PUBLIC SECTOR PUBLIC SECTOR PROCUREMENTPROCUREMENT‘‘Rules & ToolsRules & Tools’’

Governing Framework for Public Sector Governing Framework for Public Sector Procurement Procurement

Governing FrameworkGoverning Framework

Government Procurement Government Procurement PolicyPolicyGovernment Procurement in New Zealand: Policy Guide Government Procurement in New Zealand: Policy Guide for Purchasers for Purchasers

Mandatory Rules for Procurement by Departments Mandatory Rules for Procurement by Departments

OAG Good Practice GuidesOAG Good Practice Guides–– Procurement guidance for public entitiesProcurement guidance for public entities–– Public sector purchases, grants, and gifts: Managing funding arrPublic sector purchases, grants, and gifts: Managing funding arrangements angements

with external partieswith external parties–– Managing conflicts of Interest: Guidance for Public EntitiesManaging conflicts of Interest: Guidance for Public Entities

Treasury Guidelines for Contracting with NGOsTreasury Guidelines for Contracting with NGOs

Public Service Code of ConductPublic Service Code of Conduct

Sustainable Procurement Standards, Targets and Sustainable Procurement Standards, Targets and GuidelinesGuidelines

While procurement remains devolved to individual agencies, the While procurement remains devolved to individual agencies, the Government expects its departments, and encourages other agencieGovernment expects its departments, and encourages other agencies, s, to be guided by these principles:to be guided by these principles:

•• Best value for money over whole of lifeBest value for money over whole of life

•• Open and effective competitionOpen and effective competition

•• Full and fair opportunity for domestic suppliersFull and fair opportunity for domestic suppliers

•• Improving business capabilities, including eImproving business capabilities, including e--commercecommerce

•• Recognition of Recognition of NZNZ’’ss international trade obligations and interestsinternational trade obligations and interests

•• Requiring sustainably produced goods and services whenever Requiring sustainably produced goods and services whenever possible, having regard to economic environmental and social imppossible, having regard to economic environmental and social impacts acts

over their life cycleover their life cycle

Government Procurement PolicyGovernment Procurement Policy

Main Headings Main Headings from Table of Contentsfrom Table of Contents–– Government Procurement PolicyGovernment Procurement Policy–– Policy Compliance When Using Purchasing Policy Compliance When Using Purchasing

Consultants and Agents Consultants and Agents –– Potential Value for Money Advantages of Local Potential Value for Money Advantages of Local

Supply Supply –– Environmental Issues Environmental Issues –– Promoting Opportunity Through Good Practice Promoting Opportunity Through Good Practice –– Appendix 1: Role of The Ministry of Economic Appendix 1: Role of The Ministry of Economic

Development Development –– Appendix 2: International Agreements Appendix 2: International Agreements

Government Procurement in New Government Procurement in New Zealand: Policy Guide for Purchasers Zealand: Policy Guide for Purchasers --

August 2007August 2007

Coverage:Coverage:

•• The The ““public servicepublic service”” departments (State Sector departments (State Sector Act schedule) plus NZDF and NZ PoliceAct schedule) plus NZDF and NZ Police

Value thresholds (calculated over contract life): Value thresholds (calculated over contract life):

–– goods/services $100k goods/services $100k

–– construction services $10mconstruction services $10m

Below these thresholds departments are still Below these thresholds departments are still expected to be guided by the procurement expected to be guided by the procurement policy/good practice principlespolicy/good practice principles

Other public sector agencies encouraged to Other public sector agencies encouraged to follow these rulesfollow these rules

Mandatory Rules for Procurement by Mandatory Rules for Procurement by DepartmentsDepartments

Main Features of the RulesMain Features of the Rules

Open tendering is the norm Open tendering is the norm

GETS to be the publication medium for open GETS to be the publication medium for open tenderingtendering

Tenders are to be on GETS for a minimum of 10 Tenders are to be on GETS for a minimum of 10 working daysworking days

Contract award notices to be promptly published on Contract award notices to be promptly published on GETS GETS

Any Any ““prepre--qualified supplierqualified supplier”” lists must be published lists must be published and open for application via GETSand open for application via GETS

Departments are to prepare and publish on GETS Departments are to prepare and publish on GETS by 1 July indicative by 1 July indicative annual procurement plansannual procurement plans, on a , on a rolling basis (updated at least every 6 months)rolling basis (updated at least every 6 months)

PrePre--qualified Supplier Listsqualified Supplier Lists

DonDon’’t confuse with panel contract arrangementst confuse with panel contract arrangements–– Panel of Panel of contracted contracted suppliers (panel = 2 or more) for suppliers (panel = 2 or more) for

the supply of the same goods and servicesthe supply of the same goods and services

PrePre--qualified Supplier Listqualified Supplier List–– List of suppliers from whom closed tenders are called or List of suppliers from whom closed tenders are called or

selective procurements madeselective procurements made

–– May include a qualification criteria to be on the list e.g. May include a qualification criteria to be on the list e.g. x skills or knowledge x skills or knowledge

Main Features of the Rules Main Features of the Rules ContdContd..

