Preferred Supplier Contracts-Setting Up Contract … Presentations... · Preferred Supplier...
Transcript of Preferred Supplier Contracts-Setting Up Contract … Presentations... · Preferred Supplier...
Preferred Supplier Contracts-Setting Up
Contract Panels
Presented by
Phill Scott, Contracts Manager, Local Government Procurement
IPWEA International
Public Works
Conference August 2011
Key Points
1. The Legislation & guidelines
2. Preparing a Request for Tender (RFT)
3. Tender Openings
4. Evaluation
5. Negotiation
6. Contract Management
Some guidelines when tendering
Tendering Guidelines for NSW Local Government,
DLG, October 2009
NSW Government Tendering Guidelines,
November 2005
NSW Government Code of Practice for Procurement,
January 2005
NSW Government Procurement Planning Guidelines,
June 2005
Legislation
1. Local Government Act 1993, Part 3, s55
2. Local Government (General) Regulation 2005
163 Application of part
166c Selective tender-Recognised Contractors
170 Tender Documents
177 Consideration of Tenders
178 Acceptance of Tenders
3. Government Information Public Access Act 2009
(GIPA)
Begin with the end...
If you know what
you want...
...tenderers will know
what is required...
...and the results will be
advantageous for
everyone.
Preparing for a Request for Tender
He who fails to plan, plans to fail!
• Business Case
• Procurement Plan
• Probity Plan
• Evaluation Plan
• Negotiation Plan
Preparing a Request for Tender (2)
• Conditions of Participation & pre-requisites
• Intended level of accreditation
• Tender fees & advertising
• Electronic vs physical lodgement
• Probity Advisor
• Evaluation criteria (weighting, local
preference, pricing options)
• Advertising
Evaluation Criteria
Establish What is important?
Apply Make it clear in the
RFT
Formulate
questions
Elicit precise
answers
Differentiate
tenders
Split the pack
„First blush‟:
Establishing a panel of building contractors
CRITERIA
A. Experience 40%
B. Management team 20%
C. OHS Management System 15% 5%
D. Licenses & Insurances 20% 25%
E. References 10%
Paired Comparison method
Buying a new grader
Scoring Scale 2 = Slightly more important
5 = Substantially more important
8 = Most Important
Op
Weight
Engine
Power Cylinders FW Drive Drive
A
B
C
D
E
Score %
Op weight A
Engine
Power B
Cylinders C
FW Drive D
Drive E
A8 A5 D5 A2
C2 D8 B5
D5 E8
D8
15
5
2
26
8
26
27
9
4
46
14
100
Local Preference as a criteria
Buyer beware.....
• Allow competition
• Non-discrimination
• Be transparent and inform
tenderers
• Benefit to local economy??
Do you want the “lowest tender
price” or “value for money”?
