VFM)

Include performance targets or include criteria for acceptance of the products or services

Include service levels and a process for measuring ongoing performance Avoid over-specification of performance (more than "Fit for Purpose" or than

is actually required) to ensure procurement at the optimum cost Take account of any e-Commerce requirements Take account of sustainability policies where appropriate Take into account suitability of design for all users Take account of relevant legislation e.g. health and safety and equality Take account of relevant policies e.g. is the requirement one that would be

suited for the inclusion of a Community Benefits clause? Take account of all licensing requirements that a supplier must have in order

to operate in a particular industry/sector and which are relevant to the performance of the contract e.g. A supplier of water and waste water services must hold a current retail license for the provision of water and wastewater services in Scotland under the Water Services (Scotland) Act 2005, including signing up to the accompanying market code (including the code subsidiary documents) and operations code

Not refer to brands or trade names but refer to the characteristics of the product e.g. it is not permissible to specify a particular product brand

Ensure that any requirements for limits, tolerances, deliverables timescales etc are practical and realistic

Consider commercial and ongoing performance management aspects of the contract throughout the supply chain e.g. payment terms including those to sub-contractors (SPPN 08/2009)

Support a structured method of tender evaluation Be able to form the major part of the formal contract between the purchaser

and the contractor

If the specification is wrong it may result in:

Failure by the organisation to meet their objectives Wasted money Unsuitable tenderers Unsuitable bids Mis-interpretation of requirements Major difficulties in evaluating the bids Wrong or unsuitable products/services supplied Claims of unfair treatment being made by tenderers

The award criteria must be linked to the specification. The award criteria must be relevant to the subject matter of the contract and not discriminatory.

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Once a contract is awarded the scope to make changes to the specification (e.g. asking the contractor to deliver more, or less of something that was not was specified at the time of tendering) is limited and any such changes may be challenged in the Courts. If it is not possible for the supplier to deliver the contract as originally intended as a result of omissions or errors in the specification, the contract may have to be terminated and a new procurement undertaken.

Variants

If you intend to award a contract on the basis of the most economically advantageous tender you may consider variants on the requirements as long as it has been specified in the contract notice. The minimum requirements to be met by the variant and how the variant will be evaluated must also be stated in the contract documentation.

Who provides the specification?

The User Information Group (UIG) are responsible for developing the specification, but should ensure that other end-users, stakeholders and technical specialists are consulted where appropriate. Part of the role of the UIG is to challenge accepted thinking. At the specification stage the UIG should explore opportunities to incorporate economic development and sustainability considerations.

The foundation of a good specification is laid in the planning and research undertaken before writing begins. Allow sufficient time to create the specification.

There is often merit in discussing the specification with a broad range of potential tenderers. This must be done in a fair and transparent manner to avoid distorting competition and/or giving any potential tenderer an advantage. Care must be exercised to avoid not only genuine unfairness, but also the impression of unfairness to some tenderers. Under no circumstances should any commitments be made during this process.

Following discussions with the marketplace, care must be taken to ensure that innovative ideas and approaches which provide a supplier(s) with a competitive edge are not disclosed in the development of the specification e.g. inclusion of proprietary methods or Intellectual Property Rights (IPR).

Purchasers can also use their commercial influence to help improve the competitiveness of suppliers by encouraging them to produce innovative goods and services which will assist the public body to deliver evolving policies and strategies e.g. with regards to sustainability low carbon products.

Suppliers should not be put to unnecessary cost through casual enquiries for bids. Everyone is responsible for ensuring that best VFM is achieved through the procurement process.

Output/performance specification

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The specification should be written in "performance" terms, which focus on the function of the product or the output of the service required. It builds the specification around a description of what is to be achieved rather than a fixed description of exactly how it should be done and encourages innovation in the market place, thereby allowing and encouraging suppliers to propose modern (including environmentally preferable) solutions.

In very exceptional circumstances, for a very limited number of products or services, a "design" specification may be unavoidable. As the term implies, such a specification starts with exact details of the physical dimensions, the materials used, power input and output, the manufacturing processes required, and so on. The nature of the requirement may make it essential to narrow the options by writing a detailed full design specification. However, these assertions should be tested and guidance sought particularly when EU Procurement Regulations apply, as a "design" specification may restrict competition.

Technical specifications and standards

The EU Procurement Directives set extensive rules on how contracting authorities may define and incorporate technical specifications and standards.

You must avoid reference within a technical specification which has the effect of favouring or eliminating particular suppliers by specifying a particular material or goods of a specific make or source or to a particular process, or trademark, patent, type, origin or means of production e.g. do not specify "Hoover" when we mean a vacuum cleaner or "Intel" when we mean a Central Processing Unit of a PC. In exceptional circumstances such reference may be justified if either the subject of the contract makes the use of such references indispensable or where the subject of the contract cannot otherwise be described in a manner which is sufficiently precise and intelligible to all bidders. In either circumstance, such reference must be accompanied by the words "or equivalent".

Using samples, patterns, etc, in specifications

If it is not possible to produce a detailed description of the requirement, samples or patterns may be issued to the tenderers or requested from them. In this case, a "sealed sample" must be kept for later comparison with the products supplied. Samples, patterns and drawings may also form part of a design specification.

Any samples that are no longer required should be returned to the tenderer.

Care should be taken that Copyright is not breached when using samples, patterns etc. for specification purposes. Consideration again needs to be given to the Intellectual Property Rights of the tenderers.

Simplification and variety reduction

Simplification and variety reduction techniques can help in reducing costs and in obtaining better VFM.

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Simplification and variety reduction in a specification requires the elimination of complexities in design by omitting different types, sizes, grades etc. of products. At its simplest this might be seen as the reduction in the number of colours in which an item is purchased, or in the sizes of envelopes which are purchased and kept in stock and can be a valuable tool when seeking to establish a specification for large collaborative procurements.

Contract implementation/contract and supplier management

As you develop your specification, especially an output specification, you will start to consider how the quality and performance aspects of the goods and services of the contract will be measured. These factors should be translated into the Management Information (MI) you will require from the supplier(s) and the Key Performance Indicators (KPIs) both of which will be included in the ITT and Terms and Conditions.

Review and sign-off

The key criteria that the UIG need to ensure in completing the specification are:

Requirements are complete and accurate Stakeholders needs are taken into account Future developments have been taken into account Consistency with the organisations' requirements and objectives including

business case, EU Directives, and other relevant legislation, procurement and contracts strategies, sustainability objectives and evaluation strategy

Risk assessment is completed to ensure that related risks are closed or managed

Specification Checklist

Procurement Officers should give consideration to the following aspects when preparing specifications:

Description Y/NAre previous (similar or related) specifications available?Are the requirements stated clearly, concisely, logically, unambiguously and contain the essential features or characteristics of the requirement?Do the specifications contain enough information for potential suppliers to design and cost the products or services they will offer?Are limits, tolerances or performance targets reasonable and reliable? Are they written in such a way that they define the criteria for acceptance of offered products or services as well as permitting them to be evaluated by examination, trial, test or documentation?Do specifications conform to relevant national, European or international standards and comply with any legal obligations?Do specifications provide equal opportunity for all potential suppliers to offer a product or service which satisfies the needs of the user and which may incorporate alternative technical solutions? Ensure that specifications do not contain features that directly or indirectly unlawfully discriminate in favour of, or

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Description Y/Nagainst any supplier, product or source.Is the specification presented in performance terms rather than a detailed design?Are you sure that it does not over-specify requirements i.e. specify performance that is more than 'Fit for Purpose'?Have you taken due account of the buying organisation's environmental, other sustainability, social and other relevant policies?Have you considered the possibility of variety reduction and simplification?Does the performance of the contract require the contractor to hold licences, and does the specification reflect this?Are site specific requirements necessary?Any documents you need are listed below:

KPI Document (file type: pptx)

Management Information Document (file type: docx)

Route 3 - Develop Documents - Selection, Award and Exclusion CriteriaThe European Single Procurement Document (ESPD) is introduced by the new EU Public Procurement Directive. It is a legal requirement to use the ESPD (Scotland) for all procurements with an estimated value of the OJEU threshold and above, commenced on or after 18 April 2016.

The distinction between selection and award criteria is crucially important. Selection criteria are focussed on "the bidder" and award criteria is focussed on "the bid" and Procurement Officers must maintain a clear distinction between both throughout the procurement process. This means that issues/questions which are appropriate to the selection criteria must be addressed at the selection stage and cannot form part of the award stage (even if they were omitted from the selection stage in error) and vice versa.

The selection stage, often known as the "pre-qualification stage", involves an examination of the suitability and capability of the potential suppliers to perform the contract that will be awarded at the end of the competition. The criteria used for selection must be appropriate, relevant and proportionate to the particular procurement. The selection process should be a "backward-looking, not forward-looking" process. That is, the criteria for selection must concentrate on the general suitability and capability of the supplier for the project, as opposed to the specific means by which the supplier would perform the contract. To allow public bodies to identify a number of suitably qualified and experienced businesses who will be invited to submit a tender, the Scottish public sector's standard Pre-Qualification Questionnaire (sPQQ) should be used to assist in supplier selection. The sPQQ is covered in more detail in the Pre-Qualification Questionnaire (PQQ) station.

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The award stage involves examination of the merits of the bids. This will identify which of the eligible tenderers will deliver best value for money for the organisation, based on either the most economically advantageous tender or lowest price, depending on the criteria agreed by the User Intelligence Group (UIG). The award criteria must relate directly to, and be proportionate with, the subject matter of the requirement.

Value for Money is defined as the optimum combination of whole life costs and quality (or fitness for purpose) to meet the user's requirement. Depending on the nature of the contract, whole-life costs may include implementation costs, ongoing operating costs and end-of-life disposal.

You must ensure that the criteria used at both stages are relevant, objective, proportionate and non-discriminatory. Criteria (and any sub-criteria) used by a public body at both the selection stage and the award stage, together with any weightings attached to them, must be published and made known to suppliers at the time of the issue of either the PQQ or the Invitation To Tender (ITT) documents.

A clearly documented process must be followed in order to ensure there are satisfactory responses from suppliers and no inconsistencies in both pre-qualification and tender evaluations, which could ultimately result in a legal challenge. Any failure in this respect will leave the procurement suspect to audit scrutiny and legal challenge.

Examples areas that are commonly known as "selection" and "award" criteria are listed in the table below:

Selection Criteria Award CriteriaBusiness probity and criminality checks PriceTechnical and professional qualifications, capability including experience Quality

Economic and financial standing (Further examples provided below)

Publication of Criteria

As a matter of procurement policy, and in order to meet obligations of transparency, public bodies must publish details of the evaluation criteria to be used to either select the suppliers to be invited to bid for the contract or the evaluation criteria to be used to identify the supplier to whom the contract will be awarded. It is best practice that evaluation criteria for both selection and award stages be agreed, along with respective weightings, by the UIG before the Contract Notice is published and any documentation issued. The evaluation criteria will comprise of the selection or award criteria (depending upon the stage of the competition), sub-criteria, weightings, minimum standards, pass marks (if any) etc. If there is any doubt as to the level of detail that must be disclosed/published, you should seek specialist professional procurement or legal advice and guidance.

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The evaluation criteria must be included or referenced within the Contract Notice where possible, and set out in the subsequent PQQ and ITT documentation. If it is not possible to have all of this prepared prior to the publication of the Contract Notice, the public body must ensure that it publishes any selection evaluation criteria at the same time as it issues PQQ and it publishes the contract award criteria at the same time as the ITT document is issued.

Where it is not possible to provide weightings on objective grounds, the criteria should be stated in descending order of importance in the contract notice or ITT documents.

The objective and non-discriminatory criteria that will be applied to produce a 'short-list' must be contained in the Contract Notice, or at the very latest published at the same time as the PQQ documents is issued to suppliers.

In exceptional circumstances you may be entitled to invoke the Negotiated Procedure with or without competition. Please see EU Public Procurement Guidance for more information. Please note that the Negotiated Procedure may only be invoked in circumstances set out in procurement legislation, and if there is any doubt about use of this procedure, you should seek specialist professional procurement or legal advice and guidance.

The agreed and advertised award criteria and weightings must not be changed once they have been notified to the tenderers.

Minimum Standards

Where it has been determined that minimum standards are applicable either within selection or award criteria they must relate to and be proportionate to the subject matter of the requirement and clearly detailed in the appropriate documentation. Where you wish to apply minimum standards to limit the number of potential suppliers to be invited to tender, minimum standards or objective criteria must be specified or referred in the Contract Notice and set out in the PQQ to allow the rejection of potential suppliers. Similarly if a pass mark can only be obtained by a response that meets the minimum requirement, it must be clearly stated within the scoring guidance provided to suppliers.

Selection Criteria

Further information on the selection stage is available under the Supplier Selection station of the Procurement Journey. The standard Pre-Qualification Questions can be found in the Supplier Selection station of the Procurement Journey, PCS-Tender and PCS-Advertising. These questions should not be amended, however questions can be deleted if not required and additional questions added. If additional questions are added on PCS-Tender, the Procurement Officer should create a separate section for these as appropriate.

Prior to issuing the PQQ, the Procurement Officer should develop a percentage scoring methodology for the questionnaire tailored to the needs of the requirement.

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Selection criteria can include sustainability issues – e.g. social, economic and environmental considerations, this can also include fair work practices.

Award Criteria

The Procurement Officer should work with the UIG to agree appropriate award criteria, based upon their knowledge of the goods, services and works to be procured and the critical aspects of the requirement as identified in the Specification.

