What is a tender?
A bidding document drawn up by an organisation or public sector body. It states their requirement for goods or services and invites you to put in a priced tender (a bid) for it. The best offer(s) wins – sometimes more than one bidder is accepted because of the nature of the goods or services.
How do I know what my tender will be measured on?
It is down to the organisation that issues the tender to let you know this on the tender document. The requirement (‘specification’) for the goods/services should be clearly shown, as should details of how you will be evaluated against everyone else. You are normally ‘scored’ on a combination of things which typically fall under ‘Price’ and ‘Quality’. The best overall winner(s) is awarded the contract.
What do you mean by ‘Quality’?
Basically everything other than ‘Price’. Examples are: ordering and delivery procedures and proposals, quality of product, compliance with the specification, warranties, after-sales service, and service delivery proposals.
What is a contract?
Basically a legal agreement between you and the organisation that invited you to tender. If you win the tender, the contract will be for you to supply the goods and services for which you submitted a bid. Sometimes a contract can be really simple e.g. a one-off order issued by the organisation showing its standard terms and conditions, and you supply the goods and invoice them. Where the tender is for longer-term supply, a written contract is usually drawn up, signed by both parties, which lays out the terms and obligations of both those parties.
How long will a contract be for?
This varies; it could be a one-off for a delivery of computers, for example – or it could be a set period such as supplying computers to all schools in a set area for 4 years.
Can’t I just sell directly – why do I have to do a tender?
For low value requirements, you may be able to sell directly. However, public sector bodies have to abide by their own ‘contract procedure rules’ – sometimes called ‘financial regulations’ – or EU regulations for higher values. Both these rules and regulations require the authority to show ‘best value’ by conducting a quotation or a full tender exercise. This ensures fair competition and puts the authority at less risk of being accused of showing preference to certain bidders.
What are the EU regulations?
A set of legal rules and procedures by which all public sector bodies must abide. The principle of the EU regulations is to ensure fair and open competition across the whole of the EU area, not just the UK. Requirements for goods or services above a certain value have to be advertised via a ‘Contract Notice’ in the EU Journal, which is an online publication updated daily. The value, or ‘threshold’ for local authorities (above which they need to advertise) is currently £164,176 for goods and services (£106,047 for Central Government), and £4,104,394 for Works (e.g. construction, civil engineering). A separate threshold of £589,148 is in place for certain health, social and some other services, for which the regulations give public sector bodies more freedom to apply a ‘light touch regime’, or a relaxation of procedural rules, for any value under it.
Anything under these EU values comes under the public sector body’s own contract procedure rules. These often allow more flexibility in advertising, issuing and awarding a tender. For example, some authorities allow a tender to be sent to 3 selected bidders only. These internal rules vary between authorities, whilst the EU regulations are fixed for everyone.
What is a PQQ?
A PQQ, or Pre-Qualification Questionnaire (or ‘Selection Questionnaire’), is the initial stage of a 2-part ‘restricted’ tendering procedure. It is not always used, however, because it does depend on the type of subject matter and also how many replies the authority thinks it might get back. Basically, a PQQ looks at the past or present state of a bidder e.g. finances, policies, qualifications, experience and track record. Once you complete and submit the PQQ, it is evaluated and scored. Those who are deemed to have the necessary credentials will pass and go through to the second stage – the invitation to tender.
Note the PQQ does not ask you for you proposals or prices; these come at the tender stage. If an authority expects a lot of responses, it may decide to use a PQQ and whittle down the number of responses so that only a selection of the highest-scoring PQQs are then invited to tender in full. PQQs are advertised in the same way as tenders because it is the first stage of a tender process – you can’t have one without the other.
How is the value (threshold) calculated for a tender?
The value determines the procurement route by the authority. It should be an estimate by the authority of the TOTAL value (spend) over the entire length of the contract. A 3 year contract, with an estimated spend of £50K p.a. will be advertised at £150K, or even £200K if it states that there is an optional 1 year extension. An authority estimates this value by looking at its previous spending patterns and/or projections based on market intelligence.
Where are tender opportunities advertised?
In a variety of places: public sector bodies’ websites, e-tendering portals such as ‘The Chest’, TED Europa (EU website for daily opportunities), the press, Contracts Finder (government-run) and also companies who specialise in advertising opportunities on their websites. If you do an internet search on ‘tender opportunities’ it should point you in the right direction.
Why are tender documents so complicated?!
Tender documents are often complicated because they have to contain a lot of information and tell you in detail what is required – the ‘specification’ in full for the goods or services. The tender should also explain how you will be evaluated, ask you for your pricing and details of other policies, and provide full instructions for its completion – possibly attaching the authority’s terms and conditions which will govern any future contract. It is not meant to be burdensome but, unfortunately, if not all the information was given, the authority would be inundated with queries, be open to challenge, and would have to amend and continually re-issue the tender.