Debrief unsuccessful suppliers on request Debrief unsuccessful suppliers on request

Departments choosing to join an existing Departments choosing to join an existing syndicated procurement are exempt from the syndicated procurement are exempt from the requirement to open tender their opportunityrequirement to open tender their opportunity

OAG Good Practice Guide: OAG Good Practice Guide: Procurement guidance for public Procurement guidance for public

entitiesentities

Not a set of rules, but is described as a statement Not a set of rules, but is described as a statement of good practice. of good practice.

It suggests that each public entity uses the guide It suggests that each public entity uses the guide as a benchmark for its own procurement policy and as a benchmark for its own procurement policy and procedures, and as a guide to what its own procedures, and as a guide to what its own procurement manual should contain.procurement manual should contain.

Governing FrameworkGoverning Framework contd.contd.

Agency procurement policyAgency procurement policy

Agency procurement proceduresAgency procurement procedures

ReferencesReferences

Ministry of Economic Development: Ministry of Economic Development: www.med.govt.nzwww.med.govt.nzGovernment Procurement Policy (incl. policy guide)Government Procurement Policy (incl. policy guide)Mandatory Rules for Procurement by Departments Mandatory Rules for Procurement by Departments

OAG: www.oag.govt.nzOAG: www.oag.govt.nzGood Practice GuidesGood Practice Guides

Processes and ToolsProcesses and Tools

The Procurement Project Life CycleThe Procurement Project Life Cycle

Procurement PlanningProcurement Planning

Understanding the Market Understanding the Market

Defining the Need (the specification)Defining the Need (the specification)

Developing the Business Case Developing the Business Case

Developing the Procurement StrategyDeveloping the Procurement Strategy

Developing the Procurement PlanDeveloping the Procurement Plan

Procurement PlanningProcurement Planning

Understanding the Market Understanding the Market Defining the Need Defining the Need Developing the Procurement StrategyDeveloping the Procurement StrategyDeveloping the Procurement PlanDeveloping the Procurement Plan

Understanding the MarketUnderstanding the Market

Market Research:Market Research:

own knowledgeown knowledge

ICN (Industry Capability Network) ICN (Industry Capability Network)

suppliers suppliers

other buyers of the same goods or services other buyers of the same goods or services

specialist market analysts specialist market analysts

professional organisationsprofessional organisations

Request for InformationRequest for Information

Request for Information (RFI)Request for Information (RFI)

A structured means of soliciting information A structured means of soliciting information (not offers) from the market. (not offers) from the market. Used when:Used when:–– ‘‘Just lookingJust looking’’–– Gain an understanding of the marketGain an understanding of the market–– Gain knowledge to build a statement of Gain knowledge to build a statement of

work/specificationwork/specificationAdvertised openlyAdvertised openlyOn its own it doesnOn its own it doesn’’t meet the Mandatory t meet the Mandatory Procurement Rules requirement for open Procurement Rules requirement for open tendering tendering

From a legal perspective an RFI is not part of the procurement pFrom a legal perspective an RFI is not part of the procurement process rocess

Developing the Procurement Developing the Procurement Strategy: Portfolio AnalysisStrategy: Portfolio Analysis

Strategic Vendors(Operational)

Objective: risk reduction,Identification of

alternative supplyoptions

Strategy: risk management

Preferred Vendors(Tactical)

Objective: cost reduction: costof goods/servicesand transactioncosts

Strategy: Aggregate demandand efficienttransaction mngt

Strategic Partnership(Strategic Alliances)

Objective: long term value formoney

Strategy: effective supplierrelationshipmanagement

Commodity Vendors(Transactional)

Objective: transaction cost reduction

Strategy: efficient transactionmanagement

BusinessImpact or Risk

Dollar Value

Requesting and Receiving OffersRequesting and Receiving Offers

Requesting and Receiving OffersRequesting and Receiving Offers

Procurement MethodsProcurement Methods

Issuing the Request for OfferIssuing the Request for Offer

Managing Questions & Answers Managing Questions & Answers

Receipting of Offers Receipting of Offers

Procurement Methods (Procurement Methods (RFxRFx))

Request for Proposal (RFP)Request for Proposal (RFP)

Request for Tender (RFT)Request for Tender (RFT)

Request for Quotation (RFQ) Request for Quotation (RFQ)

