Project Contracting Process

Steps in Project Contracting Process

The contracting process describe here step by step in detail:

Stage 1: Identify a Requirement

This activity may be led by the commissioner. It corresponds largely with Stages 1 ‘Look at outcomes for Children and Young People’, 2 ‘Look at particular groups of children and young people’ and 3 ‘Develop needs assessment with user and staff views’ of the Joint Planning and Commissioning Cycle.

It is essential that the background work carried out at this stage is correct and comprehensive. It will dictate the success of all of the later procurement activities. Commissioners should aim to identify, for example:

• The clearly stated outcomes they need to achieve including details of the target group.
  
  
• If proxy outcomes are to be used to describe the requirement, the evidence that supports this decision. Is a pilot exercise required?
  
  
• Any potential unwelcome outcomes that may need to be managed
  
  
• Details of the current position so that any added value delivered by the provider can be identified
  
  
• The agreed view among stakeholders of what success will look like

Consider if there may be a sustainability element (social, economic or environmental) to the procurement and ensure it is clarified at the outset and eventually included in the invitation documents sent to prospective providers.

Consider if this exercise offers the opportunity to delivery wider government initiatives such as apprenticeships, and incorporate these in the process.

Stage 2: Justify a Procurement

• This activity will be led by the commissioner with input from procurement professionals. It sits within Stage 5 ‘Plan pattern of services and focus on prevention’ and Stage 6 ‘Decide how to commission services efficiently’ of the Joint Planning and Planning & Commissioning Cycle.
  
  
• Identify the options (including procurement) for achieving the outcomes and evaluate them. Include an evaluation of how the options will help to manage the key risks of delivery.
  
  
• On more complex requirements develop a business case signed off at the appropriate level for the project in hand and start planning the procurement as a project.
  
  
• Identify any stakeholders who may need to be involved in the process.

Stage 3: Investigate the Provider Market

• This could be lead by a commissioner or equally by procurement specialists. The activity would sit within Stage 5 ‘Plan pattern of services and focus on prevention’ and Stage 6 ‘Decide how to commission services efficiently’ of the Joint Planning and Commissioning Cycle.
  
  
• This stage may not be necessary if adequate information was gathered when developing the Business Case at the stage ‘Justify a procurement’, or where the procurement is very low value.
  
  
• How to take the procurement forward will be dependent to a large extent on a number of considerations around the state of the provider market. The considerations include:
  • New developments in delivery of your type of requirement at home and abroad.
  • The number of potential providers, if any.
  • The capacity of the market. For example would one provider be able to meet all of your requirements?
  • The potential price in relation to the budget.
  • Interest in bidding for your requirements.
    • What would make them more/less attractive e.g. incentives?
      
      
• Where helpful, communicate with the market to gather useful information. Take care not to be seen to favour any provider or group of providers – use an open day for example or a structured questionnaire sent to a cross section of providers.
  
  
• Consider if a market needs to be created.

Stage 4: Define the Procurement Approach

• For significant procurements, specialist procurement skills will be required. This would sit largely within Stage 6 ‘Decide how to commission services efficiently’ of the Joint Planning and Commissioning Cycle.
  
  
• Where procurement is the preferred option, identify the details of how to achieve best value for money. Consider, for example:
  • The potential risks to delivery (for example lack of providers, provider collapse, poor performance, changes to demand) and how these can be managed within the contracting process to ensure ongoing timely delivery of the required goods or services at the quality level you require.
    
    
  • If an existing framework can be used.
    
    
  • If the requirement should be split across a number of providers.
    
    
  • If the requirement should be broken down into lots (e.g. by locality, by user group, by particular outcome) and awarded separately.
    
    
  • How you would work with a number of providers, if one provider would not able to provide the whole service themselves, you could contract with a number of individual providers or with just one (the prime contractor) who subcontracts to others and has responsibility for overall delivery?
    
    
  • If the number of prospective providers is very small (or non-existent), how you can build a sustainable market, through, for example, incentives to encourage entrants.
    
    
  • How users and other stakeholders should be involved?
    
    
  • The extent to which you should collaborate with other units in your organisation or with external organisations, particularly partners in a Children’s Trust. Also agree the respective roles and responsibilities.
    
    
  • The extent to which the EU Directive applies. Would Competitive Dialogue offer benefits over open and restricted procedures?
    
