Route 3

Route 3

You should ensure all research conducted is collated and reviewed as a whole. A poorly scoped and researched requirement can present major risks to the project.  Records should be kept of any discussions with potential suppliers.

Shaping the Requirement - Key Areas

The following areas are key:

  • Ensuring customer requirements are met and balanced with value for money
  • Challenging the end users’ requirement.  This ensures a balance between whole life costing and quality
  • Keeping your options open: avoiding  'zeroing in' on particular options; allowing bidders to make suggestions
  • Considering business models: looking at options for how customers and potential suppliers work together 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 together to reflect market structure.  For example procuring computer hardware desktops/laptops 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
  • Incorporating sustainability requirements from the beginning i.e. including sustainability into your specification, and using a whole life costing approach as a minimum
  • Considering the application of Life-cycle costing.  You would therefore include all costs associated with buying, using, maintaining and end of life/disposal of any product or service.  You must be able to calculate any environmental costs from a non-biased source
  • Consider how relevant Fair Work practices are to your requirements.  This would include subcontract requirements (if relevant)You must ensure you include relevant criterion -  see the Statutory Guidance.  The following practical tools will help you make your decision: – Fair Work commodity / service strategy – Checklist “and Flowchart
  • Consider any cyber risks, with reference to the Scottish public sector Guidance Note on Supplier Cyber Security and (if appropriate) using the Cyber Security Procurement Support Tool (CSPST)
  • Considering demand management:  reduce your consumption, consolidate spend, improve your specification and
  • Considering how demand fluctuations will be managed and forecasted and how (if possible) it can be reduced. More extensive demand management guidance can be found on the Managing & Improving Performance station.

Checklist

Checklist

Costs to Consider

Cost Included?
small/short term funding and larger/long-term funding  
whole life costs including set up, running and decommissioning costs  
the cost of meeting all regulatory requirements  
additional costs related to location e.g. rural location results in extra transport costs, import/export taxes, etc.  
the complexity of the service  
training and continuing development of staff  
potential costs of staff transfers under TUPE regulations  
additional costs of inflation, and  
any commitments to three year funding cycles (or longer) where appropriate  
   
   

Blank rows are provided for your use e.g. to add additional checklist items.

An organisation should also:

  • consider whether its own systems and practices are adding to costs and whether changes be made.  For example could using differing administration technology reduce costs?
  • ssess if and how a service needs to change to meet individual needs and intended outcomes.  How can services be improved?
  • assess the need for service continuity.

Care and Support Services

For additional guidance for Care and Support Services see Benefits and Risks to People who use Services and Service Delivery.

Any documents you need are listed below

Route 3

You should undertake supply market analysis to allow the User Intelligence Groups (UIG) to develop a detailed understanding of:

  • key trends,
  • major players, and
  • overall market dynamics

that could influence the development of the commodity/service strategy e.g. route to market, lotting strategy.  At least one of the market analysis templates provided should be used to assist in this exercise. You should 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. The Market summary Template may assist you with developing your own Market Summary Template.

Public procurement projects can positively impact on various sectors of the business community, either as directors or as sub-contractors.

Care and Support Services

Lotting

Once you have completed your Commodity Tree or Options Appraisal and Supply Market Analysis, this information will support grouping your requirements into suitable lots.  For example for a waste equipment disposal  category you may choose to procure plastic and metal bins through separate lots.

You should give consideration to using potential for third sector involvement and supported businesses and SMEs.

If you are not using lotting in your procurement exercise you must provide the main reasons for this in:

  • the procurement documents, or
  • in your individual report and indicated in the procurement documents, or
  •  your procurement exercise written report.

TUPE

You should consider:

  • whether Transfer of Undertakings (TUPE) applies and
  • whether to allow potential service providers to set out different TUPE scenarios within its bid. If so, you must provide clear directions to tenderers to ensure bids can be compared on a like-for-like basis.

Equality

The public sector equality duty is set out in the Equality Act 2010.  It requires organisations to assess new or revised policies and practices on people with different protected characteristics.  To do so you need to consider the three needs of the public sector equality duty i.e.:

  • to eliminate discrimination;
  • advance equality of opportunity; and
  • foster good relations between people with different protected characteristics.

The protected characteristics are:

age

disability

gender reassignment

marriage and civil partnership

pregnancy and maternity

race

religion or belief

sex and sexual orientation

 An organisation must also consider the need to undertake and publish an Equality impact Assessment (EQIA). Depending on your particular procurement, an EQIA may be an integral part of the procurement process.  It should help identify and mitigate negative impacts and identify opportunities to promote equality.  This can be done by looking at how your procurement might impact on people with a protected characteristic. For example for the service industry, which relies heavily on its labour force, an EQIA may help to identify new or improved ways or working.

External sources for supply market data

The supply market sources document is a list of suggested external sources for supply market data.  This  may provide you with  useful information required to develop your commodity/service 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 a external data sources template. Your use of external data should be appropriately referenced throughout the process – just including an external website or publication is not a  Scottish Government endorsement.

Market sounding

The overarching theme of early engagement is to identify the desired outcomes, risks and issues and permit potential 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.

Any cost discussions you have at this stage should be indicative only.  You should make this clear to potential bidders. 

Care should be taken to preserve transparency and equal treatment.

Frequently it is more appropriate to ask the market what solutions are currently or potentially available prior to advertising a contract.  This is as explained further in the ‘Stakeholder Identificationstation). The Public Contracts (Scotland) Regulations 2015 (Regulation 41) now include provision for Organisations to engage in market consultation. 

Any such market consultation must be carried out in a carefully managed manner.  This must comply with the Principles of Procurement.  As a minimum, the consultation must be transparent way causing no  market distortion..  The procurement outcome cannot  unduly favour or disadvantage a  potential supplier.  It is your organisation’s responsibility  ensure these requirements are met.

This can encourage tenderers creativity in their potential solutions.  This can inform your decisions  on when and how to procure the best available solution(s).

Market sounding can be beneficial as a long term strategy, even when you do not intend to carry out your procurement exercise soon. As a matter of courtesy you should be  transparent with suppliers about  this.

There is no formal process for market sounding.  Activities typically include researching and analysing the whole market  and meeting selected potential suppliers for discussion. Your Organisation must ensure that it takes appropriate measures to ensure that competition is not distorted by the participation of potential suppliers.

You can generate supplier interest by publishing advance notice of your likely requirements.  For example through a Prior Information Notice (PINs) in Public Contracts Scotland (PCS).

Organisations should engage with a cross-section of potential suppliers.  This will  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 differ.

