b1 the fundamentals of procurement - far north … · 4.2.1 public tenders ... b1 the fundamentals...

Local Buy Pty Ltd Your Procurement Partner

THE FUNDAMENTALS OF

LOCAL GOVERNMENT PROCUREMENT

‘A practical guide to assist council officers in understanding the complex local government

procurement environment’

CONTENTS

1 USING THIS GUIDE .................................................................................................. 1

2 FUNDAMENTALS OF LOCAL GOVERNMENT PROCUREMENT ........................... 3

2.1 PROCUREMENT OBJECTIVES AND STRATEGIES .......................................................................... 3

2.2 PROCUREMENT POLICY .................................................................................................................... 4

2.3 BASIC ELEMENTS OF A CONTRACT ................................................................................................ 6

2.4 WAYS OF ENTERING INTO A CONTRACT ........................................................................................ 8

2.5 RIGHT TO INFORMATION ................................................................................................................... 8

3 SCOPE OF PROCUREMENT ................................................................................. 12

3.1 CATEGORISTION OF PURCHASES .................................................................................................12

3.2 BUILDING AND CONSTRUCTION SERVICES .................................................................................12

3.3 GOODS AND GENERAL SERVICES .................................................................................................14

3.4 CONSULTANCY SERVICES ..............................................................................................................14

4 SELECTING A PURCHASING METHOD ............................................................... 16

4.1 SIMPLE PURCHASING ......................................................................................................................16

4.1.1 DIRECT PURCHASING .................................................................................................................16

4.1.2 VERBAL QUOTATIONS .................................................................................................................16

4.1.3 WRITTEN QUOTATIONS ...............................................................................................................16

4.2 COMPLEX PURCHASING ..................................................................................................................17

4.2.1 PUBLIC TENDERS .......................................................................................................................17

4.2.2 APPROVED CONTRACTOR LIST ....................................................................................................17

4.2.3 EXPRESSIONS OF INTEREST ........................................................................................................17

4.2.4 DELETED INTENTIONALLY............................................................................................................18

4.2.5 REGISTER OF PRE–QUALIFIED SUPPLIERS ....................................................................................18

4.2.6 PREFERRED SUPPLIER ARRANGEMENTS ......................................................................................18

4.2.7 ESTABLISHING A PREFERRED SUPPLIER ARRANGEMENT ...............................................................18

4.3 EXCEPTIONS TO TENDERS OR QUOTES.......................................................................................19

4.3.1 EXCEPTIONS ..............................................................................................................................19

5 SIMPLE PURCHASING .......................................................................................... 21

5.1 DIRECT PURCHASING ......................................................................................................................22

5.2 VERBAL QUOTATIONS .....................................................................................................................24

5.2.1 SOURCING THE MARKET .............................................................................................................24

5.2.2 GUIDELINES FOR OBTAINING VERBAL QUOTATIONS .......................................................................24

5.2.3 RECORDING INFORMATION ..........................................................................................................24

5.2.4 ACCEPTANCE .............................................................................................................................24

5.3 WRITTEN QUOTATIONS ...................................................................................................................26

5.3.1 SOURCING THE MARKET .............................................................................................................26

5.3.2 PREPARING THE REQUEST FOR QUOTATION .................................................................................27

5.3.3 ISSUING THE REQUEST FOR QUOTATION ......................................................................................27

5.3.4 DOCUMENTING AND ASSESSING THE WRITTEN QUOTATIONS .........................................................27

5.3.5 ACCEPTANCE AND NON-ACCEPTANCE .........................................................................................28

6 COMPLEX PURCHASING ...................................................................................... 31

6.1 LOCAL GOVERNMENT’S DUTY WHEN TENDERING .....................................................................31

6.2 TENDERS FOR PROVIDING GOODS OR SERVICES TO LOCAL GOVERNMENTS.....................31

6.3 PUBLIC TENDERS .............................................................................................................................35

6.3.1 DEVELOPING A SPECIFICATION ....................................................................................................35

6.3.2 CONTRACTUAL CONDITIONS ........................................................................................................36

6.3.3 CONDITIONS OF TENDER .............................................................................................................39

6.3.4 DEVELOPING SELECTION CRITERIA AND EVALUATION METHODOLOGY ............................................39

6.3.5 DEVELOPING A PRICE SCHEDULE.................................................................................................41

6.3.6 ADVERTISING THE TENDER .........................................................................................................42

6.3.7 ADDENDA ..................................................................................................................................43

6.3.8 PRE-TENDER BRIEFINGS .............................................................................................................44

6.3.9 CLOSING AND OPENING THE TENDER ...........................................................................................44

6.3.10 EVALUATING THE TENDER ...........................................................................................................46

6.3.11 RECOMMENDATION REPORT .......................................................................................................52

6.3.12 FORMAL APPROVAL ....................................................................................................................52

6.3.13 AWARD OF CONTRACT ................................................................................................................52

6.3.14 FORMAL DE-BRIEFING .................................................................................................................53

6.3.15 CONTRACT ADMINISTRATION .......................................................................................................53

6.4 APPROVED CONTRACTOR LIST .....................................................................................................53

6.5 EXPRESSIONS OF INTEREST ..........................................................................................................54

6.5.1 DEVELOPING THE EXPRESSIONS OF INTEREST INVITATION ............................................................54

6.5.2 CONTRACTUAL CONDITIONS ........................................................................................................55

6.5.3 CONDITIONS OF INVITATION ........................................................................................................55

6.5.4 DEVELOPING SELECTION CRITERIA AND EVALUATION METHODOLOGY ............................................55

6.5.5 REQUESTING INDICATIVE PRICING ...............................................................................................55

6.5.6 ADVERTISING THE EXPRESSIONS OF INTEREST INVITATION ...........................................................56

6.5.7 ADDENDA ..................................................................................................................................56

6.5.8 BRIEFINGS .................................................................................................................................56

6.5.9 CLOSING AND OPENING THE EXPRESSIONS OF INTEREST INVITATION .............................................56

6.5.10 EVALUATING THE EXPRESSIONS OF INTEREST ..............................................................................56

6.5.11 RECOMMENDATION REPORT .......................................................................................................57

6.5.12 FORMAL APPROVAL ....................................................................................................................57

6.5.13 DEVELOPING A REQUEST FOR TENDER ........................................................................................58

The Procurement Guide 2010

B1 The Fundamentals of Procurement

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1 USING THIS GUIDE

Consistency in process and documentation control crucial

Local Government buyers are operating in an increasingly dynamic commercial environment. These demands, combined with the expectations of the general community for higher standards and greater accountability, make consistency in process and documentation control a crucial element of Local Government purchasing.

Simple, practical tools

These guidelines have been developed to assist Local Government employees with simple, practical tools for Local Government purchasing. They are designed to help all employees carry out procurement activities efficiently and effectively, and in a transparent, fair, legal and ethical fashion. In any event, employees must comply with the requirements of: (a) section 4 (local government principles) of the Local Government Act 2009

(“the Act”);

(b) section 106 (sound contracting principles) of the Act; and

(c) chapter 4 of the Local Government (Finance, Plans and Reporting) Regulation 2010 (“the Finance Regulation”).

The Guide does not deal with the disposal of land or goods. If sufficient interest is shown by Councils, an update to this Guide dealing with those areas can be released.

Local Government / Council

For the avoidance of doubt, the expressions “Local Government” and “Council”: (a) have the same meaning in the Guide; and

(b) refer to a local government (as that expression is defined in the Act) for a local government area declared by regulation under the Act.

‘Procedural’ versus ‘Strategic’ contracting provisions

The focus of the Guide is the ‘default contracting procedures‘. If a significant number of Councils migrate to the strategic contracting procedures, a supplement to the Guide may be offered.

Issues for contracting highlighted

Each purchase requires its own contract, be it verbal or written. Given the wide variety of goods and services purchased it is not possible to offer guidance on what should be included in each and every contract. However, the Guide identifies the major issues that should be considered when purchasing goods and services and provides examples.



