GPG Procurement - V5

The Good Practice Guide to...

FM PROCUREMENT

good practice guide no.1 retail price £10

British Institute of Facilities Management67 High Street, Saffron Walden

Essex CB10 1AA

Tel: 01799 508606Fax: 01799 513237

Email: [email protected]: www.bifm.org.uk

The objective of this guide is to show how to obtain best value in the procurement of

FM services in a professional and compliant manner. This should achieve efficient, economic and effective procurement of FM services, cost savings, and standardised procurement processes that support economic growth and profitability.

It is aimed at all organisations that procure FM services, within both the private and public sectors.

Procurement is an essential function of FM. It is in the interests of all purchasing organisations that value for money and professional standards are achieved when procuring FM goods and services and that procedures are in place to ensure high standards of financial management and ethics.

Both HM Treasury and the Office for Government Commerce (OGC) produce guidance on procurement that highlights the need to demonstrate a clear

understanding of the procurement process to establish optimum value and standardised methodologies based on best practices. These are spelled out in a number of ‘Guidance’ publications. The content of this guide is also based on a review of these publications.Within the context of FM and services, procurement can be defined as: “the process of acquiring goods, works and services, covering both acquisition from third parties and from in-house providers.

“The process spans the whole life cycle from identification of needs, through to the end of a services contract or the end of the useful life of an asset. It involves options appraisal and the critical ‘make or buy’ decision.”

Procuring FM services This guide addresses the principal considerations and issues of most FM procurement activities. It is worth noting

Welcome to the Good Practice Guide to… FM Procurement

The Good Practice Guide to FM Procurement 1

Contents1 Introduction 2 FM procurement principles 7 The procurement process 15 Tender documentation 20 Appendix A: EU procurement rules 21 Appendix B: Prequalification: suggested format and inclusions 22 Appendix C: Template for supplier-reference questionnaire 23 Appendix D: Template for tender evaluation

however that there will be some deviations and differing requirements and processes, particularly in the following areas:

Public sector procurementPublic sector organisations have to comply with the EU Procurement Directives and Regulations. All works and services above a threshold value will need to comply with these requirements resulting in open competition across the European Union.

Within the context of this guide, the main differences concern the procedures for engaging suppliers; opportunities need to be publicly advertised (via the Official Journal of the EU), there are specified procedures and timescales to be adhered to. Brief information on public sector procurement thresholds is given in Appendix A.

PFIThe Private Finance Initiative is a UK Government scheme to reduce public sector borrowing and to promote efficiency in project finance and execution. It is essentially a method of procuring capital projects (including FM services) over a long term to enable enhanced service delivery, but where the capital expenditure in the

2 The Good Practice Guide to FM Procurement

present is converted to an expenditure commitment in the future. The FM services are generally included in such deals over a long-period (typically 25 years).

eProcurementAlso known as eSourcing, eProcurement has grown significantly in the UK in the past couple of years and is considered to be the major driver for establishing further efficiencies within the procurement cycle.

It is fully endorsed by

government and involves the electronic procurement of works and services via a dedicated portal over the internet. Within the context of FM, eProcurement focuses on achieving process efficiencies and savings in the following areas:• Pre-qualification process • Tender Process• Contract managementeProcurement is not discussed in

detail here: it is the subject of another guide in this series.

And don’t worry... even with the differing requirements, constraints and procedures required to satisfy the above categories, the principles and the majority of the processes outlined in this guide will still apply.

Legal considerationsThe procurement process refers to the supply of goods or services from one party to another. The basis of the relationship and the remedies available for non-performance are defined by and result from legal processes, and virtually all aspects of procurement are influenced by law.

Within FM services procurement, the legal frameworks most frequently encountered will be contract law and other statutory law relating to the supply of goods and services. Within the public sector, procurement is also influenced by the European Union (EU) public procurement directives.

In order to verify the existence of a valid contract, the following elements must exist:• Intention – both parties must intend to be bound by the conditions of the contract• Offer and acceptance –

FM procurement principles

DOs and DON’Ts DO ensure that suppliers are dealt with fairly and impartially DO consider the merits of the various sourcing strategies for your particular situation DO ensure you follow a well structured procurement process

Within the context of FM, procurement can be defined as: “the process of acquiring goods, works and services from third parties and in-house providers”

agreement must be reached by both parties. One party can make an offer, the other confirms acceptance• Capacity – generally any person can enter into a contract• Consent – for the contract to be binding, the consent to contract must be free of fraud, deceit, undue influence or misinterpretation• Performance – the obligations must be capable of being performed• Legal – a contract can be declared illegal if it requires one or both parties to engage in illegal activities

A number of laws regulate the sale and supply of goods and services. The key ones are:Sale of Goods Act 1979: covers the supplier liability concerning description, merchantable quality, and fitness for purposeSupply of Goods and Services Act 1982: imposes a duty of

care and achievement of a reasonable timescale on sellers of servicesUnfair Contract terms Act 1977: offers limited protection against suppliers who seek to avoid statutory obligations

Procurement ethicsEthics in the context of procurement concerns the standards of conduct that ensure individuals and organisations are trusted and respected by those with whom they deal.

They are important because poor relations with suppliers can cause long-term harm to the reputation and credibility of purchasing organisations.

The general principles governing the conduct of an organisation’s employees would normally be incorporated into an employee handbook or other similar document.

The guidelines on ethical practices cover situations when

procurement personnel are confronted with choices during their work. These include:• Bribery• Gifts and hospitality• Expenses• Conflict of interests• Confidentiality• Samples, discounts and personal purchases• Contests, lotteries and drawsPurchasing organisations should aim to deal fairly and impartially with suppliers. Suppliers should be given a fair deal and equal opportunity to present their products and services.