Market sounding improves public sector knowledge that is useful in a broader sense. For example UIGs greater understanding of relevant markets helps to develop their commodity/service strategy.  This could be in terms of how they currently operate  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. It is vital to understand  key issues before starting the procurement process.   You should determine your desired outcomes, risks and issues and allow potential bidders to provide feedback.  For example on how the outcomes might be achieved, along with feedback on timescales, feasibility and affordability.

You should always be present at meetings with potential bidders. A bidder 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 the services provided are at the forefront of those available

EU law is concerned with the EU single market.  Analysis of the market should therefore have regard to possible interest from providers in other Member States and may assist an organisation to identify whether there is a cross-border interest.

When procuring a service, you should also consider your organisation’s policy and approach to  delivering services in-house.

In respect of the above questions and the following areas of guidance, you should consider stakeholder engagement activity and management.  For example:

  • will consultation with an economic development team member be necessary? 
  • Can we identify what guidance we will need from the climate change team in terms of supply chain carbon assessments?

It is important to tie this into your stakeholder mapping exercises. 

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 potential suppliers to invest in and deliver pioneering solutions to support current and future public service needs.  Throughout this process, are should be taken to avoid distorting the market.

You must document the measures taken to ensure competition is not distorted during any prior involvement of candidates or tenderers..

Discussions with potential suppliers

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

Care must be taken to ensure 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 potential supplier(s). If either of these approaches is not adhered to you could breach the Public Contracts (Scotland) Regulations 2015 and the procurement itself could be challenged. 

Measures to ensure competition is not distorted must include:

  • communicating to all potential suppliers the dates of any relevant information exchanged between parties in the market sounding and,
  • when tendering, giving adequate time limits for the receipt of tenders from interested parties.

Quickfire Guide

Quickfire Guide

Supply Market Analysis - Example Questions

There are a number of questions you can ask to support you market analysis.  This Quickfire Guide list some examples.

Community Benefits - What Can the Market Provide?

Organisations are required to consider including community benefit requirements for all regulated procurements.  This is procurements where the estimated value of the contract is equal to or greater than £4 million (excluding VAT). 

Community benefit requirements may not always be appropriate to your contract. You must consider their use by taking into account the nature of the contract, its duration and other local factors. 

While the threshold for considering community benefits is £4M, research has shown that community benefits can be achieved in procurements under £4 million threshold.  It is regarded as best practice to consider its inclusion for all contract values. 

Care should be taken to ensure the requirements would not place a disproportionate burden on potential suppliers or have a wider, unintended effect.   This could be the case, for example, where training and recruitment requirements are included.  Here, care needs to be taken to avoid displacement of existing trainees and employees in order to meet community benefit commitment.  It should also be noted that training and employment opportunities require adequate contract length for these activities to be undertaken.

Fair Work Practices

What Dimensions of Fair Work Practices can be Targeted?

  • Engaging early with the market can help you gather information about the nature of Fair Work practices in the sector.  It  can provide information on what opportunities there are to address in your procurement exercise.  These should be relevant, proportionate and treat bidders equally.
  • It can help you establish whether the supply chain is susceptible to exploitative practices.  For example, in contracts where the workforce can typically be made up of sole traders or self-employed workers, you should consider is appropriate or a form of bogus self-employment?
  • You can seek input from other areas of your own organisation.  For example stakeholders, industry bodies or trade unions.  This can establish which dimensions of Fair Work could be addressed in a particular commodity / service area and to shape commodity / service strategies.

Sustainability

Sustainability: can potential 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. There should be an assessment of future demand of any particular commodity/service or category.  This should be based upon the knowledge and expertise within the team and on information obtained from non-team members. Engaging with potential suppliers provides an opportunity to ensure 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.  Care should be taken to maintain competition, transparency and equal treatment of potential suppliers.

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/service 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.

Not every template listed in 1-7 below requires completion. You should consider the complexity of your commodity/service and procurement exercise to help you decide which template(s) to use.  Once your analysis is complete, consider how to use this information to inform strategic options.

All templates listed can be found under "Any documents you need are listed below" at the bottom of this page.

1. Supplier profile analysis

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

2. Competitive advantage - porter's 5 forces

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

3. 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). 

4. PESTLEE analysis

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

5. Supplier market share

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

6. Understanding supplier cost drivers

The supplier cost drivers document provides:

  • a checklist containing cost driver
  • guidance to complete a typical supplier cost driver example
  • sources of information includes tips on how to obtain cost drivers

7. 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 potential suppliers. The following guidance slide will help you to consider the wider costs associated with the procurement of the requirement.

TCO considerations

A blank Total Cost Considerations template, with examples, are provided for you to populate with details specific to your requirement.

Procurement Between Public Sector Organisations

It is possible that the potential supplier for a contract may be another  public sector organisation.  A contract between two or more such organisations are exempt from the Public Contracts (Scotland) Regulations 2015 and the Procurement Reform (Scotland) Act 2014.  This exemption is in place if the “buying organisation” and the “supplying organisation” are jointly controlled or if all of the following conditions are met:

  • The “buying organisation” exerts control over the “supplying organisation ” similar to that which it has over its own departments.
  • Where 80% of the activities of the “supplying organisation ” are undertaken for the “buying organisation” or other bodies controlled by it.
  • Where no other organisation or person has invested direct capital in the “supplying organisation” subject to limited exceptions

Any documents you need are listed below

Options Appraisal

(file type: docx)

Options Appraisal C&SS

(file type: docx)

Segmentation Categories

(file type: docx)

Supplier Cost Drivers

(file type: docx)

Supply Market Sources

(file type: doc)

Total Cost Considerations

(file type: docx)

Route 3

The purpose of this section is to:

  • determine the requirement,
  • agree what is in/what is out of scope and
  • consider e-Commerce implications with the User Information Group (UIG) and other key stakeholders.

You should start by breaking down the requirement into its sub-commodities/services and identify the specific products/services within each category.

Use one of the templates below to assist in this process:

Once you have identified the specific products and services, it is now important to consider their specific environmental or social characteristics.  

You should use labels (if they exist in your marketplace) that comply with these characteristics e.g. those relating to fair trade.  (Please note: note bidders should be allowed to offer other proof of compliance).

You should also consider whether you should include special conditions of contract relating to the performance of the contract.  This may cover:

  • economic,
  • innovation-related,
  • environmental,
  • social or
  • employment-related conditions.

It is a legal requirement that each contract includes conditions which are reasonably necessary to ensure supplier compliance to environmental, social and employment law.  These laws must be linked to the subject matter of the relevant contract. These conditions of contract must be included in the procurement documents.At this stage you may  want to consider how the products/services are provided e.g. electronic purchase orders, purchasing card, consolidated invoices and self-billing.

