|
|||
| Joint Astronomy Centre |
|
|
|
| Show document only |
|
||||||||||||||||||||||
|
____________________
|
||||||||||||||||||||||
|
|
|
FM 401 PROCUREMENT POLICY AND PROCEDURE
CANCELLATION OF PREVIOUS FM 1. This FM supersedes and replaces PPARC FM 27 Contracts Procedures (formerly SERC FM 6/77 dated 30 March 1977) and subsumes and replaces: PPARC FM 1 (formerly
SERC FM 4/69 dated 17 November 1969) all of which are hereby cancelled. 2. The purpose of this FM is to describe PPARC’s purchasing policy and procedures and to identify sources of further information and guidance. It should be read in conjunction with FM 402 which describes the requirements of the EC Public Procurement Directives.3. Procurement, in the sense in which it is applied in this FM, covers the process of acquisition of goods, services and works projects from third parties, from initial concept and definition of business needs through to the end of the useful life of a procured asset or services contract. In this context, it does not cover the purchase of land or buildings (whether freehold or leasehold) which is a specialist area requiring professional legal services. (In the event that an Establishment wishes to acquire land or buildings, advice should first be sought from PPARC’s Legal Liaison Officer - Angela Roythorne, Personnel Group, Swindon Office.) CONTRACT LAW 4. A contract is a legally binding agreement between two or more parties. With certain exceptions (eg contracts for the purchase of land) a contract does not have to be in writing. Contracts made orally are just as valid but the terms will be uncertain and evidence of those terms difficult to establish in the event of a dispute. As a matter of policy, therefore, all of PPARC’s contracts are made, or at least confirmed, in writing with the exception of low value purchases made using the GPC. 5. The key elements of a contract are offer, acceptance and consideration. Without any one of these a contract is unenforceable. For a full explanation of these terms and information regarding the other elements of a contract see section D of the DTI’s Procurement Manual. 6. The provisions of a number of Acts of Parliament may affect contracts placed by PPARC. For a list of the principle legislation and a description of its relevance see section D of the DTI’s Procurement Manual. 7. In cases of doubt concerning any aspect of contract law, the advice of the Head of Procurement should be sought. GENERAL POLICY 8. PPARC’s policy is to apply the principles of best procurement practice and to ensure that PPARC gets value for money in its purchases. PPARC aims to ensure a high standard of professionalism in purchasing, to emphasise the need for accountability for purchasing decisions, and to maintain the very highest ethical standards in purchasing activity. PPARC’s policy and procedure reflect both public sector policy and guidance issued by Treasury (see CUP guidance notes) and OST.9. In determining best value for money it is necessary to take into account the optimum combination of whole life cost and quality necessary to meet the customer's requirement. All procurement decisions must be based on robust assessments of all the options in each set of circumstances. Continuous improvements in value for money should be sought throughout the life of a contract through effective contract monitoring and control. 10. PPARC’s procurement staff seek to achieve these aims by ensuring suppliers compete for PPARC’s business resulting in lower prices and improved standards of service. This necessitates training procurement staff to the highest possible standards and implementing best purchasing practices, maintaining the integrity of audit trails by fully documenting any action taken and decisions made, and maintaining a professional relationship with suppliers.11. Suppliers are asked to compete for PPARC’s business except where there are convincing and supportable reasons for limiting or dispensing with competition. Competition must be genuine and effective. Inviting bids from suppliers whose product, service or technical capability is known to be unacceptable is not genuine and effective competition. 12. In general, contracts are placed using PPARC’s standard terms and conditions. Any proposal to depart significantly from these should be considered on its merits by procurement staff and, when appropriate, seeking advice from the Head of Procurement. Attempts to introduce conditions disadvantageous to PPARC should always be resisted. 13. PPARC’s procurement strategy aims to establish a streamlined process for obtaining certain goods and services. This strategy has four main features:
14. PPARC is committed to providing its procurement specialists with both the opportunity and encouragement to pursue professional membership of The Chartered Institute of Purchasing and Supply. DELEGATED AUTHORITY 15. Establishment Directors are notified each year in the their Letters of Delegation of Financial Authority (see FM 101) of the limits of their delegated authority to procure goods and services and to enter into collaborative agreements or memoranda of understanding. In exercising such delegated authority, Establishments should have regard to Government Accounting, DTI’s Procurement Manual and PPARC’s FMs. In the event of any apparent conflict between the provisions of these documents, advice should be sought from the Head of Procurement. 16. Establishment Directors are free to sub-delegate their own delegated authority as they consider appropriate. Staff in receipt of delegated authority, other than in respect of Small Value Orders, are expected to undergo formal training in procurement practice and procedure at a level appropriate to the Establishment. Staff other than procurement specialists may be granted delegated authority to raise warrants/orders against specified running contracts or framework agreements. All delegations must be explicit and in writing. In determining levels of delegation, Establishment Directors should have regard to the experience, training and expertise of the individual member of staff. Suggested upper limits related to grade are shown in Appendix 1. HEAD OF PROCUREMENT 17. PPARC’s Head of Procurement is based in Finance Division in Swindon Office. The Head of Procurement is the focus of PPARC’s procurement expertise and is best placed within PPARC to provide advice and guidance on a wide range of procurement matters including staff training. The Head of Procurement is also able to provide model contract documentation and to assist in drafting special terms and conditions where these are required. General guidance is disseminated in the form of Procurement Guidance Notes. Copies of both PPARC’s standard contract documentation and the Procurement Guidance Notes may be found on PPARC’s intranet. 