Commissioning and Procurement Toolkit

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1 Commissioning and Procurement Toolkit A Resource for the Voluntary and Community Sector and Social Enterprises January 2016

2 Commissioning and Procurement Toolkit With government increasingly funding the voluntary and community sector and social enterprises through contracts, it is right that senior officers and trustees/directors in the sector should understand the basics of the commissioning and procurement process and give thought to whether bidding for contracts is the right next step for their organisation. This toolkit is designed to give voluntary and community organisations and social enterprises a brief overview of the basics of commissioning and procurement to assist in understanding and preparing to bid for contracts with public bodies. It has been compiled jointly by Devon County Council and Devon Voluntary Action (DeVA). Devon County Council is committed to helping the sector compete equally with other organisations for contracts the Council lets. To that end a series of workshops for 2016 is being devised jointly by Devon County Council and DeVA to provide more information and guidance on the commissioning and procurement process in Devon. This toolkit will provide a framework and resource for those workshops. For details of the workshops visit or The information in this Toolkit is correct at time of publication in January As regulations and guidance on commissioning and procuring services is under constant review, the reader is advised always to seek the most up to date information when considering whether to bid for a contract. Please note this is only a general overview as processes will vary, so it is important to check all the details when entering into a tendering process. There are links to resources and details of further help at the end of the toolkit including The National Association for Voluntary and Community Action (NAVCA) and the National Council for Voluntary Organisations (NCVO) s free guide on procurement law. Contents: The Procurement Cycle Page 3 Deciding whether to submit a tender Page 6 The Tendering (Bidding) Process Page 6 Resources and Further Help Page 11 Finding Tenders and Contracts Page 11 Glossary of Terms Page 12 2

3 1. Identification of need: A definition of aims, what is needed (a service specification) prepared by the commissioner of the service. 2. User Requirement / needs assessment: The commissioning/procurement team consults with the community and/or users to understand what is needed in terms of outcomes. 3. Market Research and analysis: The commissioning/procurement team analyses the market - the potential providers of the service - to understand how competitive it is and what it can offer. 3

4 4. Risk assessment and options appraisal: The commissioning/procurement team examines the various options and risks associated with fulfilling the need, resulting in a decision as how the procurement process will be carried out. The decision will take account of market conditions, legal obligations and public sector policies. 5. Business Case and specification: Stages 1-4 enable the commissioning /procurement team to produce a business case incorporating market intelligence, associated risks and options appraisal. This culminates in the production of an outcome based specification of the service(s) the commissioner wants to procure. 6. The competitive process a. Call for competition The opportunity will be advertised: including details of what is required and how to express an interest. At this stage interested organisations will have a window during which they can express an interest in the competitive exercise. For more information on where opportunities will be advertised see section Finding Out about Tenders and Contracts. b. Invitation to tender (ITT) Includes all the arrangements for the bid, including a timetable and the formal arrangements for complying with the tender. It will usually include a draft copy of the contract terms and a list of criteria that will be used to assess the bid. Potential bidders, reading the ITT will decide whether or not they wish to submit a tender. There are two main types of tendering: 1. Open procedure: A one stage process where all those who show an interest and respond to the advertisement are invited to tender if they comply with the selection criteria. 2. Restricted procedure: A two stage process where only those suppliers who meet certain economic or technical selection criteria are shortlisted and invited to tender. c. Selection The selection of suppliers who expressed an interest in the tender opportunity are shortlisted to go on to the award stage based on their capability and capacity and 4

5 financial standing and ability to perform the contract. The criteria for selection will be included in the invitation to tender in the open process and analysis of ITTs against criteria will be undertaken before bids are requested in the restricted process. 7. Evaluation and Award Tenders from those organisations that were selected are evaluated against published criteria and scored and ranked based on quality and price. There may or may not be a presentation/interview with the commissioner before the award is decided. The contract will then be awarded to the highest ranked tenderer(s). The purchasing authority announces which organisation has won the contract and provides feedback to unsuccessful bidders on their bids. 8. Mobilisation The period between award of contract and the contract start to enable the appointed contractor to mobilise its resources to be in a position to deliver the required outcomes from the start of the contract and ensure a smooth transition between the outgoing contractor and the incoming contractor. 9. Contract management, - service delivery, monitoring & evaluation The successful provider and the purchaser (the Public Body) manage the contract performance against the contract specification and agreed key performance indicators. Information is shared between the parties and the contract is monitored and reviewed by the purchaser. 10. Exit strategy A contract exit strategy, should be considered up front as part of the process of risk identification and reduction before a contract is put in place and should define responsibilities at the end of the contract to ensure a smooth contract end and transition to whatever provision follows, together with continuity of supply the exit strategy will commonly include the following: 1. Continuing Service Requirements and continuity of service during any change over period. 2. Data Security and Privacy - what happens to data returned Archived for future reference, destroyed? 3. Knowledge and Documentation Transfer - this is to ensure a smooth handover. 4. Costs - who bares the cost of de-commissioning etc. 5. People - TUPE involved in which case the exit strategy should put an onus on the contractor to provide TUPE information prior to the end of the contract. 6. Contract data transfer - the contracting authority will require end of contract data this may include customer lists, demand data etc. over the whole period of the contract in question. 5

