APPENDIX 9
CONTRACT
STANDING ORDERS
The main purposes of these Contract
Standing Orders (CSO’s) are:-
·
To ensure that the Council obtains genuine value in the
way it spends money, so that it delivers Best Value services to the public it
serves
·
To comply with the laws which govern the spending of
public money
·
To demonstrate good corporate governance
·
To reasonably protect individuals and the Council from any
criticism or allegations of wrongdoing regarding specific procurement decisions.
Both ‘procurement’ and ‘contract‘ are
used as generic terms covering the purchase of goods, services or works from a
supplier, contractor or other entity - whether it is through a formal tendering
process, placing of a purchase order, call-off via an established framework
agreement or other similar arrangement.
The highest standards of probity are
required of all officers and members involved in the procurement, award and
management of any Council contract. Similarly the Council will endeavour to be
fair and open in its dealings with all suppliers and prospective suppliers, and
all members and officers shall uphold these principles. Nine key objectives of
the Council’s Procurement Strategy, which underpin the Council’s overall approach
to good procurement practice are reproduced as Appendix A.
1
BASIC
REQUIREMENTS
1.1
Key Principles
and Responsibilities
1.1.1
All procurement activity must be in connection with
the Council’s lawful functions and within the bounds of its statutory powers.
1.1.2
All procurement shall be in accordance with all
relevant legislation including Best Value and, when applicable, the European
Union Procurement Directives.
1.1.3
All procurement activity shall be conducted with
integrity and fairness throughout. It shall also be conducted with sufficient
openness to engender public confidence in the procurement processes generally
and meet the requirements of the Freedom of Information Act.
1.1.4
Those awarding contracts shall have a duty to
ensure and demonstrate that the best value for money is obtained, having regard
to an appropriate and realistic balance between price, quality and service
considerations.
1.1.5
Unless there are sufficient and explicitly stated
reasons to the contrary, a reasonable show of competition shall be sought as
part of all contract-letting processes.
1.1.6
No contract shall be awarded unless there is
delegated authority to award the contract and there are adequate budget funds
available.
1.1.7
Strategic Directors and Heads of Service are
responsible for ensuring compliance with these CSO’s by their staff, and for
ensuring that staff who are given such delegated responsibility have the
necessary skills and knowledge appropriate to the task. Staff have a
responsibility to familiarise themselves with these CSO’s and undertake any necessary
training.
1.1.8
Proportionate and timely consultation shall take
place with elected members regarding procurement exercises. Most contracts can
be let (subject to relevant delegated authority) without formal reference to
members. Only where a contract has a particularly high risk, sensitivity, value
or other substantial effect on the Council’s corporate objectives or its
reputation, shall the Cabinet (or where appropriate the designated Portfolio
Holder) be called upon to take procurement decisions.
1.1.9
Where elected members are involved in procurement
decisions, this should be as early as possible in the process (see paragraph
2.2.2).
1.2
Conduct
1.2.1
Members and staff must ensure that when involved in
making any procurement decisions, they always act in the best interest of the
Council and the community it serves.
1.2.2
It is important to be impartial. The Council has
well-defined policies on gifts & hospitality and on registering personal
interests, and all members and staff are required to comply with these.
1.3
Financial
values
1.3.1
Unless otherwise stated, any financial values or
thresholds stated in these CSO’s refer to the projected value of a contract for
its whole duration, not the annual value. For contracts that have an extension
option, then the contract value shall be calculated on the basis of the
original contract period plus the possible extension period. For any contracts
that are for an unspecified period, a ‘default’ duration of four years shall be
assumed for the purposes of calculating the financial value.
1.3.2
No attempt must be made to break down one large
purchase into a number of smaller purchases, solely with the aim of trying to
circumvent the financial thresholds specified in these CSO’s. Moreover, it is
the aggregated expenditure by the Council as a whole on like or similar goods
and services, rather than that of individual budget holders, that shall have
effect – this being particularly important as regards compliance with the EU
Procurement Directives.
1.3.3
All values stated throughout these CSO’s exclude
VAT.