Sourcing strategies & FM optionsA common theme within FM is outsourcing. Beyond the single service or small number of packaged services, usually managed by in-house departments, there are essentially three main types of management service provision in the marketplace, managing agent, managing contractor and total FM (sometimes referred to today as integrated facilities management).

Single Service SuppliersSometimes a purchasing organisation’s business case and procurement strategy dictates that a single supplier will be required as opposed to a bundled or packaged FM


Service e.g. for maintenance, cleaning or security.

There are many reasons why single service suppliers are procured in preference to other sourcing options, including:• market expertise• niche market• in house capacity & expertise• other services catered for (in house or already outsourced)• to satisfy specific organisational needs (strategic or operational)• risk reduction• provides greater operational controlAs the purchasing organisation’s outsourcing policy matures however, alternative sourcing options may be required to satisfy the business case, in particular, where greater economies and efficiencies may be recognised.”

Managing agent (MA)The managing agent model is based on forming contractual relationships directly between the client organisation and individual service supply organisations and then appointing a management company to monitor and manage performance, delivery and relationships.

By bringing in an external organisation to manage the facilities, the organisation is essentially appointing a client representative (or managing agent). There are distinct advantages in adopting this arrangement. Both the managing agent and the various service providers can be selected on the basis of competitive tendering as formal contracts will exist between both the managing agent and the client organisation and the individual, or packaged service contractors and the client organisation.

Managing contractor (MC)Under this arrangement, one contract exists between the client organisation and the facilities supplier. Sub-contractors to the MC will be under contract directly with the managing contractor and so will not have a contractual relationship with the client organisation. This means that the client organisation will have a single point of contact with the managing contractor on all matters pertaining to the service provision. One advantage of this type of arrangement is that there should be a sizeable reduction in administrative duties required to manage the contract.

Total FM provider (TFM)The TFM organisation supplies a fixed price for all support services through directly employed staff or by using outside suppliers. Instead of service contracts being provided in separate packages by individual companies, the client organisation would seek tenders for the primary contract.

The TFM provider may offer a single point of contact and responsibility for the client organisation with the benefit of only one contract to manage.

The TFM provider must ensure that no gaps exist in the specifications and will require skilled staff to manage the contract. As with the managing


MANAGEMENT CONTRACTOR

PACKAGED SERVICE SUPPLIER

SINGLE SERVICE SUPPLIER

TOTAL FACILITIESMANAGEMENT PROVIDER

MANAGING AGENT

DELIVERY MANAGEMENT

NU

MB

ER

OF

SER

VIC

ES

contractor option, a clear advantage with TFM is the reduced administration input.

The opportunities for value-for-money are reduced as competitive tendering for the various services for which the client organisation receives

benefits is only provided once (the TFM organisation will keep discounts or benefits from sub-contractors, unless agreement is made to share profit on possible savings).

The client organisation has less control of the sub-

contractors. There is also major upheaval when the contract expires or is terminated.

Procurement strategyThe quality of services is difficult to evaluate before it is delivered. It is therefore


Advantages of the Managing Agent Model Disadvantages of the Managing Agent Model

• Separate appointments with no interdependence

• Transfer of risk from the client organisation

• Introduction of specialist expertise

• Enhanced flexibility through individual tailoring

• Independent viewpoint, no conflict of interest

• Can work with a combination of in-house resources and outsourced providers

• Possible gaps between work packages

• Greater reliance on capability of MA

• Some risk remains with the client organisation

• Client has no direct relationship with service provider

• Possible loss of in-house expertise

Advantages of the TFM/Managing Contractor Model Disadvantages of the TFM/Managing Contractor Model

• Lower bid prices

• Minimal headcount

• Fixed price

• Risk transfer

• Single point of contact for the customer

• Clear delineation of responsibilities

• Reduced administration

• Major changes and effort required in educating and starting up new Contracts periodically

• Inflexible, ‘all or nothing’

• Danger of getting standard offering

• Client organisation may require support in administering the Contract

• Is totally dependent upon trust and a ‘partnering’ ethos to succeed.

essential to have in place effective, well structured and well managed procurement systems which enable the management and control of the risks inherent in any procurement decision

The procurement process is as defined in the diagram (below).

Development of the procurement strategy will involve the following steps:


• Detailed market sounding/market intelligence• Determine the contract strategy and procurement route• Identification & allocation of risk• Estimates for resources and funding• Outline business case• Preparation of tender documentation including evaluation strategies/criteria

Supplier & Market Intelligence

Define Business Need and Project Objectives

New Service/Contract Requirement

Review Performance and Feedback

Administer and Manage Contract

Award Contractand Debrief

Evaluate and Refine Tenders

Invite Tenders

Define tender list

Define the BriefDefine procurement and contract strategy

PROCUREMENT CYCLE

The procurement process


Procurement programmeA typical procurement programme is shown on the next page. It highlights the activities and approximate time required to complete each task.

Procurement activities within the public sector are governed by the EU procurement directives and rules which specify the procedures to be adhered to concerning the initial pre-qualification process and specifies specific times that must be adhered to between activities (these are referred to in Appendix A).

With these additions activities within public sector procurement is otherwise the same as the table on the next page, which assumes a traditional procurement programme and not an e-procurement process.

While this indicative programme provides approximate timings for each activity, some activities may run parallel with each other and others will be on a critical path. This should be identified and agreed during the preparation of the detailed programme.