Expression of Interest (EOI) / Registration of Expression of Interest (EOI) / Registration of Interest (ROI)Interest (ROI)

Selective ProcurementSelective Procurement

Open or closed tendersOpen or closed tenders

Request for Proposals (RFP)Request for Proposals (RFP)

Seeks ProposalsSeeks Proposals

Open for Open for tenderertenderer’’ss innovationinnovation

Not a prescribed processNot a prescribed process

Functional in definitionFunctional in definition

Requests for Tenders (RFT)Requests for Tenders (RFT)

A formal invitation to suppliers to submit bidsA formal invitation to suppliers to submit bidsBased on preBased on pre--determined technical specifications determined technical specifications or requirementsor requirements

Used Where:Used Where:An organisation knows precisely what it wants An organisation knows precisely what it wants Clearly defined specifications where the risks are Clearly defined specifications where the risks are already well knownalready well knownOutcome is essentially price driven so there is Outcome is essentially price driven so there is little room for flexibility or innovationlittle room for flexibility or innovation

Request for Quotations (RFQ)Request for Quotations (RFQ)

Simple cost effective processSimple cost effective processRequirement is Requirement is ‘‘stock standard, off the stock standard, off the shelfshelf’’Simple specificationsSimple specificationsLow valueLow valueLow riskLow risk

Open Vs Closed TendersOpen Vs Closed Tenders

ClosedClosed

Selected number of suppliers invited to submit Selected number of suppliers invited to submit offers. offers.

Used when:Used when:issues of confidentialityissues of confidentiality

a limited number of suppliers are known to have a limited number of suppliers are known to have the capability to supplythe capability to supplycost of open tendering is greater than the value cost of open tendering is greater than the value that will be derived from the processthat will be derived from the process

Consideration needs to be given to the Mandatory Consideration needs to be given to the Mandatory RulesRules

OpenOpen

Advertised openlyAdvertised openlyMandatory rules Mandatory rules –– open tenders are the default open tenders are the default method for goods and services procurements over method for goods and services procurements over $100K$100KAdvertised on GETS Advertised on GETS

Consistent with Govt Procurement Policy principlesConsistent with Govt Procurement Policy principles

Expression of Interest (EOI)Expression of Interest (EOI)

/ Registration of Interest (ROI)/ Registration of Interest (ROI)

• A short-listing tool

• 1st part of a multi-stage process

• Used when:– there are a large number of potential suppliers– the size of the potential supplier base is

unknown

• Does not request detailed pricing

“ The purpose is to reduce the number of interested suppliers as quickly as possible, so as to minimise costs to all parties.”

OAG Guidelines

Selective ProcurementSelective Procurement

• Sole Source

• Lower value

• <$100k

• <$50k / $20K / <$10k

• Specialist expertise or knowledge

• Justification process

“

Requesting and Receiving OffersRequesting and Receiving Offers

Procurement ModelsProcurement Models

AdvertisingAdvertising

Vendor briefings Vendor briefings

Management of Q & AManagement of Q & A

Receipting OffersReceipting Offers

Late TendersLate Tenders

Advertising Advertising –– which media?which media?

GETS GETS –– www.gets.govt.nzwww.gets.govt.nzNewspapers Newspapers Tenders GazetteTenders GazetteTenderLinkTenderLink

Key considerationKey consideration-- Ensure media chosen does not Ensure media chosen does not advantage one potential tenderer over anotheradvantage one potential tenderer over another

Managing Questions & AnswersManaging Questions & Answers

Any info/clarification which fundamentally affects Any info/clarification which fundamentally affects tender detail must be advised to tender detail must be advised to ALLALL tendererstenderers

Exception:Exception:–– If tenderer asks for info and requests If tenderer asks for info and requests

confidentiality confidentiality –– competitive advantagecompetitive advantage

All questions and answers in writing All questions and answers in writing

Receipt of OffersReceipt of Offers

Specified in the Specified in the RFxRFx document document HOW TO SUBMIT PROPOSALS

Deliver (1) one signed original plus three (3) copies in a sealed package by the closing time of 4PM Tuesday 16 May 200X to:

Agency Y, PO Box 3077, 112 Molesworth St, WellingtonAttention: Tenders Box

• Fax and email copies of your proposalwill not be accepted.

Process for Managing Late OffersProcess for Managing Late Offers

Policy should be stated in the Request for Offers Policy should be stated in the Request for Offers document.document.

As a general rule, late tenders wonAs a general rule, late tenders won’’t be accepted. t be accepted. Issues Issues –– possible collusion or knowledge of another possible collusion or knowledge of another tenderstenders’’ prior received submission, unfair advantage prior received submission, unfair advantage re additional time.re additional time.