1.3.4
The list of all staff having approved delegated
authority limits shall be maintained by the Exchequer Services Manager.
Strategic Directors and Heads of Service are responsible for ensuring they
provide the necessary details to enable the list to be kept fully up-to-date.
1.4
Exceptions to
the rules
1.4.1
These CSO’s do not apply to:-
·
Contracts of Employment
·
Contracts that relate solely to the purchase or
acquisition of land and property
1.4.2
In addition, exemptions from the full provisions of
these CSO’s as regards seeking competition may apply in the following
circumstances:-
·
Genuine emergencies
– Critical preventative or remedial work where there is a real and imminent
risk to the safety of people or property arising from a hitherto unforeseen
‘catastrophic’ event or incident such as fire, bombing, flooding, major
landslide, etc.
·
Urgency not of the Council’s own
making – The urgency must have been reasonably
unforeseeable (e.g. existing supplier going into liquidation, urgently imposed
statutory changes, etc.) and genuinely be a case of ‘time is of the essence’.
However, urgency arising through problems of the Council’s own making (whatever
the cause and regardless of whether it involved previous delays or shortage of
resources, etc.) shall not in itself justify exemption.
·
Collaborative/Joint Purchasing
– Where another authority/public body is acting as ‘lead buyer’ and provided
that the person(s) awarding the contract can demonstrate the arrangements
comply with the requirements of Best Value and other applicable legislation
including, if necessary, the EU Procurement Directives. This includes any
recognised wider public sector agreements including, for example, Office of
Government Commerce (OGC) contracts, etc.
·
Sole source of supply
- Where suitable goods or service are genuinely only available from one
supplier (e.g. if patent, copyright or other exclusive design rights exist).
Similarly, for any highly specialised/niche services where, for all practical
purposes, no realistic alternative source of supply exists.
·
Reasons of compatibility
- If compatibility with existing goods, equipment or services is essential
(e.g. spare parts/components for existing equipment) or where additional units
are being purchased to match existing equipment and there is an overwhelming
case for matching the existing items on the grounds of functionality,
aesthetics, etc.
·
Partnering – Where a formal
partnering arrangement and/or established framework agreement already exists as
the result of an earlier competitive selection and award process.
1.4.3
No exception to these Contract Standing Orders
shall be permitted unless a CSO Waiver Form (see Appendix B) has been completed
and confirmation of authorisation received. The waiver form shall be submitted
in the first instance to the Compliance and Risk Manager, who shall confirm
whether the waiver is granted or if (in the light of the particular
circumstances and in his judgment) the matter needs to be referred further to
the Strategic Directors’ Group for a decision to waive the CSO’s.
1.5
Other
considerations
1.5.1
Where they exist, corporate contracts and framework
agreements shall be used. The Procurement Section shall be responsible for
maintaining and distributing details of such contracts as necessary.
1.5.2
Any procurement activity shall accord with other
relevant Council policies, technical standards or requirements as necessary
e.g. ICT hardware and software compatibility policy, in-house printing
protocol, etc.
1.5.3
A library of relevant procurement information and
good practice guidance shall be developed and maintained on the Council’s
intranet by the Procurement Section.
1.5.4
Consultants acting as an agent on behalf of the
Council are required to operate in accordance with these Contract Standing
Orders. It is the responsibility of the officer engaging the consultant to
ensure such compliance. Furthermore, the selection and engagement of
consultants is a procurement in itself, and therefore subject to these CSO’s.
2
ESTABLISHING
AND MANAGING CONTRACTS
2.1
Openness and
forward planning
2.1.1
The Procurement Section shall maintain a register
or database of all the Council’s current contracts and publish extracts of this
on the Council’s website as part of the “Selling to the Isle of Wight Council”
guide for prospective suppliers. Heads of Service shall provide the relevant
details in a timely manner to enable the accuracy of the information to be kept
up-to-date.
2.1.2
As part of the annual service planning process, the
Procurement Section shall compile a procurement forward plan identifying the
Council’s major contracts (over £75000) that are expected to be procured over
the next three years. This shall include an initial risk-assessment, which will
indicate whether the procurement should be considered for a ‘Gateway Review’
process.