18. The Head of Procurement must be consulted in all instances where Establishments propose to enter into a contract: (a) where the value exceeds the EC thresholds (UK Establishments only); or Consultation should ideally be at the earliest possible stage ie the project planning stage and, in all instances, before invitations to tender are issued. ETHICAL STANDARDS 19. As PPARC’s activities involve the expenditure of public funds, procurement staff must not only seek to preserve the highest standards of integrity, objectivity, fairness, efficiency, courtesy and professionalism but also be seen to do so. 20. Procurement staff should:(a) familiarise themselves thoroughly with the very high standards expected of public servants (see The Seven Principles of Public Life – Annex B to FM 202 and CUP Guidance Note No 16 "Purchasing Ethics"; (b) make contractors acting for PPARC aware that they are also expected to meet these standards; and (c) ensure suppliers are aware that they are expected to respect those standards. THE PROCUREMENT CYCLE 22. The procurement cycle comprises three basic stages:
24. The respective roles of the Demanding Officer and the Procurement Officer in the procurement cycle are described at Annex B. THE REQUISITION STAGE 25. It is a fundamental principle that public money should not be spent unless the need to make a purchase has been demonstrated. The business case is therefore the first element of the requisition stage and, for higher value purchases, a written statement is required defining in a rational manner the need for the purchase. The Demanding Officer is responsible for developing the business case and obtaining approval prior to completing a requisition form. Requisitions should not be authorised until the business case has been approved. Guidance on the business case can be found at Annex C.26. Demanding Officers should communicate their requirements to their Establishment’s designated Procurement Officer through requisitions which may take the form of paper documents or electronic files depending on the finance software in use at the particular Establishment. The exact format of the requisition form is left to individual Establishments to determine. Guidance on the preparation of requisitions can be found at Annex D to this FM. A model form of requisition is appended to the Annex. Guidance on the drafting of specifications may be found at Annex E. 27. Requisitions must be authorised at the appropriate level before orders/contracts are processed. A proper audit trail showing both the originator ie the Demanding Officer and the budget holder ie the Authorising Officer must be preserved. Where paper requisitions are used the requisition form must be signed by both the Demanding Officer and the Authorising Officer and retained on the contract file. For items of low value, the same person may sign in both capacities. Establishment Finance Officers are free to determine the low value threshold for this purpose subject to the threshold not exceeding the overall level for PPARC set by the Head of Procurement (see Appendix 1 for current thresholds). 28. When completing requisitions, the estimated cost of the total requirement must be taken into account. For example, if the requirement is for design, manufacture, installation and maintenance of a piece of equipment, then it is the cost of the total package that will determine whether or not full tender action is appropriate. A requirement must not be split in order to keep the various constituent elements of it within the Small Value Order limit. THE ORDER/CONTRACT STAGE Running Contracts and Framework Agreements 29. Where a running contract or framework agreement in respect of the goods or services required is already in place the Procurement Officer, or other person suitably authorised by the Establishment Finance Officer, will, on receipt of a properly authorised requisition, raise a warrant or order. Details of running contracts and framework agreements open to all Research Council sites can be found on the Research Councils’ Purchasing Consortium’s web site. 30. Whilst PPARC’s policy is to maximise the use of running contracts for frequently required low value items (eg electronic components, stationery) there comes a point, usually determined by volume factors, where such contracts cease to be attractive to the supplier and it is not practical to negotiate advantageous terms. Individual orders must therefore be placed for goods and services not covered by a running contract or framework agreement. The category "Small Value Order" has been established to facilitate fast stream processing for lower value orders. The upper value for this limit (see Appendix 1) is determined by the Head of Procurement but Establishments may determine a lower limit appropriate to local circumstances and needs. It is to a certain degree an arbitrary limit but it establishes a point below which there is no need to insist on competitive tender action or conversely to record the justification for non-competitive action. In deriving the limit the factors to be considered are complexity and risk against the potential return or resources spent on the procurement. Consideration needs to be given to the effort involved in obtaining competitive tenders, providing a speedy service and obtaining value for money. 31. The Small Value Order limit enables professional procurement effort to be concentrated on the high value requirements. The end-user also does not have to explain the reasons for choosing a particular supplier although staff need to be satisfied that the chosen supplier is indeed suitable. Up to this limit there is no need to record the reason for dispensing with competition provided that procurement staff are satisfied that Small Value Order procedure is the most advantageous course, the price to be paid is fair, reasonable and represents value for money and that any risk is adequately catered for. It does not mean that orders below the limit will not require competitive action in certain circumstances should professional procurement staff judge such action justified (eg first purchase of a completely new item or in a new market area). 