Simplifying Supplier Selection. Sue Hurrell, Value Wales

Transcription

1 Simplifying Supplier Selection Sue Hurrell, Value Wales

2 What am I covering? Background Supplier Selection what we set out to achieve SQuID what is it? The risk-based approach Summary of content The project where we are now Questions

3 Bit of background Perennial question how can we reduce barriers to entry, especially for SMEs? Barriers to procurement opportunities report Pre-qual always the main culprit Seen as over-complex, bureaucratic, opaque etc but buyers have to: Manage risk and process costs Be fair, transparent and operate within the law.

4 Other Barriers recommendations Need for wider advertising, particularly of lower-value contracts. Greater clarity around the assessment process. Better feedback and communication generally.

5 Supplier Selection Research, specification, advert etc what do we want? Selection are they capable? Shortlisting can we narrow the field down a bit? Award what s the best offer?

6 Selection rules Treaty principles all procurement Regulations application depends on contract value and market No muddling or duplication of selection and award questions Law is restrictive about what can be asked at each stage. Transparency of requirements and assessment at all stages is essential.

7 The problem: Common mistake including requests for info just in case or because we ve used it before, in the belief it covers all the bases. But if you don t know: why you re asking for the info; what you will do with it; and how you will assess or score it you waste everyone s time, and risk a legal challenge.

8 Costs of supplier selection based on on-going survey of (~ 40) suppliers, Sell2Wales and Bravo data. (statistical significance?) Average cost for completing a PQQ is approx 1600 for non-construction and 2700 construction (too conservative?) An average of 16 PQQ responses are completed per procurement. At least 20m is spent annually, in Wales by suppliers, on PQQs for OJEU procurements alone. Approx 20% of this cost is incurred by suppliers simply trying to figure out whether or not to bid.

9 Key objectives More standardisation AND more tailoring! Efficiency for both public sector and bidders Consistency of approach Minimise legal risk of challenge Better feedback leading to improved tenders Increase competitiveness in all markets and especially of Welsh SMEs maximising economic benefit of procurement in Wales.

10 Some principles We wanted to encourage buyers to: think about specific contract requirements and associated risks; favour YES/NO (pass/fail) questions and thresholds that enable non-compliant suppliers to self-deselect ; reduce use of open-ended exam questions ; reduce use of essay questions to back up a yes/no answer; reduce focus on policies and statements of intent; and increase focus on facts - past experience and performance.

11 What is SQuID? Supplier Qualification Information Database although it s not a database yet! A common core set of questions NOT a standard form/template Risk-based tool for buyers

12 What is SQuID? (2) Currently rather a lot of paper! Part 1, introduction Part 2, guidance for buyers Part 3, the question set Similar documents for construction-specific Work underway on the on-line version on which will summarise Part 2 into a single wizard (to be used for every new project) Store suppliers data in answer pots for re-use.

13 How was it developed? Long-list of questions based on some standard PQQs in use Groups of experts (public and private sector) looking at categories: Finance Capacity and capability Management (quality, PM) Equality Sustainability Health and Safety Long-list down to shortlist A year s active consultation feedback and 400 (mainly public sector) staff trained. An identical parallel construction exercise

14 How is SQuID used by buyers? Use the risk-based guidance (Part 2 of paper doc, or wizard on the on-line version): to analyse requirement and the associated risks, and choose questions that address them leave out questions that are not relevant Add in any necessary project-specific questions Include guidance for bidders Issue your PQQ (using the system) and receive responses assess off-line.

15 How is SQuID used by suppliers? Paper version read the guidance and answer the questions as usual. Sell2Wales version (when we have it): Log on and complete your full profile (your Master answer pot ) at any time Respond to an advertised opportunity and fill in the PQQ using your stored data Store your new answers as an answer pot Manage your answer pots to update your Master answer pot.

16 When can SQuID be used? For any formal tendering: Open procedure as first part (selection) of invitation to tender Restricted procedure as PQQ at selection/qualification stage Sub-threshold procurements 16

17 Risk-based approach What are we doing at selection? Minimising the risks associated with a supplier failing to deliver or causing some other cost or embarrassment. Most organisational procedures based around value, not risk.

18 Assessment tool - risk of supplier failure None = 0 Low = 1 Moderate = 2 High = 4 Very High =8 Penalties or costs incurred by the buyer if supplier failed Less than 5,000 Around 10,000 Around 25,000 Around 50,000 Near to or over 100,00 Goodwill / reputational impact on Buyer of supplier failing; impact on public and consumers. No external impact on failed contract. Very limited impact on public; public perception unlikely to be affected. Some impact on public; small negative impact on public perception. Moderate impact on public; moderate negative impact on public perception. High impact on public; significant negative impact on public perception. Incremental cost of providing a temporary alternative service/capability Less than 5,000 Around 10,000 Around 25,000 Around 50,000 Near to or over 100,00 Procurement costs associated with buying a temporary and/or alternative service or capability Less than 5,000 Around 10,000 Around 25,000 Around 50,000 Near to or over 100, points (up to approx 35k impact): no check of financial standing 4 7 points (approx 35-85k impact): light-touch check of financial standing 8 or more points (approx 100k impact and over): in-depth check of financial standing

19 Scenario 1 prescribing software Software to support critical [Prescribing/Social Services] function. Value 75k. Mainly off the shelf product but some bespoking needed. Term: 3 years with option to extend to 5. Maintenance and support required over contract term. Several suppliers in the market but businesscritical and would take 5-6 months to replace. Installation required (including some time working on purchasing body s premises).

20 Scenario 2 - Staff uniforms Term: 3 years fixed. Value 60k. Purchase only. These are basic, widely available garments which only require finishing in the appropriate colours and the purchasing body s logo and wording to be attached. Relatively easy to re-procure and non-critical because of stock held. However garments manufactured in Far East (though finished in EU) and purchasing body s policies require sustainability and labour policy / conditions to be scrutinised closely.

21 Low-risk financial appraisal Light touch check: Profitability over 2 years (opportunity for losses to be explained, or put into the context of available assets) Acid-test ratio (short-term liabilities and assets) Credit checks or D&B risk of failure? Possible concerns around transparency.

22 High-risk financial appraisal Comprehensive analysis of accounts by experts in-house or third party. Balance sheet of bidding company (and parents) Historical cash and profitability Other structural issues, market context etc Opportunity for mitigating steps (bonds, guarantees)

23 Capacity and capability Experience (answers may not be storeable ) Record of successful delivery (deductions for damages, cancelled contracts) Turnover (relevant) Certification/qualifications/skills/capacity

24 The other sections Management (quality), equality, sustainability, H&S Treated similarly: Do you have convictions? What have you done to put things right since? Do you check the credibility of sub-contractors? Do you have a third-party accredited system (ISO9001, ISO14001 or equivalents etc)? If not, do you have your own process? Does it include the elements we need? Can we see a copy please? What s your record (H&S)?

25 What s next? Finalising the question sets and guidance summer Getting them in use on current systems and built into our e-tendering system (Bravo) Building the new functionality on Sell2Wales (end of the year?) Data sharing with other systems Include other supplementary question sets (social care, food, local transport?)

26 Is this another white elephant in the making? Very widespread buy-in to the principles and current question sets. WG support, manifesto commitments etc. Wide take-up already, and enthusiasm about the prototype of the on-line system. Sell-out courses Why? We consulted widely joint ownership of the outcome There is more risk of challenge out there It s a completely flexible solution What s not to like?! Challenges are getting the on-line system working and the links with 3 rd party systems. Scotland and N Ireland developing their own systems based on ours.

27 So.. Hopefully not!