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Scale and complexity help determine process Sections in this Guide Instructive Text and Notes to Text

A degree of judgement is required by employees as to the type of procurement process to follow. This will be influenced by the nature, complexity and estimated value of the intended purchase. When preparing tender documentation employees should use judgement and common sense to decide what to include or to leave out. Thinking about the issues raised in this Guide will help employees make this decision wisely. This Guide contains over fifty documents categorised into thirteen sections. This section of the Guide (Section B – The Fundamentals of Procurement) provides Local Government employees with some guidelines for procurement. The Sections following this are a series of templates and forms to assist Council officers in formulating the necessary purchasing documents. Within the template documents some instructional text has been provided to indicate where Council employees are required to insert, delete or amend information. This is provided for in [highlighted yellow bold writing]. Additionally and in some of the forms and templates, notes to the text have been provided. These notes are in [highlighted green bold italic text]. These should be removed before the documents are released.

To be used as a guide only

The Guide is not a replacement for the Act or the Finance Regulation. If there is any inconsistency between the content of the Guide and a requirement of the Act or the Finance Regulation, the requirement of the Act or the Finance Regulation, as the case may be, prevails. In other words, in any event, Council must comply with the requirements of the Act and the Finance Regulation.

Common sense prevails Disclaimer

There is no right or wrong way to use this Guide. Because each reader will use the Guide for differing reasons, different approaches will be appropriate. In recognition of this, the Guide has been designed for easy reading and quick reference. This Guide has been prepared and represents a snapshot of procurement procedures at one given point in time. The law constantly changes and as such, this Guide should not be taken to be a replacement for professional legal advice. Local Buy Pty Ltd ABN 61 561 663 808 (“Local Buy”) accepts no liability for any losses whatsoever that a Council may incur from the use of this Guide. Local Buy suggests that Councils obtain professional legal advice to ensure that they remain fully compliant with procurement law requirements.



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2 FUNDAMENTALS OF LOCAL GOVERNMENT PROCUREMENT

2.1 PROCUREMENT OBJECTIVES AND STRATEGIES Procurement is a strategic activity

Queensland Local Government procures a wide range of goods and services to support its operation. For many Local Governments procurement is an administrative business function operating within the Finance, Governance or Corporate Services area. Traditionally, Local Government has not viewed procurement as a strategic business activity and consequently procurement has been undertaken in an ad-hoc operational manner. However, Local Governments are beginning to recognise the potential value procurement can provide and Local Governments are making the transition to a more planned and strategic environment.

Develop procurement objectives – what do you want to achieve?

Local Government buyers are operating in an increasingly dynamic commercial environment. Effective planning is crucial to controlling the risks and costs involved in purchasing. Procurement objectives for Local Government can include:

(a) improved risk identification and risk management;

(b) greater value for money;

(c) transaction cost minimisation;

(d) improved relationships with suppliers; and

(d) better purchasing decisions.

Understanding the procurement environment is critical

Understanding the procurement environment is fundamental to the development of relevant procurement strategies. Assessment of procurement data will enable the development of strategies to ensure achievement of Councils overarching goals. This assessment should address, as a minimum:

(a) what goods and services are purchased by the Local Government;

(b) how much is spent on them;

(c) what is the frequency of purchase;

(d) who are the goods and services to be purchased from; and

(e) how are they purchased.

Examples of strategies as a result of analysis

Having analysed the procurement environment, specific strategies can be formulated to achieve the Council’s procurement objectives. Examples of strategies include:

(a) implementing preferred supplier arrangements for commonly purchased items to overcome repetitive quoting;

(b) using an LGA arrangement such as a Local Buy established contract to reduce tendering and quotation costs; and

(c) developing and implementing risk assessment tools to enable accurate analysis of Council risks in the procurement of specific goods and/or services.



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2.2 PROCUREMENT POLICY Helpful to develop a set of written policies on important purchasing issues

Successful purchasing requires the Local Government to establish a solid framework within which to operate. Consequently, the Local Government may need to develop written policies on the following important purchasing issues:

(a) regional preference;

(b) the opening of tenders;

(c) monetary thresholds;

(d) risk management; and

(e) post award debriefing and complaints handling process.

Procurement policy is a legislative requirement

Chapter 3, part 5 of the Finance Regulation provides that Council must prepare and adopt a procurement policy for each financial year. The procurement policy must include details of the principles, including the sound contracting principles, that the Local Government will apply in the financial year for purchasing goods and services. A Council’s procurement policy must be available for inspection and purchase (at cost) by the public.

A template procurement policy is provided in Section H of this Guide. Where required, Local Buy is also able to assist Councils with the preparation of their procurement policies.

Legislation provides Councils with a framework

The Act and Finance Regulation provides a framework for Council procurement, particularly in relation to contracts and tendering. All Council officers involved in procurement activities must have an understanding of the legislative requirements which regulate those procurement activities.



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Principles which underpin the Act Regard to the sound contracting principles governing the making of contracts

Any action taken under the Act (including procurement activities) must be undertaken in a way which is, and provides results which are consistent with, the “local government principles”. The local government principles are:

(a) transparent and effective processes, and decision-making in the public interest; and

(b) sustainable development and management of assets and infrastructure, and delivery of effective services; and

(c) democratic representation, social inclusion and meaningful community engagement; and

(d) good governance of, and by, local government; and

(e) ethical and legal behaviour of councillors and local government employees.

Section 106 of the Act provides that when entering into contracts for the carrying out of work, or the supply of goods or services, Council must have regard to the following principles (the “sound contracting principles”):

(a) value for money; and

(b) open and effective competition; and

(c) the development of competitive local business and industry; and

(d) environmental protection; and

(e) ethical behaviour and fair dealing. Regardless of the procurement method adopted by Council in respect of a particular purchase, and the consideration expended or to be expended by Council of or incidental to the purchase, Council must have regard to the principles identified in section 106 of the Act.



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Local Preference considerations

Supporting local business is a major consideration for Local Government when making purchasing decisions. How Local Governments support local business operators through purchasing activities is often one of the most controversial decisions a Local Government has to make because these decisions are so visible to the wider community.

The majority of Queensland Councils purchase locally to support their business community. In many cases, Local Governments apply a local preference policy. Under the Act, the development of local business and industry is simply one of the five factors which must be taken into consideration in any purchasing scenario. However, if Council wants to apply a local preference policy other than simply by reference to section 106(3)(c) of the Act, that is, the development of competitive local business and industry, the conditions of tender or request for quotation, as the case may be, must:

(a) specify the policy; and

(b) detail how and when (during the evaluation process) the policy will be applied.

Local preference policies based solely on the price of goods or services may give some recognition to the ‘social and economic’ aspects of supporting local businesses through purchasing decisions. However, the decision to purchase from a particular supplier should not be based on price alone. Other considerations which can be relevant in the formulation of a local preference policy include:

(a) additional costs that may be incurred through longer delivery times;

(b) irregularity in providing services where the supplier is not situated locally;

(c) inferior product quality; and

(d) the life span of the relevant item.

Value for Money equations in evaluation Caretaker Period

A value for money equation is a useful mechanism for determining a purchasing outcome because it can take into account a variety of factors including price, but also including such things as warranties, maximum delivery times and guaranteed service timeframes. Thus, a local preference can be applied to a ‘local’ supplier’s total score at the evaluation stage.

Schedule 2, part 9 of the Act provides that a Council must not make a major policy decision in the caretaker period for an election for the Local Government unless exceptional circumstances apply. A major policy decision includes a decision to enter into a contract the value of which is more than the greater of; $150,000.00 or 1% of the Council’s net rate and utility charges as stated in the financial statements of its annual report. A contract entered into pursuant to an invalid major policy decision is invalid and the Council may be required to compensate a person who has acted in good faith and suffered loss having relied upon an invalid major policy decision.

2.3 BASIC ELEMENTS OF A CONTRACT A contract is a legally binding agreement

A contract can be simply defined as a legally binding agreement between two or more parties. In order to form a contract there are a number of elements, which must be present. The main elements are:

(a) Offer and Acceptance

An offer must be clearly communicated

An offer signals the intent on behalf of one party to enter into a contract. The offer must be communicated in an identifiable manner. Generally, the offer remains open for acceptance until it is either withdrawn, or unless it is clearly communicated that the offer will lapse at a certain time. An invitation such as a request for tender is legally known, not as an offer, but as an invitation to treat.