Guide to Making Content Decisions

You should consider whether or not the commodity/service you are buying is capable of being catalogued or not.

This simple Guide to Making Content Decisions at the bottom of the Pecos Content Management page will guide the buyer in the right direction. 

If the commodity/service you are buying is to be catalogued, this electronic content must be provided for the contract via Pecos Content Management (PCM) . 

Sometimes  it is appropriate to build the ITT documents in a format where the evaluation is based on catalogue submission.  If this is the case, the Contract Notice or the invitation to confirm interest as a result of a Prior Information Notice (PIN) should detail this clearly. Further guidance is provided at the notification of contract award decision and at the develop documents stages.

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

Care and Support Services

Example of Care and Support Services Service Tree (Residential Care).

Digital/ICT Requirements

If your procurement is of a Digital or ICT nature, consideration must be given to the Digital Public Services Scotland Programme. This strategy sets out the collective ambitions and national level actions at sector, cluster or organisational level.  Since this strategy release more Current Standards, Guidelines and Recommendations have been developed as outlined within the ICT High Level Operating Model.

Further information on how to assess and manage cyber risks as part of the procurement process, including information on the Scottish public sector Guidance Note on Supplier Cyber Security and the Cyber Security Procurement Support Tool (CSPST) can be found in Leadership and Governance.

CSS Service Tree

(file type: docx)

Commodity Service Tree

(file type: docx)

Route 3

The Sustainable Procurement Duty, outlined in the Procurement Reform (Scotland) Act 2014, requires you to think about how you can improve the:

  • Social,
  • Environmental and
  • Economic wellbeing

of the area(s) in which you operate – whether that is nationally or more locally.  Particular focus should be on reducing inequality.

You can create a positive environmental impact through every procurement exercise you undertake, regardless of its value or scope. This must be a key part of commodity/service profiling and strategy development rather than an optional area of interest. You must fully explore the possibilities with your User Intelligence Group and other stakeholders for your procurement.

Quickfire Guide

Quickfire Guide

Economic, Social and Environmental Wellbeing Examples

Economic Factors

  • Availability of suitable and high quality jobs
  • Measures to encourage local small businesses
  • Addressing Fair Work Practices, including paying the real Living Wage
  • Efficient and effective transport links
  • Lifelong learning
  • Training and skills development
  • The provision of infrastructure, new information and communication technologies

Social Factors

  • The promotion of good quality and affordable housing
  • Safe communities
  • The encouragement of the voluntary sector
  • Looking after the needs of children and young people
  • Looking after the most vulnerable

 

 

Health Factors

  • Promotion of good physical, social and mental health
  • Developing and promoting polices that have a positive impact on health outcome

 

 

 

 

 

Environmental Factors

  •  Availability of clean air, clean water and clean streets
  • The quality of the built environment
  • The removal of objects considered hazardous to health
  • Removal of disfiguring or offensive graffiti
  • Protecting communities against the threat of climate change
  • Freedom from high risk flooding
  • Improving and promoting biodiversity and accessibility to nature

Each contract or Framework Agreement must include conditions relating to the performance of the contract (which are linked to the contract subject matter).   These conditions must be considered reasonably necessary to ensure the supplier complies with these environmental, social and employment law obligations.  These conditions of contract must be included in the procurement documents and a plan in place at this point to manage these through the life of the contract. 

Statutory Guidance has been published on Sustainable Procurement Duty to help you. 

Sustainable Procurement Tools

The Scottish Government has developed a number of tools to help you:

  • identify and work on how to increase social, environmental and economic benefits from your contract.
  • to agree your sustainable procurement priorities and policies.

You can use the following tools when developing your commodity/service strategies:

  • The Prioritisation Tool: an early stage tool
  • The Sustainability Test: used at category/commodity/service level to identify potential scope of benefits;
  • Life Cycle Impact Mapping: assesses environmental impacts throughout the life cycle
  • The Flexible Framework Assessment Tool: assess current performance and actions required

The above tools can be accessed by registering on the Sustainable Procurement Tools platform.  Accompanying Sustainable Procurement Guidance can also be accessed on the Sustainable Procurement Tools and is available for both registered and unregistered users.

By assessing and scoring the socio-economic criteria on these tools you can:

  • identify what risks and opportunities can be targeted  for each commodity
  • how to influence the management of those risks
  • include recommendations in your Commodity Strategy to be addressed as part of the procurement process.

As a matter of good practice, you should have completed the Sustainable Public Procurement Prioritisation Tool (to prioritise Sustainable Procurement aims) at a category or organisation level prior to working on your commodity/service strategy.   If you are unsure, please speak to your manager to ask if this has been done.

Successful Sustainable Procurement, Risks and Opportunities

Sustainable Procurement is successful where its importance is made equal to other areas of commodity/service profiling e.g. quality, technical specifications and commercial objectives. 

There are always different options available to you when examining how to achieve this balance. You may wish to visit the Case Studies section of the Sustainable Procurement Tools platform to read process-focused examples of how sustainability benefits have been embedded in public procurement exercises. 

While many options will be commodity/service specific, the primary considerations of the Sustainable Procurement Duty (when Profiling the Commodity/Service) are:

  • Identify the opportunities to improve the economic, social and environmental wellbeing of the area(s) in which your organisation operates
  • Facilitate the involvement of small and medium enterprises, third sector and supported businesses
  • Promote innovation

There are a number of areas procurement can influence to improve environmental, social and/or economic factors.  These are listed below and more information can be found in the Sustainable Procurement Duty Index.

Quickfire Guide

Quickfire Guide

Successful Sustainable Procurement, Risks and Opportunities

Involving Supported Businesses, SMEs and Third Sector Suppliers

To meet your obligations under the Sustainable Procurement Duty you must consider how to facilitate the involvement of:

  • Small and Medium Enterprises (SMEs) and
  • Third Sector Bodies and
  • Supported Businesses

in all procurement exercises. 

To do so there are some specific actions you must take.

Supported Business

A Supported Business is a supplier:

  •  whose main aim is the social and professional integration of disabled or disadvantaged persons,
  •  where at least 30% of their employees are disabled or disadvantaged workers.

Reserving Contracts

Your Organisation can “reserve” a competition  so that only supported businesses can bid.  In these cases, this must have been assessed as appropriate as there are specific rules around the reservation of competitions.

SPPN 4/2017 provides further information and guidance on Reserving Contracts For Supported Businesses, including:

  • Determining whether an organisation meets the definition of a supported business for the purposes of public procurement legislation;
  • Identifying supported businesses; and
  • Monitoring and reporting.