The criteria identified must relate directly to the goods, services or works to be provided and not focus the characteristics of the individual suppliers. Each award criterion should be clearly defined, so that there is a common understanding of what it means.

Good criteria will ensure that responses from suppliers clearly addressed the most critical aspects of the specification and allow the evaluation panel to make a fair and equal comparison of the bids received.

The objective of any procurement exercise should be to achieve best Value for Money for the taxpayer. Public bodies can award contracts on the basis of the most economically advantageous tender or the lowest price. In determining the criteria for the award of contracts, purchasers should rarely rely on price alone. This is because awarding contracts on the basis of the most economically advantageous tender allows public bodies to balance the quality of the goods, services and works they are procuring against price and to frame specifications in a way which encourages innovation rather than defining the solution. As part of value for money, due regard to other relevant organisational policies is important, for example, policies in relation to corporate social responsibility/sustainability and Quality/Technical Merit - Is the product or service proposed fit for purpose? How well does it perform?

Lowest price is based on the lowest priced tender which meets the users requirements.

Some examples of award criteria are given below:

Quality/Technical Merit - Is the product or service proposed fit for purpose? How well does it perform?

Design, functional characteristics and aesthetics - How should the product look and feel? How easy is it to use?

Sustainability - e.g. social, economic and environmental considerations and fair work practices, see statutory guidance

Innovation, where appropriate - e.g. new or novel concept? Maintenance, ongoing technical support or after sales service - What support

is required and available? Delivery or period of completion- the guaranteed turnaround time from order

to delivery or provision of service Price- The whole life cost including the initial purchase price, operating costs,

consumables and disposal costs. How cost effective will the goods/service prove to be?

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A Procurement Officer must consider the relevance and proportionality to the contract of fair work practices for its inclusion in the award criteria. Fair work practices will be particularly relevant to consider where the quality of the services/works/goods to be delivered are directly affected by the quality of the workforce engaged in the contract.

In deciding whether or not fair work practices are relevant to the quality delivered under a contract, Procurement Officers should consider all relevant factors and be able to justify their inclusion in any decision making process. For a relevant contract Purchasing Officers should consider whether:

There is any previous experience of poor quality practices, including pay and conditions, impacting on the quality of service to be delivered;

There is any history of low pay or unequal pay in that sector; There is a risk that staff working on the contract might be subject to

exploitative practices e.g. through the inappropriate use of zero hours contracts, through unnecessary distancing of the employer-worker relationship e.g. by use of any “umbrella company” and through pay and hours arrangements that deny workers stability of employment or hours of work, e.g. by failing to pay wages for travel time within the working day, such as in the care at home sector;;

There is evidence that working conditions are making recruitment and retention problematic;

Contractors are seeking to cut their costs through driving down staff terms and conditions, including pay;

Workers will be required to interact directly with the contracting authority’s employees and/or members of the public and whether they will spend any time on the organisation’s premises

If the answer to any of the above questions is “yes”, then fair work practices are likely to be relevant consideration for the contract in question. However this is not an exhaustive list and other factors may be relevant, depending on the specifics of an individual contract.

An example of a fair work practices Invitation to Tender question can be found in the Annex A of the statutory guidance.

Weighting the Criteria

The Procurement Officer should work with the UIG to decide on an overall ratio or split between price and quality (non commercial aspects) criteria and allocate weightings to any sub-criteria as appropriate.

As the aim of any procurement exercise should be to achieve Value for Money, it is recommended that the "most economically advantageous" evaluation is used.

The ratio will determine how much price and quality will influence the tender evaluation and should reflect the relative importance of either element to the public body. You may find it useful to refer back to the Strategic Positioning Action Plans to help decide the appropriate price/quality ratio to apply.

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The table below provides some suggested criteria and ratios depending on the nature of the commodity/service being procured:

Commodity Type Description Suggested

Price/Quality Ratio

Routine Low Value/High Volume Many Existing Alternatives 0:10 to 80:20

Leverage

High spend area Many Sources of Supply Commercial involvement can influence

price0:30 to 60:40

Strategic

Strategic to Operations Few Sources of Supply Large Spend Area Specification may be complex

60:40 to 50:50 to 40:60

Bottleneck

Few Sources of Supply and alternatives available

Complex specifications If supply fails, impact on organisation

could be significant

40:60 to 10:90

Scoring Methodology for Award Stage Evaluation

The Procurement Officer should ensure that a robust methodology is developed to assist with the evaluation process.

If PCS-Tender is being used, the Procurement Officer should input the weightings in relation to the specified criteria. Please note that all sections should add up to 100 and all questions within each section should also add up to 100.

An example of scoring methodology provided below should be used when utilising PCS-Tender:

0 Unacceptable Nil or inadequate response. Fails to demonstrate an ability to meet the requirement.

25 PoorResponse is partially relevant and poor. The response addresses some elements of the requirement but contains insufficient/limited detail or explanation to demonstrate how the requirement will be

fulfilled.

50 AcceptableResponse is relevant and acceptable. The response addresses a broad understanding of the requirement but may lack details on

how the requirement will be fulfilled in certain areas.75 Good Response is relevant and good. The response is sufficiently

detailed to demonstrate a good understanding and provides

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details on how the requirements will be fulfilled.

100 ExcellentResponse is completely relevant and excellent overall. The

response is comprehensive, unambiguous and demonstrates a thorough understanding of the requirement and provides details of

how the requirement will be met in full.

If the Procurement Officer is not utilising PCS-Tender for their procurement, an example of scoring methodology provided below and should be used in conjunction with the Evaluation Matrix: this can be tailored to suit the specific requirements of your procurement exercise.

0Unacceptable Nil or inadequate response. Fails to demonstrate an ability to meet the requirement.

1 PoorResponse is partially relevant and poor. The response

addresses some elements of the requirement but contains insufficient/limited detail or explanation to demonstrate how the

requirement will be fulfilled.

2 AcceptableResponse is relevant and acceptable. The response

addresses a broad understanding of the requirement but may lack details on how the requirement will be fulfilled in certain

areas.

3 GoodResponse is relevant and good. The response is sufficiently detailed to demonstrate a good understanding and provides

details on how the requirements will be fulfilled.

4 ExcellentResponse is completely relevant and excellent overall. The

response is comprehensive, unambiguous and demonstrates a thorough understanding of the requirement and provides

details of how the requirement will be met in full.


Standard Pre-Qualification Criteria (file type: doc)

Evaluation Matrix (file type: xlsm)

Strategic Positioning Action Plans (file type: ppt)

- See more at: https://www.procurementjourney.scot/route-3/route-3-develop-documents-selection-award-and-exclusion-criteria#sthash.P2lvhTlG.dpuf

Route 3 - Develop Documents - European Single Procurement Document ESPD (Scotland)

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https://www.procurementjourney.scot/route-3/route-3-develop-documents-selection-award-and-exclusion-criteria#sthash.P2lvhTlG.dpuf

https://www.procurementjourney.scot/route-3/route-3-develop-documents-selection-award-and-exclusion-criteria#sthash.P2lvhTlG.dpuf


This is a standalone Procurement Journey station. As a result all other Procurement Journey stations have not been amended to reflect the introduction of the ESPD (Scotland).

The ESPD (Scotland) must be used for all selection stage questions. Organisations can issue selection stage questions either in advance of an ITT e.g. a Restricted procedure, Competitive Dialogue, Competitive Procedure with Negotiation and Innovation Partnership, or within an ITT document e.g. an Open Procedure. If the selection questions are issued in advance of the ITT, this is known as a two stage process.

The selection stage should allow you to identify suitably qualified and experienced bidders. Selection criteria should be proportionate to the value of the purchase, its sensitivity, estimated risks, and the complexity of the requirement. You must clearly state the minimum requirements and consider the mandatory and discretionary exclusions in the Contract Notice and relevant procurement documents. More detail on exclusion criteria can be found in the exclusion stage station.

To allow organisations to identify suitably qualified and experienced bidders the ESPD (Scotland) must be used to assist in supplier selection.

European Single Procurement Document - ESPD (Scotland)

The European Single Procurement Document replaces the Standard Pre-Qualification Questionnaire (sPQQ) and it is mandatory to use the ESPD (Scotland) for all Route 3 procurements which begin on or after 18 April 2016. You must not use the standard Pre-Qualification Questionnaire (sPQQ) or any local Pre-Qualification Questionnaires from this date onwards.

If you are currently a PCS Tender user you will be able to use the online ESPD (Scotland) template on PCS Tender. If you do not use PCS Tender you should download the ESPD (Scotland) template. Please ensure you always use the document from this source location to ensure that you are using the most up to date version.

The ESPD (Scotland) replaces the requirement for suppliers to provide up-front evidence or certificates by allowing them to self-declare that they:

do not fall within a ground for exclusion (or, if they do, they can demonstrate that they have taken self-cleansing measures);

meet the relevant selection criteria; (where applicable) fulfil the objective rules and criteria for reduction of

candidates.

The introduction of the ESPD is intended by the European Commission to reduce the administrative burden on bidders and to remove some of the barriers to participation in public procurement, especially for small to medium-sized enterprises (SMEs).

There are circumstances in which a bidder must be excluded from the procurement process, and there are other circumstances in which a bidder(s) may be excluded

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from the procurement process if you have selected such ground(s) as possible exclusion ground(s) for your procurement process and you consider that exclusion(s) is appropriate in that particular case. These are referred to as mandatory and discretionary exclusion grounds respectively, and can be found in Part III of ESPD (Scotland) and if chosen for your procurement process will apply to all bidders.

ESPD (Scotland) Questions

The generic ESPD is used across all Member States of the EU and formed the basis from which the ESPD (Scotland) was developed. The ESPD (Scotland) contains the standard set of questions in line with the ESPD requirements and this means that the questions in the ESPD (Scotland) cannot be amended and new questions cannot be added.

Contract Notices and Standardised Statements

The Procurement Officer must set out the specific requirements and minimum standards that are relevant and proportionate for the procurement exercise in the Contract Notice (or the PIN if that is being used as a Call for Competition).

This set of standardised statements has been developed to support you in preparing this aspect of the relevant Contract Notice(s) (or the PIN if that is being used as a Call for Competition). These statements are for you to include in the Contract Notice (or the PIN if that is being used as a Call for Competition) and complete where relevant. You may also set out further selection stage information you require to be included in the Contract Notice (or the PIN if being used as a call for competition) where relevant and proportionate to the subject-matter of the contract.

These statements are aligned to the relevant selection questions in the ESPD (Scotland) to enable procurement officers to adopt a standard approach in Contract Notices (and in PINs being used as Calls for Competition). Therefore where selection questions are not being used in the ESPD for the specific procurement exercise, the corresponding statements will not be required in the Contract Notice (or the PIN if that is being used as a Call for Competition).

Some ESPD (Scotland) questions (and therefore statements) are naturally contract specific and it is necessary for you to add some information to these statements before insertion into the contract notice e.g. if requesting details of appropriate financial ratios you will only choose to use those appropriate to your particular contract, while others do not require further specification and you can choose to adopt them in their entirety.

This is not a definitive list of statements and the Procurement Officer should determine which statements are most appropriate for the individual procurement exercise.

The Scottish Government is working with the Public Contracts Scotland (PCS) system provider to have these standardised statements embedded in the contract notice functionality to enable Procurement Officers to use these online on PCS in the future.

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Reliance on Other Parties

Where the capability and capacity of a sub-contractor, members of a consortia or any other body will be relied on to meet the selection criteria, you must request submission of a separate ESPD from each of those other parties relied on.

Where sub-contractors are to be used, but their capability and capacity is not to be relied on to meet the selection criteria, you may choose to request a separate ESPD from those sub-contractors if you consider it relevant and proportionate to the particular procurement exercise, you may consider requiring confirmation of whether there are any mandatory or discretionary grounds for the exclusion of any sub-contractor involved in the delivery. Where this information is sought, the ESPD must be used and any such requirements must be specified in the Contract Notice or Procurement Documents referred to in it (or, if a PIN used as a call for competition, in the PIN, the Procurement Documents referred to in the PIN or in the invitation to confirm interest).

Where the verification has shown that there are mandatory grounds for the exclusion of a sub-contractor, you must require that the sub-contractor is replaced.

Where the verification has shown that there are discretionary grounds for the exclusion of a sub-contractor, you may require that the sub-contractor be replaced. This should be considered on a case by case basis, taking into account the various circumstances of the procurement exercise.

More details on this can be found in the exclusion criteria.

Supporting Evidence

Bidders are not required to produce supporting documentary evidence at the time of submitting the ESPD (Scotland). . You must, however, request this evidence from the tenderer to which you decide to award the contract before awarding the contract (or before the ITT stage of the Restricted Procedure, Innovation Partnership, Competitive Dialogue and Competitive Procedures with Negotiation procedure) as part of your due diligence process.

You may also, where it is necessary to ensure the integrity and proper conduct of the procurement process, request at any time during the procurement process, all or part of the supporting documents from bidders.

It is a discretionary ground for exclusion for a bidder not to be able to provide the ESPD supporting documents, or to withhold or misrepresent such information. More details on this can be found in the exclusion stage.

Multiple Use of the ESPD (Scotland)

Bidders may reuse the information that has been provided in an ESPD (Scotland) which has already been used in a previous procurement procedure, as long as the information remains correct and continues to be pertinent.

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Bidder Responsibility

Bidders may be excluded from the procurement exercise where:

there is serious misrepresentation in filling in the ESPD (Scotland),

or

there is serious misrepresentation of, or withholding, the information required for:

o the verification of the absence of grounds for exclusion;o the fulfillment of the selection criteria;

or

the bidder is unable to submit the supporting documents.