Contract durationA number of factors influence the duration of any FM contract. More often however, the purchasing organisation pays

insufficient attention in deciding the duration of a contract and assumes the duration will be for a minimum of three years and maximum of five years.

The duration of the contract period should be included as a fundamental part of the business case and procurement strategy.

The purchasing organisation should consider a number of influencing factors before deciding on the contract duration.

Indicators for short-contract duration• Query performance standards• Value-for-money concerns• Changing technology• Changing market (purchasing organisation)• Future sourcing trends (supplier)• Changing legislation & apparent business risk

Indicators for longer contract durations• Procurement and transition costs• Optimising in-house resources and expertise• Investment• Staff transfers/TUPE• Internal customer relations• Low perceived business risk

The above issues and other

factors should be considered before determining the contract duration. This ensures that the contract duration is consistent with both the short-term and longer term business objectives. It is also worth noting that it is usually the strength of the partnership, not the wording in the contract which governs the actual term of the contract.

Pre-qualificationThe main purpose of the pre-qualification stage is to reduce the number of suppliers to be invited to tender to a manageable number. The object being to produce a short-list of suppliers, any one of which could be entrusted with the required services.

Referring to the table on the next page, the initial step is to gather market intelligence on the suppliers that may deliver the required services. This will enable an organisation to prepare the ‘long-list’ of suppliers.

Market intelligence on potentially suitable suppliers

DOs and DON’Ts DO identify a realistic programme duration for the procurement process DO give detailed consideration to the appropriate duration of the contract


Procurement Activity Time Notes

Pre-qualification Period

Establish the Procurement Project Team 1-2 weeks Will generally include:Project sponsorProject managerProcurement professionalTechnical professionalStakeholder group

Re-visit/update the business case 1-2 weeks Complete checklist

Gather supplier market intelligence/Establish 1-2 weeks Based on known requirements, e.g. size, volume, turnover, expertise, services offered. Review suppliers’ websites

Contact potential suppliers to establish interest 1 week Initial contact by telephone or email

Prepare the RFI (pre-qualification) question-naire and criteria for evaluation

1-2 weeks Include input from the project team

Issue and receive the completed RFI 2 weeks Generally by email

Evaluate RFI responses against pre-defined criteria & prepare a ‘short-list’ of companies. Prepare report

Tender Period

1-2 weeks Include the project team as appropriate

Prepare tender documentation 3-4 weeks This will generally include several draft versions circulated for comments within the project team

Invite Tenders/Issue tender documentation to short-list

4-6 weeks Supplier presentations/site visits & management of queries during this period.

Receive & evaluate tenders 3-4 weeks This period will include:Commercial/financial/technical reviewsClarification/substantiationSeek referencesSupplier presentationsPost tender negotiations

Prepare Tender Evaluation report 2 weeks Should be well structured and cover the entire procurement process

Arrive at a decision to proceed 1 week Project sponsor

Appoint preferred supplier via ‘letter of intent’ 4-6 weeks This period will include:Further post tender negotiationsAgreement of Terms & ConditionsTUPE transfers (if appropriate)

Prepare & sign Contract Agreement Document 2 weeks Includes tender documentation, questions & answers during the tender period, supplier’s proposal document & all post tender documents

Mobilisation & setting-up activities 4 weeks Transfer responsibility to operational team

Contract commencement

may be obtained via the trade and accredited bodies that represent the particular industry in which they operate. The relevant trade bodies usually publish details of their membership, including other key information and details which will shorten the process.

The pre-qualification criteria should be developed and agreed before suppliers are invited to participate. The pre-qualification criteria will be used to evaluate supplier responses and should generally include a scoring system, with weighting as appropriate, to evaluate the following aspects of each response:

• General company details (not scored)• Financial information (min.requirements to be met)• Business activities• References (quality of)• Insurance details (min. requirements to be met)• Service specific requirements• Quality, health and safety• Human resources• Professional and business standing

Within the above, there will be certain ‘show stoppers’, eg financial and insurance data, that will need to satisfy minimum criteria before a


providing each tenderer with a reasonable chance of success. The precise number of suppliers on the short-list should be based on the individual merits of the respective requirement including size, scope and value. Typically, between four and six companies should be invited to tender.

The tendering processThe tender information should be as comprehensive as possible in order to receive quality bids and to reduce the number of queries during the tender period.

It must be clear which elements are contractual and which parts are for information or guidance to assist the supplier in understanding the requirement and transferring this knowledge to their bid proposals.

The Tender documents will form the basis of the supplier’s price. Lack of clarity or ambiguity in the tender documents will create weaknesses or opportunities which the supplier may exploit in order to increase costs at a later stage and/or delay the delivery programme.

It is important therefore that the tender documents satisfy the following key elements:• The documents should be

Supplier may be considered further. In some instances, suitable forms of evidence will also be required at this stage of the process, eg, company-registration certificate, audited accounts and copies of other relevant certification.

A framework matrix for the pre-qualification questionnaire is included in Appendix B for reference purposes.

The pre-qualification questionnaire (PQQ) should be evaluated consistently and objectively according to the pre-defined model.

Buyers will carry out their evaluation of submitted bidder prequalifications questionaires and supplier reference questionnaires (Appendix C) and exclude those bidders who do not meet the minimum requirements of suitability to do business with.

Following the evaluation process a short-list of suitable suppliers will be defined and the buyer should inform the unsuccessful suppliers and provide substantiating information as appropriate from the evaluation matrix.