 

SME’s

The majority of businesses are SME’s. By doing everything you can to make it easy for SME’s to bid for your exercise then you are reaching the broader market and this will benefit your organisation as well as the broader economy.

Some things you can do to help SME’s access your process include:

  • Make sure your procurement exercise is advertised properly;
  • Use Lotting to enable smaller companies to identify potential opportunities;
  • Make sure to include SME’s in pre-tender market engagement;
  • Check that your tender and any pre-qualification are proportionate and will not exclude SME’s - e.g.  do you really need such high levels of insurance for this process?
  • Using a Dynamic Purchasing System (DPS) can offer benefits to SME’s in that, on qualifying they can access the contract at any time through it’s life and have access to smaller competitions within larger frameworks. 

There are many more things that you can do (or indeed not do) and you should take time to explore these as part of your strategy development.  Speaking to colleagues, your UIG and contacting organisations such as the Federation of Small Businesses and the Supplier Development Programme can be very helpful.

 

Third Sector

The third sector, which includes charities, social enterprises and voluntary groups, delivers essential services, helps to improve people’s wellbeing and contributes to economic growth.  It plays a vital role in supporting communities at a local level.  The economic contribution of third sector organisations is steadily increasing and we expect this to continue in the coming years.  Some things you should do to help Third Sector suppliers access your process include:

  • Identify and engage with any relevant Third Sector suppliers as early as possible in the process;
  • Examine the market to identify any potential “blockers” to entry – e.g.  are their providers for some of the requirement but not all?  Would lotting help open up the opportunities ?

Many of the actions that you can take to make sure SME’s are engaged can also support the inclusion of Third Sector organisations.  Each council in Scotland has a Third Sector Interface”  (TSI) and further information can be obtained from these if you need help in identifying local Third Sector organisations.

Addressing Fair Work Practices

Fair Work practices are actions an employer adopts for the benefit of its workers.  They are above the minimum legal requirements and reflect the five dimensions of the Fair Work Framework.

When developing any procurement exercise, you must do so in line with Statutory Guidance.  This requires you to consider how to address Fair Work practices in all procurement exercises before you start your procurement.

To support this Best Practice Guidance and a Toolkit have been developed to offer additional guidance and practical tools for public bodies and suppliers.  Guidance has been embedded throughout the Procurement Journey.

The Scottish Government believes that contractors who go beyond minimum legal requirements by adopting Fair Work practices will:

  • increase innovation,
  • improve workplace outcomes and business performance,

positively impact on the delivery of a public contract. The payment of the real Living Wage is considered by the Scottish Government to be a significant indicator of an employer’s commitment to Fair Work practices. The payment of the real Living Wage is one of the clearest ways an employer can demonstrate a positive approach to its workforce.

- the real Living Wage should not be confused with the National Minimum Wage (including the ‘national living wage’), which is the legal minimum wage set in law by the UK Government.

The Scottish Government expects:

  • Organisations to promote Fair Work practices in all relevant procurement exercises.  At the same time ensuring  a balance between contract quality and cost.  This will  include the impact of  working conditions costs, and
  • Suppliers delivering public contracts to adopt and demonstrate appropriate Fair Work practices., They should ensure these are delivered for all workers engaged on public contract delivery.

In addition to the Sustainable Procurement tools, a Fair Work practices commodity/service strategy: checklist and flowchart is available to help identify how to address fair Work in relevant procurement exercises with an example  - Fair Work commodity/service strategy: checklist - home support services.

The Toolkit also includes Information Sheets on:

You must make sure the performance of the contract by suppliers complies with their obligations in environmental, social and labour law.  It is essential that robust requirements are built into your strategy, procurement documents and contract management processes.

For example, when considering how to address Fair Work practices in a procurement exercise, you must assess whether you should exclude supplier(s)  if they do not meet their legal obligations as a diligent employer. 

SPPN 09/2016 includes guidance and contract conditions an organisation can adapt for use in its contracts.

Promote Innovation

You must consider how you can promote innovation through your procurement exercise.

Some methods you can use to achieve this are:

  • using outcome specifications,
  • identifying options to innovate through the procurement process
  • directly procure research and development to inform your requirements

Other Areas for Consideration

Sustainable procurement elements can also be included as part of your costing model and it’s important for you to review what models are available and assess where you think that sustainable elements can be considered.

 

Life Cycle Costing

You can apply life cycle costing as part of the specification and subsequent evaluation. 

Life Cycle Costing may be used where additional environmental costs result from the products or services being purchased e.g. carbon emission costs from purchased machinery  and the environmental disposal cost at end of life.

Life cycle costing takes into account all identifiable  product or service costs i.e.:

  • from its acquisition
  • through use,
  • maintenance and
  • end of life (recycling / disposal). 

These can be direct costs like scheduled maintenance and energy used through the life of a road sweeping vehicle.   Also included are less apparent external environmental costs.  Such as the cost of emissions of greenhouse gas based on the energy use of the road sweeper.

These costs can only be assessed when:

  • They are based on objective criteria that don’t favour or disadvantage any potential bidders
  • The assessment method is accessible to all interested parties
  • The data required can be provided with reasonable effort from all interested parties.  This includes those from other EU states and states party to international agreements by which the EU is bound e.g. the World Trade Organisation Government Procurement Agreement ( USA).

If using a life-cycle costing approach, the Procurement Documents must state:

  • The data to be provided by bidders
  • The method used to determine the life-cycle cost on that basis

It is important to differentiate between Whole Life Costing, Lifecycle Costing and Lifecycle Impact Mapping:

Whole Life Costing:  Focuses solely on cost(£) of a product or service from cradle to grave. It takes into account:

  • acquisition,
  • operation,
  • ownership and
  • disposal costs.

It does not include any environmental or social costs.

Lifecycle Costing:  Life-cycle costing covers part or all of the following costs over the life cycle of a product or service:

a) costs produced by the Organisation or other users, such as:

 (i) acquisition costs;

(ii) usage costs such as energy consumption and other resources;

(iii) maintenance costs;

iv) end of life costs, such as collection and recycling costs; and

(b) external environmental costs linked to the product or service during its life cycle.  These costs must be able to be determined and verified. This may include the cost of emissions of greenhouse gases,  other pollutant emissions and other climate change mitigation costs.

Lifecycle Impact Mapping:  Focuses on social and environmental impact rather than cost. Life cycle impacts help the user identify and assess impacts. For example, it may help to focus attention on the disposal phase before the procurement is carried out.  This  allows you to build end-of-life management requirements into performance clauses for successful contractors and your  own internal management procedures.