    
  • If you should advertise even though the requirement is below the EU threshold or is a Part B Service.
    
    
  • How performance can be incentivised, e.g. length of contract, number of providers, stage payments linked to performance, payment of setup costs?
    
    
  • If and how you should proactively encourage smaller suppliers to compete.
    
    
• Plan the procurement in detail.

Stage 5: Specify the Requirement

• For significant procurements, specialist procurement skills will be required. This would sit within Stage 6 ‘Decide how to commission services efficiently’ of the Joint Planning & Commissioning Cycle.
  
  
• Draft the detailed specification. The specification is the document which sets out the requirements specific to a procurement exercise and allows potential providers to understand the requirements and develop an appropriately costed response.
  
  
  • The specification should, as far as possible, be developed in terms of the outcomes you need to achieve, with the provider detailing the inputs and outputs they are going to employ in their proposals. Only specify inputs (processes, materials) if necessary to inform the provider of these. Specify outputs if these are a proven proxy for the required outcome. When drafting a specification, consider:
    
    
    • How performance will be monitored. You could for example, Identify one or more performance indicators for each outcome which will allow you to monitor the extent of change.
      
      Set intermediate outcomes (milestone targets on the way to achieving the full outcome) if these will help to monitor progress. Include appropriate performance measures such as sampling, questionnaires, observation, interviews or, if you are not sure which to apply, providers could be asked for their proposals.
      
      
    • How the specification can allow flexibility, within clearly defined boundaries, to work with the provider, particularly if this is an innovative area and it may be necessary to test new approaches.
      
      
    • If the specification is written in such a way as to allow and welcome proposals for innovative ways of meeting the required outcomes. Avoid inadvertently reflecting the current method of delivery to the extent that alternatives are discouraged.
      
      
    • The appropriate payment and incentivisation approach. These should be linked to progress against the performance indicators. Traditional payment methods such as daily rates may be less appropriate. A shortterm contract is unlikely to incentivise providers adequately to meet outcomes which may not be expected to become apparent for some time.
      
      
    • Should a pilot exercise be held to test aspects (untested proxy outcomes for example) before going out to a full procurement exercise?
      
      
    • Does the specification adequately reflect government initiatives (e.g. apprenticeships) as well as statutory requirements?
      
      
    • Have you set out the non-negotiable inputs (such as mandatory processes e.g. CRB checks) that providers must provide as a minimum?
      
      
• Identify the evaluation criteria and weightings that will identify the provider who is most likely to meet your requirements as set out in the specification (plus other criteria such as financial stability, experience of similar size and type of contracts, references, project plan, skills of named staff).
  
  
• Agree the specification, evaluation criteria and weightings with stakeholders, including users wherever possible. Users are likely to play an important part in defining the required outcomes (success will depend on their experience of outcomes), evaluating providers’ proposals for interfacing with them, and in identifying how appropriate performance monitoring proposals are.

Stage 6: Invite Proposals

• For significant procurements, specialist procurement skills will be required. This would sit within Stage 6 ‘Decide how to commission services efficiently’ of the Joint Planning and Commissioning Cycle.
  
  
• Finalise the invitation documents. Include evaluation criteria in invitations to tender.
  
  
• Include your organisation’s standard terms and conditions of contract. Take care to choose the correct type of terms and conditions (Goods, Services or Works). For low value/risk procurements use your organisation’s short version of the terms and conditions, if available, to make it easier for smaller and third sector suppliers to respond. Check there is no conflict between the wording of the specification and the terms and conditions.
  
  
• Ensure that the documents include adequate coverage of issues such as Intellectual Property Rights (IPR) and limitation of liabilities. Transfer of Undertakings Protection of Employees (TUPE) is another area requiring special consideration. TUPE requires staff terms and conditions of employment to be preserved in certain circumstances when a business or undertaking are transferred to a new employer such as a transfer from a public sector body to a private sector provider, or subsequently from that private sector provider to another private sector provider.
  
  Invitations to tender should require a provider to hand over timely and adequate information on their employees at contract end. The Information Commissioner’s Office provided guidance on this in 2008. These are complex areas and are likely to require legal assistance.
  