2.2
Pre-procurement
considerations
2.2.1
Realistic consideration (proportionate to the risk,
complexity and value of the purchase) should be given to possible alternative
options. For example, this might include a fundamental revision of the need or
standardisation of the specification; reuse or recycling of equipment; internal
provision of the service; collaboration with other purchasers; etc. Narrow
departmental considerations should never jeopardise any wider benefits to the
Council.
2.2.2
The involvement of elected members in procurement
decisions is generally most effective at the earlier rather than later stages
of the procurement cycle – particularly in terms of helping to scope the
requirement, developing an outline business case and determining the
procurement approach. For example, members can often bring valuable insight and
perspectives to issues such as how well a proposed requirement meets the
Council’s strategic objectives and its current priorities (“strategic fit”), or
whether a wide enough range of possible supply options (including innovation
and/or collaboration with other organisations etc.) is being explored.
Such involvement can be far more
beneficial overall than having members merely “rubber stamp” a subsequent
decision to award a contract to a particular supplier following the evaluation
of tenders, by which time it could effectively be little more than accepting a
virtual ‘fait accompli’. Therefore,
for all service-specific procurements above the Council’s formal tendering
threshold (currently £75000) Heads of Service (or the designated Authorised
Officer/Project Manager for a particular Tender) shall liase with the relevant
Portfolio Holder. The input of the Portfolio Holder will be confirmed in an
auditable record. For any very high risk or strategically sensitive projects,
including those where Gateway Reviews are to be conducted, the Head of Service
shall refer the matter to the Strategic Directors’ Group, who shall advise
whether it is more relevant to refer the matter to the Cabinet for approval to
proceed.
2.2.3
General market research or consultation can be
undertaken with potential suppliers before the issuing of an Invitation to
Tender (e.g. regarding the nature or extent of supply, contract ‘packaging’,
etc.) provided this does not prejudice any potential tenderers. No technical
advice on the preparation of an Invitation to Tender or similar shall be
accepted from anyone who may have a commercial interest in this if it might
prejudice the equal treatment of all potential suppliers or distort competition
in any way.
2.3
Seeking
competition
2.3.1
Formal competitive tenders shall be invited for any
procurement with an estimated value of more
than £75,000. Tendering opportunities shall be advertised on the Council’s
website and, as appropriate, in the local press and/or relevant trade journals
(except where a recognised approved/select list exists).
2.3.2
Where applicable, the further requirements of the
EU Procurement Directives must be complied with, including advertising in the
supplement to the Official Journal of the European Union (OJEU). This
potentially affects all contracts (with a few exceptions, mainly covering
so-called ‘Part B’ Services) above
£153,376* in the case of goods and services, or above £3,834,411* in the
case of works contracts. There are additional thresholds for the publication of
Prior Information Notices. Guidance on the application of the EU Procurement
Directives shall be sought from the Procurement Section as necessary. All OJEU
notices will be compiled in conjunction with, and submitted for publication by,
the Procurement Section.
[* Note: These are the £sterling equivalents
of the EU thresholds, which are formally stated in Euros and Special Drawing
Rights. The exchange rates are normally re-calculated every two years; the
current values took effect from 1 January 2004]
2.3.3
For contracts with an estimated value between £10,000 and £75,000, at least
three written quotations from bona fide
suppliers shall be sought. Although Requests for Quotations (RFQ’s) tend to
involve less formality than the tendering process, in reality there is little
difference in either the purpose or outcome. As with an Invitation to Tender,
any Request for Quotation must communicate clearly to the potential suppliers
what is required (the specification).
2.3.4
For contracts below
£10,000, no formal competition is strictly required. However, it will
often be appropriate to obtain one or more quotations in order to demonstrate
best value.
