Public Procurement: the good and the bad
11th January 2016
An early PFI tender submission was a massive logistics exercise
We were recently discussing the challenges and opportunities which Public Procurement can bring. As consultants, we’ve worked for many years around the world on the client “buyer” side where we’ve issued tenders, and also on the “seller” side where we’ve responded to tender requests. Over the years we’ve experienced a number of positive and sadly many negative procurement situations and so this blog explores the process in more detail, and offers advice for both buyers and sellers.
Procurement is a necessary process that involves an organisation acquiring services from an external source, in a structured and accountable way. Limited or open procurement is a common method for obtaining consultancy or other services throughout the world. The process is basically the same worldwide, however the details vary enormously, in process, effort and honesty.
A tendering process is initiated which should allow a fair and confidential opportunity for sellers /bidders to submit a proposal and price at their own risk in a process which should allow the client to seek the most appropriate priced solution for their problem.
Organisations ranging from the United Nations, the World Bank, down to local city councils must publicly tender their projects, whether it is for construction, material supply, service supply or consultancy services. The internet has brought huge innovative opportunities to be able to search for procurement opportunities anywhere in the world.
The European Union have made excellent progress to ensure equal opportunities for organisations to bid for projects across Europe, outside of their own specific geographical area, in order to try and prevent corruption in awarding contracts through bribery or nepotism. Sadly, there is still a long way to go here. Standardisation of procurement codes, language and process have made it easy to find suitable procurement opportunities.
Procurement of any services should in theory lead to a value-for-money solution for the client, as they are able to market test prices and skills, and find organisations who innovate, bring new solutions to existing problems and also have the experience and energy which may be outside of the Client’s sphere of knowledge and influence.
Writing tenders takes a lot of time for both the buyer and the seller. The hours spent writing tender packages or tender response are effectively unpaid and for the seller; these hours are taken away from the hours we earn from projects with fee paying clients. The success rate of winning a tender for the seller is therefore important.
When we're the seller, we will often screen a large number of tenders but reject many as no organisation can “scatter gun” tender responses for everything. We must focus on our target markets and identify opportunities where we have a high chance of being successful every time we agree to write a tender response. Researching the project, the client and any incumbent teams who are working with the Client are important to know before committing to writing a tender. Assessing the Client competence is also an important part of our due diligence. Do they know what they really want? Are the realistic with the budget?
Likewise, we always suggest that the buyer should be absolutely clear on what they need before going to market with a tender, and most importantly be clear on how they expect the market to respond, especially on price. We've seen a large publicly released tender being scrapped as the client realised - after receiving eight tender responses - that another internal Government process would actually provide the exact same output as the tender, and therefore the procurement was stopped. Luckily we didn't waste time on that Client.
Our most important advice to Clients when writing a tender package is to be absolutely clear on what is asked for, how it will be submitted, how it will be evaluated and the timeline for deciding the winner. Expectations of what is to be seen in the tender response should be written in the tender documents. It is unacceptable to place new expectations on the tenderer during the evaluation or interview and worse mark them down if these expectations were not communicated from the start.
In this day and age of innovation, we are still amazed when clients ask for paper copy tenders to be submitted. Printing, postage time/cost and delivery risk are all unnecessary parameters that can be easily avoided by electronic submission. Not just submission by email delivery, but via one of the many electronic tender hosting websites where documents can be easily and transparently uploaded.
Back in the early days of PPP/PFI bids, the clients would often ask for 11 paper copies of the entire submission, and were always shocked when two delivery trucks turned up on submission day filled with boxes and boxes of binders filled with paper. All that from three separate bidders. Sustainability policy? There were 33 unnecessary printed copies of massive amounts of paper documentation delivered.
We saw a recent tender for a university who were looking for a relatively small scope of works and a tiny number of hours from a consultant, however the procurement response criteria and number of in-depth questions being asked for evaluation meant that it simply was not worth spending the time on the tender response.
Publishing the evaluation criteria is very important so that the bidder can see what is the priority for the client in terms of score weighting. Is the buyer focused on cheapest price or the experience of the team? It’s good for the tenderer to know in advance. It is also important that the Client sticks to this evaluation criteria and be absolutely fair and transparent with the evaluation, not simply selecting the tenderer they feel is "best" and ignore the evaluation scoring.
To us, one of the biggest pitfalls of procurement is when the client states that the tender must be open for 90 days or so, with no clear date for a decision to be made. Or worse, the client simply does not provide any response to the bidders and keeps them hanging on with no news whatsoever. Very frustrating! We all have other projects to work on, other priorities, and 90 days really is to long for any decision. If the client has any issues over a tender (internal reorganisation, funding issues, political issues, project need issues etc), sort them out before bring the tender to market!
Our advice for the tenderer is to make sure you give the client the exact tender response that is asked for and make the response easy to find. When working for the client/buyer with a stack of 8 tender responses to carefully check and evaluate, make it easy by providing the answers in the correct order. To compare apples with apples is important to make the process absolutely fair!
We will summarise our advice into a procurement “good practice checklist” for Clients/buyers:
Always provide feedback to the tenderers on what is going on in the process and when decision are to be made.
Be realistic on your timetables: simply because internal sign-off process has taken more time than expected, don't push a tenderer to deliver a 6 month project in 3 months and expect them to be cheapest.
Provide feedback to all tenders if they won or not, including an anonymous pricing breakdown for each bidder if doing so will not identify a bidder from the price (for example two bidders), so that all tenders can see how their prices relate to other tenders.
Keep the bid returns confidential. All bids contain commercially sensitive information, especially pricing breakdown, rates etc and should be treated accordingly by the client.
Be careful what is asked for in a tender return. Garbage in, garbage out. If a client asks many hundreds of questions in a tender, and 11 hard copies (don't ask for hard copies!), don’t be surprised to find hundreds of boxes of binders and paperwork being delivered.
Use electronic means for submission, as this cuts down on postal delivery time and printing /binding problems.
Original signatures and company stamps should not be considered necessary in this day and age.
Tender bid guarantees are not welcomed by the private sector, as these costs money, take time to organise and add to the burden of submission requirements.
Don't hold interviews for more than the top 1-2 tenderers. Anything more is a waste of the tenderers time.
Don't use public procurement as an opportunity to gather new ideas from the market for free. Pay consultants for that.
Our summary advice to the sellers:
- Submit early where possible, and not last minute.
- A 12 noon deadline is 12 noon, regardless of IT problems, printer problems or courier problems!
- Read the questions and answer them exactly as given.
- Don’t submit mountains of standard company literature, it simply doesn’t get read!