What is a framework agreement?
This is where one or more suppliers wins a tender exercise but goes onto a ‘framework’ where they often have to re-compete against each other and are not guaranteed any business. The winning bidder(s) goes on a type of ‘approved list’ – although it’s not commonly known as this. Those bidder(s) are then contacted by the letting authority from time to time as and when they have requirements for the type of goods or services outlined in the original tender.
These requirements will be called-off via either a ‘direct award’ or a ‘further competition’ (sometimes called a ‘mini-competition’). A ‘contract’ in the legal sense is not created until a direct call-off is made or an order placed following a further competition. Every time this happens a series of ‘mini-contracts’ are created, under the overall banner of the ‘framework agreement’. Note that the authority is not allowed to drastically alter its requirements and terms at the call-off stage from those stated in the original tender that led to the framework agreement being awarded.
Can you explain a ‘direct award’ under a framework?
A direct award occurs where the original tender award contained all the details and fundamental terms, including prices, that give the authority the information they need to then just ‘call-off’ their requirements from you (or whoever) with an order. When they need to buy specific goods or services they simply do an analysis amongst the suppliers listed on the framework agreement and apply the pre-arranged terms to their specific requirement.
As a simple example, an authority wants to purchase 5 items for delivery to a certain geographical area, one out of several areas covered by the framework. The framework has a number of suppliers and shows about 500 priced items, not all of which are priced by every supplier nor in every area. They analyse the framework price list and this ‘shopping basket’ comparison amongst the suppliers will select the best offer for their chosen 5 items to the area in question. The supplier that provides the best offer will then get the order. The previously-issued tender documentation should have explained whether the award was going to be made by direct award and/or a further competition.
What do you mean when you say that no business is guaranteed under a framework?
You are on a list for the authority to contact for their requirements, but so might other suppliers be. The authority probably didn’t know their exact requirements at the time of the tender and therefore set up a framework which lays out key terms for future call-offs by direct award or further competition.
Unless a direct award is possible, the authority can’t just pick a supplier on a whim from the list – they all have to be invited to quote through a further competition. The resulting award is made on the best value offer. This may not be you, and may never be you, if others’ offers are better than yours. Some suppliers take a framework agreement with a pinch of salt for that reason – they could put a lot of time into it but never get a single order from it. Also, since it is not a ‘contract’, the authority doesn’t have to use the framework at all and can go elsewhere for their requirements if they think they can get better value – for example, use another framework or do a new tender exercise altogether.
Are ALL low value tenders (under OJEU) advertised publically on ‘Contracts Finder’?
This depends. Where the authority decides to do an ‘open’ invitation to anybody who might be interested, then for values over £25K (£10K for Central Government) – but below the EU thresholds – they should advertise it on Contracts Finder as well as on their own e-tendering system. However, depending on their contract procedure rules, the authority might not advertise it openly but issue it on a ‘restricted’ basis by simply approaching a few selected suppliers e.g. get 3 quotes. If this is the case, you won’t see it on Contracts Finder because the authority approaches each of the selected suppliers privately via an e-tendering portal.
For contract values that fall below the £25K/£10K mentioned above, then the authority simply follows its own contract procedure rules – these may, for example, say it is acceptable to get a quote and go directly to one supplier, or it may say to invite a set minimum number of quotes.
If we win a tender would we have to take on the old supplier’s staff under TUPE?!
This can be complicated! TUPE transfers not only occur for a sale of a business or a merger, but can also apply to a change of contractor following a tender process. The tendering authority should guide you as to whether or not TUPE could apply, and you should also take legal advice if you are in any doubt about the implications. You might have to take their staff on but it depends on many factors. There are a few basic rules, though:-
First, for TUPE to apply the contract has to be for an ongoing service; one-off events or contracts don’t count. The activities carried out before and after the transfer must essentially be the same for TUPE to apply. Second, TUPE only applies to an organised grouping of permanent and named employees, not temporary ones. Third, and perhaps most importantly, that set of permanent employees of the old supplier must be deliberately dedicated to the ongoing contractual work going to you as the new supplier – so much so that if they weren’t transferred to you they would effectively be surplus to requirements by the old supplier. If their staff can simply be re-assigned elsewhere within their business then they are obviously not principally used on the contract in question and TUPE would not apply. A simplified example: an engineer handling call-outs to a wide variety of local authority clients = not TUPE; an engineer taken on specifically for the contract in question and no other work available for him in the company = likely to be TUPE.
The tendering authority should have spoken to the incumbent (current) supplier to see if TUPE could apply, and could attach a list of relevant posts (for potential transfer) in the tender pack. Most authorities give you information but then go on to say that any transfer of staff is strictly a matter for you and the outgoing contractor to sort out. They will usually say that your tender must agree to comply with TUPE, i.e. state your intent to employ the staff listed, and that your completed bid should fully reflect any costs incurred as a result of applying TUPE.