More details on the circumstances when a bidder may be excluded due to the above and the possible justifications by bidders is set out in the exclusion criteria e.g. bidders must not be excluded if they have “self-cleansed”.

Shortlisting

Shortlisting the number of bidders to be taken forward to the next stage can be done most easily within the Technical and Professional Ability (Part IV. Section C) section of the ESPD (Scotland), since in this section the Procurement Officer can apply a weighting and scoring mechanism.

The objective and non-discriminatory criteria that will be applied to produce a 'shortlist' of bidders must be contained in the Contract Notice or PIN if that is used as the Call for Competition. This should include weights and scoring, where applied, with an explanation of the relative weighting and scoring methodology.

In summary

The diagram below is provided to assist your understanding:

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ESPD (Scotland) (file type: docx)

ESPD (Scotland) Standardised Statements (file type: doc)

Route 3 - Develop Documents - Pre-Qualification Questionnaire (PQQ)The European Single Procurement Document (ESPD) is introduced by the new EU Public Procurement Directive. It is a legal requirement to use the ESPD (Scotland) for all procurements with an estimated value of the OJEU threshold and above, commenced on or after 18 April 2016.

To allow public bodies to identify a number of suitably qualified and experienced businesses who will be invited to submit a tender, the Scottish public sector's standard Pre-Qualification Questionnaire (sPQQ) template should be used to assist in supplier selection.

These questions should not be amended, however questions can be deleted if not required and additional questions added provided that they are relevant to the subject matter of the contract.

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Supplier selection is the assessment of supplier's resources and capability as detailed in the sPQQ Guidance for Buyers.

Selection should be proportionate to the value of the purchase, its sensitivity, estimated risks, and the complexity of the requirement. For many small value purchases of standard items or simple services, the supplier appraisal may be no more complicated than confirming potential tenderers are experienced in their business, can supply the requirement and have not been convicted of any of the criminal offences listed in regulation 23(1) of the Public Contracts (Scotland) Regulations 2012 (even for contracts which are not covered by the Regulations). Equally, a small value purchase could involve some detailed supplier appraisal work should the item be of strategic importance or involve a frequent servicing commitment.

Ensuring that selection criteria are appropriate to the particular procurement, the supplier selection process prior to issuing an Invitation to Tender (ITT) is a "backward-looking, not forward-looking" process. That is, the criteria for selection should concentrate on the general suitability and capability of the candidate supplier for the project, as opposed to the specific means by which the supplier would implement the contract. The intention of this stage of the procurement process is to identify the suppliers who are most capable of performing the contract. The contracting authority must therefore refrain, at this stage, from asking questions that would be more appropriate for the tender stage of the process.

It is vital that PQQ questions make sense to the supplier; that they deal with topics, processes and services that they can readily understand, and that they do not ask for inappropriate information (or the right information in an inappropriate way). The questions asked in the PQQ must be consistent with what is allowed under the EU Procurement Regulations. The sPQQ template provides details of questions which can be asked. If you are unsure about what can and cannot be asked then seek professional procurement or legal advice. Market sounding can help here, by providing useful background on market-specific terms, conventions etc.

Where suppliers propose to form a consortium, the prime bidder should be requested to provide a single set of responses covering all consortium members. Where a public body awards a public contract to a consortium it may, if it is justified for the satisfactory performance of the contract, require the consortium to form a legal entity before entering into, or as a term of, the contract.

The track record of a consortium member should include details on performance and reliability on previous projects - those undertaken on its own account and jointly with consortium partners. This will also encompass records on short-listing and details of any contract breaches.


Standard Pre-Qualification Questionnaire (file type: doc)

sPQQ Guidance for Buyers (file type: doc)

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Route 3 - Develop Documents - Invitation to Tender (ITT)The Invitation to Tender (ITT) document should include comprehensive information for potential suppliers about the requirement being tendered. The content will be specific to each requirement however there are a number of generic documents that you should include in the ITT pack.

Whilst developing the documentation it is likely that the procurement officer will draw information from the developing strategy stage of the Procurement Journey.

If following a 'restricted' procurement procedure, the ITT will only be sent to those who were successful at the pre-qualification questionnaire (PQQ) evaluation stage.

A list of documents that should make up the ITT pack is provided below:

Mandatory Inclusion

Instructions to tenderers e.g. timetable, submission deadline, e-tendering process, including information regarding the impact on a public body of the Freedom of Information (Scotland) Act 2002 and the Environmental Information (Scotland) Regulations 2004

Background and overview of the tendering and evaluation process including details of presentations and site visits, if applicable

Terms and Conditions of contract which will apply to any resulting contract with the principle supplier

Specification and technical requirements Response requirements Quality questionnaire Pricing schedule Form of tender Acceptance of Terms and Conditions For Frameworks inclusion of mini competition guidance

Suggested Inclusion

Covering letter Acknowledgement letter for tenderers to return to the public body on receiving

the documentation

Suggested templates for many of the above mentioned documents are available via the following link: Scottish Procurement Standard Forms & Documentation

Evaluation criteria

The questions within the ITT must be consistent with the evaluation criteria and weightings published or referenced within the Contract Notice. You should also draft

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a timetable for the process which must comply, where appropriate, with the minimum timescales detailed in the EU procurement regulations.

Further inclusions for ITT documentation

You may wish to consider the areas below for inclusion within the ITT documentation:

eCommerce

eCapability ITT section ITT - Appendix X - eProcurement Information

Contract implementation/contract and supplier management

Requirement to provide line item detail Roles & Responsibilities KPIs Management information requirements Proposed approach

Mini-competition guidance

Details of process to be followed for call offs

Buyers can ask for the most updated list of organisations for each of the worksheets on Appendix X:

[email protected]


eCapability ITT Section Document (file type: docx)

Appendix X (file type: xls)

KPI Document (file type: pptx)

Management Information Document (file type: docx)

Route 3 - Develop Documents - Contract Notice and AdvertisingPublic Contracts Scotland (PCS) is a national portal which provides free access for suppliers to contract opportunities and guides Procurement Officers through the

47


process of creating a Notice for publication on it's website and the Official Journal of the European Union (OJEU).

Further information about the portal was issued in SPPN 12/2008

If your Organisation does not use PCS, the SIMAP portal can be used to create and publish Contract Notices for OJEU. The standardised Pre-Qualification Questionnaire (sPQQ) can be found in the Pre-Qualification Questionnaire station and issued if your Organisation is not using PCS-Tender. Please note size restrictions currently apply (10Mb per document and a maximum of 40Mb for the Procurement Officer and 10Mb per document with a maximum of 30Mb for the Supplier) on PCS Advertising.

It is important that the Contract Notice provides the scope of the requirement, either by volume or by value and, in the case of Contract Notices for Framework Agreements that it clearly identifies the bodies who will be entitled to use it. There are points to consider when completing OJEU notices and further guidance specific to Framework Agreements is provided in SPPN 05/2010.


Points to Consider in Completing OJEU Notices Document (file type: docx)

Route 3 - Supplier SelectionThis section of the Procurement Journey provides the Procurement Officer with guidance on completing the 'Selection Stage' of the tendering process as outlined in the Contract Award Procedures.

The guidance found here centres around the use of a Pre-Qualification questionnaire (PQQ) to assess the resources and capability of suppliers who express interest in the published Contract Notice. The PQQ questions may also be used under the Open procedure as a means of assessing suppliers capability. The main difference in the use of a PQQ document under the Restricted procedure and the Open procedure is that in the former, the Invitation to Tender (ITT) document need only be issued to a 'short-list' of competent suppliers, whereas in the latter, all competent suppliers must be issued with the ITT.

Timescales for each procedure differ. Consideration must also be given to Planning and Risk Management throughout this stage of the Journey.


OJEU Timescales (file type: pptx

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Route 3 - Supplier Selection - Publicising the ContractTo ensure that value for money is achieved it is essential that a sufficient number of competent, financially sound suppliers with adequate capacity to undertake the work be identified.

If a purchase is above the relevant EU thresholds, publication in OJEU is likely to be mandatory. The EU Procurement Regulations do not allow advertisements for such contracts to appear in any other media before the notice is despatched to OJEU. Neither can adverts in any other media contain information which is not included in the OJEU notice.

You should note that even where the EU Procurement Regulations do not require advertisement of a public contract in OJEU, Procurement Officers must still consider whether the requirement needs to be advertised in order to meet a general obligation derived from EU law of demonstrating open competition, equal treatment, non discrimination and transparency.

For further information on adequate publicity see SPPN 3/2006 on advertising contracts that are exempt from the Scottish Procurement Regulations and SPPN 4/2009 for Public Contract Scotland (PCS) and advertising contracts with values of £50,000 and above.

Any advertisement should make it clear what the business need is so that suppliers can see what services are required. Suppliers can then assess whether they wish to register an interest in bidding.

Route 3 - Supplier Selection - Issuing Pre-Qualification Questionnaire (PQQ)The standard Pre-Qualification Questionnaire (sPQQ) Guidance and the standard Pre-Qualification Questionnaire (sPQQ) template are available to help you produce a PQQ for use in restricted, negotiated and competitive dialogues procedures, which entail two distinct phases:

The qualification stage, which involves an examination of the capability and suitability of the potential suppliers to perform the contract, and is used to produce a short-list of suppliers to whom the Invitation to Tender (ITT) document is issued

The award phase, which involves examination of the merits of the bids

PQQs are sent out to suppliers who have responded to the contract notice. Timescales for the receipt of completed PQQs are stipulated in the EU Procurement Regulations and a time limit may be reduced if the contract notice has been transmitted to the OJEU Offices by electronic means.

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The sPQQ questions should be used on PCS-Tender if the Procurement Officer has access to PCS-Tender. If the Procurement Officer does not currently have access to PCS-Tender, PCS-Advertising should be used. It is vital that the sPQQ questions are not amended. New questions, however, can be added.


sPQQ Guidance for Buyers (file type: doc)

Standard Pre-Qualification Questionnaire (file type: doc)

Route 3 - Supplier Selection - Assessing ResponsesThe evaluation panel should assess responses to the Pre-Qualification in accordance with the scoring methodology which was drawn up in advance of publishing the Contract Notice. As this stage of the process supplier's suitability is being assessed on the basis of:

Business probity and criminality Technical and professional ability Economic and financial standing

These issues should not be revisited at the award phase.

If PCS-Tender is being utilised, the Procurement Officer should invite the evaluation panel to evaluate on the system.

The government is committed to ensuring that public contracts are awarded to legitimate businesses which is why any supplier convicted of one of the criminal offences listed under regulation 23 of the Public Contracts (Scotland) Regulations 2012 should not be invited to bid for a public contract.

SPPN 2/2010 provides information on the use of the security industry authority approved contractors scheme for security industry services.

Route 3 - Supplier Selection - Limiting number of potential suppliersTo limit the number of potential suppliers, the objective criteria and, if applicable minimum standards must be specified or referred to in the Contract Notice and set out in the Pre-Qualification Questionnaire (PQQ) documentation to allow the rejection of potential suppliers.

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The Contract Notice must specify and the PQQ documentation must set out, the objective non-discriminatory criteria that will be applied to limit the number of suppliers to be invited to tender.

The number of suppliers invited to participate in the next stage should not be less than five suitably experienced suppliers who meet the minimum requirements set out in the PQQ evaluation for the restricted procedure and should not be less than three suitably experienced suppliers who meet the minimum requirements set out in the PQQ evaluation for competitive dialogue procedures. Although these are the minimum numbers to be specified by the public body, the actual numbers may be less, if there are fewer numbers of suitably experienced suppliers who have submitted a PQQ or more, if a higher number is deemed desirable to ensure effective competition.

An evaluation report that clearly identifies reasons for rejecting suppliers should be produced to assist with debriefing, and as a matter of best practice, suppliers should be advised in writing of the outcome of the PQQ evaluation stage. For requirements that are subject to the Public Contract (Scotland) Regulations 2012, any supplier not advised at the PQQ stage that they will not be issued with an Invitation to Tender (ITT) documents must be provided with certain information at the contract award decision stage.

If PCS-Tender is being utilised, the system can generate de-briefing reports.

SPPN 3/2010 provides details regarding the notification of suppliers of their elimination from a competition prior to the final award decision being made.

Standard template notices have been updated since SPPN 3/2010 issued and can be found at:http://www.scotland.gov.uk/Topics/Government/Procurement/buyer-information/standardformsanddocs

Route 3 - Issue ITTThis section of the Procurement Journey provides guidance about the tender stage of the process. Timescales for each procedure differ and are outlined on the Contract Award Procedures.

It is important that you maintain fairness and transparency during this stage, particularly when providing information to suppliers at meetings and/or following questions on the ITT documentation. Guidance on conduct is therefore contained within this section.

Consideration must also be given to Planning and Risk Management throughout this stage of the journey.

Route 3 - Issue ITT - ITT Administration

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It is considered best practice to use PCS-Tender if the Procurement Officer has access to help manage the administrative aspects of the tendering process. Alternatively, Public Contracts Scotland – Advertising should be utilised.

If your Organisation does not use an electronic tendering system or Public Contracts Scotland, you should refer to your internal governance procedures for information on how to manage this stage of the Procurement Journey. Some basic guidelines are provided below.

Invitations to Tender (ITT) normally go to all short listed companies at the same time, although the open procedure allows for ITTs to be issued on request at any point prior to the date set for submission of tenders. When an ITT is issued near to the closing date, the recipient should be made aware that the submission date is imminent.