32. Where the goods or services required are not the subject of an existing running contract or framework agreement and where the cost of the order does not exceed the local Small Value Order limit the purchase may be dealt with in accordance with the procedure described at Annex F to this FM.Simplified Methods 33. Simplified Methods is a further stage in streamlining strategy. It applies to purchases above the Small Value Order limit where the supply is of a proprietary or well-defined nature. Establishments may determine a value limit for simplified methods appropriate to local circumstances and needs subject to that limit not exceeding PPARC’s overall limit for Simplified Methods as determined by the Head of Procurement (see Appendix 1). Provided competitive quotations have been received, then it may be possible to offer a contract without the issue of formal invitations to tender. The underlying aim of this strategy is to concentrate available procurement effort on those contracts deserving the most careful consideration, resolute negotiation and thorough post-contract monitoring.34. Where the goods or services required are not the subject of an existing running contract or framework agreement and where the cost of the order does not exceed the Simplified Methods limit, the purchase may be dealt with in accordance with the guidelines described at Annex G to this FM. 35. Where the goods or services required are not the subject of an existing running contract or framework agreement and where the cost of the order exceeds the Simplified Methods limit, as determined from time to time by the Head of Procurement (see Appendix 1), tenders should be sought in accordance with the procedure described at Annex H to this FM. Where the estimated value of the goods or services required exceeds the relevant threshold for the EC Procurement Directives special procedures are required (see FM 402 and CUP Guidance Note No 51). Adequate time must be allowed for such tender exercises to be completed. Urgency alone will seldom provide adequate reason to dispense with competition under EC rules.Dispensing with Competition 36. It is a fundamental requirement that contracts should, whenever possible, be placed only after genuine competition between suppliers. Whenever Demanding Officers request that competition is dispensed with there must be sound, supportable reasons for single tender action. Approval to proceed on the basis of single tender action must be obtained from a suitably authorised member of the procurement staff before invitations to tender are issued. The justification for single tender action must be recorded in writing for retention on the contract file. Guidance on the factors to be considered before dispensing with competition can be found in Annex I to this FM.Evaluation of tenders 37. Guidance on the evaluation of tenders can be found at Annex J to this FM. The choice of supplier will, in general, be the supplier offering the lowest priced tender meeting the specification and any other stipulations in the invitation to tender. However, there may occasionally be circumstances in which it is proposed to accept other than the lowest tender. Guidance can be found at Annex K to this FM.Post tender negotiation 38. Post tender negotiation is the process of renegotiation, or additional negotiation, with one or more suppliers who have gone through a tender exercise. It requires great care and should only be carried out by appropriately trained procurement specialists. Further information may be found at Annex L to this FM and in CUP Guidance Note No 1. 39. PPARC’s usual payment terms are payment within 30 days of receipt of an invoice following completion of the contract. However, in certain circumstances it may be advantageous to agree to make phased payments or stage payments if, for example, this enables a lower price to be negotiated. Stage payments should only be considered where there is a clear benefit to PPARC. Stage payments should be linked to completed work packages and the supplier should be asked to agree to a suitable vesting clause. A model form of words may be obtained from Procurement Group, Swindon Office. Invoices will generally not be due for payment until the goods or services forming the subject of the invoice have been received and accepted or satisfactorily performed. RETURNS OF INFORMATION TO SWINDON OFFICE 40. Establishments should maintain records of all contracts placed (including Small Value Orders) in a format which enables statistical information to be readily compiled as and when required by the Head of Procurement for the purpose of answering queries (including Parliamentary Questions) from OST and the Office of Government Commerce.41. To assist the Head of Procurement in developing PPARC’s procurement strategy, Establishments are required to submit monthly returns to Swindon Office showing the information set out in the tables at Appendix 2. 42. PPARC is required to submit an annual return to the European Commission showing the number of contracts placed during the calendar year under the procedures laid down in the EC Procurement Directives. To enable the Head of Procurement to compile the return on behalf of PPARC, Establishments are required each year to advise the numbers of contracts placed during the previous calendar year under each of the three procedures – open, restricted and negotiated – by the end of March. It is expected that the ING and the JAC will normally submit nil returns. 43. Any queries concerning the content or interpretation of this FM should be referred to Tom Hinde, Head of Procurement, PPARC Finance Division, Swindon Office, tel: 01793 442045, e-mail: tom.hinde@pparc.ac.uk.Tom Hinde Appendix 1 to FM 401 LIMITS AND THRESHOLDS The Head of Procurement in consultation with the Head of Finance, PPARC, has determined the following limits and thresholds for use in PPARC with effect from 1 November 2000. These should be regarded as upper limits and thresholds. Establishment Finance Officers may elect to set lower limits and thresholds for local use.
The Head of Procurement, PPARC, holds delegated power to authorise competitive tender contracts to the value of £1,000,000 and single tender contracts to the value of £500,000. The following are advisory upper limits for delegation to other staff of authority to place contracts. The actual delegations should take account of the experience, training and expertise of the individual member of staff. Staff should not normally be given delegations at the full levels shown unless and until they have successfully completed appropriate specialist procurement training.