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The supplier in responding to the invitation to treat, is in fact making an offer to the inviter (the Local Government). Alternatively, in the context of a request for quotation, the request for quotation issued by Council is an invitation to treat and the supplier’s response to the request for quotation is an offer to the inviter (the Local Government).

Acceptance of an offer must be totally unconditional and must address all of the terms of the offer. Any acceptance that contains within it a condition, which in one way or another seeks to alter the terms of the offer, is generally deemed to be a counter offer. Accordingly, in the context of a request for quotation, if the offer of a respondent is conditional or seeks to alter the terms or conditions of Council’s request for quotation then it is not an offer, but rather a counter offer from the respondent.

(b) Intent to Create Legal Relationships

There must be an intention to create a legal relationship

A contract cannot be formed unless there is an underlying intention to create a legal relationship between the parties.

(c) Consideration

Something of value must be given in return for something of value

The law states that something of value must be given in return for something of value that is offered. However, the values coming from one party to the other do not need to be equivalent.

(d) Legal Capacity

The parties must be legally capable of being bound

The parties to a contract must be legally competent entities and must be capable of becoming legally bound.

(e) Consent

Consent must be genuine

There must be genuine consent between the parties. The law allows for remedies in certain circumstances where genuine consent is absent, including fraud, misrepresentation, or mistakes of law or fact.

(f) Legality of Objects

If the objective of the contract is illegal then the contract is illegal

If the contract has as its objectives some matter that is not proper and legal, then the contract itself is illegal.



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(g) Certainty of Terms Agreement on all essential matters is required

If the parties have failed to agree on all essential matters, (for example, the price), a court may hold that there is no concluded contract.

The rights and obligations arising from a contract only bind the parties to the contract

The basic rule is that rights and obligations arising from a contract only affect and bind the parties to the contract. For example, where a subcontractor fails to carry out its actions satisfactorily, the Principal cannot take action against the subcontractor. The Principal would have to take action against the head contractor who may look to the subcontractor for redress.

A contract should detail the powers which can be exercised following a breach

The failure by a party to perform its obligations under a contract is known as a breach of contract. An effectively drafted written contract should clearly detail the powers that can be exercised following any breach. Examples of breaches include failure to make payments on time, failure to complete on time and failure to carry out instructions.

2.4 WAYS OF ENTERING INTO A CONTRACT Contracts by delegate

Chapter 4, part 5 of the Finance Regulation relevantly provides that a Local Government may, by resolution, delegate power to make, amend or discharge a contract for the Local Government. However the delegate may only make, amend or discharge a contract if:

(a) the Local Government’s expenditure because of the contractual action has been provided for in the approved annual budget for the relevant financial year; or

(b) the contractual action has been taken because of genuine emergency or hardship.

2.5 RIGHT TO INFORMATION Right to Information

The Right to Information Act 2009 (the “RTI Act”) gives the general public a right to be given access to the documents of an agency (including a Local Government) and not merely “information” as the name might suggest. This right to access is subject to a number of procedural matters which are checked by Council’s RTI Officer as a matter of course, in order to ensure that each RTI application is valid (eg, payment of the prescribed fee). The scope of the RTI Act is wide and there are only limited classes of documents that are exempt from disclosure. Documents exempt from disclosure are set out at schedule 3 of the RTI Act and include, most relevantly for Local Government purposes: 4B Budgetary information for local government 7 Information subject to legal professional privilege; and 8 Information disclosure of which would found a breach of confidence.



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While these exemptions may exclude Council from giving access to some procurement-related documentation, it is clear that the exemptions will only have limited application. Where a document is not exempt from disclosure, Local Governments must deal with the application for access in accordance with the RTI Act. The Parliament’s intention is that decisions regarding access applications must be made against a background of pro-disclosure. Accordingly, a Local Government must give access to a document unless giving the access would, on balance, be contrary to the public interest. In general terms, deciding whether the release of a document is contrary to the public interest requires a Local Government to balance factors favouring non-disclosure, and factors favouring disclosure, as set out in schedule 4 of the Act. The following factors favouring non-disclosure, as set out in part 3 of schedule 4, may be relevant in the context of procurement-related documents: 2. Disclosure of the information could reasonably be expected to prejudice the

private, business, professional, commercial or financial affairs of entities.

15. Disclosure of the information could reasonably by expected to prejudice trade secrets, business affairs or research of any agency or person.

16. Disclosure of the information could reasonably be expected to prejudice an agency’s ability to obtain confidential information.

17. Disclosure of the information could reasonably be expected to prejudice the competitive commercial activities of an agency.

In addition, part 4 of schedule 3 lists factors favouring non-disclosure in the public interest because of public interest harm that might be caused by such disclosure. These factors tend to cover the same ground as items 15 and 16 above, but are relevant only where a Local Government can demonstrate that disclosure of such documents would result in public interest harm. Where the part 4 factors apply, Local Governments may place additional weight on those factors when balancing the relevant factors. The RTI Act does not preclude a person or entity from obtaining documentation about another person from a government agency. Therefore, an unsuccessful tenderer may apply under the RTI Act for access to a tender response submitted by, for example, a successful tenderer. However, section 37 of the RTI Act provides, relevantly:

(1) An agency or Minister may give access to a document that contains

information the disclosure of which may reasonably be expected to be of

concern to a government, agency or person (the relevant third party) only if

the agency or Minister has taken the steps that are reasonably practicable—

(a) to obtain the views of the relevant third party about whether—

(i) the document is a document to which this Act does not apply;

or

(ii) the information is exempt information or contrary to public

interest information; and

(b) to inform the relevant third party that if access is given to the

document because of an access application, access may also be

given to the document under a disclosure log.

...



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(3) If—

(a) the agency or Minister obtains the views of the relevant third party and

the relevant third party considers—

(i) the document is a document to which this Act does not apply;

or

(ii) the information is exempt information or contrary to public

interest information; but

(b) the agency or Minister decides—

(i) the document is a document to which this Act does apply; or

(ii) the information is not exempt information or contrary to public

interest information;

the agency or Minister must—

(c) give prescribed written notice of the decision of the agency or Minister

to the applicant and the relevant third party; and

(d) defer giving access to the document until after—

(i) the agency or Minister is given written notice by the relevant

third party that it does not intend to make any application for

review under this Act; or

(ii) if notice is not given under subparagraph (i) and no application

for review under this Act is made by the end of the review

period—the end of the review period; or

(iii) if an application for review under this Act is made by the end

of the review period—the review has ended (whether because

of an informal resolution or because of a decision of the entity

conducting the review).

... Thus, Council must first obtain the views of the successful tenderer prior to making any decision regarding the release of tender documentation to an unsuccessful tenderer. Regardless of the views of the successful tenderer, Council’s RTI Officer is still obliged to make his or her own decision about whether, having balanced the relevant factors (including any factors raised by a third party during the process of third party consultation), giving access to the document is contrary to the public interest. Bearing in mind the numerous factors favouring non-disclosure that are likely to be relevant, and the likelihood of a third party (for example, the successful tenderer) citing such factors to avoid release of the documents, Council’s RTI Officer may well consider, on balance, that giving access to the documents is contrary to the public interest and refuse to give access. In any event, Council needs to be congizant of the fact that the unsuccessful tenderer (being the person seeking access) has appeal rights both internally (i.e. at the Local Government level) and externally (i.e. to the Information Commissioner).

Judicial Review

For the sake of completeness, the unsuccessful tenderer may also request a statement of reasons under the Judicial Review Act 1991. Schedule 2 of that Act specifically identifies a number of decisions in respect of which reasons need not be given. Relevantly, a statement of reasons need not be given in the following circumstances:



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“Tendering and awarding of contracts

13. Decisions relating to:

(a) the selection of a tenderer following the conduct of a competitive tendering process; and

(b) the awarding of contracts.”

Consequently, there is no obligation on Council to provide a statement of reasons in circumstances where the decision of Council falls within the scope of Item 13 of Schedule 2 of the Judicial Review Act 1991.