If there is a justifiable reason to change the closing date, the necessary approval must be obtained in accordance with your internal governance. If the date is amended, the new date should be notified to all tenderers, and if any tenderer indicates that they have already submitted a tender then they should be given the opportunity of withdrawing the original tender and submitting a revised one.

Route 3 - Issue ITT - Open Suppliers' MeetingA Suppliers' Meeting (also known as a Bidder's Conference) is where all tenderers are invited to attend at the same time and venue to discuss the Invitation to Tender (ITT). This can happen before or after the ITT is issued. The purpose of the meeting is to highlight and clarify aspects of the ITT. Commercially sensitive information should be guarded at all times (e.g. you may not wish to reveal project/budget information).

Sufficient time must be allowed for tenderers to take account of outcomes the suppliers' meetings.

The meeting should be opened by setting out the agenda and introducing the personnel involved. This will be followed by a presentation, setting out the aims of the procurement process and expected business benefits. If appropriate, there can then be a walk round of the facilities/site, otherwise it is straight into a question and answer session.

The overriding principle that should be applied is equality of information, questions raised and answers provided should be confirmed in writing and sent to all tenderers whether they were represented at the meeting or not. This information should be provided not later than six working days before the tender return date. In conjunction with the information provided, suppliers may wish to take notes of the proceedings. Suppliers should not however, be permitted to use audio or visual recording equipment at any time during the course of the meeting. This should be made clear to suppliers when invited to attend the meeting.

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A suppliers' meetings will not always be necessary for every tender exercise. A judgement will have to be made, prior to the issue of the ITT, whether or not such a meeting is required, in order that it may be planned into the procurement timetable.

Route 3 - Issue ITT - Questions from SuppliersOnce the procurement has commenced either by issuing the Pre-Qualification Questionnaire (PQQ) for the restricted, negotiated or competitive dialogue or by issuing an Invitation to Tender (ITT), care must be taken and a process put in place to ensure that all correspondence between the suppliers and the public body are carried out in a fair and transparent manner. For example, any question submitted by a supplier along with the answer provided by the public body must be anonomised and circulated to all of the suppliers involved in the process. All questions must be responded to at least four days for restricted procedure or six days for open procedure prior to the date set for tender return. For other procedures please refer to The Public Contracts (Scotland) Regulations 2012.

The use of an electronic tendering system, for example Public Contracts Scotland - Tender, will facilitate the receipt and circulation of questions and answers. Public Contracts Scotland offers similar functionality via the bulletin board. If you do not use an electronic system, clear instructions and contact details should be provided to the suppliers within the ITT documentation. Communications with all parties during the procurement activity should be coordinated by the Procurement Officer.

It is best practice to provide details of the deadline for the submission of questions and the date by which all questions will be answered within the ITT documentation. These dates should be prior to the closing date for expressions of interest or tenders and allow sufficient time for all suppliers to consider information which may be relevant to their proposals.

Route 3 - Open & Evaluate TenderThis stage of the Procurement Journey has become the subject of much scrutiny and criticism in recent years. The Freedom of Information Act (Scotland) 2002 has led to a notable increase in the amount of documentation relating to the evaluation of tenders and contract awards being released into the public domain and it is your duty to ensure that any procurement process can withstand such scrutiny.

This section provides you with guidance to assist in maintaining transparency and impartiality throughout the process of tender evaluation. It is important that the evaluation of tenders is robust in order to provide a full justification and audit trail for the resultant award decision.

Consideration must also be given to Planning and Risk Management throughout this stage of the Journey.

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Route 3 - Open & Evaluate Tender - Receipt of TendersIt is considered best practice to use PCS-Tender if the Procurement Officer has access. Alternatively, Public Contracts Scotland - advertising can be utilised.

If your Organisation does not use PCS-Tender or Public Contracts Scotland, you should refer to your internal governance procedures for information on how to manage this stage of the Procurement Journey. Some basic guidelines are provided below:

All formal tenders must be returned to the named individual within the Invitation to Tender (ITT) document

Any tenders mistakenly returned to any other person must not be opened and should be forwarded immediately to the named individual within the ITT document

To ensure tenders remain unopened until the pre-defined opening ceremony, the ITT should include a tender return label for the supplier to attach on the exterior envelope or package

The named individual within the ITT document is responsible for storing the unopened tenders in a locked cabinet or secure room

Best practice suggests that you should obtain at least three responsive tenders where possible. The Regulations require that a minimum of five tenders are invited for the restricted process, where the five are capable of delivering the requirement.

Where tenderers issued with a copy of the ITT do not submit a response, you should ask for reasons why and record these on file to inform future strategy development.

In a case where only one tender is received it must be decided whether to restart the competition or to proceed as a Non-Competitive Action (NCA). Where an NCA is required it is mandatory that the Procurement Officer receives approval from the appropriate person in their organisation e.g. Head of Procurement, before proceeding with the process.

It is the responsibility of all suppliers to ensure that their bid is submitted in accordance with the rules of the competition and before the specified deadline. In exceptional circumstances it may be permissible for a bid that arrived after the deadline to be accepted into the competition. The policy for addressing tenders returned after the due date/time will be subject to the internal governance for your organisation, and possibly legislation. If there is any doubt about whether to allow a late bid into the competition professional procurement and/or legal advice should be sought. There will need to be a clear audit trail in respect of the handling of late bids and any decision taken.

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If PCS-Tender is being utilised, the Procurement Officer will be able to identify the suppliers who have submitted late tenders and determine whether to open the late tender or reject it.

It is considered best practice for the Procurement Officer to notify the supplier if the late tender has been accepted or rejected.

Route 3 - Open & Evaluate Tender - Opening of TendersIf your Organisation is using PCS-Tender, this stage of the Procurement Journey will be automated. You should refer to the specific guidance for these systems for information on how to manage this stage of the Procurement Journey. It is important to ensure that you select the sealed tender option on any electronic tender system.

If your Organisation does not use PCS-Tender, you should refer to your internal policies and procedures for information on how to manage this stage of the Procurement Journey. If you have no internal policies and procedures you may wish to follow the guidelines outlined below.

Prior to the tender return date the Procurement Officer should establish a Tender Opening Board consisting of at least two members of the Organisation's staff. The board is responsible for opening, checking, and recording the details the returned tender submissions on the Tender Opening Form.

The Board must check the following:

Form of tender has been signed and dated by the tenderer Price schedule has been completed in accordance with the instructions within

the ITT Standard Conditions of Contract and all other conditions of contract issued

with the ITT have not been amended or altered nor replaced by the supplier's terms and conditions of contract.

Any omissions must be recorded in writing, and kept for the registered file

Note: if a tender is incomplete, or doesn't conform to instructions, it may be disqualified - refer to the appropriate person in your Organisation e.g. Head of Procurement, for guidance.If the tender is disqualified, the Procurement Officer must inform the tenderer in writing at the earliest opportunity that the tender has been disqualified and the reason(s) for disqualification.

The completed Tender Opening Form must be retained and filed as part of the audit trail for the procurement.


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Tender Opening Form (file type: docx)

Route 3 - Open & Evaluate Tender - Technical EvaluationTechnical and quality evaluation is one of the most important stages of the Procurement Journey. This stage of the Journey ensures that:

The contract award decision is objective The decision making process is fair, transparent and auditable The public body can demonstrate best value in the tender process

Tender evaluation happens once the deadline for tender submissions has passed. The time taken to evaluate the returned submissions will vary from project to project depending on the complexity and the number of responses received. However, the Procurement Officer should endeavour to provide approximate timescales for this stage as part of the Invitation to Tender (ITT) document.

The tender evaluation timescales may reduce if PCS-Tender evaluation is being utilised.

An evaluation panel of at least two people should be established and consist of individuals with demonstrable technical ability to evaluate tenders, this may or may not include the Procurement Officer. Ideally the panel membership will be consistent throughout the entire process from pre-qualification to presentations and site visits. The evaluation panel should be able to withstand any scrutiny and no member should be associated in any way with any of the tendering suppliers without prior declaration of interest.

The panel members should read and score the quality/technical aspects of the tenders independently using pre-defined evaluation criteria and scoring system prior to a moderation meeting taking place. At the moderation meeting the evaluators come together to agree the final scores. The process to agree the final scores must be fully transparent and documented. The Procurement Officer should evaluate the commercial aspects of the tenders separately, including the price evaluation. As a matter of good practice, no member of the evaluation panel should assess both the quality/technical elements and the commercial elements of the tender. The evaluation criteria and scoring methodology should have been determined as part of the Develop Documents stage and published to tenderers in the Invitation to Tender (ITT) or OJEU advert.

The role of the Procurement Officer in the evaluation panel is to ensure an impartial and objective approach is taken to the evaluation of tenders. Some suggested 'Do's and Dont's' are listed below:

Do's and Dont's of Tender Evaluation

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Do Don'tMake note of areas that are unclear for clarification with the bidder 'Read between the lines' or make assumptions

Read the submission at face value and score on the basis of the information provided

Collude with other panel members to agree scoring collectively

Score tenders independently and discuss any irregularities at a Tender Evaluation Meeting

Make changes to the evaluation criteria during the process - the criteria MUST be the same as that published in the ITT

Ensure full justification for scoring is provided for each question to assist with debriefing

The tender evaluation stage may be accompanied by Presentations/Site Visits.

Unsuccessful bids

You should ensure that the evaluation panel provide justification for their scoring to help when preparing standstill letters and debriefing suppliers. A full justification of scoring is especially important where a bid has failed to meet the 'acceptable' expectation set out in the evaluation criteria. A record should be kept to ensure fairness and transparency of the process.

If PCS-Tender is being utilised, the justification for scores should be recorded on the system.

Route 3 - Open & Evaluate Tender - Price evaluationWhere possible, the price/commercial evaluation of tenders should be completed by the Procurement Officer.

To enable an easier comparison, you should include a price schedule (or use the Commercial Envelope if PCS-Tender is being utilised) with a breakdown of the product/service areas for tenderers to complete. The evaluation should endeavour to identify and compare all the costs and benefits' which can be quantified in money terms.

You must consider a 'whole-life costing' approach in order to take account of all aspects of cost from cradle to grave (acquisition, operation, ownership and disposal). Higher value or complex procurements may require the use of investment appraisal techniques (such as discounted cash flow calculations). In all cases the method for price evaluation should be defined within the Invitation to Tender (ITT) documentation.

You may find the Supplier Cost Drivers Checklist useful when developing a pricing schedule.

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Price/financial evaluation criteria should include:

Whole Life Cost comparisons Quantifiable financial benefits arising from the technical evaluation (e.g.

speed, fuel or electricity consumption, coverage, shelf life etc) Fixed or variable pricing Cost of components, spare parts, consumables and servicing Risk analysis and financial appraisal (for major contracts of strategic

importance, especially those of an innovative nature)


Supplier Cost Drivers Checklist (file type: ppt)

Route 3 - Open & Evaluate Tender - Presentation/Site Visits Presentations and site visits can be included as part of the evaluation process to offer the opportunity for the evaluation panel to gain a clearer and deeper understanding of the tenderers proposal.

The purpose and anticipated outcomes of the presentations and site visits must be made clear in the Invitation to Tender (ITT) documentation including details of how the visits will count towards the overall evaluation of the tender submissions.

Details of any scoring for either the presentation or site visit must be pre-agreed and published with the Contract Notice and ITT documentation.

The Procurement Officer should ensure that the focus of these events is around the specification and delivery of the product or service and not on the characteristics of the tenderer.

Route 3 - Open & Evaluate Tender - Evaluation ToolsThe Evaluation Matrix is a tool that can be used to identify the best value for money proposal taking account of both qualitative and financial criteria.

As a matter of good practice, no member of the evaluation panel should assess both the quality/technical elements and the commercial elements of the tender.

The price criteria worksheet considers the whole life cost of the project in terms of acquisition, operating and end of life costs. Government Procurement Services (formerly Buying Solutions) have developed a Total Cost of Ownership Calculator for PCs, Laptops and Monitors to calculate all the costs associated with the ownership of the equipment, which can then be entered into the evaluation matrix.

Note that all formulas are embedded within the template therefore you only need to enter the values. The spreadsheet is based on a scoring methodology of 0-4, if an

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alternative range is more appropriate for your procurement exercise the formula for the weighted score will have to be amended.

If PCS-Tender is being utilised, percentage scoring is required and the weightings input onto the system therefore the Evaluation Matrix is not required.


Evaluation Matrix (file type: xlsm)

TCO Calculator (file type: xls)

Route 3 - Post Tender ClarificationThis section provides the Procurement Officer with guidance to conduct Post Tender Clarifications and Negotiation where appropriate. It is important that any discussions at this stage are fully documented.

Consideration must also be given to Planning and Risk Management throughout this stage of the Procurement Journey.

Route 3 - Post Tender Clarification - Tender ClarificationsThe objective at the clarification stage is to clarify the tenders as submitted.

Tender, or bid clarifications may become necessary during the evaluation of tenders. For example, where there are aspects of the bids that are unclear or contain minor errors. The Procurement Officer should consider whether, where a certain aspect of the bid seems anomalous, it might be prudent to request clarification. For example, if a bid appears especially low, or especially high on price, it may be that an arithmetical error has been made. Clarification may also be sought from tenderers on matters of quality performance or particular terms and conditions of contracts.

In seeking clarification, all communications with tenderers must be properly recorded so that an audit trail is maintained. IF PCS-Tender is being utilised, this can be recorded on the system in the messaging area. Negotiations in relation to price or other areas where improvements may be possible should not take place.