2.3.5
These requirements are summarised in the following
table:-
|
Estimated Total Value
(i.e. for full duration
of contract including any extension options)
|
Competition requirements
|
|
Below £10,000
|
No
formal competition required, although quotations can be sought in order to
demonstrate best value
|
|
£10,000 - £75,000
|
At
least 3 quotations
|
|
£75,000 and above
|
Invitations
to Tender
|
|
£3,834,411 and above (Works) or
£485,481 and above (Goods and Services)
|
Publication
of Prior Information Notices (in accordance with EU Procurement Directives)
|
|
£3,834,411 and above (Works) or
£153,376 and above (Goods and Services)
|
Invitations
to Tender in accordance with EU Procurement Directives
|
2.4
Choosing the
tendering methodology
2.4.1
There are three basic tendering methodologies or
procedures to choose from – Open, Restricted and Negotiated. The selection of the
most appropriate one shall depend on circumstances as follows:-
2.4.2
The open procedure makes no advance
assessment of a tenderer’s suitability to supply before submission of the
tender. This is a useful process where speed is important, where there are a limited
number of potential providers in the marketplace or if the procurement is for a
relatively simple product or service where technical capability might be less
crucial. However, it can make the tender evaluation stage much more
time-consuming and onerous if a large number of tenders are received.
2.4.3
The restricted procedure is a two-stage
process. Firstly expressions of interest in the tender are sought and then on
the basis of responses to a pre-qualification questionnaire, short-listed
candidates are invited to tender. This is useful where a large number of
potential tenders are likely to be received, although a disadvantage is that
the tendering process can take longer overall.
2.4.4
A derivative of the restricted procedure is the use
of a recognised approved vendor list (sometimes also referred to as a select list). This is best used
where there is likely to be a regular need for work or services of a similar
nature over a period of time. Any such approved lists must be reviewed,
refreshed and made open to new applicants at least every three years.
The existence of an
approved list avoids the need to keep advertising tender (or quotation) opportunities
on the open market and enables a manageable ‘bank’ of capable and generally proven suppliers to be kept. A
disadvantage is that such a list requires regular use to justify the time and
effort of setting up and keeping the list up-to-date. Furthermore some caution
can be needed to guard against suppliers’ expectations of future business
potential being unreasonably high. It is also important to rotate the companies
on an approved list who are invited to tender (or quote) for individual
procurements in order to ensure fairness and a realistic sense of competition,
and achieve best value.
[Note: The Council does not make extensive use of approved lists, with the
principal exceptions of:-
·
Contractors
for building, construction & maintenance trades and related services (for
which the Property Services Department shall use the Constructionline
accreditation service for selecting suitable suppliers/contractors)
·
Contractors
for Highways minor works.]
2.4.5
The negotiated tender procedure is only to
be used in limited circumstances such as complex ICT projects where the
specification cannot be defined at the outset with sufficient certainty to make
sealed bid tendering practical. Where the negotiated procedure is used, the
process shall conclude with the submission of ‘Best and Final Offers’ as sealed
bids. There are strict restrictions on
any price negotiation on tenders conducted under the EU Procurement Directives
(although, with effect from 2006, a new procedure under the Directives called
“Competitive Dialogue” will allow some increased flexibility on this particular
issue).
2.5
Determining
tender award/evaluation criteria
2.5.1
Tenders will be awarded on the basis of the Most
Economically Advantageous Tender (or ‘best value’ solution) - in other words, a
realistic balance between price and quality/service factors.
2.5.2
The actual mix between these elements shall be
established at the outset of the tendering process and will depend on various
considerations including the complexity of the project or purchase itself, the
degree of innovation sought from suppliers and the flexibility required in
terms of project/service delivery, etc. The following quality/price ratios are
deemed to be a realistic split and are given for guidance purposes, but may be
varied depending on particular circumstances:-
Qualitative
factors Pricing factors
Straightforward or repeat
purchases 20% 80%
Projects/services of
medium complexity 40% 60%
Complex
projects/services/products 50% 50%
Innovative/creative
design projects 70% 30%
Feasibility
studies/consultancy work 80% 20%
2.5.3
As far as possible, pricing factors should cover all
identifiable elements that make up the ‘whole-life cost’. Where price is not a
fixed sum as such (but instead comprises a schedule of prices or rates with no
firm commitment as to quantities) then a best endeavours or notional bill of
quantities shall be incorporated into the Invitation to Tender/evaluation
process to facilitate satisfactory total price comparisons between tenderers.