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3 SCOPE OF PROCUREMENT

3.1 CATEGORISTION OF PURCHASES Determine the type of purchase

When undertaking any procurement a Local Government employee should firstly determine what type of purchase is required. The most common categorisation of purchases, and that which has been adopted in this Guide, is as follows: (a) building and construction services; (b) supply of goods and general services; (c) supply of consultancy services. Other categories of purchase which are not addressed in this Guide are: (a) the purchase of land; and (b) the purchase of an interest in land, for example a lease.

These categorisations act as a guide to determining the type of purchase. Generally, a purchase may be classified as a building and construction services purchase as opposed to a general goods or services purchase where it involves: (a) a construction site; (b) use of heavy machinery and plant; and/or (c) a technical specification and/or drawings.

Employees must exercise judgement and common sense in determining the type of purchase

There are no fixed rules for determining into which category a purchase falls. Council officers must exercise judgement and common sense in determining the type of purchase and how the purchase should be categorised. For example, the purchase of playground equipment would be categorised as the supply of goods. However, if the Council was building a playground and installing the equipment as part of a larger development project, the purchase could be categorised as building and construction services.

Disposal of valuable non-current assets

The Guide does not currently cover the disposal of valuable non-current assets. If there is sufficient interest from Councils, a supplement dealing with this area will be issued by Local Buy.

3.2 BUILDING AND CONSTRUCTION SERVICES Includes both major and minor works

This type of purchase includes both major and minor building and construction services, commonly known as major and minor works. Determining whether a purchase is a major or minor work will help to determine when building and construction conditions of contract should be included in the tender documentation.

Examples of minor works procurement may include:

(a) contracts for brick paving; (b) resurfacing a car park; (c) construction of a road; (d) repairing a footpath; and (e) undertaking tree lopping.



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Some examples of major works procurement may include:

(a) the construction of a new Local Government administration centre; or (b) the construction of an aquatic centre.

No strict rules as to whether purchase is a major or minor work

Determining whether a purchase is a major or minor work involves consideration of the following factors:

(a) value; (b) risk; (c) nature of work; (d) complexity; and (e) sensitivity of the purchase. Another relevant criteria is the requirement to pay a levy under the Building and Construction Industry (Portable Long Service Leave) Act 1991. A levy is payable if building and construction work is to be carried out in specified circumstances. This Guide does not attempt to dictate at what monetary threshold each type of procurement should be utilised. Local Government employees must refer to their own applicable internal policies and procedures, to determine at what threshold a building and construction services purchase becomes either a major or minor work.

Major works

Major works procurement is often complex and high risk due to the:

(a) high value of the procurement; (b) requirement for detailed technical specifications and drawings; and (c) complex and detailed conditions of contract which are used when developing

major works contracts, for example Australian Standard AS 4000-1997. Instruct professional consultants

It is recommended that the Local Government instruct professional consultants to assist with the development of the tender documentation for the procurement of major works.

Common industry practice

When undertaking major works procurement it is recommended that Local Governments follow standard Queensland building industry practices. Given the significant cost and time required for tendering for major works projects, the building industry prefers the buyer to pre-qualify building contractors prior to issuing a request for tender.

Pre-qualification stage

Therefore, it is recommended that Local Governments undertake a two stage tendering process: (a) invite expressions of interest – this document may contain the Local

Government’s compliance and qualitative criteria for the pre-qualification of the building suppliers. For example, relevant selection criteria may be financial capability, past experience, skills and experience of key personnel.

(b) the issue of a request for tender to pre-qualified tenderers. Given that all suppliers to whom tender documentation has been issued are pre-qualified, it may not be necessary for qualitative criteria to be included in the request for tender. The assessment of tenders may then be largely based on price.

This process will help ensure that building contractors are spared the excessive expense of tendering and reduce the risk of financial failure of the building contractor through over commitment.



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Minor Works

This Guide includes an example of a request for tender template which may be used for minor works. Also included in this Guide is set of general conditions of contract for minor works (See Section E titled General Conditions of Contract for the provision of Minor Works by Tender). These general conditions are provided as an example only. Local Governments may use these or any other general conditions they deem appropriate for their purchase. This Guide currently does not provide any tender templates for Major Works contracts.

Other relevant legislation must be considered

Councils must also consider the implications of other relevant legislation when developing contract documents for major or minor works, including the Subcontractors’ Charges Act 1974, the Building and Construction Industry Payments Act 2004 and the Queensland Building Services Authority Act 1991. (See Section 6.3.2 titled Contractual Conditions)

3.3 GOODS AND GENERAL SERVICES General goods involve purchases of items manufactured or produced for sale

General goods procurement involves the purchase of commodities manufactured or produced for sale. Common examples include:

(a) stationery; (b) office furniture; and (c) computers.

General services involve the purchasing of services other than consultancy services

General services procurement involves the purchasing of professional services and non-construction based services. For example, this type of purchase includes:

(a) cleaning services; (b) security services; and (c) lawn mowing services. A request for tender template for the purchase of Goods and Services and sample general conditions of contract are provided for in Section D.

3.4 CONSULTANCY SERVICES A consultant is an independent contractor who provides specialist skills and expertise

A consultant is an independent contractor who provides professional or technical advice. Local Governments engage consultants to obtain specialised skills and expertise not normally available from within their organisation. Local Governments commonly require the services of consultants for a variety of professional services, for example:

(a) legal services; (b) accounting services; (c) architectural or drafting services; (d) engineering services; (e) community services; and (f) town planning.

Choosing General Conditions of Contract for the Engagement of Consultants

This Guide includes a sample set of general conditions specifically tailored for the engagement of consultants, based on the use of Australian Standard 4122-2000 General Conditions of Contract for the Engagement of Consultants. Councils are required to purchase or licence the required number of copies of AS4122-2000. See Section F.

These general conditions are provided as an example only. Local Governments may use these or any other general conditions they deem appropriate for their purchase.



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Issues to be addressed when engaging and managing consultants

When engaging consultants Local Government employees should, in particular:

(a) ensure that they have a clear and defined scope of what services the consultant is required to provide under the contract. This defines the consultant’s role and responsibilities and should help to prevent pricing disputes emerging during the term of the contract;

(b) ensure adequate performance mechanisms are incorporated in the specification, ie reporting and supervision;

(c) ensure that the tender documentation clearly addresses fees and payments schedules, timing and issues relating to conflicts of interest, professional indemnity, public liability and intellectual property; and

(d) ensure that the Australian Standard annexures are completed and included in the tender documents (where an Australian Standard is used).

Using Consultants to assist in tender selection

Local Governments are dependent upon the quality of their employees’ advice when they make important commercial decisions such as awarding tenders. Local Governments have a duty to scrutinise consultants’ reports and the process that led to the advice, so as to ensure proper decisions are made.



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4 SELECTING A PURCHASING METHOD

The Act, Finance Regulation and internal policies help to determine method

Selecting the most appropriate method for conducting a particular purchase is an important aspect of the purchasing process. The Act and the Finance Regulation, combined with the Local Governments’ internal policies and procedures, will assist the Local Government employee to determine the appropriate procurement method.

Verbal or written quotations?

This Guide does not attempt to dictate at what monetary threshold each type of procurement should be utilised. Employees must refer to their own applicable internal policies and procedures, to determine at what threshold direct purchasing may be utilised or when verbal or written quotations, or public tenders, should be called. The category into which a particular purchase falls must also be determined by the degree of complexity or management risk. The Finance Regulation dictates that Council must invite written quotations before making a contract for the carrying out of work, or the supply of goods or services, worth $15,000.00 or more, but less than $150,000.00 (a “medium-sized contract”). Further, the invitation must be given to at least 3 persons who the Local Government considers can meet its requirements at competitive prices. Accordingly, verbal quotations from suppliers will only be relevant in circumstances where a Local Government is making a contract for the carrying out of work, or the supply of goods or services, worth less than $15,000.00.

In this Guide, purchasing has been categorised into two levels: (a) Simple Purchasing: this includes direct purchasing (by corporate credit

card, cash payment) and obtaining verbal and written quotations including medium-sized contracts; and

(b) Complex Purchasing: this generally involves large-sized contracts and includes public tenders, expressions of interest, compiling an approved contractor list or a preferred supplier arrangement and establishing a register of pre–qualified suppliers.

Listed below is a brief explanation and definition of each of the different ways in which Local Government purchasing can be undertaken.