The Procurement Officer should give all tenderers who are able to meet the requirements of the tender the same opportunity to engage in tender/bid clarification. Extreme caution and care must be exercised to avoid either unfairness to potential tenderers or the impression of unfairness to some tenderers.

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Procurement Officers should examine tenders to ensure that suppliers are not making fraudulent claims, and have delivered similar type of work, if they have claimed to do so. In doing so the following points should be considered:

Are the claims made in the tender submissions legitimate and verifiable If tenderers are inexperienced in the type of work being tendered, tenders

may appear excessively high or abnormally low. In both cases Procurement Officers should ensure that suppliers have understood the scope of the requirement

Have there been any perceived or obvious attempts to influence/interfere with the process?

Are similar tenders with a large price discrepancy between different tenderers? This could suggest collusion

Was anyone involved who should have been excluded as part of the selection process?

Have conflict of interest forms been requested and if so who controls the information submitted? Consider an efficient monitoring system

Should a conflict of interest have been identified earlier in the process? Have conflict of interest declarations been examined and ratified? Are there tenders with large price discrepancies from tenderers, who have

worked in the same industry for some time? This could again suggest collusion

Read and digest the tone of emails. Do they appear over friendly or allude to additional meetings either professionally or socially? Information is often exchanged during a visit or a social event. Procurement Officers should always maintain an audit trail of all correspondence

Were all tenders submitted on time and delivered in the prescribed manner? Examples of tenders being sent via a person within the tendering organisation could constitute a breach of protocol and should be examined

Were late tenders accepted and if so was there a legitimate reason?

Post-Tender Negotiation (PTN), where it is practiced by an organisation, should be handled as a separate exercise from Tender Clarification.

Route 3 - Post Tender Clarification - Post Tender NegotiationPost Tender Negotiation (PTN) should not be confused with 'tender' or 'bid clarification'. Tender clarification, explained in the previous section, is contact between the Procurement Officer and the tenderer(s) purely for the purpose of clarifying aspects of the tender which are perhaps ambiguous or anomalous.

PTN is contact between you and the leading the tenderer with a view to improving or enhancing Value for Money (VFM). PTN is conducted after the receipt of formal tenders, and before the award of any contract. It is the role of the Procurement

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officer to ensure that any PTN conducted does not change the outcome of the competition.

PTN as part of the competitive tendering process in the open and restricted procedures, may be used to refine and improve the bid(s) from the preferred supplier(s) in order to ensure that prices, delivery or associated terms of the contract are competitive.

The potential areas for negotiation will differ for every contract but typical topics might be the terms of payment, quality of goods or services, supply and cost of spare parts, earlier delivery or completion dates, warranties and guarantees, documentation requirements, expediting and inspection procedures, maintenance and support, repair or after-sales service, compensation for failure to meet specified requirements (e.g. of delivery, quality etc) and procedures for remedial action for unsatisfactory service. The list is not meant to be exhaustive.

PTN must not become any form of 'Dutch Auction': unfairly trading off one tenderer against another by using the lowest tender to seek a reduction in costs from the other tenderers.

Competition must not be distorted by allowing a tenderer, not clearly in the lead, a chance to improve its offer. Nor should any changes be made which would result in a contract being awarded on terms more favourable to the tenderer. At all stages the competing tenderers must be treated in an honest, fair and ethical manner, whilst retaining confidentiality of their bids.

Procurement Officers engaging in PTN should comply with the EU Regulations - see section entitled "Post-Tender Negotiations in Open and Restricted Procedures".

It must be a controlled and documented process. It should not be used automatically on all procurements. Before engaging in PTN, the following criteria must be met:

there must be a considered and soundly based prospect of improving value for money

it must be subject to senior management's prior approval trained and experienced purchasing staff must conduct negotiations the negotiations must be fully documented, so that a clear audit trail is left

A clear "audit trail" must be available so that it can be seen that it was conducted in a fair manner. The file should show:

the justification for PTN the approval for PTN (at a suitably senior level of management) the aim of the negotiation the precise record of all exchanges written and verbal the approval for the award of contract

When carried out in an atmosphere of openness and mutual trust negotiations can strengthen relationships with suppliers.

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Negotiation Process (file type: docx)

Route 3 - Contract Award

You should now be at a stage where you have identified the successful tenderer(s). From a fraud awareness perspective, the following checks should be made before progressing to the next stage:

Tender Award Documentation

Before a Procurement Officer awards a contract they should check the following points:

Who was involved in the tender award process? Have there been any changes in staff from those involved during the tender evaluation?

Did any of the tenderers drop out of the process and decide not to proceed with the tender?

Consider if an unknown agreement has been made. On the award, review the list of suppliers/sub-contractors. Are they the same

as other companies involved in the tender exercise? Such circumstances can lead to a pre-determined outcome as it would be irrelevant who is awarded the work. This may rule out cartel operating.

Tender Award

A contract award recommendation report should be prepared by the Procurement Officer and endorsed by the User Information Group (UIG) prior to approval by the appropriate authority level within your organisation.

The report should contain reference to the following:

Summary of the process to date Ensure any decisions for supplier disqualification have been fully documented

and that the paperwork is available for inspection Recommendation of award & request for approval Pre-qualification evaluation results (if not contained within previous report) Technical & commercial evaluation including details of any clarifications

conducted Benefits and savings available Details of any risks still present Sustainability considerations (social, economic and environmental)

Once you have obtained approval you can notify both the successful and unsuccessful tenderers of the outcome they should be notified as soon as possible.

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If PCS-Tender is being utilised, the notification can be issued electronically through the system.

Route 3 - Contract Award - Remedies DirectiveThe Remedies Directive provides legal remedies to aggrieved bidders for breaches of EU procurement law by public bodies or utilities. The current directive came into force on 20 December 2009 and introduced changes to:

a prohibition on entering into a contract or concluding a framework agreement if a notice of court proceedings have been issued and served

remedies/penalties for the most serious breaches of the procurement rules, including ineffectiveness orders (orders which have the effect of cancelling a contract or framework agreement), orders shortening the duration of a contract or framework agreement and the imposition of a financial penalty on the public body concerned

changes to the time limits for bringing court proceedings

Further information can be found in SPPN 7/2010.

Route 3 - Contract Award - Notification of Contract Award DecisionStandard template notices can be found at: Standard Forms and Documentation.

Standstill notices should be sent as soon as possible after the contract award decision has been made.

Please note, if the commodity was deemed to be catalogueable, the Procurement Officer should set up the successful tenderer on the Catalogue Content Management (CCM) system to ensure that he/she can prepare the catalogues.

Route 3 - Contract Award - StandstillThe standstill period is a defined period of time between the contract award decision and the award of the contract. The purpose of the standstill period is to provide unsuccessful tenderers and candidates concerned (candidates who were not notified of the outcome of the PQQ stage) with feedback on their submissions (SPPN 3/2010).

If unsuccessful tenderers have any concerns with regards to the process and/or its outcome, they should be raised during this period. A supplier should inform the Organisation before approaching the court seeking any legal remedies,

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explaining the basis for its application to the court. The Organisation should be aware of any legal challenge prior to the end of the mandatory standstill period.

For all public sector and utilities procurements covered by the full regime of the EU Procurement Directives, the mandatory standstill period means that a period of not less than ten calendar days must elapse between the written communication of the award decision to all tenderers and contract commencement where communication has been issued by e-mail otherwise duration increases to 15 days.

The mandatory standstill period does not apply to below threshold procurements, to procurements otherwise outside the full scope of the Directives (e.g. Part B services) or where there is only one tenderer. This includes those following the urgency provision under the negotiated procedure where single tendering takes place.

If a Organisation decides to follow the standstill period on a voluntary basis, they should state that they are doing so on a voluntary basis and not because they believe that they are required to under the 2012 Regulations. If this is not made clear it may create a legitimate expectation on the part of challengers that the full procedural requirements of the Regulations should apply to the procurement.

Route 3 - Contract Award - DebriefingDebriefing is a way of helping suppliers to improve their competitive performance, which in turn produces benefits to procuring organisations. Unsuccessful suppliers and tenderers have a right to know the reasons for their rejection. The Organisation needs to ensure that enough time and resource is given to completion of the debriefing process.

Objectives

To assist suppliers to improve their performance. A debriefing should cover the positive aspects and suggest areas for improvement of the unsuccessful bid. Suppliers will then have the opportunity to address these issues and improve their competitiveness in any future bids.

To offer unsuccessful tenderers the opportunity to provide feedback to the public body on the tender process and to help with continuous improvement of the process.

To establish and maintain a reputation as a fair, honest and ethical customer. This will help to ensure that high quality suppliers will be encouraged to submit tenders.

Debriefing will also be necessary for unsuccessful candidates at the Pre-Qualification Questionnaire (PQQ) stage of the Restricted Procedure.

The Procurement Officer should chair the debriefing. Other User Information Group (UIG) members or end-users can still provide guidance and/or assistance. Where a formal debriefing meeting is required, this may involve representatives from both operational and procurement professionals to ensure that the debriefing is carried

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out by experienced and fully trained personnel. You should ensure that technical/operational representatives understand their role in the debriefing.

The point at which debriefing takes place is determined to a certain extent by the Regulations and also by commercial judgement.

Candidates eliminated at the PQQ stage

legal requirement to notify candidates eliminated at the PQQ stage "as soon as reasonably practicable" (based on commercial judgement)

provision of de-brief information is not required, but should be done as a matter of best practice

if candidates make a written request, de-brief information must be provided within 15 days

Unsuccessful tenderers

all tenderers must receive a standstill notice with the required information as soon as possible after the contract award decision has been made, including a summary of the reasons why they were unsuccessful

if tenderers make a written request, additional de-brief information must be provided within 15 days

For more information on de-briefing content and timescales can be found in SPPN 3/2010.

Standard template notices can be found at: Standard Forms and Documentation.

For requirements where the value is below the EU threshold, debriefing should take place at a mutually convenient time within a reasonable period.

Route 3 - Contract Award - Challenges During StandstillIf court proceedings are served on a public body during the standstill period then the Organisation cannot enter into the contract.

Public bodies must ensure that a process is in place to make sure that all relevant staff are informed when proceedings are served and that appropriate action is taken.

For further information you should refer to SPPN 3/2010.

Route 3 - Contract Award - Award

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Once the standstill period has elapsed with no challenge from unsuccessful tenderers you can award the contract providing you have obtained any internal approvals your Organisation's governance requires.

Before awarding the contract to the successful tenderer(s) you may wish to refer to the checklists in SPPN 3/2010. See extract below:

Pre-Contract Award Checklist:

Was the standstill notice sent to all tenderers? Were there any candidates concerned and if so was the standstill notice sent

to them? Has the standstill period actually passed? Were any tenderers or candidates concerned not notified by fax or email? If

so 15 day standstill applies.

The contract documentation should be collated and finalised to reflect the successful tenderers submission and agreed terms and conditions. The documentation must be signed in duplicate by the appropriate authority levels in both the contracting and tenderer's organisations.

You must consider who you need to inform when a contract has been awarded and the information they will require e.g. notify stakeholders and users of the contract award providing them with timescales, details of the contract and any migration considerations. Many organisations have a governance process which requires internal approval to be obtained before the contract is awarded to a supplier.

If utilising PCS-Tender, the Contract Award must be activated on the system. Please note that this does not generate correspondence to the tenderers and this should still be issued by the Procurement Officer. The Contract Award Notice should also be created on PCS-Advertising.

Route 3 - Contract Award - Contract Award NoticeThe Contract Award Notice is a public announcement of the outcome of a public procurement exercise in the Official Journal of the European Union (OJEU).

The publication of a Contract Award Notice is mandatory for ALL procurement exercises exceeding the value of the EU advertising threshold, including those that did not require full advertising at the outset of the process e.g. Part B service contracts. The notice must be published within 48 days of the contract award date.

The notice can be submitted using the Public Contracts Scotland (PCS) portal or SIMAP (if your organisation does not use PCS) and will include the following details:

The successful contractor(s) or supplier(s) The overall value of the contract

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The length of contract including any extension periods.

The notice should not include any commercially confidential information such as pricing.

In exceptional circumstances, an Organisation may choose to publish an award notice for a contract with a value below the EU advertising threshold e.g. if the market is particularly competitive and/or there was a significant initial interest in the contract opportunity. However it is recommended that the Procurement Officer exercises caution if considering this option.

Route 3 - Contract Award - Points to Remember

Points to Remember:

Tenderers are entitled to a written explanation of the reasons why their tender was unsuccessful.

In other contracts where the Regulations do not apply debriefing may be undertaken over the telephone, by letter or face-to-face. Which of these methods is the most appropriate is dependent on the complexity and value of the contract.

Care must be taken to ensure that all information provided to a supplier can be justified in the event of a formal complaint and/or legal action being made against the procuring organisation.

Prior to the meeting it is essential that the tenderer understands that the discussion is being carried out with the object of mutual longer term benefits and that the company will be told honestly of strengths and areas for improvement contained in their tender/quotation. The meeting must not be viewed as a forum for debate as to the validity of a tender.

The tenderer should be informed at the start of the briefing that the evaluation was carried out by a multi-skilled tender evaluation team.

It must be made clear to each tenderer that only their own tender will be discussed in relation to the successful tender. Under no circumstances will such things as commercial terms, innovative ideas put forward by another tenderer be disclosed.