  
• If necessary or useful, advertise and produce a shortlist, usually by using a prequalification questionnaire, of suppliers to invite to quote or tender. Ensure the advertisement is worded so that it is no less restrictive than the specification with regard to future length or scope of contract. If it is less restrictive you should abide by the wording in the advertisement to avoid unfair treatment of providers who chose not to respond as a result of the advertisement.
  
  Also ensure the advertisement sets out any information required from providers in relation to shortlisting or asks interested parties to request a questionnaire.
  
  
• Plan how you are going to evaluate proposals and prepare an Evaluation Strategy for significant procurements.
  
  
• Despatch the invitation to potential providers allowing them reasonable time to develop their costed response (taking any EU Directive implications into account).
  
  
• Ensure someone is available to answer queries from potential providers.

Stage 7: Evaluate Proposals

• For significant procurements, specialist procurement skills will be required. This would sit within Stage 6 ‘Decide how to commission services efficiently’ of the Joint Planning and Commissioning Cycle.
  
  
• Evaluate proposals against the pre-agreed evaluation criteria including whole life costs, and confirm the provider offering the best value for money.
  
  
• Identifying the extent to which the proposed outcomes and inputs will contribute to an outcome is one of the difficult areas of outcome based procurement. Ask the providers for evidence of where they have been successful elsewhere but ensure you have skilled staff on the evaluation team who can assess the implications of the proposals.
  
  
• Involve users in the process – are they happy with the proposals?
  
  
• Interview potential providers to clarify their proposals if this would help the evaluation process. Do not introduce new evaluation criteria.
  
  
• Particularly given the current market, ensure the provider is financially robust.
  
  
• Involve key stakeholders in the evaluation process, particularly the contract manager. Stakeholders are also likely to include users such as children and young people.
  
  
• Clarify contents with providers as necessary to avoid any ambiguity in the final contract. Take care that negotiations are non-discriminatory.
  
  
• Ensure the necessary budget is available before awarding the contract.

Stage 8: Award and Implement the Contract

• For significant procurements, specialist procurement skills will be required. This would sit within Stage 6 ‘Decide how to commission services efficiently’ of the Joint Planning and Commissioning Cycle.
  
  
• Ensure you understand the terms of the contract on the table before awarding the contract.
  
  
• Award the contract in writing making reference to all the documents that are part of the contract.
  
  
• Ensure the organisation is ready to receive and operate the goods/services.
  
  
• Debrief unsuccessful providers.
  
  
• For procurements subject to the EU Directive, including Part B services, don’t forget to send the Post Award Notification.

Stage 9: Manage the Contract

• Contract management activities sit largely within Stage 9 ‘Monitor and review services and process’.
  
  
• Ensure adequate resources are available to appropriately manage the provider relationship so that the required outcomes and benefits are delivered, and value for money is maintained throughout the life of the contract.
  
  
• For significant procurements, specialist contract management skills will be required. Try to maintain continuity of contract managers and seek regular updates on performance.
  
  
• The contract will have set out how progress against the required outcomes will be monitored, with the provider often required to undertake exercises to identify progress at regular intervals and report findings to the Contract Manager. Commissioners should work with the Contract Manager to assess progress. Measuring performance against outcomes is generally more difficult than for inputs or outputs.
  
  
• For longer term, strategically important contracts, contract managers should build a partnership-type relationship with the provider. This should take account of the flexibility that may be needed to support providers in meeting outcomes in what may be a learning experience for buyers and providers alike. The relationship should also encourage the provider to put forward innovative ideas throughout the life of the contract, possibly with rewards attached, such as sharing savings. The scope for flexibility should have been agreed in the contract.
  
  
• Carry out acceptance testing if necessary.
  
  
• Manage risks through the contract including regular financial checks on critical providers. The Department for Children Schools and Families has produced a very helpful toolkit to assist organisations with identifying and managing the risk of non-delivery. This type of approach is essential at a time of financial turbulence where seemingly robust providers may struggle.
  
  
• Collect management information to inform future needs assessments.
  
  
• Start planning for the end of contract and whether it is necessary to redesign, recommission or decommission.

Stage 10: Closure/Lessons Learned

• Closure activities sit largely within Stage 9 ‘Monitor and Review services and process’ and are likely to be Commissioner-led.
  
  
• Identify and prepare for future arrangements focusing largely on the success, or otherwise, of the procurement to achieve the required outcomes.
  
  
• Record lessons learnt to aid continuous improvement.