Appendix 2 to FM 401 MONTHLY RETURNS TO PPARC FINANCE DIVISION, SWINDON OFFICE A: All Contracts and Orders
Annex A to FM 401 ETHICS IN PROCUREMENT 1. Ethical behaviour in procurement is particularly important in organisations such as PPARC because its activities involve the expenditure of public funds. PPARC’s activities are subject to public scrutiny. It is of the utmost importance, therefore, that the integrity of the individual, and therefore, the integrity of PPARC, is not only maintained, but it must also be obvious to any observer that it is maintained. The drive for improved value for money in procurement must not compromise standards of conduct. 2. This guidance sets out the following:-
The Legal Framework 3. Under the Prevention of Corruption Acts passed between 1889 and 1916 no employee of a public body may solicit or receive any gift or consideration from any person or body with whom they deal as part of their official duties as an inducement or reward for doing or refraining from doing anything, or showing favour or disfavour to any person of firm, in their official capacity. Gifts and other considerations are automatically considered corrupt unless the individual can prove otherwise. Code of conduct 4. Against this background, the guiding principles of ethical behaviour in procurement for PPARC staff are as follows:
5. These guiding principles can be summarised as impartiality, independence, and integrity. The following paragraphs describe the practical implementation of these principles and the standard of conduct to be adopted. Disclosure of Interest 6. The basic rule is that anyone who has any form of personal interest must disclose it to PPARC. For example, where an invitation to tender is to be issued to a supplier whose staff are friends or relatives of a member of PPARC staff involved with the procurement, line managers should be informed immediately and they must decide if the matter should be dealt with by another member of staff or to seek further advice from the Establishment Finance Officer. Similarly, if a commercial interest exists (eg where a member of PPARC staff holds a directorship of the tendering company), or any other interest that might conflict with an individual's impartiality, independence or integrity, the matter should be reported immediately. The action taken should be recorded in writing. Gifts and Hospitality 7. The basic rule is that no gift or money should be accepted. However, it should be noted that the offer of small gifts or hospitality is an accepted part of commercial life and thus care must be taken not to offend or damage relationships when explaining acceptance is contrary to PPARC’s normal practice. All offers of gifts should be declined and be recorded and reported to line management. The only exception to the basic rule is gifts of a trivial or inexpensive seasonal nature. Examples of acceptable gifts include inexpensive diaries, calendars and similar "desk-top trivia". Examples of unacceptable gifts include tickets to sporting events or weekend breaks (see para 10 below). All gifts of significant value must recorded in the Establishment Gift Register (see FM 203). 8. Any attempts by suppliers to undermine the honesty of staff by the offer of gifts or other inducements should be reported to line management immediately. 9. Some inducements are unavoidable, as they come packaged with the product. An example is "Air Miles" earned on business travel. All benefits gained through spending PPARC funds are the property of PPARC and should be reported and surrendered (although if they are of no value to the organisation the Head of Procurement may authorise the recipient to retain them).10. The provision of hospitality by suppliers may represent an attempt to circumvent the rule on acceptance of gifts. Offers for hospitality may take many forms. Some of the most common are:-
11. Hospitality which arises in the normal course of business (eg lunches provided at meetings with suppliers and at promotional events or seminars organised by suppliers) may be accepted where the usual conventions of returning hospitality in principle apply. All other offers of hospitality should be declined and should be recorded and reported to line management. A useful guideline is that if the hospitality offered is beyond that which PPARC itself would provide in similar circumstances then it should be declined. 12. Lavish or excessively frequent hospitality is likely to be regarded as having influenced a particular decision and accepting free travel or invitations to conferences and other events together with the provision of travel and/or accommodation, especially in exotic locations, will be regarded as having influenced a particular decision. Such offers should be declined. 13. Commercially confidential information must be kept confidential and never utilised for personal gain or to prejudice fair competition. Information on individual contracts, contracts policy or procedures must not be given to the media or any other third party without the authority of line management. Price and other details must not be revealed, either directly or obliquely in a way that enables the information to be seen as applying to the offer of a particular firm. Care must be taken to avoid inadvertent disclosure. Bearing in mind that suppliers may have many different points of contact within PPARC, such information should be safeguarded to ensure it is not released by others, inadvertently or otherwise. Fair dealing 14. The basic rule is to be honest, fair and even-handed with suppliers. Suppliers should not be misled or invited to participate in Dutch auctions. Suppliers must be satisfied that PPARC is an impartial manager of the public funds in its charge.Further information 15. See also FM 202 Prevention of Fraud, and CUP Guidance Note No 16.
Annex B to FM 401 ROLES AND RESPONSIBILITIES Demanding Officers 1. Demanding Officers are responsible for completion of the requisition form (see Annex C to the FM) and should provide all the information necessary to ensure the requirement is fully met. This includes a precise description of the item or service, including any drawings, performance specifications or any other supporting documentation. Demanding Officers are responsible for producing a clear and unambiguous specification of the goods or services required (see Annex D to the FM). 2. Demanding Officers may suggest a number of sources of supply to ensure that orders and contracts are let as a result of competition. Demanding Officers may make enquiries of the trade in order to establish possible alternative suppliers, price indications etc before submitting requisitions but a line must be drawn between this general level of enquiry and the sort of discussions which encroach on commercial and contractual issues which are the responsibility of procurement staff.. When making such preliminary enquiries, Demanding Officers must take special care not to imply, or give a supplier any cause to believe, that an order or contract is likely to be placed with them. It is essential, therefore, that Demanding Officers restrict their discussions with suppliers to a general level and to technical matters. 3. Demanding Officers must not attempt to place orders or otherwise instruct suppliers or contractors to provide any item, service or works unless they have the authority to do so. Such general authority will be given in writing by the Head of Finance, PPARC. In the case of Small Value Orders, one-off authority may be give by a member of the procurement staff. 4. Where negotiations with suppliers are likely, or desirable, procurement staff should be brought into all discussions at the earliest possible stage. Demanding Officers should attempt to maintain the closest possible links with procurement staff at all stages in a contract. 5. When considering delivery dates, Demanding Officers should, where appropriate, bear in mind the timescales inherent in the tendering process. Typically, the process of preparing, issuing, receiving and evaluating tenders can add at least 4 weeks to normal manufacture and delivery times. This is often longer at times of peak annual leave and towards the end of the year when workloads invariably increase. In particular, the timescales and provisions contained in the EC Public Procurement Directives, described in FM 402, should be considered. 6. Demanding Officers are responsible, in appropriate cases, for providing a technical evaluation of suppliers tenders. 7. Where appropriate, Demanding Officers are responsible for providing technical supervision of contracts. As indicated above, this supervision must be confined to ensuring the technical requirements of the contract are met, eg inspection, quality control, testing. Technical supervisors should bear in mind that specifications form part of a contract and that any modification to them can be used by the supplier to justify delays in delivery or increases in price. Consequently, technical officers should not discuss alterations to a specification with the supplier before first discussing the matter with procurement staff.8. One of the most valuable tools in negotiations with suppliers is feedback on their performance of previous contracts. Demanding Officers are in the best position to provide information about the supplier's technical competence, and should, if necessary keep simple notes to support any judgements they may make. Procurement staff will initiate vendor rating action in the appropriate cases, eg large value contracts and running contracts, although Demanding Officers should highlight any specific examples of good or poor performance as they arise. Procurement Officers 9. Procurement Officers are responsible for implementing PPARC’s purchasing policy; for ensuring that, where appropriate, orders and contracts are placed as a result of competition; and for ensuring PPARC obtains value for money. 10. Procurement Officers are responsible for undertaking the financial and commercial appraisal of potential suppliers, and, where appropriate, for co-ordinating vendor rating exercises, ie assessing existing suppliers' overall performance. Vendor rating embraces all aspects of supplier performance, eg technical, administrative and commercial competence, and will, necessarily, require input from Demanding Officers. 11. Procurement Officers are also responsible for checking and verifying financial and budgetary authorities on requisitions. 12. Procurement Officers are empowered to discuss and negotiate commercial or contractual matters with existing or potential suppliers. Where those contractual matters are likely to encompass technical issues, the Procurement Officer should involve the Technical Officer in the discussions. 13. Procurement Officers are responsible for placing orders, preparing and issuing invitations to tender, evaluating the commercial and financial aspects of tenders, and awarding contracts.