The Briefing must be accurate and factual. Debriefing meetings must be carefully planned and executed and only carried

out by experienced personnel. At the end of the interview, suppliers should be asked if they have any

constructive comments on the Invitation to Tender (ITT) documentation and the tendering process generally.

A record of the debriefing meeting must be made and placed on the appropriate registered file.

Route 3 - Contract Implementation

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This section of the Procurement Journey outlines the process and activities associated with implementing a new contract which ensures:

supplier(s) have all the information they require to plan the migration of users to the contract

users have all the information they require to use the contract e.g. suppliers contact details, information on the goods/services available from the contract

continuity of supply

Contract implementation consists of two distinct phases:

Migration - facilitating the movement of organisations to a new contract post 'go-live'

Mobilisation - the process of moving from contract award to 'go-live' i.e. the point when a user can actually buy from the contract

NB Some steps in the process may be done concurrently.

The mobilisation process above is a guide to help plan activities between contract award and go live. The timescales for each of the stages should be amended to reflect your own specific procurement exercise.

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Route 3 - Contract Implementation - CommunicationBelow are the key considerations for communicating the contract these should be considered in your communications plan.

Why?

Having completed all of the vital work to get the procurement to the point of award it is essential that it be communicated effectively. Communication of the contract award and the subsequent procedures are an essential element of ensuring compliance and maximisation of the planned benefit of the procurement exercise.

Who?

It is essential to know who it is that you are targeting with your communications. During the strategy development phase you should have identified all key stakeholders from suppliers to end users. It is important that you consider the communications in terms of the three areas below, for each of the identified stakeholder groups.

What?

What is your communication about? Be clear on and decide your key and supporting messages. Ensure that the subject is appropriate for the correct audience (stakeholder group) and ensure that the communication stays focused on the appropriate subject, what they need to know and what is expected of them.

When?

You should plan and consider the timing of your communications carefully, in line with the implementation process discussed previously. It is important that communications arrive in good time and allow for the audience to digest the information and to then act upon or respond within the timescales. Communication should not only take place at the start and end of the process but should be undertaken periodically.

How?

You must fully consider how you are going to communicate to your audience, some of the activities you will undertake are described more fully further along this process e.g. buyer/end user information packs, supplier buyer events. You may also wish to consider (but not limited to):

Newsletters Intranet/internet article e-zines e-mail Roadshows

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Your communication method should be determined by the stakeholder audience you are targeting e.g. e-mail -small targeted group, newsletter - stakeholder community, internet - public audience. This is intended as a guide rather than being prescriptive.

Route 3 - Contract Implementation - Post Award Supplier Meeting

You should hold the first meeting with the successful supplier as soon as possible after the contract has been awarded. The purpose of this meeting is to discuss the contract implementation phase and agree roles, responsibilities, identify activities and agree timescales. It is important to keep in regular contact with the supplier during the contract implementation phase and to arrange meetings etc when required.

Route 3 - Contract Implementation - Content ManagementPlease note, if the commodity was deemed to be catalogueable, the buyer should set up the successful tenderer on the Catalogue Content Management (CCM) system to ensure that he/she can prepare the catalogues.

The process of content management from start to finish can take weeks, mainly dependent on the size (number of line items) and number of catalogues involved, i.e. receiving initial catalogue data from suppliers, checking catalogue content, validation checks and testing, before finally issuing it to end user organisations.

Route 3 - Contract Implementation - Buyer/End User Information PacksYou may wish to create an information pack for any organisations and/or users which can contain key information about the use of the contract including:

details of the goods and services available through the contract prices supplier contact details ordering information returns/complaints/escalation process contract and supplier management process

This information pack should also demonstrate how the contract delivers best value and provides information relating to the benefits of the contract e.g. savings, KPIs, improvements in quality and service etc.

An example of an information pack is here Postal Services Example. This is a very detailed example and every information pack must be proportionate to the size and complexity of the procurement, therefore your information pack may well be much smaller in size.

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Postal Services - Buyer and Supplier Information Pack Example (file type: docx)

Route 3 - Contract Implementation - Supplier/Buyer EventsA useful way to raise awareness of the contract amongst potential customers is to organise Supplier/Buyer events to give both parties an opportunity to meet each other, an example of a Supplier/Buyer Event Presentation.

This is also a good opportunity to distribute information packs/ buyers guides.


Supplier/Buyer Event Example Presentation (file type: ppt)

Route 3 - Contract & Supplier Management

The purpose of Contract and Supplier Management is to work closely with suppliers and internal customers to minimise the total cost of ownership and to maximise efficiencies throughout the Supply Chain

Route 3 - Contract & Supplier Management - Overview

Vision

To reduce risk, improve and develop contract and supplier performance across organisations, sectors and nationally via a consistent approach which maximises efficiencies and promotes value add contribution across the supply base. To appropriately influence supplier activity and decisions and improve value for money, over and above cost savings.

Organisations should routinely look to employ various techniques to continually improve both their own performance and that of the supply base.

There are a number of formal and informal continuous improvement methods ranging from full continuous improvement programmes through to organisational collaboration and improved internal and external communication. One of the key continuous improvement tools used in the Scottish Public Sector has been the

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Procurement and Commercial Improvement Programme designed to drive forward best practice and develop procurement activity.

Contract & Supplier Management can be considered successful when:

the arrangements for service delivery continue to be satisfactory to both parties, and the expected business benefits and value for money are being achieved or exceeded

the supplier is efficient, co-operative and responsive the organisation understands its obligations under the contract there are no surprises there are no disputes professional and objective discussions over changes and issues are

straightforward and easily managed efficiencies are being realised.

Definition and Importance

Definition There is often confusion between Contract Management and Supplier Management. They are both part of the continuum of activities that relate to post contract award management of the supplier and contracts. Supplier Management is the actions that apply across a supplier’s whole portfolio of contracts, and generally is accepted to be around the more strategic, longer term activities we undertake with them.

However, the fact that it is a continuum has one important consequence. It is very difficult to peform effective Supplier Management if the basic Contract Management disciplines are not in place. It would be difficult to discuss strategic partnerships, innovation or joint ventures if you do not understand the detail behind the contracts your organisation has with this supplier, or how they’re performing day to day. Effective Contract Management is therefore a necessary condition for successful Supplier Management.

Importance of Contract Management at Board/Senior Management Level

An effective Contract Management strategy should be a high priority for Chief Financial Officers (CFOs) or Chief Operating Officers (Accounting Officers) and the Senior Management Teams. Contracts which deliver services or provide infrastructure or third party essentials are so central to the running of an efficient and compliant business, that managing contracts effectively has been, and always will be, a necessity. Eliminating significant cost out of the business (not necessarily by impacting supply chain efficiency/profit), complying with corporate governance regulations, managing enterprise risk and maximising revenue streams are all central functions of an organisation’s Contract Management strategy.

Managing the information and obligations contained in a contract and the overall contract lifecycle are critical to meeting the compliance regulations. This means that the entire process of contract creation, clarity of final agreement, management (say)

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in a central electronic repository, and actions such as integration of contract data with back-end systems and contract performance reporting, needs to be sponsored at an executive level and rolled-out to the entire organisation (for at least the most critical/high impact contracts).

Purpose

The purpose of contract and supplier management is to work closely with suppliers and internal customers to minimise the total cost of ownership and to maximise efficiencies for both buying organisations and suppliers throughout the supply chain by:

developing and managing constructive and transparent relationships with suppliers

ensuring the contract is successfully executed maximising value for money from suppliers and contracts providing a formalised system of monitoring, managing and continuously

improving the supplier and the buying organisations performance against the contract

ensuring that all parties recognise and understand their contractual roles and responsibilities

monitoring overall compliance to Key Performance Indicators and Service Level Agreements and implementing improvement plans in the event of under performance

leveraging supplier expertise in pursuit of cost and efficiency gains realising of additional savings and benefits and sharing them appropriately effectively managing the supply chain providing a focus for development of initiatives and innovations driving continuous improvement identifying of lessons learned to inform future contract terms or strategies developing supplier relationships to maximise efficiency, collaborate towards

common goals and reduce waste, environmental or social risks.

Benefits

Within legal limits, both parties should be motivated and enabled to deliver additional value add, over and above that which was specified in the original contract e.g. not simply extending the expenditure. The process should deliver benefit to both parties, by:

providing formal routes of engagement at different levels of management, thereby allowing opportunities for improvement to be exploited at senior levels

ensuring supply costs are contained and minimised for all parties, and that opportunities for improving cost effectiveness and efficiencies are explored and progressed e.g. packaging, service level definition

proactively ensuring that the business needs under the contract are delivered ensuring both the customer and supplier’s obligations are understood and

managed reducing reactive ‘incident resolution activity’ to minimise the cost of failure

and of managing the relationship

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promoting proactive issue resolution and ensuring clear escalation paths exist within both organisations

using the same standardised approach for a number of suppliers/customers, which will embed operational efficiency, consistency and quality

limiting the number of people involved to ensure consistency in process and communication - ensuring the right people are involved in the right activities at the right time with the right information

encouraging the supplier to improve their product or service in ways which provide value add to the customer and to future customers

promoting efficiencies within both organisations will develop the skills of the employees and help the supplier’s staff to deliver a better service

Route 3 - Contract & Supplier Management - Planning & Governance

Business Case / JustificationWhy embed Contract & Supplier Management?

Persuading stakeholders to implement change can be difficult, particularly if there are no absolute, cast iron guarantees to support the proposition, therefore consideration must be made as to how to demonstrate the potential benefits of an embedded C&SM model.

The guidance below and the linked templates should help you build the necessary business case / justification.

While industry leaders assert that a minimum cost saving of 5% will be achieved by increased and embedded focus on C&SM, an alternative approach may be to consider the risks and missed opportunities of not focussing on C&SM, for example:

the cost of incident resolution activity / service failure poor supplier engagement / flexibility ineffective cost control confused / cumbersome communication channels uncertainty risk of reputational damage risk to service continuity lack of accurate Management Information missed (mutually beneficial) innovation / cost reduction opportunities

Consequently, contract management is unlikely to be effective unless the parties transition from a transactional to a relational model which actively encourages and develops close working relationships.

This necessitates an investment in building the relationship outside of the traditional constraints of a performance-based contract. A ‘we are in this together’ approach

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should be fostered to encourage open communication and to maximise service and cost efficiencies.

It is essential that the Contract Manager is engaged early in the process to ensure that the stakeholders and Contract Manager determine the appropriate service level requirements and KPIs, and that they are built into the contract. Service level and KPI requirements should have been included in the tender documentation.

How to demonstrate the potential benefits of an embedded C&SM model

To succeed, build on small success:

When a pattern of small successes has been achieved, proposing a more ambitious adoption plan becomes much less daunting as there are proven results to refer to.

Instead of leaping into the unknown, it simply becomes the expansion of an already successful process. Given that initial small successes are a recognised option to create awareness and buy-in for the larger initiative; smaller micro-projects are likely to be the best way to gain the traction necessary for the broader, organisation-wide adoption of an embedded C&SM model.

The selection of the micro-project(s) is important, and should be contracts or services which are not in crisis and which have scope for improvement. Even better if it is a contract or service where stakeholders have voiced concerns or expressed a desire to seek improvements in any way.

Once the contract/service has been agreed, a small cross-functional team should be created under a nominated contract manager who will own and manage the project through to its conclusion.

As laid out in more detail throughout the C&SM guidance, the nominated cross- functional team should:

Engage with the nominated supplier and have them create a reciprocal team within their organisation

Ensure clarity of roles and responsibilities within both the supplier and buying organisations

Agree desired outcomes, such as:o leveraging client and supplier expertise to drive cost and efficiency

gainso improved M.I.o agreed KPI’s and a formalised system of managing and monitoring

supplier performance against the contracto identification of innovation / opportunitieso aggressive, but realistic timescales to ensure to ensure focus is

maintained and commitments are delivered

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Once the desired outcomes have been agreed, the nominated contract manager should ensure focus is maintained within both organisations until they have been achieved and delivered. The results should be used to demonstrate the untapped potential open to a focussed C&SM approach.

This document contains some ideas you may wish to include and should help lay out the business case. Your organisation may have a standard template to use.

Resource Planning

Determining the resource required to manage the contract portfolio / supplier base is not an exact science, but very often subjective. Some options are laid out below, but any organisation planning to transition Contract and Supplier Management responsibilities to an embedded C&SM team, must invest time to realistically and pragmatically estimate the required resource.

Subjective

Resource planning for a new C&SM team very often depends upon the subjective judgement of an experienced manager. The post-segmentation profile should provide enough information for an experienced manager to make an initial estimation of the extent of work required to manage the volume of Leverage, Routine, Strategic and Bottleneck suppliers.

A decision may be made to start with a small selection of critical or problematic suppliers and gradually incorporate more contracts/suppliers with additional resource coming on board as appropriate.

The spreadsheet attached is taken from a Scottish Public Sector organisation’s successful proposal to transition from a traditional ‘let & forget’ model to a C&SM model (and is indicative only). For the avoidance of doubt, this organisation absorbed the workload into the existing headcount by reallocating/reprioritising responsibilities and eliminating non value-add activity.

Quantification / Segmentation

Quantification / Segmentation is the most accurate methodology of estimating the resource required to manage the contract / supplier portfolio. It is however, still an ‘estimation’ as many factors can affect the resource requirements, such as:

organisational / process maturity employee capability supplier performance / capability / flexibility

Assess the potential level of C&SM required

Identify where your contract sits

Regardless of how formal a commodity strategy is, or is not, there is always thought and decision making on how the contract or agreement will be set up, who the

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potential supply base is and what the desired outcome is. A straightforward way of assessing the potential level of C&SM required is to consider the:

value (both monetary and importance to the organisation) and; risk (also considering diversity of supply base and reputation) of the

contract/agreement.