4.1 SIMPLE PURCHASING

4.1.1 DIRECT PURCHASING

Direct purchasing

In some situations, it is more practical for Local Governments to buy goods or services direct from a selected supplier. (See Section 5.1 titled Direct Purchasing)

4.1.2 VERBAL QUOTATIONS

Internal policies will dictate thresholds for verbal quotations

Each Local Government should have its own internal policies and procedures, which determine at which monetary thresholds and by which process verbal quotations may be sought. (See Section 5.2 titled Verbal Quotations)

4.1.3 WRITTEN QUOTATIONS



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Request for Quotation (RFQ)

A request for quotation (RFQ) may be used when the Local Government wishes to obtain written quotations and is not required under the Act or its internal policies to invite a public tender. (See Section 5.3 titled Written Quotations)

4.2 COMPLEX PURCHASING

4.2.1 PUBLIC TENDERS

Request for Tender (RFT) Establishing an approved contractor list

A request for tender (RFT) is the documentation used by the Local Government to request industry to submit tenders. An RFT seeks information to determine the most advantageous outcome for the Local Government. (See Section 6.3 titled Public Tenders)

4.2.2 APPROVED CONTRACTOR LIST

A Local Government may compile a list of approved contractors suitably qualified to provide a service. A list must be compiled by: (a) inviting expressions of interest from suitably qualified persons to be included

on the list by an advertisement in a newspaper that circulates generally in the local government area;

(b) allowing expressions of interest to be given to the Local Government for at least 21 days after the invitation is advertised; and

(c) selecting persons on the basis of the principles mentioned in section 106 of the Act.

Refer to Section 6.4 of this document for further details.

4.2.3 EXPRESSIONS OF INTEREST

Expressions of Interest (EOI) – a two stage process

Section 177 of the Finance Regulation provides: (a) a Local Government may invite expressions of interest under section 177 of

the Finance Regulation before inviting tenders if it resolves that it would be in the public interest to do so;

(b) the Local Government must record its reasons for making the resolution; (c) expressions of interest must be invited in the way provided for inviting

tenders under section 177 of the Finance Regulation; (d) the Local Government may prepare a shortlist from the persons who

responded to the invitation and invite tenders from the persons on the shortlist;

(e) if the Local Government decides to accept a tender from a person on the shortlist, the Local Government must accept the tender most advantageous to it, having regard to the sound contracting principles in section 106 of the Act.

Refer to Section 6.5 of this document for further information. EOI Templates are provided for in Section G.



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4.2.4 DELETED INTENTIONALLY

Register of pre–qualified suppliers Local Buy Arrangements Preferred supplier arrangements Local Buy Arrangements

4.2.5 REGISTER OF PRE–QUALIFIED SUPPLIERS

A Local Government may establish a register of pre–qualified suppliers for the supply of goods or services only if: (a) the preparation and evaluation of invitations every time the goods or services

are needed would be costly; or (b) the capability or financial capacity of the supplier of the goods or services is

critical; or (c) the supply of the goods or services involves significant security

considerations; or (d) a precondition of an offer to contract for the goods or services is compliance

with particular standards or conditions set by the Local Government; or (e) the ability of local business to supply the goods or services needs to be

discovered or developed. This Guide does not currently provide templates for establishing a register of pre-qualified suppliers. Local Buy has a number of pre-qualified supplier arrangements available which Councils are able to access without the need to obtain written quotes or tender. These can be accessed from the LGAQ website (http://www.lgaq.asn.au) by clicking on the “Local Buy Contract Directory” link on the left hand side of the page.

4.2.6 PREFERRED SUPPLIER ARRANGEMENTS

A Local Government may only establish a preferred supplier arrangement if: (a) the supply of goods or services is needed in large volumes or frequently; and (b) the Local Government is able to obtain better value for money by

accumulating the demand for the goods or services; and (c) the goods or services needed can be described in terms that would be well

understood in the relevant industry. This Guide does not currently provide templates for establishing preferred supplier arrangements. Note that the term “standing offer arrangement” is no longer referenced in the Act or Finance Regulation. Local Buy has a number of preferred supplier arrangements available which Councils are able to access without the need to obtain written quotes or tender. These can be accessed from the LGAQ website (http://www.lgaq.asn.au) by clicking on the “Local Buy Contract Directory” link on the left hand side of the page.

4.2.7 ESTABLISHING A PREFERRED SUPPLIER ARRANGEMENT

Procedure for establishing preferred supplier arrangement

A Local Government must invite persons to tender if it proposes to establish a preferred supplier arrangement. The invitation must:

http://www.lgaq.asn.au/

http://www.lgaq.asn.au/



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(a) be made by an advertisement in a newspaper circulating generally in the

local government area of the Local Government; and (b) allow at least 21 days from the day of the advertisement for the submission of

tenders; and (c) describe the terms of the preferred supplier arrangement. In selecting persons to enter a preferred supplier arrangement, the Local Government must have regard to the principles mentioned in section 106 of the Act. The Local Government must ensure that the arrangement allows for the contract to be cancelled for the poor performance of the preferred supplier. The Local Government may establish a preferred supplier arrangement for longer than 2 years only if satisfied that better value will be achieved by entering into a longer arrangement.

4.3 EXCEPTIONS TO TENDERS OR QUOTES

4.3.1 EXCEPTIONS

Exceptions to tenders or quotes

The exceptions to the requirement to seek tenders or quotations are identified in chapter 4, part 3, division 3 of the Finance Regulation. The exceptions include: (a) where a quote or tender consideration plan has been prepared (see section

179); (b) where an approved contractor list has been established (see section 180); (c) where a register of pre-qualified suppliers has been established (see section

181); (d) where a preferred supplier arrangement has been established (see section

182); (e) where there is an LGA arrangement in place (eg a register of pre-qualified

suppliers or a preferred supplier arrangement established by Local Buy, subject to compliance with the requirements of section 183 (see section 183));

(f) if the Local Government resolves that it is satisfied that there is only one

supplier who is reasonably available (see section 184(a)); or (g) if the Local Government resolves that, because of the specialised or

confidential nature of the services that are being sought, it would be impractical or disadvantageous for the Local Government to invite quotes or tenders (see section 184(b));

(h) where a genuine emergency exists (see section 184(c)); (i) where the contract is for the purchase of goods and is made by auction (see

section 184(d)); (j) where the contract is for the purchase of second-hand goods (see section

184(e)); and (k) where the contract is made with, or under an arrangement with, a

government body (see section 184(f)).



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Local Buy contracts can be used without tendering or obtaining quotes

In fact, Local Buy has established a wide range of contracts (standing offer arrangements, preferred supplier arrangements and registers of pre-qualified suppliers) which any Council can access as part of its procurement activities. In establishing these arrangements Local Buy has complied with the requirements of the Finance Regulation. Accordingly, there is no need for any Local Government to comply with the quoting or tendering requirements of the Act when the Local Government is entering into a contract which Local Buy has established as an LGA arrangement.

The only exception is where the LGA arrangement involves a supplier (an “LGAQ related supplier”) which is:- (a) a subsidiary of LGAQ Ltd; or (b) an associated company of LGAQ Ltd under the Corporations Act. An LGA arrangement may include an LGAQ related supplier only if the arrangement is approved by the Minister responsible for the administration of the Act.



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5 SIMPLE PURCHASING

Value for Money and Accountability are vital

Section 175 of the Finance Regulation relevantly provides that a Local Government must invite tenders before making a contract for the carrying out of work, or the supply of goods or services, worth $150,000.00 or more (a “large-sized contract”). In this Guide, purchases worth less than $150,000.00 have been categorised as simple purchases. This category includes:

(a) direct purchasing (by corporate credit card or petty cash); (b) inviting written quotations where the contract is worth $15,000.00 or more but

less than $150,000.00 (a “medium-sized contract”); and (c) inviting verbal quotations if the contract is worth less than $15,000.00, subject

to the content of Council’s procurement policy. This type of procurement is relatively simple as it involves lower risk, does not require the preparation of detailed documentation and there is no statutory requirement for public advertising. However, Local Government employees should still ensure they obtain value for money and are accountable for their actions. Consequently, it is important that all purchases made are recorded and documented in accordance with Council’s written policy dealing with the acquisition of goods and services.