There are no specific rules that suggest how many suppliers should be included on the short-list but a reasonable balance must be struck between encouraging competition and


specific about what is required• The documents should be clear and unambiguous; these and any other documents e.g. post tender negotiations that are subsequently incorporated as contract documents, should be consistent with one another• The conditions must clearly allocate risks between the supplier and purchaser and specify who must pay what in the event of variations or delays.

The content of tender documentation will generally include:• The request for proposal (tender instructions)• Draft agreement (including general conditions of contract or reference to a specific form of contract)• Abstract of particulars• Standard forms as appropriate (eg tender & tender price form, parent company guarantee etc.)• Additional contract conditions (if using a standard form of contract and/or for specific conditions which are excluded from the general conditions of contract, eg detailed health & safety conditions)• Scope of the services/specification• Pricing schedules• Performance measurement system (incorporating the KPI’s)• Asset registers (for

maintenance contracts)• Schedules and drawings• Administration procedures• Property schedules (if multi-property portfolio)• Minimum or acceptable maintenance/service standards• Legislative compliance checklists• Miscellaneous reference documents (e.g. facts and figures, organisational details, details of current/historical services etc.)

In addition to stating specific requirements within the tender documents it is always worthwhile providing additional background information in the form of appendices to enable the supplier to establish proposals which will promote best value principles and innovation.

Tender evaluationSufficient time should be allowed for the assessment of returned tenders to ensure that the most appropriate supplier is selected for the required services. The following policy considerations should apply:• The purpose of the evaluation process is to identify the best value-for-money supplier by comparing the price against the assessed benefits• Parity of tendering should be

observed• The evaluation process should be in accordance with pre-defined criteria

The following procedures should be adhered to within the tender evaluation process:

Reference Site Visits

Supplier Presentations & Post Tender Negotiations

Commercial & High-Level Financial Checks

Receive & Record Tenders

Establish Tender Board

Tender Report & Recommendation

Financial Evaluation

Technical Evaluation

The tender evaluation board should comprise; the individual responsible for managing the tender process, an end-user of the service and a representative from the finance/procurement function.

The tender evaluation should be carried out in a logical sequence, usually comprising the following stages: • Commercial evaluation (including client references)• Financial evaluation• Technical evaluation (including site reference visits)• Supplier presentations with clarifications and substantiation• Post-tender negotiations• Tender evaluation report, including recommendations

The tender evaluation procedure should be consistent in its application, relevant to the scope and scale of the project and fair to all tenderers.

The purpose of evaluation is to compare the commercial, technical and financial terms of the offers received. Comparing these aspects individually will allow an assessment of overall value for money.

Typical evaluation criteria are shown below and it is usually good practice to include a high-level version of this in the tender documents to enable the suppliers to respond accurately

to requirements and focus in the right areas.

It is usual practice to apply a rating system to the evaluation process where proposals can be evaluated against the criteria stated below.

Commercial evaluation• Compliance with tender documents• Agreement of terms and conditions• Qualifications or omissions• Compliance with the delivery or implementation schedule• Acceptance of payment arrangements• Ownership rights• Sufficiency of insurance• Experience & capability• References received• All necessary information received• Price validity period

Financial evaluation• Accuracy of pricing• Fixed-price evaluation• Variable price evaluation• Application of equalisation factors• Life-cycle costing projections (& quantifiable benefits)• Cost of components, spare parts, consumables etc.• Mobilisation & on-going costs• Resource allocation/total employment costs• Financial qualifications (e.g.

review of published accounts)• Quantifiable benefits arising from the Technical evaluation

Technical evaluation• Contract mobilisation• Account management/contact administration• On-site management• Operational resources• Off-site support• Quality of total service offering (fit for purpose)• Professional competence• Operational standards• Performance and productivity standards• Processes and procedures (communications & reporting standards)• Method statements• KPI’s• Flexibility• Customer satisfaction• Continuous improvement/innovation• HR & training• Reference site visits• Sample documentation

Supplier presentationsThe opportunity for suppliers to present their proposals is an integral and important part of the evaluation process.

It offers the opportunity for the suppliers to provide an oral summary of their proposal and enables the purchasing organisation to


experience at first hand each supplier’s physical presence. Presentations enable the purchasing organisation to gain valuable information about the suppliers which would not otherwise be apparent in the tender response.

While supplier presentations are held after the tender response has been received they may occur at any stage of the evaluation process and are subject to the individual project and organisational requirements.

Sometimes all tendering organisations are invited to present their proposals and at other times a reduced number of suppliers are invited, following an initial sifting exercise.

Either way, the presentations contribute significantly to the decision making process and should be planned accordingly.

The purchasing organisation should establish the format for the presentations in advance and will usually invite all short-listed companies to attend over a two or three day period.

A pre-defined scoring sheet should be developed and applied consistently to each supplier to reflect the objectives of the exercise and circulated to the stakeholder group within the purchasing organisation

beforehand. It is also recommended that the majority of the project team attends these presentations.

The format of the presentations should be distributed to the supplier beforehand to enable the supplier to tailor his presentation accordingly.

During the presentations, members of the review team will complete the score sheets and these will be collected by the presentation

chairperson at the end of each presentation. The respective scores will then be added to the overall evaluation matrix as appropriate.

A typical agenda for the supplier presentation is:a) Chairperson welcomes the supplier’s representatives and introduces the evaluation panelb) Chairperson outlines purpose, structure and timings of the presentation

c) Supplier’s presentation (approx. 20 minutes)d) Questions by the evaluation panel (approx. 20 minutes)e) Supplier questions/clarificationsf) Chairperson to close

Post-tender negotiationsThese should only be carried out after the evaluation process and following the decision to appoint ‘preferred bidder’.