6 Deciding whether to submit a tender Deciding whether to bid for a contract opportunity is an important decision. It s essential to read the service specification carefully and look at the intended outcomes and outputs, the user base it is targeting, the service expectations, the length of contract and the likely value and extent of the work to be awarded. Your organisation needs to consider a range of factors and issues including: The relevance of the contract to your organisation s aims, values and strategic direction. Your organisation s capability and ability to deliver the contract. The potential risks involved in taking on the work. The extent to which the contract is achievable and realistic for the costs involved in its delivery. It may be useful to draw up a list of criteria for your organisation against which you can evaluate whether tender opportunities are right for your organisation. These may include the following questions: Is it in line with our value base? Is it what users want? Is the contract financially viable? Are the contract terms fair and reasonable? Do we have the capacity to do it Is the level of risk acceptable? Does it fit with our strategy? Is it sustainable? Your organisation may only be in a position to deliver part of the contract or the entire contract but only in a part of the required geographic area. In this case it might be appropriate to submit a tender as part of a partnership or consortium with other organisations. The Tendering (Bidding) Process Stage 1: Pre-qualification Questionnaire (PQQ) A Pre-qualification Questionnaire is a questionnaire used by a public service organisation to check the suitability of suppliers and providers and shortlist the ones they will invite to tender. The use of PQQ has declined following the Public Contracts Regulations The Regulations contain two provisions dealing with the use of PQQs, in addition to the regulations dealing with the questions that can be asked and means of proof. Regulation 111 prohibits the use of PQQs for contracts below the services threshold which change every year on 1 st January. The thresholds from 1 st January 2016 are 164,176 for local government or 106,047 for central government departments. Each PQQ will vary according to the size of contract and type of service. However, there are some key areas most PQQs will cover in order to assess whether your 6

7 organisation has the right financial standing track record and other systems in place to effectively manage the contract. These are usually assessed using a Pass /Fail or scoring system. Pre-Qualification checklist - things to think about Key section in PQQ Organisational Information Health & Safety Equal Opportunities Insurance Financial information Track record Types of information/evidence required Is your organisation a registered charity or registered company. Have you got a copy of the certificate of incorporation as a company and/or your charity number? Do you have examples of the sizes and types of contracts you have managed previously or are managing currently? Do you have the details of relevant contact details for references for your organisation from agencies you currently or previously have had a contract with? If you are working in partnership with other organisations, do you have their contact details and details of joint-contracts you have delivered (e.g. referral procedures, service level agreements) Is your organisation CHAS registered (Contractors Health and Safety Assessment Scheme) or registered with a similar scheme? Does you organisation have a Health & Safety policy? Do you have a named Health and Safety Officer and what relevant qualification do they have? Does your organisation have an Equal Opportunities Policy that covers recruitment, selection, remuneration, training and promotion? Does your organisation have or can it obtain public/third party Liability Insurance (minimum cover 5m)? Does your organisation have or can it obtain Employers Liability Insurance (cover 10m)? Does your organisation have or can it obtain Professional indemnity insurance (between 500,000 and 2m) (depends on the service)? Do you have your accounts audited and have copies (these must include: Balance sheet, Profit & Loss Account, Cash Flow Statement, Full notes to the Statements and Auditors and Directors Reports)? Do you have a statement of your organisation s turnover, profit and loss and cash flow position for the most recent full year of trading? If you are VAT registered, do you have your registration number? Do you have examples of previous/current contracts or service provision to demonstrate how your organisation has the expertise, experience, qualities and organisational infrastructure to deliver a personalised, high quality service? Tick 7