Cost alone cannot tell you:
• Final price
• Guarantee expertise
• Whole of life cost
• Supplier performance
• Service
It might tell you:
• How competitive the market is
• Indication of quality
Advertising
• Interpretation of the Regulation‟s
requirements
Opening the tender box
Evaluation
• Aspects of conformance
• Conditions of Participation & other
prerequisites
• Consistency in scoring
• Clarification vs later negotiations
• Evaluating sole traders vs SMEs vs
multinationals
• Tenderer‟s financials
• Evaluating price
Negotiation
• Regulations, Standards and Guidelines
• Obligations
• Negotiating different contract terms
Contract Management
• Maintaining competition on panel
• Security bonds
• Going outside the panel
• Adding and removing panel members
• Performance monitoring
• Contract variations
In Summary
1. Have a plan
2. Understand your
obligations
5. Aim for value for money:
cheapest is not always
the best
4. Beware of some pitfalls
3. Give due attention to
evaluation criteria
www.lgp.org.au
Thus there is limited specific local government information on this topic. However the other points that I’d put forward are that contract variations can fall into different categories e.g. those required because of latent conditions (and thus potentially needing to be implemented immediately) and those proposed because they offer some advantage. These later one’s might be advantageous, but may not be necessary to complete the project. It would seem sensible that a latent condition requiring a minor cost variation should be able to be approved by the project manager or engineer. An issue might arise if the sum total of all these minor (but necessary), variations adds up to a significant $ value, but if as part of contract administration, a monthly report goes to management and the councillors advising them of these variations, then the situation is normally considered acceptable given that all parties are kept informed. On the other hand, I would think that approval of a significant cost variation that was not necessary, but which offered some advantage, should be determined by either management (if delegated to do so) or by the councillors. Also, the approval of the variation should be formally given before the contractor is instructed to commence work on the variation. Further to the above, you also need to think about who’s going to do the variation. If it’s a minor one, then it would be sensible for the current contractor to do it based presumably on a schedule of rates provided at time of tendering. (Alternatively you have to ask them for a quote, and yes, its likely to be higher in $ value that it might normally be!) If the variation is major eg $100,000, then I would suggest that the current contractor as well as other parties should be offered the opportunity to bid (assuming the contract terms do not prevent this.) Remember also, that a contractor is not obliged to carry out a variation that substantially changes a contract. Sometimes the contractor will refuse to carry out the variation for a number of reasons. If the contract results in significant variation costs, it may indicate poor project management and it could conceivably lead to an investigation e.g. Port Macquarie Hastings Glass House project. Project overruns of 5% may or may not indicate a problem. It just depends on the circumstances. Remember too that the longer the project takes, the more likelihood for variations, particularly if the contract allows for CPI adjustments of industry index material and labour price adjustments. To someone who is not familiar with the basis of the tendered price, variations may seem excessive, but be aware that an apparent total tendered price can be altered with good reason due to variation or escalation where the price was based on a schedule of rates, or is a fixed price contract based on a specific set of criteria, or is a ‘fast track’ tendered price, or is a cost-plus contract. So in conclusion, its not always easy to lookback and decide if the extra costs are reasonable or not. However if variations and escalations are approved by appropriately delegated staff or the council and if there is a regular report mechanism to track these things, then hopefully good contract control is in place.
• In considering payments on a contract duly approved by Council, how do you assess the following:
• Say contract for $4m was duly approved after appropriate tender process
• It turns out that there are variations to the contract which arise during the life of the contract.
• If the variations result in additional costs of say $100,000 what is your view regarding approval of such
variation?
• What if the variations are a series of different payments which result in additional costs of say $300,000.
What is your view about such transactions ?
• An overal variation of more than 5% of the original price surely indicates some problems with the process
somewhere?!
• Attached are two extracts of interest. The first one from the NSW Local Govt Tendering Guidelines and
the second from the Victorian LG Procurement Guideline.
• The NSW guidelines say little on the subject of contract variations other than in Section 3.21 2nd
dotpoint: “Ensure proper processes are followed for the approval of variations to the contract.”
• The Victorian guidelines make comment differentiating operational contracts, complex contracts and
partnerships & strategic contracts. It goes on to state under the section „Contract Variations‟ that:
• Thus there is limited specific local government information on this topic. However the other points that I‟d
put forward are that contract variations can fall into different categories e.g. those required because of
latent conditions (and thus potentially needing to be implemented immediately) and those proposed
because they offer some advantage. These later one‟s might be advantageous, but may not be
necessary to complete the project. It would seem sensible that a latent condition requiring a minor cost
variation should be able to be approved by the project manager or engineer. An issue might arise if the
sum total of all these minor (but necessary), variations adds up to a significant $ value, but if as part of
contract administration, a monthly report goes to management and the councillors advising them of these
variations, then the situation is normally considered acceptable given that all parties are kept informed.
• On the other hand, I would think that approval of a significant cost variation that was not necessary, but
which offered some advantage, should be determined by either management (if delegated to do so) or by
the councillors. Also, the approval of the variation should be formally given before the contractor is
instructed to commence work on the variation.