Negotiations should not take place before this stage as it would otherwise place other tendering suppliers at a disadvantage and may distort fair competition.

The purpose is to obtain an improvement in content and circumstances with the ultimate objective of establishing an optimum level of service at best value to the purchasing organisation.

All negotiations should be recorded to provide an audit trail details of which will be included within the evaluation report and contract agreement.

Tender evaluation report The evaluation process is captured and formalised in the Tender Evaluation Report (Appendix D) which should cover each stage of the evaluation process culminating in a recommendation to


DOs and DON’Ts DO carry out a market survey of potentially suitable supplies for prequalification DO agree the prequalification criteria before suppliers are invited to express interest DO ensure that the prequalification questionnaire asks questions relevant to the prequalification criteria

appoint the tendering supplier which offers best overall value for money. The detail to be included in the report is relative to the size and complexity of the project. It is usual practice to issue a ‘letter of intent’ to award the contract to the preferred supplier.

The supplier will need to mobilise his operation and engage in various ‘setting up’ activities directly after being appointed preferred bidder or following post tender negotiations. Such activities will generate a cost which will be at risk to the supplier unless certain assurances are received from the purchasing organisation. In an ideal world the contract agreement should be signed by both parties at this stage. However, this does not usually happen overnight because other incomplete tasks (agreement of terms and conditions, TUPE implications, finalising KPIs etc.) prevent a quick resolution to the contact signing.

The ‘letter of intent’ is therefore an interim measure which provides guaranteed payment to the supplier (for a limited time), states the purchasing organisation’s intention and provides certain ‘limited’ assurances to the supplier that he may now

commence the mobilisation process with limited risk and exposure.

Following the final agreement of the terms and conditions and any TUPE and/or other issues, the contract document may be prepared, signed by both parties and exchanged.

The contract document establishes the legal formation between the purchasing organisation and the supplier for the duration of the contract period.

It will contain all necessary information and documentation from the tender issue to appointment of preferred supplier, usually comprising:

• Tender documentation• Questions and answers during the tender period• Changes or enhancements to the tender documentation during the tender period• The supplier’s response and priced proposals• Post tender clarifications and substantiations as requested by the purchaser and provided by the supplier• All documents relating to any post tender negotiations

Declining tendersIt is advisable to notify the successful supplier of the intention to accept their offer

before sending out letters to the unsuccessful suppliers. Following confirmation from the successful supplier, ‘decline letters’ should be sent immediately to all unsuccessful suppliers.

The letter of decline should state the principal reason for not being successful on this occasion and thank them for all of their hard work and efforts as they would have expended much time, effort and costs during the tendering process.

DebriefingPurchasing organisations should also offer a debriefing meeting to unsuccessful suppliers for two reasons:• It gives suppliers confidence in the process• It serves as a useful exchange of information to both purchaser and supplier which helps to encourage market performance

As well as forming good procurement practice, the debriefing process is an important learning tool for both purchasing organisation and suppliers.

For suppliers, it assists them to identify where they went wrong and to improve their competitive performance which means that they would stand a better chance of winning future business. The purchasing


organisation will benefit from gaining more information from the marketplace.

The high-level goal of continuous improvement requires that we should all take time to reflect on the procurement process and to identify how it may be improved in future.

While time constraints and other pressures suggest that this offers little value to the purchasing organisation it should be viewed as an opportunity to draw lessons from the preceding stage and provide positive feedback and constructive criticism, as in the long term this will help to improve the overall process.

Effective debriefing requires time and effort but this is generally outweighed by the potential benefits to both parties as highlighted below.

Benefits to the purchasing organisation- Identifies ways of improving the process in the future- Suggests ways of improving communications- Makes sure best practice and guidance is updated to reflect any relevant issues that may have been highlighted- Encourages better bids from those companies in future- Helps establish a reputation

as a fair, open and ethical buyer with whom suppliers will want to do business

Benefits to the supplier- May help companies rethink their approach so that future bids are more successful- Provides direction and guidance as to areas that they need to address- Can provide reassurance about the process and their contribution or role (if not the actual result)- Will provide valuable feedback for future reference

Mobilisation & operational periodFollowing the tender process and the appointment of the supplier, the mobilisation and operational periods will commence.

It is at this stage when the transfer of knowledge between the procurement project team to the operational management takes place. This is an important period and should ensure that the supplier delivers against his promises and contractual obligations.

The fist six months of any FM contract is critical in determining the potential for long-term success.

The purchasing organisation should not under-estimate the input required on their behalf

as any shortfall could cause a disruption to the healthy relationship developed during post-tender negotiations.

The content of the specification will generally require the supplier to develop his processes and systems, including reports, IT, invoicing procedures, KPIs etc. during this period and the purchaser needs to ensure sufficient resources, both to manage and accept the mobilisation activities and to manage the contract and relationship thereafter.

The Good Practice Guide to FM Procurement 1514 The Good Practice Guide to FM Procurement

DOs and DON’Ts DO give suppliers an opportunity to present their proposals DO distribute the proposed format of presentations to suppliers beforehand DO advise potential suppliers if they are unsuccessful at the prequalification stage, and why DO be specific in the tender documentation about which elements will be contractual and which are for information DO make clear how risks will be allocated between supplier and purchaser and what any resultant payments will be DON’T carry out post-tender negotiations until the preferred bidder has been appointed

Request for proposal (RFP)Otherwise referred to as ‘tender instructions’ or ‘invitation to tender’, the RFP will not usually form part of the contract documentation since its purpose is to provide an introduction and guidance to suppliers in assisting them to submit a compliant bid.