Annex C to FM 401 THE BUSINESS CASE – PROCUREMENT GUIDANCE NOTE 1/2000 1. It is a fundamental principle that public money should not be spent unless the need for the goods or services has been demonstrated. The business case is therefore the first stage in the procurement process and is a statement defining in a rational manner the need for the purchase.2. The Demanding Officer is responsible for developing the business case and obtaining approval prior to completing a requisition form. The manner in which approval is obtained will vary according to the value of the goods or services required. For routine, low value purchases the Authorising Officer’s signature on the requisition will be sufficient. However, for purchases with a value exceeding £20k the business case should always be recorded in writing. The case need not necessarily be lengthy but it must be adequate having regard to the nature of the purchase. For high value purchases (ie purchases with a value exceeding £100k) or purchases of an unusual, novel or contentious kind Establishment Finance Officers must be consulted. In cases of doubt, advice should be sought from PPARC’s Head of Finance, Swindon Office. Where the value of the proposed purchase exceeds the Establishment Director’s delegated authority it will be necessary for the business case to be approved in Swindon Office. The Budget Holder should not authorise the requisition until the business case has been approved at the appropriate level. Whilst Procurement Officers may, in general, regard the Budget Holder’s signature as providing evidence that the business case has been approved they must obtain a copy of the approval for high value purchases or purchases of an unusual, novel or contentious kind. This copy should be placed on the contract file. 3. The amount of detail required in the business case will be proportional to the value and complexity of the proposed purchase. There will be instances where the case is routine eg where consumables such as stationary are running low in which case the Budget Holder’s authorisation of the requisition is adequate approval on its own. Where new equipment is to be purchased or worn out equipment replaced, at the lower end of the scale a simple minute may suffice whereas a full economic appraisal (see FM 301 insert hyperlink) is expected for a major purchase. Judgement will need to be exercised to ensure that the amount of effort in producing the case is commensurate with the value of the intended purchase. 4. A typical business case is likely to include the following:
5. Further guidance may be found in FM 301 Economic Appraisal.
Annex D to FM 401 REQUISITION FORMS – PROCUREMENT GUIDANCE NOTE 8/2000 1. All requests for the purchase of goods, services or works should be made on a fully completed requisition form, copies of which may be obtained from local procurement staff. Two types of form are currently used in Swindon Office – one for Small Value orders and another for higher value contracts. Copies are appended to this Annex.2. It is important that requisitions and requests for tender action contain all the necessary information to ensure that what is described in the subsequent order or invitation to tender will fully meet the requirement. If there is insufficient space on the relevant form for all the necessary information, the details, including any drawings, should be provided in a separate documents suitably cross-referred to the main document. 3. Requisitions should show:
5. Care should be taken to ensure that the expenditure authorised on the requisition includes the appropriate amount for VAT. 6. The Demanding Officer is responsible for ensuring that enough time has been allowed for the procurement and for specifying realistic delivery dates. ASAP is not an acceptable delivery date. Annex E to FM 401 DRAFTING A SPECIFICATION FOR GOODS OR SERVICES – PROCUREMENT GUIDANCE NOTE 11/2000 Introduction 1. One of the first steps of any procurement is to describe the requirement, ie the specification. This should provide potential contractors with a full understanding of the Demanding Officer’s needs and serve as a measure to ensure those needs are met completely.2. The specification ought to set down the Demanding Officer’s full expectations of the goods or services required from the contractor. It should give detail, but avoid prescribing methods for providing the requirement; this is for contractors to present in their bids. 3. The specification should:
4. The specification will:
Method 5. There are various methods of specifying, the choice very much depends on the nature of the procurement. The key to successful specifying is to be absolutely clear on, in respect of "services", what the entire objectives are, or, in respect of a purchase of "goods", what they are expected to do. 6. The specification is vital to the success of the procurement process. Demanding Officers must make sure enough time is given to writing it. The emphasis of the specification will vary according to the particular circumstances of the purchase. The method adopted could take either of the following approaches, or a mixture of both:• a focused and PRESCRIPTIVE approach. For example this could be a service required during certain times, during which specific tasks are to be carried out that must follow specific procedures. This begins to set the methodology for providing the service. This approach may be used where it is necessary, but prescription should be avoided whenever possible, as it will stifle contractors’ ability to be innovative in meeting PPARC’s requirement; • an open approach focusing solely on OUTPUT. For example this could be a service with specific objectives that could be provided in a number of ways. The method of delivery is completely in the hands of the contractor and this approach maximises the scope for innovation and flexibility. 8. The specification could take one of these formats:
Content 9. In compiling the specification the following should be taken into account: 10. The components of a specification will vary, particularly between goods and services. The following is a checklist of points that might be included:
11. A specification should set out the monitoring procedures to be used by the contractor. This will ensure that contractors are aware of the monitoring arrangements from the outset. Summary 12. The specification is the blue print of PPARC’s requirement. It must contain enough detail to convey exactly what the product or service is required to achieve and what is expected from the contractor. 13. Once the specification has been written, the following should be used to ascertain its adequacy: 14. The specification need not necessarily be a complex document. The Head of Procurement can advise on the content of specifications and assist in drafting. Further guidance can be found in CUP Guidance Note No 30 ‘Specifications’. Copies can be viewed on the Treasury’s web site.