2.5.4
The various qualitative award criteria must be
appropriate to the contract in question and reasonably expected to provide a
best value outcome. These qualitative factors can include moderate recognition
of what are often termed ‘Corporate Social Responsibility’ issues. In other
words, taking into account how well each supplier is in accord with the
Council’s own policies, objectives and values in relation to, for example, care
for the environment; promoting equalities & diversity; supporting fair
trade; well-being of the local community; etc.
2.5.5
The award criteria (though not necessarily the
actual weightings to be applied to each criterion in the evaluation model)
should be stated to prospective tenderers in the Invitation to Tender (ITT)
documentation. Subsequently, evidence of each tenderer’s suitability to supply
shall be judged against these criteria - usually by small panel of suitably
knowledgeable officers (typically up to 3) convened as required.
2.6
Preparation of
invitation to tender
2.6.1
Every effort shall be made to produce clear and
straightforward Invitation to Tender documentation. Whenever practical,
specification details should focus on successful outcomes rather than being
unnecessarily prescriptive as to the precise method of achieving those
outcomes, as potentially this can encourage innovation from tenderers and avail
particular market expertise. Similarly, variant bids (i.e. allowing tenderers
to suggest possible variations or alternative ways in which they might satisfy
the potential contract) should be an allowable option and duly considered in
the pursuit of best value.
2.7
Receipt and
opening of tenders
2.7.1
A reasonable length of time must be allowed for
tenderers to compile and submit their bids, having regard to the complexity of
the tender and, when appropriate, any mandatory timescales under the EU
Procurement Directives (see Appendix C). The Invitation to Tender must state
clearly the latest date and time that tender bids can be received by. Any
tenders received after the closing date shall not be considered unless there is
clear evidence that it was posted at least the day before the closing date and
any delay in delivery was wholly outside the control of the tenderer.
2.7.2
All tenders submitted must be in plain sealed
envelopes and are to be posted or delivered to Customer Services at County
Hall, where they will be held in a secure locked box until the designated
tender closing date. They will then be passed unopened to the Procurement
Section for opening. Two members of the Procurement Section will then open all
the tenders received and record the value of each tender bid in a register
maintained for that purpose. No assessment or recording of any of the
qualitative information shall be practical at this stage.
[Note:
Invitations to Tender can be issued to tenderers electronically (e.g. as a Word
or PDF file) but completed tenders must be submitted in paper form currently.
Electronic tendering and/or e-auctions shall be acceptable in due course, but
at the present time the Council is still evaluating suitable and secure systems
for their use as part of the current e-Procurement project.]
2.7.3
The tenders shall then be passed to the lead
officer responsible for the tender, who shall arrange the evaluation of the
tenders.
2.8
Evaluation and
award of contract
2.8.1
All compliant tenders shall be checked for basic
arithmetic accuracy. If any arithmetical errors are found they must be notified
to the tenderer who shall be given the opportunity to confirm (urgently and in
writing) what the correct price is or withdraw the tender bid altogether.
Commonsense shall prevail as to the nature of any such errors and that they do
not undermine the basic integrity of the tendering process.
2.8.2
All tenders shall be evaluated against the
designated award criteria (see section 2.5).
2.8.3
Officers with the appropriate delegated authority
are empowered to award contracts without formal reference to elected members
provided CSO’s have been fully complied with. However if the contract is
considered to be of a particularly important or sensitive nature, the approval
of the relevant Portfolio Holder to award the contract shall be obtained.