The RFP provides an overview of the requirement to suppliers and serves as a ‘road map’ for the tender documentation.

It contains a complete list of tender documents, specific instructions that the supplier needs to adhere to in order to meet its obligations for a compliant bid and states the information required to be returned by the supplier within his proposals and the pro forma for the response.

It is good practice to include a format for response so that all bids are returned in a logical order which enables ease of evaluation between suppliers. It is also good practice to refer to all documentation that is to be returned with the tender here as opposed to the specification.

Typical contents for an RFP include:• Introduction• A complete schedule of tender documents including

Annexes and Appendices as appropriate

• Tender objectives and strategy• Procedure for dealing with tenders including alternative bids• General instructions• Overview of the organisation• Description of the services requirement (scope of services)• Description of the site(s)• Procurement programme key dates• References and reference site visits• Acceptance of tenders• Supplier selection criteria• Information to be submitted with the tender• Arrangements for site visits• Format for tender responses• Local supplier’s policy• Joint ventures• No payment for tenderers• Confidentiality of tenders• Enquiries concerning tenders

The information contained in the tender documents submitted by potential suppliers is confidential and should not be disclosed to other tenderers or made public. If it is necessary to make a material alteration to the specification or the tendering process, the purchaser must circulate the same information to all recipients of the RFP.

Contract conditionsThe conditions of contract will set the legal framework for the Agreement between the purchasing organisation and the supplier. It is therefore essential that the conditions of contract cater adequately for the services to be delivered under the agreement and are fair and reasonable to both parties.

It is usual practice to either issue the contract conditions with the tender documents or state the applicable form of contract within the tender and include any specific detail or deviations to the form of contract within the abstract of particulars.

By doing this, anomalies, discrepancies or conflicting information may be raised by the supplier during the tender period and resolved with the purchasing organisation prior to signing the agreement. If in doubt the contract conditions should be checked by a property contract lawyer before they are issued.

Wherever possible, it is recommended that industry standard contracts (Forms of Contract) are used to formalise legal relationships between the purchasing organisation and the supplier. In the private sector, it is usual practice for the purchasing organisation to


Tender documentation

prepare and issue their own standard contract conditions, in the public sector however the industry standard contracts are usually used. These may of course also be used by private sector organisations but may need some amendment as appropriate.

Standard forms of contract

may also be supplemented by the purchasing organisation’s own specific requirements but great care is needed to ensure that there are no conflicting requirements between the different documents.

Standard forms of contract may be obtained from a number of sources, including:

1) OGC – Model Terms & Conditions for Services (2005)2) GC/Works/10 (2000) Facilities Management Contract3) CIOB – Facilities Management Contract (1999)4) CIPS – Facilities Management Model Agreement for Service Contracts

It is important to ensure that


Tender document pricing schedules

Pricing Notes Provides the supplier with guidance on completing the pricing schedules & definition of terms as appropriate

Fixed Costs

Tender Summary The first page of the pricing schedules to which all costs are carried forward.

Resource Costs Will include for all personnel/labour associated with the service including: weekly hours, unit rates for each grade, holidays, training, sickness, NI, pension & insurance costs (Total Cost of Employment)

Off-site Management Costs

Account Management, Health & Safety, Auditing specialists etc. (if not included in the overhead costs)

Specialist Sub-Contractors

Required to supplement the suppliers in-house resources

Mobilisation & On-going costs

All costs associated with the mobilisation and implementation of the contract e.g. support desk & IT infrastructure, tools, uniforms etc.

Materials, Consumables & Spares

Costs associated with materials e.g. toiletries, laundry, filters, bulbs, cleaning equip-ment etc.

Provisional Sums For services that may or may not be included in the requirement. Provisional sums may be excluded from the Tender Sum

Variable Costs (not carried forward to the Tender Sum)

Call-out rates For each response time as stated in the Specification

Day work Rates For non-lump sum works and services that may be required from time to time e.g. reactive works and small projects

Percentage On-Costs For materials ordered via the contract and for works and services (non-lump sum) undertaken/provided by specialist sub-contractors (usually quoted as a percentage)


recent Legislation and Acts are included within the Contract or supplemented as described above, whichever Contract is used.

Pricing schedulesThe pricing schedules are usually annexed to the draft contract included within the Tender and structured to reflect the specification requirements. The specification needs to be clear and unambiguous in this respect in order that the suppliers may respond accordingly.

The pricing summary will be carried forward to the Tender Form & Tender Sum which will usually be for the duration of the contract.

As the duration for FM service contracts is usually for several years the Contract Conditions will contain an updating percentage for each subsequent year beyond year 1.

In addition to the requirement for the pricing structure and format to fully reflect the specification it needs to provide sufficient cost data to enable ease of adjudication and be sufficiently flexible to enable future changes within the purchasing organisation’s business or properties.

Guidance on the preparation and content of pricing schedules suitable for FM services is included in the table opposite.

A typical Tender Summary sheet is as follows:

Item Year 1 £

Year 2 £

Year 3 £

Contract Management

Set-up & Mobilisation

FM Services (Lump Sums)

Staffing Costs

Specialist Sub-contractors

Materials & Consumables

Provisional Sums

Overhead

Profit

TOTAL

DOs and DON’Ts DO provide a format for the tender response DO use industry standard contracts wherever possible DO allow adequate resources to support the new supplier during the early stages of the contract DO specify your needs sufficiently to ensure that they are met DON’T overspecify and so discourage supplier innovation


SpecificationA specification can be defined as ‘a statement of needs to be satisfied by the procurement of external resources’. It is also referred to as an operational requirement, statement of requirement, statement of service and scope of services.