Annex F to FM 401 SMALL VALUE ORDERS – PROCUREMENT GUIDANCE NOTE 2/2000 1. Formal competitive tender action is not required for Small Value Orders ie orders with a value up to the limit established by the Head of Procurement and set out in the Appendix 1 to this FM. This is because the administrative costs of a tender exercise are likely to exceed any savings achieved. However, this does not necessarily mean there should be no comparison of prices but rather that the effort involved must be proportional to the anticipated benefits.2. In those Establishments where the Government Procurement Card (GPC) has been introduced, the normal method of obtaining low value items should be for cardholders to use the GPC to place orders direct with suppliers subject to the procedures described in their cardholder user guide. Where the GPC is not available, or where the value or nature of the item or service required is outside the scope of PPARC’s GPC scheme, Demanding Officers must raise a requisition in accordance with local procedure. (Further information about PPARC’s GPC scheme may be obtained from David Wilkinson, Finance Division, Swindon Office.) 3. Sourcing of goods may be carried out by either the Demanding Officer or the Procurement Officer. Demanding Officers should bear in mind that procurement staff will have access to records showing where similar items have been obtained in the past. 4. Where supplier catalogues are available, prices may be easily and quickly compared before orders are placed. Demanding Officers should bear in mind that procurement staff may have access to a wider range of supplier catalogues than are available elsewhere in the office. 5. Where catalogues are not available then other sources of price information may be explored eg supplier web sites. Procurement staff are likely to already know of a number of such sites and will be able to access them quickly and easily. 6. It may be appropriate to select potential suppliers from Yellow Pages (or local equivalent) and make two or three telephone calls to establish prices, availability and delivery times but the amount of time and effort involved in doing this needs to be balanced against the savings likely to be achieved. 7. Where the Demanding Officer has made initial enquiries, the name and address of the chosen supplier, the price of the goods, the supplier’s stated delivery date and the source of the information (eg Winter 2000 catalogue, telephone quotation, web site) should be included in the requisition. Where the Demanding Officer does not have this information, it will be adequate simply to state in the requisition a full description of the goods or services required, the required delivery date and the sum authorised for the purchase. The Procurement Officer will then source the goods and provided they are available within the price limit stated and by the required delivery date the order may be placed without further reference to the Demanding Officer. 8. Where Demanding Officers obtain written, faxed or e-mailed quotations a copy should be appended to the requisition. 9. Requisitions should be sent to the person or persons designated by the Establishment Finance Officer as having responsibility for procurement of goods and services. In Swindon Office this is the Procurement Group. 10. Orders should normally be placed on the basis of PPARC’s standard terms and conditions which, ideally, should be printed on the reverse side of the order form. Small Value Orders which require suppliers or contractors to carry out any work on site should be made subject to supplementary conditions covering liability for injury and/or damage and site rules. Suitable model contract clauses may be obtained from the Procurement Group, Swindon Office. Urgent orders may be placed over the telephone and should be confirmed in writing as soon as possible. When placing orders for site work by telephone it is important to ensure that any supplementary conditions are made known to the supplier. 11. Care should be taken
to ensure that it is clear from the order whether the price stated is
inclusive or exclusive of VAT.
Annex G to FM 401 SIMPLIFIED METHODS – PROCUREMENT GUIDANCE NOTE 9/2000 1. Simplified methods may be used when purchasing goods or services of a well-defined or propriety nature provided that the value of the order does not exceed the Establishment’s local Simplified Methods limit (see the Appendix 1 to this FM for the overall PPARC limits currently in force).2. Although a formal tender exercise is not required under the Simplified Methods procedure, it is still necessary to demonstrate that some form of competition has taken place. Where it is proposed to dispense with competition, approval to do so must first be obtained and a formal tender invited in the normal way. (see Annex I). Where suppliers’ current catalogues are not available, written quotations should be obtained (a fax or e-mail is acceptable provided its origin is apparent and it clearly states the suppliers name and address). Whilst it is not necessary to arrange to receive or open quotations at the same time care should be taken to prevent one supplier’s price from being revealed to another who has yet to submit a quotation. 3. Whenever practicable, suppliers should be asked to quote to PPARC’s standards terms and conditions and should be asked to separately identify the VAT chargeable. Some variation of conditions may be acceptable but any proposals to deviate significantly from these terms and conditions should be carefully considered and, where appropriate, discussed with the Head of Procurement before proceeding to let the contract. Requests to make payment in advance of supply should always be resisted. 4. Care should be taken to ensure that quotations are on a comparable basis. In addition to minor variations in terms and conditions between suppliers, other factors may affect value for money eg one supplier’s product may have a slightly different specification to the others. Where this is found to be the case it may be necessary to ask one or more of the suppliers to quote to a revised specification which more closely matches that in the requisition. It may also be necessary to ask Demanding Officers to categorise product features as "essential" or "desirable" in order to properly evaluate the quotations received. Whilst it is important to ensure that the specification meets the Demanding Officer’s requirements it is also important not to incur unnecessary expenditure on features which are neither essential nor desirable to the Demanding Officer. 5. In accepting a supplier’s quotation care should be taken to ensure that the terms and conditions of the order are clear and unambiguous. Where there has been considerable discussion or correspondence between the supplier and the Procurement Officer discussing available options it is preferable to make a fresh offer of contract to the supplier setting out the terms and conditions in full in a single letter. Such a letter should explicitly state that it contains all the contract terms and conditions in their entirety. 6. Contracts should make
it clear whether the price is inclusive or exclusive of VAT. Unless otherwise
stated, there is a presumption that prices are inclusive of VAT.