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Please find attached a link to the Segmentation Tool. The purpose of this exercise segments the contract portfolio into four categories (Leverage, Strategic, Bottleneck, Routine), which will allow an organisation to estimate the extent of work involved in managing each category.

This information can be used to populate the segmentation-based Resource Calculator Tool.

This tool will provide an estimated resource calculation. There is a natural tendency to over-estimate the work required, and it is important to avoid this trap by being as pragmatic as possible.

Where possible, it would be worthwhile comparing/collaborating with a similar organisation which has a more mature C&SM operation, especially where an organisation lacks the experienced managerial staff required to make informed judgements. This collaboration will allow the organisation to benefit from the experience of the more mature organisation and to factor in distortions such as the learning curve they will experience on the journey toward maturity.

Roles and Responsibilities

Category A, B & C Ownership and Workflow

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Organisation’s Board / Senior Management Team

Board / Senior Management sponsorship is a critical element to facilitate the success of the Contract and Supplier Management Initiative. The Board / Senior Management Team should take the ultimate strategic ownership of business critical, strategic supplier(s), and be fully committed to improving the contract performance collaboratively with those suppliers.

Contract Manager

The Contact Manager should have the mind-set to exceed, rather than meet required goals, deal with a constantly changing set of requirements, and have excellent communication and stakeholder management skills. They should be the principal owner of the supplier relationship and contract performance, and be responsible for business to business relationships, contact management performance and contact management competencies, including:

monitoring of contract and supplier performance against KPI’s and other specified performance indicators in partnership with contract management contributors and end users.

monitoring ‘take-up’ and spend through the Framework or Contract managing any reactive/unplanned issues which arise in relation to the

contract(s) communication of performance and efficiency gains as a result of MI analysis

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drafting and issuing supplier / customer surveys where appropriate chairing and managing performance reviews with the Supplier, including End

User feedback, and disseminating outcomes managing any major performance issues and complaints facilitating and championing supply chain innovation, continuous improvement

initiatives and best practice managing Framework agreement variations, and disseminating outcomes managing the extension of any optional extension periods (and/or the re-

tender process and the Supplier Exit Strategy) providing guidance and advice to End Users as necessary MI validation

Stakeholders / End Users

Contribute to contract and supplier management process by:

supporting and championing supply chain innovation, continuous improvement initiatives and best practice

facilitating the validation of End User feedback on contract and supplier performance

inputting to the monitoring of the supplier performance against KPI’s and other specified performance indicators

inputting to performance reviews with the supplier participating in the annual performance review operational management of compliance, supply, demand and payment at a

local level managing supplier relationships relating specifically to operational issues providing contract/supplier performance data to Contract Management

Contributors referring supplier performance issues to Contract Manager leading, supporting and championing supply chain initiatives

Responsibility Summary Table

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Checklists for the Contract Manager

The attached Checklists provide guidance to the Contract Manager around the following activities:

Planning and preparation Managing service delivery Managing the relationship Contract administration Seeking improvements

Route 3 - Contract & Supplier Management - Managing & Improving PerformanceThis section of the Contract and Supplier Management process outlines a number of activities and tools necessary to effectively manage and improve the suppliers’ performance.

Measuring Supplier Performance

Understand Contract Terms & Conditions

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The fundamental purpose of Contract and Supplier Management is to ensure that the suppliers meet their contractual obligations, and that the contract requirements are successfully delivered. It is therefore essential that anyone engaged in managing suppliers reads and fully understands the contract terms and conditions, otherwise they will be at a permanent disadvantage should any issues arise. It is essential that the Contract Manager is engaged from the Develop Strategy stage early in the process and participates in the development of the terms & conditions.

Balanced Scorecards

The Balanced Scorecards below are recognised tools for monitoring and managing the contract and supplier performance:

Balanced Scorecard

Contract / Supplier Scorecard

The combined ‘Quality’ and ‘Service’ scores in the standards scorecard can be reported as ‘Quality’ on the Scottish Model of Procurement.

Key Performance Indicators (KPIs)

KPIs provide a mechanism to measure the four quadrants of the balanced scorecard (Quality, Cost, Sustainability, Service) and help organisations understand how well they and/or their suppliers are performing in relation to their strategic goals and objectives. Examples can be found here.

Management Information (MI)

It is important that your MI requirements are clearly defined and communicated to the supplier. MI is used to monitor the supplier or contract performance and to ensure management have the information necessary to facilitate effective strategic and operational decisions. An example of MI can be found here.

Escalation:

Performance issues should be addressed immediately, and escalated within the supplier organisation if not resolved promptly.

If you find that the supplier is not delivering the agreed level of service, you should raise this with them immediately. For expediency, this can be done by telephone but should be followed up in writing. The supplier should be asked for an action plan to ensure that the required levels of service re-commences in a short time frame. Depending on the severity of the issue, it may also be necessary to hold a face-to-face meeting with the supplier. All discussions/meetings etc. should be minuted to ensure an audit trail exists. If resolution of the issue is not completed within the timescales agreed then the issue should be escalated (see below) and your procurement contact notified of the problem.

If the issues raised are not resolved to your satisfaction, then they should be escalated within the supplier organisation, and an early face-to-face meeting

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arranged where actions and timescale to remedy the situation should be agreed and implemented. The recovery actions should be monitored on a regular basis to ensure that the agreed recovery / resolution dates do not slip. All discussions/agreements should be noted in writing.

Contract Managers should ensure the escalation process is clearly defined, understood and communicated to all stakeholders and End Users.

Incentives and Sanctions

Incentives and sanctions should be used appropriately to maintain/improve the contract /supplier performance. There are specific contract terms and conditions that can be used to help drive contract compliance/performance, and these should incorporated into the Ts & Cs. You should ensure that you understand the specific contract terms and conditions, and that any incentives and sanctions considered are appropriate and legally enforceable. It is recommended to seek legal advice if in doubt as to the wording, appropriateness or legality of a proposed condition.

Examples of incentives and sanctions which could be considered are listed below, but must not be applied autonomously. Appropriate internal approval must be sought and received prior to implementation.

Incentives could include;

Contract Extension options A longer contract opportunity could provide performance motivation Payment by result, e.g. by use of milestone payments (linked to defined

deliverables) Reduced payment terms

Sanctions could include;

Retention, e.g. legitimately withhold payment if deliverable not completed (with genuine and notified reason, compliant with terms and conditions)

Service credits, i.e. financial deductions where supplier has failed to meet performance standards

Litigation Termination Liquidated Damages (damages whose amount the parties designate during

the formation of a contract for the injured party to collect as compensation upon a specific breach)

It should be noted that for a sanction to be effectively enforced, sufficient evidence would be required to justify the claim or action. It is therefore important to have clear records for example of agreed service levels, notice periods, reminders, communications, agreements etc.

Any incentive or sanction must be enforced in compliance with the agreed terms and conditions of the contract or agreement.

Feedback and Improved Communication

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Improvement opportunities can be identified by anyone engaged with the organisation, both internally and externally. Many improvement ideas come not from the top, but from employees and suppliers operationally involved in the delivery of the service, given that they are regularly exposed to operation inefficiencies which may not be visible higher up in the organisation. The organisation should seek feedback and work to develop a culture where everyone in the organisation is encouraged to look for and suggest operational improvements in the knowledge that all suggestions will be considered.

Demand Management

Demand management, including behavior change, represents a significant and untapped opportunity. In the short term, this is about changing expectations; in the term about changing expectations; in the medium about changing participation; and in the long term about reducing need.

With Demand management you should:

Consider a reduction in the demand for goods Is there an option to use recycled goods to avoid buying new and could

recycled goods be supplied under an existing contract Is there an opportunity to consolidate orders/services to reduce costs Consider if you can reduce your transnational cost by improving the purchase

to pay system

Consideration as to how the demand will be forecast and fluctuations managed should be initially undertaken at the ‘Shaping the Requirement’ Stage, and subsequently monitored and managed throughout the lifetime of the contract. Failure to do so could result in: excess material purchases and subsequent material write off/waste disposal costs

Excess material purchases and subsequent material write off/waste disposal costs

inadequate material availability resulting in additional recovery costs and/or service breakdown

excess inadequate or inappropriately positioned resource reputational damage as a result of service breakdown detrimental impact on the end user

For any service provider to operate effectively, it must understand and manage its demand and use this knowledge to tailor its resources and processes proportionately to ensure they deliver their service in the most efficient and cost effective manner. By understanding historical demand, work with its suppliers to realise mutual cost and efficiency gains.

The most effective way to forecast future demand is to consider a combination of historical demand, prevailing market forces and the organisation business plan/strategic direction. While forecasting is not an exact science and will never be 100% accurate, these elements should provide sufficient information to allow the

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organisation to develop forecasts which are accurate enough to accommodate demand fluctuations during the lifetime of the contract(s) with minimal cost or the service provider stays in regular contact with all key stakeholders (including suppliers), to ensure that all parties are cognisant with the prevailing supply/demand position, especially during periods of fluctuation.

Effective demand management forecasts also give the supply base the opportunity to manage their costs by positioning resource and material in line with demand.

Demand forecasting should be based on considerations such as:

Historical consumption Supplier lead times Market forces Service criticality Key stakeholder input Purchase cost

Information from other buying organisations, trade bodies and business support organisations e.g. Federation of Small Businesses and Chambers of Commerce etc.

Where practical you should look to reduce future demand and costs by using strategies such as:

considering if there is an option to fully or partially transition to recycled goods instead of buying new

reducing transactional cost by improving the purchase to pay system innovating the supplier(s) to reduce mutual cost which should have been

previously written into the contract / Agreement with the supplier

Risk Management

A key element of Contract and Supplier Management is the proactive identification and management of risk. Guidance can be accessed here.

Fraud Prevention, Detection, Monitoring and Handling

More on fraud here.

Overbilling - Weak interactions between the finance, commercial, and contract management functions provides a platform for fraud and overbilling – either due to error and inefficiency or by deliberate intent, and without basic scrutiny of payments and performance, departments rely on the contractor to interpret the contract correctly. A better scrutiny of payments and a sound understanding of the contract will quickly identify both overbilling and fraudulent activity, and allow the appropriate action to be taken

Supplier Health Check

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Contracts are awarded following a thorough evaluation process which addresses some standard elements. Throughout the life of the contract, Contract Managers should perform periodic supplier ‘health checks’ to ensure the standards demonstrated during the initial evaluation have been maintained. These checks could include:

Financial Status, CIS Registration, Business Probity, Conviction of Criminal Offences, Compliance with Legislation and Regulatory Provisions (including Equality), Corporate Social Responsibility: Sustainability and Environmental, Health & Safety and Insurances.

The frequency of the checks should be in line with the type of contract, e.g. strategic and bottleneck contracts will be checked more frequently than collaborative and routine contracts.

Innovation / Value Add

Good Contract and Supplier Management processes should encourage both supplier and organisational innovation. It should be recognised that suppliers often have innovative ideas to improve both their own and their customer’s service, however, they are frequently frustrated in their attempts to these ideas forward.

If an organisation wants to be a customer of choice into which suppliers will invest and bring innovation, it should adopt these behaviours and allow supplier innovation and value add activity to flourish:

Embrace your suppliers as an extension of your business. Learn from their ideas and build open and trusting relationships where innovation will thrive.

Establish a culture of trust and encourage ideas from suppliers, as they often know your business better than some of your own team.

Define and share your organisation's definition of supplier innovation. This way suppliers can understand your internal process, where they fit in and your expectations of them.

Share as much information as you can with your top suppliers. The earlier suppliers can see your product / services roadmap, the sooner they can provide ideas to improve it.

Implement a consistent governance framework. If a supplier’s idea has potential, assign an internal owner to it ensuring there is accountability and development continuity.

Innovation does not have to be ‘ground breaking’. Even minor service or process adjustments can bring cost and/or efficiency gains.

Encourage collaboration within the teams, and let them know there will be some ideas will be more successful than others, but all ideas will be considered. Publicise and reward innovative contributors appropriately.

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Publicise supplier innovation success stories. A brief email outlining real supplier initiated value add and the mutual benefits will encourage others to do the same.

Consider innovation as a standard KPI, and ensure innovation is on the agenda at performance reviews.

The drive for innovation should be reciprocal, and customers should be equally active in exploring innovative ideas which will help the suppliers improve their performance and service delivery.

Review Meetings

Performance Review Meetings provide both the customer and the supplier with an opportunity to focus on end to end performance, identify issues, opportunities and a forum to put the appropriate action plans in place. The Performance Review Meeting standard agenda template can be completed by both the customer and supplier in advance of the meeting, and will provide a structure to the meeting. It is suggested that there should be at least one review annually for suppliers identified under the segmentation process as requiring ‘medium level’ supplier management, and two for ‘high level’ suppliers.

A Review Meeting Template is available here, and a meeting agenda example is laid out below:

Performance Review Agenda Example (agenda can be amended to suit your personal preferences):

Introduction and Opening Remarks - Introduce attendees, recognise special or new guests and provide any opening remarks that are pertinent to this meeting such as current events, organisational changes, etc.

Review of Action Items - Each Performance Management Review meeting will produce some follow up action items for the supplier, the customer or both. These should be documented and followed up at the next Performance Management Review meeting.