Its purpose is to present prospective suppliers with a clear, accurate and full description of the organisation’s needs, and to enable them to propose a solution to meet those needs. A specification should be sufficiently detailed so that the service meets the user’s needs, but not so explicit that it prevents negotiation or discourages the supplier from using innovative solutions that offer better value for money.

The success of any procurement exercise relies on the specification being an accurate statement of the buyer’s requirements.

A good specification should:• State the requirement clearly, concisely and unambiguously• Contain sufficient information for potential suppliers to decide the level of quality of services they will offer• Permit offered services to be evaluated against defined criteria • Provide equal opportunities for all potential suppliers to offer a service which satisfies the needs of the user and which may incorporate alternative technical solutions• Comply with any legal obligations

• Not over-specify requirements• Not contain features that directly or indirectly discriminate in favour of, or against, any supplier.

Framework for a specificationA framework for the preparation of a specification includes.Introduction:- An introduction to the customer organisation- An introduction to the specification- Disclaimers, caveats etc.Scope:- What’s included- What’s excluded- What’s optional

Background to the requirement- An overview of the business of the organisation, including outline of the business strategy- An overview of business objectives relative to the procurement- The objectives of the procurement- History relevant to the procurement – recent developments- Business function and processes- Organisation and staffing- Stakeholders- Current service support- Quantitative aspects of current operations- Future developments relevant to the procurement- Policies, standards

Detailed requirementsWhile the scope provides an overview or summary of the

requirements, the main section describes the requirement in detail. Based on the information provided in this section, the supplier will base his proposals and price on this section.

This section should also offer the opportunity for the supplier to offer alternative solutions. Do not simply describe the characteristics of an existing service, but define the user’s actual needs.

Performance requirementsOver the past few years it has become common practice to specify the performance required of the solution by setting out details of the outputs to be achieved. The supplier will, within his proposals, identify and detail the inputs proposed to meet the desired outputs. These are commonly referred to as Key Performance Indicators (KPIs).

Example performance measures are:• Throughput – the volume of inputs that can be handled within a specified time• Accuracy – the number of outputs that are error free (%)• Availability – the time the solution is able to be used as a percentage of the time it is supposed to be able to be used.

Sometimes the achievement of performance requirements by the supplier is linked to the supplier’s payment on a risk/reward basis (typically 3%-5% of the supplier’s annual lump sum is related directly to KPIs).


It is therefore important that the performance requirements to be specified adhere to the following principles:

• Derived from strategy and relate to specific goals• Simple to understand • Provide timely and accurate feedback• Based on quantities that can be influenced, or controlled• Reflect the business processes• Be relevant• Clearly defined and measurable• Focus on improvementThe performance metrics for each FM service may be derived from the following aspects:• Compliance

• Cost• Quality• Quantity• TimelinessOther requirements includesecurity, standards & training

Implementation RequirementsMobilisation & setting up requirements

Contract/Service Management Requirementse.g. Management Information, Communication, Reporting Standards, Change Management

Other tender documentsIn addition to the RFP, Contact Conditions, Specification and Pricing Schedules there will

10 tips for preparing a specification

Use simple language & avoid jargon. Define terms, symbols and acronyms

Use a logical structure

Be as concise as possible, avoid ambiguity

Avoid repetition

Arrange the components of the requirement into a logical form, matching the evaluation model

Use a clear and attractive format, avoid over-fussy layouts

Number each section and paragraph using a logical and consistent numbering sequence

Make sure that the contents list and any summaries are consistent with the main body of text

Discuss the requirement with relevant stakeholders to ensure that the specification caters for your entire needs

Ask someone else to read over and check the specification before publishing it

usually be other documents annexed to or appended to the tender documents. The type, volume and extent of this additional data will vary according to the FM service, the quality of the procurement team and the attention and detail to these documents in prompting a compliant bid based on achieving best value.The identification and inclusion of supporting tender documentation will produce several benefits if presented in the right way.

Some of these benefits include; • Providing optimum detail to reflect the buyer’s precise requirements thus reducing the potential risk of escalating costs at a later stage.• Projecting the buyer in a professional way• Identification and effective management/transfer of risk• Reducing the potential for misunderstanding of requirements• Enabling the supplier to offer innovative solutions

Typical documents that may be included within the tender package include:• Supplementary Conditions• Performance Measurement/Management System• Detailed asset registers (for maintenance contracts)• Drawings• Detailed property information• Other data that may be relevant to the procurement and/or services


Thresholds – Public Sector from 1st January 2004

Supplies Services Works

Entitles listed in Schedule 1 (S.I. 1995/201)

£99,695 £99,695 £3834,411

Other public sector contracting authorities

£153, 376 £153, 376 £3834,411

Indicative Notices £485,481 £485,481 £3834,411

Small Lots Not applicable £51,785 £647,308

OJEU Advertising Timescales

Open Procedure Restricted Procedure Negotiated Procedure

Send Contract Notice to OJ Min. 52 days Min. 37 days Min. 37 days

Receive Expressions of Interest

Issue Tender Invites Select Tenderers

Receive Tenders Tender Period

Award Contract Max. 48 days Max. 48 days Max. 48 days

Appendix A – EU Procurement Thresholds and Timescales


Section Typical Questions Evidence

1.0 General Company Information

Head office/Regional Locations?Contact details?Number of Employees?Type of Organisation?VAT Registration?