Goods and Services Tax

At time of writing there is no judicial authority to support the proposition that GST should be taken into account when determining the “worth” to Council of a particular purchase in the context of the Finance Regulation. While some commentators have noted that it is unlikely that the Courts would hold that GST is to be included when determining the “worth” of a contract to Council, it is suggested that the most prudent approach is to include the GST component in these thresholds. This is consistent with the Department’s position as detailed in Local Government Bulletin No 2 of 2007.

Determine requirements

When undertaking any simple procurement, the Local Government employee should firstly determine (where applicable): (a) the type of purchase e.g. goods and services or building and construction

services; (b) the approximate hours or quantities required; (c) when the goods or services are required; and (d) where the delivery/ performance should occur. The employee should ensure that they have a clear and concise understanding of the requirements of the goods/services being purchased.

Do you have authority to purchase the requirements?

The employee must then determine the estimated cost of purchasing the required goods or services. The employee must, with due regard to their internal policies and procedures, ensure that: (a) the estimated cost falls within the purchasing process they have chosen; and (b) the employee has obtained the requisite authority (under their applicable

internal Local Government policies and procedures and by way of delegation under section 259 of the Act) to make the purchase.

Following this, the employee can select a Purchasing Method.



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5.1 DIRECT PURCHASING What is Direct Purchasing?

Direct purchasing is purchasing from a single source without first obtaining competing bids. Direct purchasing may be used for the purchase of simple low value, low risk goods and services. Whilst Council must invite written quotations before making a contract for the carrying out of work, or the supply of goods or services, worth $15,000.00 or more, but less than $150,000.00, if the cost of carrying out the work or supplying the goods or services is less than $15,000.00:

(a) Council must comply with the local government principles which underpin the Act;

(b) Council must have regard to the 5 principles identified in section 106 of the Act; and

(c) Council must comply with the requirements of the procurement policy prepared by Council pursuant to section 143 of the Finance Regulation.

Local Government employees should refer to their applicable internal policies and procedures for any limit or restriction on using direct purchasing.

Methods of Direct Purchasing

Council officers may be given the authority to make direct purchases either by petty cash or corporate credit card. These methods of payment are suitable for low value items which are purchased irregularly because transaction costs associated with the reconciliation of petty cash and corporate credit card receipts can be high. Where low value goods are purchased frequently there may be a cost benefit in the Local Government establishing a monthly account with a supplier at negotiated rates.

Receipt of goods or services should be obtained

It is important that some form of receipt or record of the goods or services be obtained, even if they have been procured electronically. This is especially important for higher value or complex purchases. Where higher value or more complex purchases are undertaken by direct purchasing, it may be necessary for the Local Government to execute a written contract with the supplier.



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Figure 5.1 Direct Purchasing – An Overview

Is it goods/services/works?

How many units/hours?

What type?-make/model/colour

Delivery details-time/place/date

Who will collect/sign for them?

Ensure no ambiguities.

Ensure that sufficient details are collected and received in some form of writing.

Is it within the allocated budget?

How much do you anticipate the requirement costing?

Does the employee have delegated purchasing authority?

Telephone/call in person during normal business hours.

Ensure relevant details are at hand.

Read back all figures given for clarity.

Ask for written confirmation.

Determine

Requirements

Determine approximate cost and purchasing

authority

Written confirmation

received

Selection

Arrange Payment

and Delivery

Ensure written confirmation matches what the employee has requested.

Ensure no additional or different contractual terms have been added.



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5.2 VERBAL QUOTATIONS

5.2.1 SOURCING THE MARKET

As a guide request three (3) to five (5) quotations

Whilst the provisions of the Act and the Finance Regulation do not deal with verbal quotations specifically, it is inferred that Council may invite verbal quotations before making a contract for the carrying out of work, or the supply of goods or services, worth less than $15,000.00. However, Council’s procurement policy may specify a lesser amount. Keep in mind that Council must invite written (not verbal) quotations before making a contract for the carrying out of work, or the supply of goods or services, worth $15,000.00 or more, but less than $150,000.00. As a guide, it is recommended that between three (3) and five (5) verbal quotations be invited. However, more or less may be invited, depending on the nature of the purchase and the market from which it is to be sourced. Internal policies and procedures should also provide guidance on establishing the numbers required.

Knowledge of market

Knowledge of the market is a critical factor. Market intelligence will assist in the selection of sources of supply. Potential suppliers may be identified by various methods including:

(a) using Local Government database/resources; (b) using local newspapers; (c) unsolicited letters from companies; and (d) using the “Yellow Pages” or similar telephone directory.

5.2.2 GUIDELINES FOR OBTAINING VERBAL QUOTATIONS

State your request clearly and consistently to all potential suppliers

It is recommend that Local Government employees when requesting verbal quotes from potential identified suppliers:

(a) ensure that the employee has a clear understanding of the requirement; (b) telephone potential suppliers during normal business hours; (c) be satisfied that the contact person has the authority to give the quote; (d) ensure that the requirement is described accurately and consistently to each

potential supplier. Conveying inconsistent information will result in incomparable results;

(e) if the supplier provides an immediate response, repeat back to the supplier any figures and other details for clarity; and

(f) request written confirmation of the quote.

5.2.3 RECORDING INFORMATION

Records should be maintained for accountability

Employees should refer to internal policies and procedures to determine the proper records to be kept of a purchase. Information such as details of the requirements, the names of the suppliers contacted and prices offered, relevant selection criteria and policies, the closing date and time for offers, and the rationale for the selection made should be recorded. It is recommended that details be recorded on a standard form. (For an example, refer to Section J and the document titled Record of Verbal Quotations)

5.2.4 ACCEPTANCE

Confirm acceptance

It is recommended that the chosen supplier be informed, in writing, of the acceptance of their quotation.



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Figure 5.2 Verbal Quotations – An Overview






Ensure that sufficient details are collected and received.

How much is available in the budget to spend?

How much do you anticipate the requirements costing?


Call during supplier’s normal business hours.

Ensure relevant details are at hand.

Read back all figures given for clarity.

Ask for written confirmation.

File all correspondence and documents received together including telephone messages.

Determine

Requirements

Determine approximate

price and purchasing authority

Written confirmation

received

Obtain three (3) to

five (5) verbal

quotes

Evaluation and

selection

Arrange delivery from selected

Supplier

Note brief reasons for selection and also evaluation methodology if applicable.



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5.3 WRITTEN QUOTATIONS

5.3.1 SOURCING THE MARKET

Obtain three to five quotes

Section 174 of the Finance Regulation provides that a Local Government cannot enter into a medium-sized contract (worth $15,000 or more, but less than $150,000) unless the Local Government has first invited written quotes for the contract. The invitation must be given to at least three persons who the Local Government considers can meet its requirements at competitive prices. A number of exceptions apply to this requirement. (See Section 4.3 titled Exceptions to Tenders or Quotes)

Internal policies should guide Councils on quotation thresholds

Internal policies and procedures should provide additional guidance to Council employees regarding inviting written quotations. For example, Council’s internal policies and procedures may provide that Council must invite written quotations before making a contract for the supply of goods or services worth $5,000.00 or more. Alternatively, Councils’ internal procedures may provide that the invitation must be given to at least 2 persons where the supply of goods or services is worth less than $15,000.00.

Only two Quotations received

The Finance Regulation stipulates that the invitation must be given to at least three persons who Council considers can meet its requirements at competitive prices. However, if Council complies with the requirements of section 174 of the Finance Regulation and only two quotations are received from suppliers, Council may still accept one of the two quotations received. The real issue would be whether Council can objectively justify its conclusion that the three persons who it invited to submit written quotations could all meet its requirements at competitive prices.

Knowledge of the market

Knowledge of the market is a critical factor. Market intelligence will assist in the selection of sources of supply. Potential suppliers may be identified by various methods including:

(a) using Local Government database/resources; (b) using local newspapers; (c) unsolicited letters from companies; and (d) using the “Yellow Pages” or similar telephone directory.

Written Quotation Process

There are four stages involved in the written quotation process:

(a) preparing the request for quotation; (b) issuing the request for quotation; (c) documenting and assessing the quotations received; and (d) acceptance and non-acceptance.