Supplier Performance – Performance against SLAs / KPIs / Scorecards should be reviewed and discussed, and any performance concerns raised. This will be a quick review if all deliverables are being achieved, but any ‘below plan’ performance will demand more discussion and most likely recovery action plans which should be managed operationally and reviewed at the next Performance Review Meeting

Customer Performance – The supplier should be afforded the opportunity to raise any customer performance issues which may be impacting their ability to fulfil their contractual obligations

Key Improvement Areas / Opportunities – All opportunities for improvement should be explored, and once identified, action plans should be agreed. Areas to be explored should include: Current performance issues, Cost, Process, Sustainability, Corporate and Social Responsibility, Innovation / Value Add

Supplier presentation – The supplier should provide a business overview: Financials, strategy, overarching objectives, etc

Meeting Summary and Review of Action Items

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Optional benchmarking (where appropriate)

Benchmarking costs against the suppliers’ competitors throughout the life of the contract is a recognised method of avoiding cost ‘creep’ and ensuring best value. It can be used for:

Ensuring incumbent suppliers remain competitive in the market Keeping abreast of the market rates A negotiation tool for cost reductions.

Step One – What to benchmark

Decide which spend category(s) in you wish to perform the benchmarking exercise, and complete a spend analysis on what you have purchased in that area over the last 12 months or so (by line item). Sort the data from the highest to lowest spend and then highlight the top 80 percent of the spend. This will normally be no more than 20 percent of the number of line items and should capture the majority of your spend. You now have a manageable amount of data to go out into the market place with.

Obviously, this does not cover every aspect of the potential scope of supply and in certain circumstances additional items may need to be added such as bottle-neck and specialised items - the idea is to gain an idea of the market rates.

The incumbent supplier should be made aware that you are planning to perform a benchmarking exercise before you go out to the market place.

Step Two – Going out into the market

Having selected the items you want to benchmark, you can now approach the market to understand the current prevailing costs. Benchmarking is generally an informal process and the Management Information Hub is a good source of information, as is the internet in general. You can also contact a number suppliers directly, but it is important to ensure that the recipients of any requests understand that it is a benchmarking exercise as opposed to a business opportunity. The request should be simple enough for the suppliers to provide the information without having to spend a great deal of time doing so.

Step Three – Results analysis

You can now compare the results of your benchmarking exercise by say, entering all the costs into a spreadsheet to determine the price difference between the costs of the incumbent supplier against the prevailing market rates. You can now determine where the incumbent suppliers sits against the best, worst and average market rates.

Step Four – What next?

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If you are happy with where the incumbent supplier’s pricing fits in comparison to market rates, then it illustrates that the supplier is competitive and no further action need be taken.

If you are not comfortable with where the incumbent supplier’s pricing fits, then invite them into a meeting and give them the opportunity to explain why they are not competitive against the current market rates (on no account should you divulge the competitors names or pricing information).

If the supplier is willing to accept that their prices are not in line with the market rate then this will be a relatively pain free cost reduction for you. If however, the supplier is unwilling to negotiate a reduction, then you should initiate the escalation process and include as an agenda item at the next Review Meeting.


Balanced Scorecard Document (file type: pptx)

CSM Scorecard Document (file type: xlsx)

KPI Examples Document (file type: pptx)

Review Meeting Template Document (file type: ppt)

Route 3 - Contract & Supplier Management - Admin & ToolsContract Administration Checklist

What you need to do Points to considerAdministration of the contract is important

Contract administration is concerned with the mechanics of the relationship between the customer and provider.

Its importance should not be underestimated. Clear administrative procedures ensure that all parties to the contract understand who does what, when and how.

The elements that need managing are likely to include:

Contract maintenance and change control

Notice periods, contract closure or termination

Charges and cost monitoring Ordering procedures Payment procedures Budget procedures Resource management and

planning Management reporting Asset management

Maintain the contract documentation Establish procedures to keep contract documentation up to

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The contract will have to evolve to reflect changes in arrangements.

Contract maintenance means keeping the documentation up to date and relevant to what is happening on the ground.

Maintaining contract documentation is an important activity

date and ensure that all documents relating to the contract are consistent and that all parties have the correct version.

Changes must be controlled

Changes to services, procedures or contracts may have an effect on service delivery, performance, costs and on whether the contract represents value for money. The specification and administration of change control is an important area of contract administration.

Appropriate structures need to be in place with representatives of both customer and supplier management for reviewing and authorising change requests

Be careful that changes do not fall outside the scope of the original OJEU advertisement and conflict with procurement regulations – seek advice if you’re unsure

It is particularly important that additional demands on the supplier should be carefully controlled

Formal authorisation procedures will be required to ensure that only those new requirements that can be justified in business terms are added to the service

Make sure management understands what is happening

Management reporting procedures ensure that information about problems with a contract reaches those with power to act as soon as it is possible

Requirements for service performance reports and management information should be built into the contract and confirmed at the tender stage.

Where possible, use should be made of your organisation's own management information and performance measurement systems

For many business managers a summary of the service they have received along with a note of

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exceptions is normally sufficient

Information requirements may change over the life of a contract

Contract Changes/Variations

Background to Contract Variations

Provision to allow and regulate contract variations should be a standard feature of all contracts. Although a supplier may request a contract variation, the ability to vary the contract must be approved, managed and controlled by the customer.

It is accepted practice for the variation process to provide a mechanism for variations to be agreed between the customer and the supplier in writing through a formal amendment of the contract. This practice is also known as a "change management process", "change control procedure" or something similar.

It is critical that no-one involved in managing and administering the contract unilaterally agrees to informal contract amendments. All potential contract variations/changes must be fully explored with the appropriate contract managers/stakeholders. Any agreed variations should be undertaken in line with the change management process (see below).

The reasons for the variation should be clearly documented. Variations should not be used to mask poor performance or serious underlying problems and the effect on original timeframes, deliverables and value for money should be assessed. If the effects are significant, senior management and other stakeholders must be consulted and/or advised.

They should therefore be planned accordingly. Customers should be alert to the risk that multiple changes made to a contract over a period of time may shift the overall allocation of contract risk or transfer particular risks to the customer. It is important to analyse all consequences of a proposed contract amendment and make sure there are no detrimental effects to the contract or service levels.

Contract managers must ensure that the contract variations are not of such a level that they significantly change the contract requirement and/or substantial parts of the original transaction. If this is the case, it may be necessary to undertake another procurement process because the revised arrangements are substantially different to those selected through the original procurement.

Change Management Process

There are a variety of issues that should be considered in any change management process to ensure that it is effective. Three key areas for consideration are:

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the need for change impact reports; any pricing principles that will apply to the change; and the supplier's obligation to undertake the change.

Where the consequences of getting things wrong are significant and it is recognised that a change is required, it makes sense to run a formal pilot. If the pilot fails to meet expectations you can revisit and retest until you achieve the required results before committing your resources and reputation on a wider scale. For example ‘Plan, Do, Check, Act (PDCA)’ is a recognised continuous improvement (CIP) model which can be utilised to ensure that your change will deliver the desired results. As its name indicates, there are 4 steps to the model of which 2 steps and 3 can be repeated until the desired result is achieved. The 4 steps can be summarised as:

1. Plan: Define the problem to be addressed, collect the relevant data, and ascertain the problems root cause

2. Do: Develop possible solutions, select the most appropriate and implement a small scale pilot solution; decide upon a measurement to gauge its effectiveness

3. Check: Check the problems you have encountered and identify the root causes. Measure how effective the solution has been by comparing pre-pilot and post-pilot data. Depending on the success of the pilot, you have the option of repeating the “Do” and “Check” phases, incorporating additional improvements until you get the desired result

4. Act: You can implement your solution. However, if you are using the PDCA as part of a continuous improvement initiative, you need to loop back to the Plan Phase (Step 1), and seek out further areas for improvement.

Change impact reports

Before any change request can be properly considered, the customer and the supplier must understand the implications of the proposed change. To facilitate this, the change management process may require the service provider (who will normally be in the best position to assess the likely impact of a change) to prepare an impact report. Ideally, the impact report will present a full description of the change, including how the change is to be implemented and, to the extent relevant, detail:

the feasibility of the change; the likely effect of the change on the ability of the supplierr to meet its

obligations under the contract; any cost implications of the change; any consequential impact of the change; where appropriate, acceptance testing procedures and acceptance criteria for

the proposed change; and any other information likely to be of relevance.

Pricing principles

It is useful for the change management process to specify how any costs associated with the change will be allocated between the customer and the supplier.

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Ordinarily, the customer should be required to pay for a change only to the extent that the change cannot reasonably be considered as within the scope of the existing agreement.

Where a change falls outside the scope of the existing agreement, the change management process may detail the principles that will determine the price to be paid by the customer. For example, the change management process may stipulate that the price for any change should be:

reasonable; competitive; and no higher than the price at which a customer would be able to procure similar

products or services from another supplier.

The change management process may enable the customer to request the supplier to provide an auditor's certificate, confirming that the pricing of any change complies with the pricing principles.

Supplier's obligation to undertake the change

An otherwise detailed change management process will be of little value if, even once the price to be paid by the customer has been determined, the supplier can simply refuse to implement the customer's change request.

Accordingly, the change management process may provide that the service provider cannot unreasonably refuse (either directly or indirectly) a change requested by the customer. Unreasonable grounds for refusing a change might include:

demanding unreasonable charges for the change; imposing unreasonable conditions for undertaking the change; or refusing to include the change under the agreement despite the subject

matter being reasonably related to or connected with the services.

Impact reports, pricing principles and the supplier's obligation to undertake the change are just some of the matters that need to be considered in any change management process to ensure that it is effective. A carefully drafted change management process can mean the difference between the system/services that a customer wanted on day one, and the system/services that a customer discovered it needed during the term of the contract.

Contract variations checklist

Key issues to consider in managing contract variations include:

following the procedures required by the contract; assessing the reasons for the proposed variation and whether these may

indicate an emerging or actual performance problem; assessing the impact of the proposed variation on the contract deliverables,

particularly whether the variation or the work it represents is actually required and whether it was part of the original contract deliverables;

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determining the effect the proposed amendment will have on contract price; considering the authority for making the variation; properly documenting details of the variation and its impact; meeting any reporting requirements

Account Pack

The Account Pack is intended to be a repository where the current and historical contract / supplier status is be recorded. Ideally, if anyone wants to understand the contract status or how the supplier is performing, this pack should provide them with the current status.


Account Pack (file type: pptx)

Route 3 - Contract & Supplier Management - Exit StrategyAn exit strategy is necessary to identify possible risks, define potential losses, ensure continuity of services and should be a ‘front end’ activity created before the contract is signed. This may appear counterintuitive, but without a well thought out strategy which is consistent with your overall sourcing strategy, your organisation risks becoming locked into an unsatisfactory relationship or being forced to pay more to part ways and minimise operational impact.

With an exit strategy in hand at the outset of a supplier relationship, your organisation’s needs will be incorporated into the contract, ensuring minimum business and customer disruption in the event that the relationship is terminated.

Exit strategies should be reviewed annually, or when significant change occurs

There are several considerations to be made when developing an exit plan, including:

1. Continuing Service Requirements2. Data Security and Privacy3. Knowledge and Documentation Transfer4. Costs5. People

The detail below suggests some factors for consideration, but is not conclusive. Each contract / supplier relationship should be considered on its own merits.

Continuing Service Requirements

An exit strategy should set forth the organisation’s service requirements for the period during which the parties are transitioning out of the relationship. These requirements may include:

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An obligation by the supplier to continue performing the services at the same level of quality for the transition period and to continue to comply with all the obligations in the contract.

Requirements for the provision of parallel services for a certain period, with the right to extend the term as necessary to resolve issues before the final cutover.

An obligation by the supplier to keep the same supplier team performing services during the transition period.

Confidentiality on any communications regarding the termination of the relationship.

Data Security and Privacy

Data privacy and security are critical and the Exit Strategy should consider provision for factors such as:

Providing for the transfer of all data belonging to your organisation, including any customer information

Determining an acceptable method by which the supplier will destroy and remove your organisation’s proprietary information

How the supplier will destroy and remove this sensitive information from all media, ensuring it is not disclosed to other individuals or organisations.

The return or transfer back of each party’s assets

Knowledge and Documentation Transfer

Rigorous documentation and knowledge transfer requirements in the contract will pay dividends. Be sure to:

Require the supplier to give you access to everything your organisation will need to maintain the service

Clearly delineate which party owns the work performed by the supplier and which party is responsible for solidifying the transfer of ownership.

Fully document the service description for any additional services of the supplier during the transition period (e.g., training your employees or training new supplier personnel).

Require the supplier to supply your company with copies of data, procedures, access logs, error logs, documentation and other information that the supplier generates as a part of providing the services. The supplier should also grant your organisation the right to provide this information to potential successor suppliers.

Costs

Transition, termination and timing are a key part of the financial aspects of an exit strategy. Be sure the contract:

Will not penalise your organisation for an early exit, especially if the termination is due to the supplier’s failure to perform adequately.

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Specifies when compensation should be paid and how much, including compensation for any continuing base services and transition activities.

Specifies the return of any pre-paid fees for which services have not been rendered.

Personnel

An exit strategy should cover personnel issues, such as:

Ensuring that supplier personnel and key resources with relevant knowledge and expertise remain on the project and committed during the transition.

Defining the exit-strategy team and its roles The treatment of employees and any obligations to inform or consult under

TUPE

YOU HAVE NOW COMPLETED ROUTE 3 HOWEVER PLEASE REMEMBER TO CONTINUALLY UPDATE YOUR STRATEGY!

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