Company Registration CertificateVAT Certificate

2.0 Financial Details Turnover (for 3 year period)?Statement of Accounts for 3 years?Value of Works as a % of turnover?Cashflow and Credit position?Financial ratios?

Audited Accounts

3.0 Business Activities Business activities of the organisation?Specialist Services?Staff numbers (Management & Operational)?Structures/Organograms?

4.0 References (Quality of) Organisation?Contact Details?Details of services provided?

5.0 Insurance Details Products and Public Liability?Employers Liability?Professional Indemnity?

Copy of valid policy detailsCopy of valid policy detailsCopy of valid policy details

6.0 Specific Requirements Similar Services provided on behalf of other organisations?Similar services provided in a similar market sector?TUPE Experience?Membership of Trade Bodies/Accredita-tion?etc.

7.0 Quality, Health & Safety Environmental Policy/EMS?Quality Policy/System?Health & Safety Policy/System?

ISO 14001 CertificateISO 9001/2 CertificateOHSAS 18001 Certificate

8.0 Human Resources HR Policy Statement?Staff Turnover rate?Average length of service?Training spend?

9.0 Professional and Busi-ness Standing

Bankruptcy/Insolvency?Criminal Offences/Misconduct?Payment of tax obligations?

10.0 Declaration Signed Declaration

Appendix B – prequalification questionnaire: suggested format

Diagram 13 in here 3 pages...


Supplier Reference Questionnaire (Private and confidential)

Supplier

We are currently evaluating Tender proposals received from the above names supplier for the provision of facilities services to our organisation. The supplier has provided your organisation as a key reference and we would therefore be grateful if you would

How long has this Supplier delivered facilities services to your organisation? years

Nature of Work Undertaken?

Type and Value of Contract?

Please enter ‘1’ as appropriate in the boxes below

Very Good Good Average Poor Very Poor

Contract Mobilisation

Contractual Compliance

Overall Account Management

On-site Management

Off-site Support Management

Operational Staff

Communications

Reporting Standards

Invoicing & Financial Management

Contract Administration

Support Desk (if provided)

Understanding of your business

Customer Satisfaction

Achievement of KPI’s

Value for money

Honesty/Integrity

Continuous Improvement/Innovation

Would you invite this Supplier to Tender again for similar work? yes/no

Any other comments?

Name Organisation

Date Contact details

Appendix C – template for supplier reference questionnaire


TENDER EVALUATION FORM

Contract Title: Date:

Tenderer: Prepared by:

Criteria Weight Factor A (1-10)

Mark B (0-10)

ScoreA x B

Comments

COMMERCIALTender ComplianceTerms & ConditionsQualifications/OmmissionsProgramme ComplainceOwnership RightsInsurance PoliciesExperience & CapabilityAll information receivedPrice Validity Period

FINANCIAL EVALUATIONAccuracy of PricingFixed Price EvaluationVariable Price EvaluationEquialisation FactorsCost ProjectionsMobilisation/On-going costsTotal Employement CostsFinancial QualificationsQuantifiable Benefits

TECHNICAL EVALUATIONContract MobilisationAccount ManagementOn-Site ManagementOperational ResoucesOff-site SupportFit for PurposeProfessional CompetenceOperational StandardsPerformance & Productivity Processes & ProceduresTechnologyMethod StatementsAdherence to KPI’sFlexibilityCustomer SatisfactionImprovement/InnovationHR & TrainingReference Site VisitsSample Documentation

TOTAL

Appendix D – template for tender evaluation


Notes

The Good Practice Guide to FM Procurement

British Institute of Facilities Management67 High Street, Saffron Walden

Essex CB10 1AA

Tel: 01799 508606Fax: 01799 513237

Email: [email protected]: www.bifm.org.uk

Publications sub-committeeChair: Dr Bob Anderson BIFM(Qual)

Members: Stephen Bennett, Richard Byatt, Graham Briscoe and Cathy Hayward

Author: Richard Davies MBIFM, account director, Acuity Management Solutions www.acuity.uk.net

Reviewer: John Bowen MBIFM, chairman, BIFM Procurement Special Interest GroupSeries editor: Dr Bob Anderson BIFM(Qual), chairman, BIFM Publications sub-committee

Redactive Publishing Limited17 Britton Street, London EC1M 5TP

020 7880 6200

Editorial Tel: 020 7880 6223

Email: [email protected]: Cathy Hayward; Production editor: Gareth Price; Sub-editor: Steve Smethurst;

Art editor: Robin Farley; Picture researchers: Claire Handley and Sam Kesteven

AdvertisingTel: 020 7880 6209

Email: [email protected] director: Justyn Gidley

ProductionProduction manager: Jane Easterman

PublishingGroup publishing director: Mark Payne

© The British Institute of Facilities Management (BIFM) series of Good Practice Guides is published on behalf of the BIFM by Redactive Publishing Ltd (RPL), 17 Britton St, London EC1M 5TP. The guides do not necessarily reflect the views

of BIFM nor should such opinions be relied upon as statements of fact. All rights reserved. This publication may not be reproduced, transmitted or stored in any print or electronic format, including but not limited to any online service, any

database or any part of the internet, or in any other format in whole or in part in any media whatsoever, without the prior written permission of the publisher. While all due care is taken in writing and producing this Good Practice Guide, neither

BIFM nor RPL accept any liability for the accuracy of the contents or any opinions expressed herein. Printed by Able Spice.

Documents

GPG Procurement - V5