Accountability and written quotes

When requesting written quotes, Local Government employees should ensure that each stage of the process meets the required standard of accountability. There is no one universal standard of accountability suitable for all written quotes. As a general rule, employees should ensure that the overall process: (a) ensures open and efficient competition; (b) declares any conflict of interest; (c) reflects purchasing policies of the Local Government; (d) promotes fairness and transparency; and (e) is consistent.



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5.3.2 PREPARING THE REQUEST FOR QUOTATION

Components of the request for quotation

It is recommended that when developing requests for quotations from potential suppliers, that the Local Government employee include the following: (a) Written Specification

This may not need to be as detailed or as lengthy as a specification for a public open tender. However, the aim of the specification is to ensure that the supplier is aware of the Local Government’s requirements. The requirements must be detailed in a manner that is clear, concise and logical. (See Section 6.3.1 titled Developing a Specification)

(b) General Conditions of Contract (See Section 6.3.2 titled Contractual Conditions)

(c) Appropriate Selection Criteria The choice of selection criteria will depend to a large extent on the nature and complexity of the requirements in the judgement of the Local Government employee. For lower value, low risk requirements, quotations may be awarded to the lowest priced conforming quotation (i.e. an offer that meets the minimum standards). Consequently, all selection criteria would be compliance criteria (Yes/ No). Where appropriate, employees may wish to use qualitative criteria (related to the features of the goods and/or services and see Section 6.3.4 titled Develop Selection Criteria and Evaluation Methodology)

(d) A Price Schedule (See Section 6.3.5 titled Developing a Price Schedule)

(e) Conditions of the request for quotation In particular, it is essential that the closing date, time and lodgement method are clearly stipulated.

Two RFQ templates provided in the Guide

Two request for quotation templates are provided within this Guide. The RFQ Short Form has been designed for relatively simple written quotations which are largely price based. The RFQ Long Form has been designed for more complex quotation transactions.

5.3.3 ISSUING THE REQUEST FOR QUOTATION

Request for quotation to be issued simultaneously to each supplier

It is recommended that the request for quotation be issued simultaneously to all potential suppliers. This ensures that each potential supplier receives an equal opportunity to respond.

5.3.4 DOCUMENTING AND ASSESSING THE WRITTEN QUOTATIONS

First stage -assessing compliance

It is recommended that: (a) all written quotations submitted be collected as soon as possible after the

stipulated closing date and time. A list of respondents’ names and addresses should be compiled; and

(b) the Local Government employee should check that each respondent has fulfilled any compliance criteria set out in the request for quotation.



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Second stage – assessing selection criteria and cost

It is necessary to make a value for money decision in order to select the preferred supplier as the most advantageous respondent. This involves making an assessment of each respondent against any selection criteria included in the request for quotation as well as assessing the cost of each quotation. If qualitative selection criteria were issued, each response must be assessed against each selection criteria using the same considerations. It is good practice to rank each response. A matrix may be a useful assessment tool. (See Section 6.3.10 titled Evaluating the Tender which equally can be used for assessing quotations).

Inadequate budgetary allocation is not considered sufficient grounds for the reissuing of quotations

It is recommended that employees assess and record details of the evaluation on a form. (See Section J and the document titled Record of Written Quotations). The form should include the number of responses requested and received. If the responses received do not produce the desired outcome, Council may decide to re-issue the request for quotation. It is largely a policy decision to decide to re-issue the request for quotation. When deciding whether to decline all responses and re-issue the request for quotation, employees must exercise some judgement and common sense. The reasons for the decision to re-issue should also be recorded. Inadequate budgetary allocation is not considered sufficient grounds for the re-issuing of a request for quotation.

5.3.5 ACCEPTANCE AND NON-ACCEPTANCE

Council must have regard to principles of the Act

Secitons 174(4) and 177(9) of the Finance Regulation provide that if a Local Government decides to accept a tender or quotation, it must accept the tender or quotation most advantageous to it. In deciding the tender or quotation most advantageous to it, the Local Government must have regard of the principles mentioned in section 106 of the Act. However, a Local Government may decide not to accept any tender or quotation available to it.

Confirm acceptance in writing

It is recommended that acceptance be confirmed in writing. All non-successful respondents should also be informed in writing.

Written Quotation Flow-Chart

The entire process for requesting written quotations is depicted in Figure 5.3.



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Figure 5.3 Written Quotations – An Overview






There are two stages to evaluating a written quotation:

Assessing compliance; and

Assessing selection criteria and price.

How much is in the budget?

How much do you anticipate the requirements costing?


In the case of a long form request for quotation, the request for quotation should include the following components:

written specification;

general conditions;

selection criteria;

price schedule; and

conditions of responding. In the case of a short form request for quotation only the request for quotation document itself is relevant.

File all correspondence and documents received together including telephone messages.

Determine

Requirements

Determine approximate price

and purchasing authority

Issue the written

quotation confirmation

received

Obtain three (3) to five (5) written

quotes

Recording Information

Assessing the

written quotation

Acceptance

Send written notification of selection or non-selection. (See Section 10 for examples)

Note brief reasons for selection and also evaluation methodology if applicable.

Issue the quotation by facsimile sending the same issue to all suppliers at the same time.



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6 COMPLEX PURCHASING

The tender documentation combined with the successful tenderer’s offer forms the basis of the legally binding contract

In this Guide, the procurement of goods or services where the consideration is or is expected to be worth $150,000.00 or more (a large-sized contract) is categorised as complex purchasing.

It includes:

(a) public tenders; (b) lists of approved contractors; (c) short listing after inviting expressions of interest; (d) establishing a preferred supplier arrangement*; and (e) establishing a register of pre-qualified suppliers;

for, as the case may be, the carrying out of work or the supply of goods or services, including building and construction services.

This method of purchasing is complex. Minimisation of the risk usually requires the preparation of a detailed specification. The publication of an advertisement in a newspaper circulating generally in the area of the Local Government is required by legislation.

* Councils should note that the term “standing offer arrangement” is no longer used.

6.1 LOCAL GOVERNMENT’S DUTY WHEN TENDERING Local Governments have a duty to act fairly to all tenderers

Legal precedent has established that Local Governments, as public bodies, have a responsibility to treat tenderers fairly. This obligation is based upon the terms and conditions of the request for tender having “contractual force”; with an implied duty on Local Governments to act fairly to all tenderers. Fair and appropriate processes must be followed and reasons given to justify decisions made on the awarding of tenders.

6.2 TENDERS FOR PROVIDING GOODS OR SERVICES TO LOCAL GOVERNMENTS

Obligations regarding tenders in legislation

The obligations of Local Government in regard to tenders for the carrying out of work and the supply of goods or services are specified in chapter 4 of the Finance Regulation, and in particular section 177 (Tender process).

A Local Government cannot enter into a large-sized contract unless it first invites written tenders for the contract under section 177. Section 177 requires that a Council must invite tenders for the carrying out of work, or the supply of goods or services, worth more than $150,000.00. The invitation must: (a) be made by an advertisement in a newspaper circulating generally in

Council’s local government area; and (b) allow at least 21 days from the day of the advertisement is published for the

submission of tenders. Whilst, at a practical level, Council may have a number of newspapers circulating generally in its local government area, when deciding the newspaper in which the advertisement will be published, it is prudent for Council to take into account the characteristics of the relevant industry, including the size and location of potential



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suppliers. On the basis that Council is expending public money, Council should endeavour to attract the attention of the best possible range of suitable suppliers. The advertisement published in the newspaper should accurately describe the work, goods or services sought by Council to avoid a scenario where suppliers simply do not appreciate the work, goods or services sought by Council pursuant to the tender process. Also, in the event that the advertisement does not properly describe the work, goods or services sought by Council, there is potential for unsuccessful tenderers to challenge Council’s tender process.