Please note:  Life cycle impact mapping can be used alongside life cycle costing as part of the procurement process.

The Lifecycle impact Mapping tool can be accessed by registering on the Sustainable Procurement Tools platform.

When purchasing goods or services  you can specify labels as a means of proof that you meet certain requirements. 

For example, does the product or service required have specific social, environmental, or other characteristics that would be verified by a label such as Fairtrade?  

Labels

There is specific guidance around the use of labels within procurement.

To specify labels in your procurement exercise you need to meet the following criteria:

  • The labels can only concern criteria that are linked to the subject matter of the contract
  • They have to be based on objective and non-discriminatory criteria
  • The label itself is established in an open and transparent procedure and accessible to all interested parties
  • The label requirements are set by a third party over which no potential bidder has any decisive influence

Rather than apply a label on a broad basis, if it’s more proportionate you can detail which label requirements are to be met.  This will reduce the burden on bidders and could expand the number of capable bidders for your process.  

Labels must comply with the label requirements of the Public Contracts (Scotland) Regulations 2015 and equivalent labels must be accepted.  Where the bidder can demonstrate it has not been possible to obtain either the label or an equivalent, through no fault of its own, you must accept other appropriate means of proof e.g. manufacturers technical dossiers.

Route 3

You should work with the UIG to review and understand the current contractual situation for the commodity/service to:

  • determine if there will be any issues that requires a phase-in of new contracts time, or
  • investigate whether early termination of existing contracts is both possible and desirable.

You should collate details of existing contract(s).  This information could include:

  • the product specification,
  • end users information and 
  • any information which can be included in the analysis of key commodity/service characteristics as described in the next section.

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

You should work with your UIG to assess future demand for the commodity/service.  The assessment would be based on team knowledge and expertise and information obtained from non-team members.

Spend Analysis

A detailed understanding of the current spend and future requirements, of participating organisations, are key to commodity/service strategy development.

An organisation should determine what resources are available for delivery of the service.

Financial planning is essential to ensure that service specifications are realistic.  This ensures the specified requirements and outcomes are informed by the organisation’s analysis and benchmarking of costs.  This means delivery will be within the available budget.

An organisation should consider what funding it can commit to the delivery of a service and for what period of time.

Care and Support Services

For Care and Support Services in particular, consideration should be given to the anticipated size and shape of service contracts in light of the promotion of self-directed support and any growth in direct payments.

An organisation should assess whether the service has met specified key performance indicators and other contractual requirements previously. It should seek feedback from people who use services and their carers and review other information relating to the quality of the service, including information from contract management and service review and information from the regulatory bodies, including any complaints about the service.

It is important to consider the Specific Considerations CSS Contracts.

The Hub

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

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

The Spend Analysis Example, generated using information from The Hub can be found in the additonal documents section below.

The data in the 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. 

It is good practice to ensure 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.

Existing Contracts

In addition to Spend Analysis, an organisation should review  existing delivery arrangements for  a service  view to:

Evaluating existing arrangements for delivering the service against best value principles will require an organisation to consider:

  • whether the service is effective and of good quality;
  • what it costs and whether it is cost-efficient;
  • whether it promotes equal opportunities; and
  • whether it contributes to sustainable development.

Contracts Register

Organisations may access the Contracts Register for their organisation to assist in evaluating existing arrangements, including contract value.

The Contracts Register module in Public Contracts Scotland (PCS) has the facility for buying organisations to operate a private register of all contracts they have in place.  A public register of these contracts meets the obligations of Section 35 of the Procurement Reform Act (Scotland) 2014.

It is important to note that the contracts register will pull through the contract value from the contract award notice. You should always be to be as open and transparent as possible when completing this field. This field can be manually amended but please be aware that all relevant amendments have to be manually duplicated in the Scottish Procurement Information Hub as there is no integration between the two systems for manual amendments.

Regulation 51(6) allows a contracting authority to withhold publication of information in the contract award or the conclusion of the framework agreement.  This is where the release of the information:

(a) would affect  law enforcement or go against the public interest;

(b) would prejudice the commercial interests of any person;

(c) might prejudice fair competition between economic operators.

So, if relying on (b) above you would need to be able to show the commercial interests of the company concerned would definitely be prejudiced by the release of this information.

Be aware that even if you withhold the contract value from a contract award notice, this does not provide cover from Freedom Of Information (Scotland) Act 2002 (FOISA).  FOISA thresholds are higher i.e. - to withhold under FOISA, the information would have to, or be likely to cause substantial prejudice.  Also the public interest in withholding the information would have to outweigh the public interest in its release.

Detailed contracts register user guidance can be found in PCS.

PLEASE NOTE:  if you do not use PCS for producing a contract register, you still must produce a publicly available one.

Any documents you need are listed below

Flowchart

(file type: docx)

Spend Analysis Example

(file type: docx)

Route 3
The profiling the commodity/service stage will help you understand and scope requirements to help ensure that they achieve the best combination of:
 

Quickfire Guide

Quickfire Guide

Profiling the Commodity/Service

  • Whole life costs

  • Quality 

  • Meet the end user(s) requirement

  • Identify any current contracts in existence

  • Estimate the relative spend on the goods/services in question

  • Use a sustainability test to maximise the positive impact the procurement process can provide.  This is in terms of social, economic and environmental impacts 

  • consider whether it is relevant and proportionate to ask bidders to supply their Scottish bidder ‘relevant contract’ Climate Change Plan at the selection stage if: environmental impacts have been identified for your contract when using the sustainability test; and/or the contract value is estimated to be equal to or greater than £4,000,000; and/or where the commodity procured is identified as a climate change priority by your organisation
  • Where the contract value is estimated to be equal to or greater than £4,000,000, would you impose community benefit requirements as part of the procurement?

  • Consider Commodity/Service Characteristics  (does not apply to Care and Support Services)

  • Consider how relevant Fair Work practices are to the scope of requirements (including Sub Contract requirements where relevant).  Ensure inclusion in accordance with the Statutory Guidance on Addressing Fair Work Practices, including the Living Wage, in Procurement.  The Practical tools are included there to help inform your decision e.g. – Fair Work commodity / service strategy – "Checklist“ and Flowchart will help inform your decision

  • Consider any cyber risks, with reference to the Scottish public sector Guidance Note on Supplier Cyber Security and (if appropriate) using the Cyber Security Procurement Support Tool.