Annex H to FM 401 INVITATIONS TO TENDER – PROCUREMENT GUIDANCE NOTE 10/2000 1. Only reputable, financially stable and technically competent firms should be invited to tender. The firms to be invited should be selected with a view to exploring the market and promoting the widest, fairest, and therefore the keenest, competition. Except in the case of a monopoly supplier, the aim should be to ensure at least 3 effective bids. Generally, however, the greater the value of the contract, the more firms should be included in the tender list, provided, of course, there is sufficient competition available. There must be a genuine attempt to encourage competition and firms must not be included simply to make up the numbers.2. Before issuing tenders the Procurement Officer in consultation with the Demanding Officer should determine the basis on which tenders are to be evaluated and draw up a list of criteria and weightings to be used. 3. Invitations to tender should be issued to all potential bidders at the same time. Tenderers must be given adequate time in which to prepare their bids. The amount of time given will vary according to the complexity of the requirement. For supplies covered by the EC Procurement Directives the time periods involved can be quite lengthy (see FM 402 for further information). Where bidders request clarification or site visits care must be taken to ensure that information arising from such enquiries or visits is made available to all tenderers. One or more potential tenderers may request an extension to the time period allowed for return of tenders. If there appear to be good reasons to allow this, all recipients of the invitations to tender must be notified of the new return date. Any who have already submitted their tenders at the time of notification should be permitted to submit modified tenders if they so wish. 4. Tenderers should be asked to submit their tenders in sealed envelopes quoting the contract file reference number but not their address on the outside. As tenders are received they should be logged by the procurement staff and stored, unopened, in a secure location. 5. On the designated return date, all tenders should be opened by the Procurement Officer in the presence of a witness – this person need not be another member of the procurement staff or the Demanding Officer. Each page should be date stamped and initialled by both persons. A check should be made to establish whether tenderers have enclosed all the required documentation and that there are no obvious errors of arithmetic. The names of the tenderers and their bids should be recorded in a schedule and signed by both the Procurement Officer and the witness.6. Tenders received after the designated date should be marked "Late Tender". In general, they should be disregarded although in certain circumstances they may be considered eg where the postmark indicates the tender was posted early enough to have arrived on the due date but was delayed in the post. Where an Establishment wishes to accept a late tender, other than in the specific example give, the Head of Procurement should be consulted before a contract is placed. 7. A commercial and contractual evaluation of the bids should then be undertaken by procurement staff in conjunction with an evaluation of the technical aspects of the bids by the Demanding Officer assisted, where appropriate, by a technical expert.
Annex I to FM 401 SINGLE TENDER ACTION – PROCUREMENT GUIDANCE NOTE 3/2000 1. Dispensing with competition for orders with a value in excess of the Small Value Order limit (see the Appendix 1) must always be fully and adequately justified. It should be borne in mind that urgency alone may not be sufficient to justify single tender action if the value exceeds the current thresholds for contracts covered by the EC Procurement Directives (see FM 402 for further information).2. The requisition should state why the nominated supplier is preferred to any other, or why it is necessary to frame the specification in such a way as to exclude competition. A distinction should be drawn between those cases where competition is not available and those where competition is apparently available but is to be dispensed with. If necessary, the Procurement Officer should ask the Demanding Officer to provide additional information. 3. All requests to dispense with competition must indicate what other sources of supply are available. In those cases where compatibility is given as the reason for dispensing with competition, the Procurement Officer should ask the Demanding Officer to state the extent to which the new equipment is to be incorporated into, or to be interfaced with existing equipment as well as the consequences of using another supplier's equipment. Where new equipment is not to form part of an integral part of existing equipment, competition may only be dispensed with where the performance of alternative equipment is known to be unacceptable. 4. The type of circumstances in which dispensing with competition might be justified are indicated below, although each case must be judged on its merits:
5. The desire to spend allocated funds within a particular financial year is not an acceptable reason for dispensing with competition or formal tender action. 6. Lack of adequate planning on the part of the Demanding Officer resulting in limited time being available for the tender exercise is not sufficient justification to dispense with competition. 7. Procurement staff should view with caution the justification "sole supplier". Except in the case of state of the art scientific instrumentation or equipment it will usually be possible to find alternatives. Satisfactory reasons for excluding such alternatives must be obtained and recorded on the contract file.8. Single tender action must be authorised in writing by a Procurement Officer with the relevant level of delegated powers. 9. Procurement Officers must satisfy themselves that prices obtained in single tender action are fair and reasonable before quotations are accepted. A note should be placed on file showing the basis on which the assessment of the price as fair and reasonable was made. 10. Prices may be evaluated by reference to established market prices, including prices previously paid for similar goods or services, or analysis of a break-down of the quoted price. Procurement Officers should consider at the outset what measures are needed to establish that prices quoted are fair and reasonable and should request the necessary information in the invitation to tender. 11. Where a breakdown is
requested, the tenderer should be asked to supply details of the labour and
overhead rates used, total labour charges, the cost of materials, packing
and delivery charges etc. It will usually be possible to compare labour
rates and the cost of materials with established market rates.