EvaluationEvaluation

Lowest Price Conforming (LPC)Lowest Price Conforming (LPC)

Most basic evaluation modelMost basic evaluation model

Strongest emphasis on priceStrongest emphasis on price

Selects the lowest priced tender once the Selects the lowest priced tender once the prerequisite level of quality is metprerequisite level of quality is met

Additional quality, over and above the minimum Additional quality, over and above the minimum

level, is not important.level, is not important.

Lowest Price Conforming (LPC)Lowest Price Conforming (LPC)

Process:Process:–– Evaluate nonEvaluate non--price attributes price attributes –– Rank conforming tenders according to Rank conforming tenders according to

price price –– The lowest priced confirming tender is The lowest priced confirming tender is

selected as the preferred tendererselected as the preferred tenderer

Two envelope system may be used (i.e. evaluate Two envelope system may be used (i.e. evaluate nonnon--price attributes before opening the price price attributes before opening the price envelopes)envelopes)

Tenderer's Name: ………………………………….

REQUIREMENT Score (Pass/Fail)

Comment

PART 1 COMPANY'S DETAILS

1. Company's Full Legal Name. Info only

2. Company's Trading Name. Info only

3. Postal address, phone, fax and email contact details. Info only

PART 2 COMMERCIAL

4. Supplier capability Pass / Fail

5. Supplier experience Pass / Fail

6. Track record (referee checks) Pass / Fail

7. Methodology (including ability to complete within published project timeline)

Pass / Fail

8. Company Health and Safety policies/procedures Pass / Fail

Selected Tenderer

LPC EVALUATION SUMMARY

Tenderer Compliant (Yes /No)

Price

AAAAAAAAA Yes 27,000

BBBBBBBBB Yes 26,000

CCCCCCCC Yes 34,000

DDDDDDDD Yes 32,000

EEEEEEEEE No -

Weighted Attribute ModelWeighted Attribute Model

Seeks to balance the tradeSeeks to balance the trade--off between off between price and qualityprice and qualityUsed for services, goods and capital worksUsed for services, goods and capital worksTwoTwo--envelopes used envelopes used MultiMulti--stage process stage process 2 methods 2 methods –– Scored Price methodScored Price method–– Narrative VFM method Narrative VFM method

Weighted Attribute ModelWeighted Attribute Model

Narrative Value for Money Method:Narrative Value for Money Method:–– Weightings and scores are assigned only to nonWeightings and scores are assigned only to non--price price

criteria criteria –– Evaluate nonEvaluate non--price attributes (assign a score)price attributes (assign a score)–– Apply weightingsApply weightings–– Rank the tenderers by weighted scoreRank the tenderers by weighted score–– Open price envelopes of compliant tendersOpen price envelopes of compliant tenders

Weighted Attribute ModelWeighted Attribute Model

Narrative Value for Money Method:Narrative Value for Money Method:–– Generate an objective narrative about the Generate an objective narrative about the

comparative value for money of each tender comparative value for money of each tender –– Tenderer assessed as offering the greatest value for Tenderer assessed as offering the greatest value for

money is the preferred tenderermoney is the preferred tenderer

TendererTenderer WtWt’’dd Score (NonScore (Non--Price)Price) Price Price AAAAAA 6262 $62,000$62,000BBBBBB 7575 $65,000$65,000CCCCCC 8282 $70,000$70,000DDDDDD 7777 $65,000$65,000

Tender Evaluation ProcessTender Evaluation Process

Planning PhasePlanning Phase–– Select evaluation modelSelect evaluation model–– Determine evaluation timetableDetermine evaluation timetable–– Determine evaluation criteriaDetermine evaluation criteria

Before issue of the Before issue of the RFxRFx–– Select evaluation team membersSelect evaluation team members–– Complete conflict of issue declarationsComplete conflict of issue declarations

Before closing of the Before closing of the RFxRFx–– Evaluation team member briefing/training Evaluation team member briefing/training

Tender Evaluation ProcessTender Evaluation Process contdcontd

After closing of the After closing of the RFxRFx–– Review conflict of interest declarationsReview conflict of interest declarations–– Complete individual evaluations Complete individual evaluations –– Team evaluation Team evaluation –– RankingRanking–– Presentations Presentations –– Due DiligenceDue Diligence–– Confirm preferred bidder Confirm preferred bidder –– Write up Evaluation ReportWrite up Evaluation Report

Questions?Questions?

Andrew McLeanAndrew McLeanExpert Procurement Solutions Ltd (EPS)Expert Procurement Solutions Ltd (EPS)

Ph 0274 423 220Ph 0274 423 220andrew@eps.net.nzandrew@eps.net.nz

www.eps.net.nzwww.eps.net.nz

Further InformationFurther Information

www.procurement.govt.nzwww.procurement.govt.nz

OROR