  • Assess the current state of the market

  • Identify market key players who could meet the requirements

  • Assess the current market for opportunities.  For example such as the purchase of supplies or services labelled or certified as having specific environmental, social or other characteristics (e.g. fairly traded or equivalent)

  • Understand current and future needs of the participating market organisation(s).  Include this in your approach to market

  • Identify any early opportunities to explore.  Provide options for meeting these requirements

  • Identify any special conditions relating to the performance of the contract.  For example economic, innovation-related, environmental, social or employment-related conditions, that should be included in the contract. These can be included as long as they are linked to the contract subject matter and proportionate

Care and Support Services

Developing a Service Strategy

When developing a service strategy, an organisation must decide how the service will be put in place and develop the service specification.  An organisation should consider service characteristics and develop a procurement plan which describes:

  • the introduction and description of the purchase (considering the purpose, critical nature of it and any sensitivities etc.);
  • whether it is advertising the requirement and awarding the contract or framework agreement by competition, extending an existing contract or making a direct award without competition;
  • the reasons for that decision;
  • the procurement process (for example, open procedure) that will be followed and relevant timescales;
  • how it can be demonstrated that the procurement exercise will be fair, transparent and non-discriminatory, i.e. compliant with procurement legislation;
  • the roles and responsibilities of staff involved in the procurement process;
  • the applicable governance arrangements and approval process;
  • how and when it will communicate its intentions to people who use the service and also their carers and proposals for their involvement in the procurement process;
  • how it proposes to address Fair Work practices in order to impact on the quality of the service.  The Practical tools, Fair Work commodity / service strategy checklist and Flowchart,  have been developed to help identify relevant Fair Work practices when developing the service strategy.  An example completed service strategy checklist and example contract award criterion question is also available for home support services.
  • how the service specification will be developed with the involvement of people who use the services and also their carers and suppliers in its development (including any opportunities to contribute to economic, social and environmental wellbeing and to reduce inequality);
  • the type and duration of the proposed contract of framework agreement, available budget and estimated contract value;
  • research of the supplier market to identify current suppliers providing the same or similar service and any spend analysis available;
  • risks identified that may impact on the progress of the procurement;
  • anticipated benefits and outcomes;
  • what criteria will be used to select suppliers and award the contract or framework agreement (including whether award criteria or performance indicators should include equality considerations);
  • what transitional arrangements will apply if an existing service transfers to a different supplier;
  • how the contract or framework agreement will be managed;
  • how the relationship between the organisation and supplier will be managed;
  • arrangements for reviewing the service;
  • what action it proposes to take at the end of the contract term; and
  • how the procurement exercise will be evaluated.

Establishing individual needs and intended outcomes

As a matter of best practice an organisation should have a local commissioning strategy and/or service(s) plan which establishes strategic and individual needs and determines what type of service should be put in place to meet those needs and deliver the intended outcomes.  An organisation should ensure that there is clarity about:

  • the needs to be met and the outcomes to be delivered by the service taking into account requirements of the public sector equality duty;
  • how people who use services and their carers will be involved in defining their needs, expressing their wishes and choices and influencing the design of the service;
  • what choice and control the service will provide for the people who use the services;
  • how the service will meet the National Care Standards; and
  • how the service will contribute to the organisation's overall objectives.

Contract Renewal and Direct Award without Competition

An organisation should analyse the benefits and risks to people who use services, and also to service delivery, of advertising the requirement and awarding the contract or framework agreement by competition.  For existing services, this will require consideration, through consultation with people who use services and their carers, of the impact that any change in service provision of supplier will have on:

  • people who use services and their carers;
  • continuity of care;
  • the quality of the service and the outcomes delivered;
  • the cost of the service;
  • the market; and
  • the workforce

This analysis may suggest that, where an organisation is satisfied with the quality of a service and that best value is being achieved, the existing supplier should continue to deliver the service.  If an organisation's contract with the existing supplier includes an extension option that is within scope, the contract may be extended for the specified period.  In the absence of an extension option, any decision by an organisation to renew (or "roll forward") its contract with the existing supplier must be compliant with public procurement legislation.  Legal advice should always be sought in respect of any procurement decisions.

Alternatively, the analysis may suggest that the requriment should not be advertised at the current time and that a staged approach should instead be adopted.  If an organisation decides to adopt a different timetable for advertising the requirement, it should describe this in relevant procurement documents and set out how it intends to move towards competition in the future.

Risk of legal challenge for breach of the procurement rules

An organisation should assess the risk of legal challenge if it decides not to advertise the requirement and proceeds to award the contract or framework agreement without competition.  A legal challenge may have serious implications for procurement activity and future service delivery.  For example, for a "light touch" contract with a value of at least £663,540 such a challenge would be pursued as a commercial action.

Digital / ICT Procurement

If your procurement is Digital or ICT in nature, consideration must be given to the Digital Public Services Scotland Programme. This strategy sets out the ambitions and actions at sector, cluster or organisational level.

Further standards and guidelines can be found in the ICT High Level Operating Model and the Digital First Service Standard.

The activities at this stage must be carefully managed and comply with the Principles of Procurement in The Public Contracts (Scotland) Regulations 2015.  The processes must be undertaken in a transparent and proportionate way.  This will  ensure no market distortion, treating bidders equally and without discrimination. The procurement outcome unduly favour or disadvantage a particular bidder. It is the responsibility of the Organisation to make sure these requirements are met.Stakeholder Map.

Any documents you need are listed below

Stakeholder Map Template

(file type: docx)

Route 3

A stakeholder is an individual or group who have an interest or concern in something e.g. an activity or a business.

When undertaking aprocurement exercise it is crucial you ensure that stakeholders are involved to:

  • provide their expertise and feedback
  • meet and manage their expectations
  • hold ongoing two way communications
  • gain their buy-in throughout all stages of the process
  • support the contract after it has been implemented

For procurement exercises, a User Intelligence Group (UIG) should be created.   The UIG is a cross functional team containing key stakeholders. 

The UIG will assist you with:

  • developing the commodity/service strategy,
  • the tender evaluation
  • 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).  Members should include procurement and business/technical/customer representatives.

The National Standards for Community Engagement principles may help when establishing the UIG. These principles are designed to support and inform the process of community engagement and improve  outputs.

All UIG’s should have a minimum of two members i.e. the Procurement Officer and the end user.

Care and Support Services

All UIG’s (with the exception of Care and Support Services) should have a minimum of two members i.e. the Procurement Officer and the end user

Quickfire Guide

Quickfire Guide

UIG Research

You should undertake appropriate research before the first UIG meeting.  For example:

  • Gain an understanding of the commodity/service market from desktop research e.g. via the internet
  • Speak to potential suppliers 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 or peers
  • Read previous tenders or commodity/service strategies

This research will help you gain an initial understanding of:

  • the commodity/service,
  • the Organisation's requirements,
  • market conditions
  • risks, issues and barriers to success.
  • any contracts you may be able to access without the cost, time and risk of developing your own contract. 