2.8.4
The authority to award contracts is summarised in
the following table:-
|
Summary of delegated authority for
procurement
|
|
|
Request Quotations
(for
below £75,000)
|
Invite tenders
(for
above £75,000)
|
Award contracts
(subject
to necessary budget available)
|
|
Service
Manager’s named delegates
|
·
No restriction
|
·
Up to £2,000,000
·
Subject to appropriate liaison with Cabinet
Member
·
No direct authority if project is very high
risk or strategically sensitive.
|
·
Up to delegated authority limit only
·
No direct authority if strategically important
or politically sensitive nature
|
|
Head
of Service
|
·
No restriction
|
·
Up to £10,000,000
·
Subject to appropriate liaison with Cabinet
Member
·
Refer to Strategic Directors if project is
very high risk or strategically sensitive (including those for Gateway
Review)
|
·
Up to delegated authority limit, except
where strategically important or politically sensitive
|
|
Strategic
Directors
|
·
No restriction
|
·
Unlimited (but determine if necessary to
seek agreement of Cabinet to proceed for very high risk or strategically
sensitive projects)
|
·
Unlimited (but seek agreement of Cabinet
for very high risk or strategically sensitive projects)
|
|
Portfolio
Holder
|
·
Not applicable
|
·
Confirm agreement to proceed as appropriate
|
·
Confirm agreement to award (only necessary
if project is strategically important or politically sensitive nature
|
|
Cabinet
|
·
Not applicable
|
·
Not applicable
|
·
Confirm agreement to award (if referred by
Cabinet Members)
|
2.8.5
Performance bonds shall not be required as a matter
of course, as in many instances they can drive up costs unnecessarily and out
of proportion to the real exposure to risk of a failing supplier. However, they shall be considered if there
are genuine concerns about the stability of a particular supplier. In such
instances, the bond must be in place before the commencement of work by the
supplier.
2.8.6
Suppliers and contractors are required to have
appropriate public liability insurance cover
(and professional indemnity insurance where deemed necessary) that provides a
realistic level of protection to the Council and is proportionate to the
value/risks involved.
[Note: Typically, a “standard” public liability cover level of
£5million for any one single incident shall be sought, although alternative
levels may be considered acceptable in relation to the adjudged risks and in
consultation with the Risk & Insurance Section.]
2.9
Debriefing of
unsuccessful tenderers
2.9.1
If requested, unsuccessful tenderers shall be given
constructive feedback on why their bid was unsuccessful. This must not betray
any commercially confidential information provided by other tenderers, whilst
the requirements of the Freedom of Information Act shall be properly
considered.
2.10
Contract
documentation
2.10.1 In
many instances, a straightforward acceptance letter (and/or purchase order) by
the Council of a supplier’s tender shall be sufficient to form the binding
contract. However, a pre-requisite for this is that the Invitation to Tender
document itself is well-structured in the first place (including the inclusion
of the Council’s chosen terms and conditions) and that good records are kept of
all salient correspondence with the supplier concerning the agreement itself,
such that there can be no doubt about the rights and obligations of both
parties to the contract.
2.10.2 Contractual
documentation should be subject to approval by the Legal Services team or, if
appropriate, by suitably qualified external legal advisors. The formal sealing
of contracts shall not be deemed necessary except on the advice of the Legal
Services department.
2.10.3 All
contracts shall provide for contractors’ obligations in relation to Human
Rights, Freedom of Information, Data Protection and other statutory obligations
as required.
2.10.4 The
officer awarding the contract shall send a completed Contracts Register Form
(see Appendix D) to the Procurement Section within two weeks of award of contract so that the Council’s
Contracts Register can be updated. Where required, a mandatory Contract Award
Notice (including those for Part B Services) shall be published in the OJEU
within the statutory 48days period
from award of contract.
2.11
Variations and
extensions
2.11.1 Reasonable
variations to the contract can be agreed with the supplier during the lifetime
of the contract provided they comply with the spirit of these Contract Standing
Orders and be within the delegated authority limits of the relevant officer(s).
2.11.2 Options
to extend a contract must have been stated in principle in the original
Invitation to Tender.
Despatch tender Despatch
additional
Open Normal documents within 6 52 days information within 6 
PIN Notes
1,2,3
Restricted Normal 37 days
40 days
Despatch
additional
PIN 37
days
37 da 26 Days Notes 1,4 
Urgent
15 days 10
Days 
Despatch
additional 
Negotiated Normal 37 days