8 Stage 2: The Tender document Your bid or tender document needs to convince the commissioning officers that your organisation is capable of successfully delivering the contract. It should highlight your organisation s experience, competency and evidence how your organisation proposes to satisfy the requirements and detail how this will be achieved. There are two core criteria assessed within the bidding process: Price and Quality The Award Criteria reliability of the contractor in terms of Price and Quality How your tender will be assessed (the scoring criteria and weighting) is provided with the ITT information. From the scoring and weightings you will be able to understand which questions are most important and answer these as fully as possible taking care to address all the points raised in the question. Writing the bid document Imagine you are writing an application for a job be methodical, make sure you answer every question and give evidence. Don t assume any knowledge about your organisation is known by the purchaser. Indeed even if the purchaser has knowledge of your organisation, they can only take into account your response to the bid. So if you leave valuable information out of your bid, you could disadvantage your organisation in the process. Additionally, be mindful of the maximum points available for each question and tailor the length and detail of your responses accordingly. Provided that they are relevant to the subject matter of the contract, highlight your particular expertise and strengths (e.g. user involvement, local knowledge etc). Evidence your previous good work (e.g. evaluation reports, impact of beneficiaries). Stress your added value (these are the benefits you offer beyond the contract specification) these could be the extra resources provided by volunteers, your existing skills or knowledge, or your ability to raise additional funding from charitable sources). Costs All departments should ensure that the price of contracts reflects the full cost of the service, including the legitimate portion of overheads HM Treasury, 2002, crosscutting review. It s important to establish the full cost of the service first, taking into account the direct costs of delivering the service, but also the indirect costs (e.g. administrative support, HR, cleaning, financial costs etc). However, you must also be aware that this a competitive process and your cost must be proportionate to what you are delivering. VAT Value added tax is a tax chargeable on the supply of services you need to check if you need to include this (you may need to seek independent advice from HMRC on whether you need to register for VAT or not). 8

9 TUPE The Transfer of Undertakings (Protection of Employment) Regulations 2006 (TUPE) protects the rights of employees who are transferred from one employer to another, requiring the old employer to inform and consult with staff who are affected and obliging the new employer to maintain certain terms and conditions (e.g. pay, annual leave, pension entitlements). This may apply if you are bidding to take over an existing service that is being provided by another organisation. You may need to check with the commissioning body whether TUPE will apply or not, and, if it does, build the costs into your bid. If TUPE does apply, you can speak to the commissioners who should be able to facilitate a dialogue with the new provider and the outgoing provider. If it is not clear whether the TUPE does apply, the safest option is to submit a TUPE and non-tupe price. Once you have determined the full cost of delivering the service, you need to price the tender. This may depend on a number of factors, including, whether the price has been fixed by the commissioner (if so, you need to be sure the price is realistic), or not. Either way, you need to establish a logical process based on what will work best for your organisation or partnership and you think the commissioners will be prepared to accept. Tips from the Authorities On Writing Bid Documents If you haven t any examples of direct experience of delivering the service before, use other examples which demonstrate transferable skills. Use the prescribed format and don t attach lots of appendices, nor write see appendix x, make it easy for the reader to see the evidence. The Evaluation Panel can only take into account what you include in your submission so provide as much relevant detail as possible. Highlight how your service/organisation fits in with government agendas/policies and the service s strategic objectives. Show that you want to deliver the service and that you will treat it as unique (if you ve delivered it in the past, you may need to build on this, adding in new fresh ideas, not just keep it the same). Don t use jargon you need to ensure there is a shared understanding of jargon before using it. Avoid cut and paste bids. Focus on the user their needs and the intended outcomes for them. Check all requirements are fully covered. Don t be afraid to ask questions. You can do this using the electronic tendering system. All questions and answers have to be anonymously circulated to all bidders. Check your bid document. Ask someone else to read it who as a critical friend. You will need to build in the time (and possibly a cost) for this to be undertaken. Key check - have you explained what you are proposing to do and how you are proposing to do it? 9

10 Information that you are likely to be asked to supply with your bid 1. Insurance documents: a. Public Liability Insurance certificate b. Employers liability insurance certificate c. Vehicle Insurance Certificate(s) 2. Finance a. Audited accounts (past two years) b. A statement of the turnover, profit & loss account, current liabilities and assets c. Declaration of true and fair accounts 3. Policy Documents a. Health and Safety Policy b. Equality Policy c. Environmental policy d. Ecological policy e. Waste policy f. Quality policy / Process 4. Additional documents that may apply to the contract a. Information Security Questionnaire b. Data Processing Agreement c. Public Service network agreement d. Any recognised accreditation certificates 5. Evidence of previous relevant work delivered Stage 3: The Presentation/Interview Following the submission of the tender document, you may also be invited to give a presentation or interview. You should be informed in advance of the date and time of the presentation and who will be on the panel. You may also be given a list of questions you need to answer as part of the presentation. The presentation may be on the areas of your tender the panel found unclear, or you had not responded to fully. Where possible provide an answer which responds point by point to the question. Prepare your presentation carefully; you may wish to structure your presentation around these five key areas (unless you ve been given a prescribed format): your organisation your experience the context your plans for delivery the intended outcomes 10