At this stage, consideration should also be given to the sustainability factors to be built into your process.  You can also identify any expert or informed input that will be required e.g. guidance from Climate Change experts on carbon in the specific supply chain, or input from Economic Development officers regarding employment opportunities.

Stakeholder Mapping

The benefits of establishing a UIG are:

  • The ability to draw on the cross-functional expertise within the group
  • Stakeholder views are considered in the decision making process
  • Clear communication channels can be established
  • Presents 'one face' to potential 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 working together to understand and overcome any barriers to success
  • Embed best practice
  • Support the implementation of continuous improvement processes to safeguard the future of public service for future generations
  • bring together the ideas and insights of groups to obtain a holistic view.

Stakeholders should work to:

  • Embed best practice
  • Encourage and sponsor continuous improvement
  • Encourage innovation
  • Understand and remove any potential barriers to success

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.  This is 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/service 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 starting their procurement: 

  • Have alternatives to procuring been considered and discounted?
  • 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. If so do you know how to access them?

Stakeholder Map & Degree of Engagement

For the procurement exercise to be effective, it must meet the reasonable expectations of stakeholders and end users.

A clear understanding of stakeholder and end users' views is essential. To obtain this understanding you must have effective stakeholder engagement,  taking into account all stakeholder views.

Many stakeholders will be positive and supportive however, it is also important to understand the reasons why stakeholders may not be supportive.

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

The stakeholder map is a useful tool for the UIG to plan communications to stakeholders who are not UIG members. 

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.

UIG charter should be agreed.

Members of the UIG should not underestimate the amount of time and commitment involved in being a member. Although the UIG may meet only fortnightly or monthly there will be work to be completed in between meetings. Members should come to meetings fully prepared.

A UIG Membership Template an be used to record UIG membership and contact details.  Information can be found in the UIG Information and Templates below.

Stakeholders should:

  • always be open to new ways of shaping the requirement by asking the market and identifying what the market can supply.
  • give consideration to the options for shaping the market,
  • encourage the market to develop in such a way that it can meet Organisations’ future requirements.
  • assess future demand of the commodity/service.  This can be based on team knowledge and expertise, and upon information obtained from non-team members.

Engaging the market provides an opportunity to ensure the services provided are at the forefront of those available. Market sounding should also take into account the knowledge held by others buying Organisations, trade bodies and business support Organisations e.g. Federation of Small Businesses and Chambers of Commerce etc.

Care should be taken to protect the principles of transparency and equal treatment during such discussions. It is strongly recommended that market sounding activity is documented so that, if challenged, there is a record on file of what took place.

Any documents you need are listed below

Stakeholder Map Template

(file type: docx)

Declaration of Interest

(file type: docx)

UIG Welcome Pack

(file type: doc)

Route 3

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 Supply Chain efficiencies throughout the life of the contract.

Contract and Supplier Management should result in contract procedure and process improvements.  It should also increase Procurement Function knowledge and experience, which can then be used to benefit future contracts.  This can be done by:

Relationships

developing and managing constructive and transparent relationships with suppliers

Execution

ensuring the contract is successfully executed.  Includes meeting all special conditions relating to the performance of the contract which may cover economic, innovation-related, environmental, social or employment-related conditions

Value for money

maximising value for money from suppliers and contracts

Monitoring & improvement

providing a formalised system of monitoring, managing and continuously improving the supplier and the Organisation’s performance against the contract

Roles and responsibilities

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

Compliance

monitoring overall compliance to Key Performance Indicators and Service Level Agreements.  Implementing improvement plans in the event of underperformance.  Leveraging supplier expertise in pursuit of cost and efficiency gains

Improved benefits

realising additional savings and benefits and sharing them appropriately

Supply Chain

effectively managing the prompt payment of the supply chain

Innovation

providing a focus for development of initiatives and innovations

Continuous improvement

driving continuous improvement

Lessons learned

identifying lessons learned to inform future contract terms or strategies

Efficiency

developing supplier relationships to maximise efficiency.  Collaborate towards common goals and reduce waste, environmental or social risks

Strategic goals

Support the achievement of strategic goals, such as attracting Community Benefits through the contract

Sustainable procurement

monitoring Sustainable Procurement benefits through the life of the contract and ensuring that targets are met

Community benefits

measuring Community Benefits achieved vs anticipated

Care should also be taken to manage the risks to changes in contracts e.g. you may require to retender if there is substantial modification.  

Vision

The future vision for Contract and Supplier Management is that organisations will use the four quadrants of the balanced scorecard in a consistent manner.  This will allow measurement of a supplier’s performance across all organisations and / or sectors using that supplier.

Contract and Supplier Management should :

  • ensure that the service/contract is delivered to the required standards
  • provides value for money;
  • proactively identifies and manages any risks e.g. which may impact on a supplier’s service delivery / fulfilment of the contract requirements;
  • improve and develop contract and supplier performance across organisations, sectors and nationally. A consistent approach will maximise efficiencies and promote adding value across the supply base;
  • appropriately influence supplier activity and decisions,  improving value for money, over and above cost savings;
  • ensure the contract is effectively administered, for example from a change management perspective.

You should frequently aim to improve your own and supply base performance by various techniques.

Continuous Improvement

There are a number of formal and informal continuous improvement methods.  These range from: full continuous improvement programmes;  to organisational collaboration; and improved internal and external communication.

One of the key continuous improvement tools used in the Scottish Public Sector is the Procurement and Commercial Improvement Programme (PCIP).  This is 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
  • the Organisation’s procurement department contract and market knowledge improves, and benefits future contracts

Definition and Importance

Definition

Contract Management and Supplier Management differ.

Supplier Management refers to activities across a supplier’s whole portfolio of contracts.  These activities are normally  more strategic, longer term activities.  Some examples are a project to move to reuseable pallets for all products and contracts delivered by the supplier.  Or for a stationery supplier, moving to a new on-line catalogue ordering system.

Contract Management applies to the specific contract for the good(s) or service(s) being procured. For example, increasing the quality of refuse sacks to the UK requirements.  Amending the hours worked by staff on a security contract.

However, although different Contract Management and Supplier Management are linked: it is very difficult to perform effective Supplier Management if 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 supplier contract details.  You need to understand how the supplier is performing day to day.

Effective Contract Management is therefore a necessary 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.

Effective contract management is necessary for an efficient and compliant business. Contracts must be managed: especially those which deliver services, provide infrastructure or third party essentials.