Annex J to FM 401 TENDER EVALUATION PROCEDURES – PROCUREMENT GUIDANCE NOTE 5/2000 1. Tenders should be evaluated by an evaluation panel comprising persons with the necessary expertise to make judgements on financial, technical and contractual matters. A typical panel will include the Procurement Officer and the end-user. Other staff may be co-opted as required. The evaluation process must be systematic, thorough and fair and seen to be so.2. Each tender should be scrutinised and a note made of any irregularities (such as incomplete signatures or alterations), omission of required information or failure to comply with instructions to tenderers. Tenders which are incomplete in minor details may be considered on their merits. Tenders which omit significant information, especially prices, may need to be treated as late tenders if amended at a later date to cover the missing information. 3. For proprietary goods, the evaluation of tenders is likely to be relatively straightforward and will consist mainly of establishing that the specification of the goods offered matches the specification requested and the tenderer can be relied upon to deliver within the required timescale. 4. Where the requirement is more complex or involves the provision of services, to make a complete evaluation of the tenders received, the following assessments should be carried out: (a) Capability Assessment – to establish whether tenderers have the capability (including personnel, support systems, experience and competence) and proven track record to deliver. (b) Technical Assessment – to establish whether tenderers have fully understood the requirement and can meet the specification. (c) Quality Assessment – to establish whether tenderers can deliver the service to the appropriate quality standards. (d) Financial Assessment – to check that all relevant costs have been included and that bids can be compared on a like basis; to consider the implications of any cost variation proposal; to consider the pros and cons of any proposal for interim or stage payments to be made. 6. In comparing the relative costs of the various tenders it will be necessary to consider whole life costs ie not just the purchase price of an item but any maintenance or operating costs expected to be incurred during the useful life of the item. 7. The general rule to
be observed in placing a contract after competitive tendering is that the
lowest satisfactory tender should be accepted.
Annex K to FM 401 ACCEPTANCE OF OTHER THAN THE LOWEST SATISFACTORY TENDER – PROCUREMENT GUIDANCE NOTE 6/2000 1. The reason for the final selection of supplier should always be recorded on file. There is a presumption that the successful tender will normally be the lowest priced satisfactory tender. Where it is proposed to accept other than the lowest tender, particular care should be taken to explain why the lowest was deemed unsatisfactory. Where the lowest tender is found not to meet the specification the file note should show which aspects of the specification have not been met. In certain circumstances, the Demanding Officer may recommend selection of other than the lowest satisfactory tender on the grounds that another tender offers significant technical advantages for little additional cost. Before agreeing to such a recommendation, the Procurement Officer needs to be satisfied that the technical argument is sound. Bear in mind, that if the additional features were deemed to be essential they would have been included in the original specification. Caution should also be exercised when rejecting tenders on grounds of unacceptable delivery times where no specific mention was made in the ITT of a deadline for delivery. In the event that delivery requirements are modified by the Demanding Officer after tenders have been opened it may be necessary to provide all tenderers with an opportunity to improve their delivery dates before selecting the successful tenderer.2. Tenderers may amend
their offers at any time prior to acceptance. Amended offers received after
the due date are, strictly speaking, late tenders and should be viewed with
caution. Before accepting an amended offer, the reasons for the amendment
should be established. It is essential to preserve equity between tenderers.
Where collusion or impropriety is suspected the amended tender should
normally be rejected. Where there is significant price advantage in
accepting the amended tender and no collusion is suspected it may be
necessary to provide all tenderers with an opportunity to confirm their
prices before accepting any tender. Where the reason for the amendment stems
from a misunderstanding of PPARC’s requirements it may be necessary to
provide additional information clarifying those requirements to all
tenderers before they confirm their prices. In cases of doubt, the advice of
the Head of Procurement should be sought before any contract is awarded.
Annex L to FM 401 POST TENDER NEGOTIATIONS – PROCUREMENT GUIDANCE NOTE 7/2000 1. Post tender negotiations with the preferred tenderer often enable a better deal to be obtained. However, care should be taken in conducting such negotiations not to put other tenderers at a disadvantage. Post tender negotiation should not be regarded as a mechanism to extract commercially and ethically unacceptable terms nor should it be thought of as a licence to conduct a Dutch auction. Post tender negotiation may be defined as:"Negotiation after receipt of tenders and before the letting of contract(s) with those companies offering the best value for money with a view to obtaining an improvement in content in circumstances which do not pout the other tenderers at a disadvantage, distort competition or affect adversely trust in the competitive tendering process." 3. Where a meeting with the preferred tenderer is necessary it is essential that a member of the Procurement Group is present. For works contracts, pre-contract discussions with potential contractors are nearly always required or desirable to enable both sides to clarify their understanding of their likely forthcoming obligations. 4. Potential areas for negotiation will differ for every contract but typical areas might include:
6. Further guidance may be found in CUP Guidance Note No 1. |