11 Stage 4: Feedback if you are unsuccessful If your tender is successful the purchasing authority will award the contract to your organisation. Read it very carefully and take legal advice before signing to make sure you will be able to comply with its terms. If your tender is unsuccessful, the purchasing autority will give you feedback on why your tender was unsuccessful. This will usually be in form of written feedback. In exceptional circumstances a representative of the Authority may clarify with verbal communication but will not enter into prolonged correspondence or any negotiation, At this stage the process for unsuccessful bidders is finished, learn from the feedback, write a better, successful bid next time and move on. Resources and Further Help Devon Voluntary Action (Deva) is a source of further information and help on organisational development, including commissioning and procurement, developing tendering partnerships and much more. Visit or or call The National Association for Voluntary and Community Action (NAVCA) and the National Council for Voluntary Organisations (NCVO) have a free guide called Pathways Through the Maze: A Guide to Procurement Law. You can download a free copy from Finding Tenders and Contracts There are several places where you can find out what opportunities are available, or coming up. Official Journal of the European Union (OJEU): This is where contract notices must be published for contracts where the value exceeds the thresholds set by the EU. The contract value thresholds above which such contracts must be published are reviewed every two years. Supplying the South West: This is a web based secure electronic tendering portal and is used by the majority of the authorities in the South West to advertise and conduct the tendering process electronically. Supplying the South West is free for companies to register and use. Supply2.gov.uk: This is the official Government contract opportunity portal, created by the Government to provide small businesses and organisations with a one stop shop access to public sector contract opportunities. Local Authority How to do Business webpages: All local authorities should have a how to do business with us web page which includes details on their procurement strategy as well as the aforementioned guide. 11

12 Glossary of Useful Terms Award criteria: The published criteria against which all bids will be considered and scored to identify the bid which represents the best value for money (the winning bid). Commissioning: The process of specifying, securing and monitoring services to meet people's needs at a strategic level. It may include engaging with the community/ service users to understand, analyse and define the need and translate it into a service definition requirement Commissioner: The person who assesses the needs of the user, and designs a service that most appropriately meets those needs. Consortium: A group formed of two or more companies or organisations that pool their resources to provide beyond what any one member could provide alone. This benefit could include: expertise, capability, capacity or geographical location. Contract: A binding agreement to provide services or goods in exchange for a consideration (usually money). Evaluation: The process undertaken by the purchaser to understand and score bids received (in relation to price and/or quality) to identify the bidder that submitted the most economically advantageous tender to whom the contract will be awarded. ITT: Invitation to tender. Most economically advantageous tender: The tender when compared against all others which represents the most economically advantageous offer taking into account a combination of quality and price. Payment by results (PbR): the practice of paying providers for delivering services after agreed results have been achieved. PQQ: Pre-qualification Questionnaire you may see this term generally used but PQQs are not used for contracts under certain sums. Procurement: The act of obtaining or buying goods and services. The process includes preparation and processing of a demand as well as the end receipt and approval of payment. So this is managing the procurement cycle from identification of need through to the exit strategy. Provider: A supplier of goods and services (e.g. local charity, company etc.). Purchaser: The buyer of goods and services (usually a public body e.g. Local Authority, Primary Care Trust (PCT)). 12

13 Selection: A process to assess any potential supplier s capacity and technical ability to perform the contract. (This process is undertaken before evaluation.) Service specification: A description of the services to be delivered under contract. Tender/Bid: A written proposal outlining how a supplier would deliver and meet the requirements outlined in a service specification and the price it would charge. TUPE: The Transfer of Undertakings (Protection of Employment) Regulations 2006 (TUPE) protects the rights of employees who are transferred from one employer to another, requiring the old employer to inform and consult with staff who are affected and obliging the new employer to maintain certain terms and conditions (e.g. pay, annual leave, pension entitlements). Weighting: The weighting applied to award criteria and between the quality and price elements of the evaluation. The weighting will indicate the order of importance of quality and price and how important price is against quality. 13

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