Central functions of an Organisation’s Contract Management strategy should include:

  • complying with corporate governance regulations
  •  managing risk
  • eliminating or reducing cost (not by impacting supply chain efficiency or profit) and
  • maximising revenue streams.

Managing the contract information, obligations and the contract lifecycle are critical to meeting compliance regulations. This means that the entire process needs to be sponsored at an executive level.  This includes:

  • contract creation,
  • clarity of final agreement,
  • electronic contract management system, and
  • integration of contract data with back-end systems and contract performance reporting,

The above need to be rolled-out to your entire organisation (for at least the most critical/high impact contracts).

Robust Contract Management will reduce risk to your Organisation.  This includes issues such as Conflicts of Interest and Fraud.

Your Organisation must consider these areas as a vital part of its governance. You must ensure all appropriate measures are taken to prevent, identify and remedy conflicts of interest.  Include measures to combat fraud, through the life of the contract.

Contract Management for Joint Procurements

If entering a joint procurement exercise with one or more public sector organisations, you must have already agreed the legal status and requirements of such an exercise.

A “lead” authority may have been agreed at strategy stage.  Legally they are responsible for forming the contract with the awarded supplier(s).

Alternatively a truly “joint” exercise may be initiated.  Here procurement conduct is  carried out in the joint name(s) of the participating organisations. 

In either case, the organisations each remain responsible for meeting their contractual obligations.

Where you have determined only part of the procurement will operate as a joint exercise, the organisations will be jointly responsible for those activity areas declared  as joint. Each organisation will retain sole responsibility for the activities carried out on its own behalf.

All of the above factors determine the subsequent approach to contract management. Although considered at Strategy Development stage, when deciding subsequent practical considerations these must remain a factor when determining the operational approach such as:

  • who is responsible for contract management,
  • how Key Performance Indicators (KPIs) will be managed and communicated and
  • the reporting / communication network  needed between your organisations and the supplier(s). 

Benefits

Both you and supplier should be motivated and enabled to deliver additional value, This should be done within legal limits and over and above that specified in the original contract, e.g. not simply extending the expenditure. The process should deliver benefits such as:

Routes of engagement

provide formal routes of engagement at different levels of management.  This allows opportunities for improvement at senior levels

Supply costs

ensure supply costs are contained and minimized, and that opportunities for improving cost effectiveness and efficiencies are explored and progressed e.g. packaging, service level definition

Deliver business needs

proactively ensure that the business needs under the contract are delivered.  Ensure both customer and supplier’s obligations are understood and managed.  Reduce reactive ‘incident resolution activity’ to minimising the cost of failure and of managing the relationship

Issue resolution

promote proactive issue resolution.  Ensure clear escalation paths exist within both organisations

Standardisation

Use a standardised approach for a number of suppliers/customers.  This will embed operational efficiency, consistency and quality

Consistency

limit the number of people involved.  This ensures process consistency and communication.  It makes the right people involved in the right activities at the right time with the right information

Improvements

encourage the supplier to improve their product or service in ways which provide additional value to the customer and to future customers.  Promote efficiencies within both organisations which will develop the skills of the employees and help the supplier’s staff to deliver a better service.

Data Protection

Organisations should build into their contract management activities sufficient checks.

This includes ensuring suppliers are meeting their Data Protection Legislation obligations. If these obligations are not being met, you should take urgent remedial action with the supplier to address issues and risks.

More detailed information can be found in Additional Resources.

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

Route 3

This section outlines the process and activities involved when implementing a new contract.  This is to ensure:

  • supplier(s) have all the information they require to plan user’s  migration  to the new contract
  • Organisations have all the information they require 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

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 at the same time.

This mobilisation process 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.

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

The Contract Implementation Plan document listed below will assist you in Framework Agreement / Contracts, Roles and Responsibilites, Framework Agreements / Contract Management Strategy and how customers can engage. 

Any documents you need are listed below

Route 3

Before proceeding with your Contract Award you must ensure you have received, reviewed and approved the most up-to-date supporting documents referred to in the selection stage response e.g. certificates.

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.

Checklist

Checklist

Contract Award Readiness Checklist

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

Action

Checked?

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 was made.

 

Review the list of proposed suppliers/sub-contractors to be used by the successful bidder?  Did these organisations also bid directly for the tender exercise?  Such circumstances can lead to a pre-determined outcome as it would be irrelevant who was awarded the work.  This may identify cartel operating.

 

 

 

 

 

Blank rows are provided for your use e.g. to add additional checklist items.

Contract Award Recommendation Report

You should prepare a Contract Award recommendation report.  This should be endorsed by the User Intelligence Group (UIG) prior to receiving approval to proceed by the appropriate authority level within your Organisation.

Quickfire Guide

Quickfire Guide

Recommendation Report Contents

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

  • Selection Stage evaluation results (if not contained within previous report)

  • Technical & commercial evaluation (including any whole life costing) together with details of any clarifications conducted benefits and savings available

  • Details of any risks still present and mitigation plans

  • Sustainability considerations (life-cycle costing, social, economic and environmental)

  • Cyber Security Considerations

  • Considerations in relation to Community Benefits in procurement exercises equal or greater than £4M

  • Details on how the tender outcome will meet the requirements identified in the Commodity/Service Strategy

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

Information provided to tenderers must, where applicable, include the grounds for any decision:

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

Remedies

Remedies provide legal solutions to bidders/potential suppliers as a result of procurement law breaches by public bodies or utilities.

This includes:

  • stopping entering into a contract or concluding a framework agreement if a court proceeding notice has been issued and served
  • changes to remedies/penalties for the most serious breaches of the procurement rules.  This includes:
    • ineffectiveness orders (orders which cancel a contract or framework agreement)
    • shortening the duration of a contract or framework agreement
    • imposing a financial penalty on the public body concerned
    • time limit changes for bringing court proceedings

Further information can be found in SPPN 7/2010

Pre-Contract Award Checklist:

  • Have you received the most up-to-date supporting documents referred to in the selection stage response e.g. certificates?
  • 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 electronically? If so 15 day standstill applies.

The contract documentation should be collated and finalised to reflect the successful tenderer’s 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.

It is important to include the Fair Work practice commitments from the successful tenderer’s bid as standard Contract & Supplier Management criteria in the contract terms, including any agency or sub-contractor workers.

 

It is also important to include terms, which will apply to any new members to the workforce during the delivery of the contract.

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 must now be created on PCS 

If the contract involves cyber risks, and you are using the Cyber Security Procurement Support Tool (CSPST), please ensure you select the successful tenderer in the CSPST tool to allow your organisation to manage overall cyber risks.

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