The threshold does not apply to any period of time

The threshold amount of $150,000.00 does not relate to any particular period of time. Rather, Council officers need to focus on the work, goods or services the subject of the contract. For example, is the relevant transaction properly characterised as a series of independent contracts where the value of each independent contract is less than $150,000.00?. Alternatively, is the transaction properly characterised as a series of contracts which are dependent on each other and the total consideration payable by Council pursuant to the series of related contracts exceeds $150,000.00? In the former scenario, Council is not obliged to invite tenders. In the latter scenario Council is obliged to invite tenders. Each case will depend on its own particular facts and circumstances. If Council regularly places orders for the same goods and services then it may well be that Council can achieve cost savings by establishing a preferred supplier arrangement (See Section 4.2.6 titled Preferred Supplier Arrangements). Alternatively, Council may achieve cost savings by accessing an LGA arrangement which is established and administered by Local Buy.

Tenders must be ‘open’ for a minimum period of 21 days

Council’s invitation to tenderers must allow at least 21 days after the day of publication of the advertisement for the submission of tenders. The advertisement can be published on any day. Whilst the 21 day period is the minimum prescribed by the Finance Regulation, for complex transactions, Council may choose to provide tenderers with a longer time frame for the submission of tenders.

Disposal of land and goods

This Guide does not address the issue of the disposal of land or goods. Local Government employees should refer to chapter 4, part 3 of the Finance Regulation which regulates the disposal of land and goods.

Contract Planning

Planning is fundamental to producing an effective contract. The greater the level of planning and testing, the better the results emanating from the tender. Prior to commencing any complex procurement it is helpful to:

(a) assess the need to purchase and determine the desired outcome; (b) involve stakeholders who will be involved in using the goods or services; (c) consider the risks associated with the procurement, and how they can be

minimised; (d) undertake market research to obtain a clear understanding of what the

market can provide and the likely cost; (e) research and plan the project budget to ensure appropriate budget allocation; (f) discuss, if necessary, with the local community, industry, educational

institutions or other Local Governments; (g) clearly define the Local Government’s procurement strategy; and (h) ensure all stakeholders agree to the planning strategy outcomes.



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Tenders Register

It is good practice to develop and maintain a tender register for each tender and expressions of interest invitation. The Local Government employee should ensure the register includes:

(a) a brief description of the required goods or services; (b) a brief description as to why a tender or an expression of interest was

required; and (c) the particulars of the making of the decision to seek a tender or invite

expressions of interest. Regardless of whether Council develops and maintains a tender register for each tender and expressions of interest invitation or not, Council’s annual report must contain a list of all action taken under section 177(7) (changes to tenders) of the Finance Regulation during the year (required by section 119(1)(d) of the Finance Regulation).

Goods and Services Tax

At time of writing there is no judicial authority to support the proposition that GST should be taken into account when determining the “worth” to Council of a particular purchase in the context of chapter 4, part 3 of the Finance Regulation. The prudent course of action is to include GST when determining the application of a threshold. This is consistent with the Department’s position as detailed in Local Government Bulletin No. 2 of 2007.



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Figure 6.1 Complex Purchasing

Contract

Administration

Planning incorporates the selection of an appropriate process.

Specification

Selection Criteria

Price Schedule

Planning

Public Tender

Conditions of

Tender

Contractual

Conditions

Specification includes the development of tender documentation.

Advertising

Addenda

Pre-Tender Briefing

Closing the Tender

Addenda include the acknowledgment of receipt of an addendum.

Closing the tender includes the opening of tenders received.

Evaluation

Recommendation Report

Formal De-

Briefings

Award of

Contract

Council

Approval

Recommendation Report could include the formulation of evaluation and recommendation reports.

Contract Administration involves monitoring all aspects of the contract over its entire life.

Expressions of Interest

Complex Purchasing



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6.3 PUBLIC TENDERS Tender documentation and tender response form basis of contract

The issued tender documentation, combined with the tenderer’s response and the letter of acceptance will form the basis of a legally binding contract. Consequently, ensuring the tender documentation is correct is of the utmost importance to minimise potentially disruptive and costly disputes. The tender document should be designed to elicit information from the tenderer, which will enable the tenderer’s performance to be assessed against the selection criteria.

Common components of tender development

The structure and content of the documentation will vary according to the complexity and type of the purchase. Generally, the tender development will include the consideration of the issues listed below. (a) developing a Specification; (b) choosing Contractual Conditions; (c) deciding on Conditions of Tender; (d) developing Selection Criteria and Evaluation Methodology; (e) developing a Price Schedule; (f) advertising the Tender; (g) issuing Addenda (if necessary); (h) holding Pre-Tender Briefings (if necessary); (i) closing and opening the Tender; (j) evaluating the Tender; (k) producing a Recommendation Report; (l) arranging Formal Approval; (m) awarding the Contract; (n) advising Unsuccessful Tenderers; (o) hosting Formal De-Briefing (if necessary); and (p) administering the Contract. See Figure 6.1 titled Complex Purchasing for a depiction of this process.

6.3.1 DEVELOPING A SPECIFICATION

Scope of the specification

The role of the specification is to provide the tenderer with a concise, logical and unambiguous description of the requirements of Council.

Three common types of specification

Specifications may be: (a) functional – focus on what is to be achieved; (b) performance oriented – define the outcome/s required but not the method

used to achieve it; (c) technical – highly prescriptive. or may be a combination of all of the above.

Background

It is helpful to commence the specification with a background. A background provides a general overview as to why the goods/ services are required and the desired outcome.



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Necessary to use concise and clear wording

When developing a specification: (a) the use of the word “Tenderer” should be avoided. The specification should

be written as the contract specification and only “Contractor” should be referred to;

(b) it is important to clearly direct the Contractor as to what is required. It is good practice to use words such as “the Contractor must”. Phrases such as “it is envisaged that” and “the Contractor will be responsible for” invoke uncertainty.

Each particular purchase has its own requirements. Using or copying old specifications should be carried out cautiously to ensure that standard clauses do not cause contradictions or uncertainties. The old documentation may also refer to repealed or substantially amended legislation, which is no longer applicable.

Specification should not include any contractual or commercial clauses

Specifications should not include any contractual or commercial clauses. The role of the specification is to explain to the Contractor exactly what is required. The contractual clauses usually set out what happens in the event that the Contractor or the Local Government fails to carry out their obligations. These clauses should be included in the general conditions and the special conditions of contract.

Drawings

Some construction services specifications may require the production of detailed design briefs including drawings. Drawings must be clear, precise and show pictorially what is required of the Contractor. It is important to ensure that the words on the drawings do not contradict the words in the specification. The preparation of technical building documentation may require appropriate, competent professional advice. When consulting such professionals, employees should identify and manage any conflict of interest that may arise.

Well defined specification prevents disputes

A well defined description of requirements will: (a) ensure a valid comparison of tenders can be made by reducing variations

between tenders; (b) prevent tenderers from loading their prices to cover unforeseen

contingencies; (c) prevent disputes occurring as a result of differing interpretations; and (d) enable better cost management.

6.3.2 CONTRACTUAL CONDITIONS

Nature of contract determines type of General Conditions

Conditions of contract are sets of legal provisions that are included in the contract to protect both parties’ legal rights. The general conditions may be incorporated by reference in the tender document and in the letter of acceptance.

Amend general conditions by special conditions

In most cases, general conditions will be sufficient to fully explain both parties’ contractual obligations. It is recommended that where amendments are required, these be undertaken by adding special conditions of contract in the tender document. Any major changes to the general conditions should only be attempted with professional legal advice. However, minor modifications may be undertaken by Local Government employees to change the conditions to reflect the unique context of a particular contract.



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Applying the General Conditions of Contract

The type of general conditions incorporated in the contract depends on the type of purchase – be it goods and general services or building and construction services (“works”). All general conditions of contract provided in this Guide are examples only. These or any other general conditions the Local Government deems appropriate to their purchase may be used.

(a) Goods and General Services

General Conditions in this Guide are suggested only

This Guide provides general conditions of contract for: (a) goods; (b) services; and (c) goods and services. The general conditions of contract for services and the general conditions of contract for goods and services are designed for use in general (non-construction) service contracts. Some specialist services, such as consultancies and information technology services will require special conditions. These conditions are provided as examples only and Local Governments may use these or any other general conditions they deem appropriate to their particular purchase.

Roles of the Parties

The parties to the contract are described as the Principal (the Local Government) and the Contractor in each of the sample general conditions of contract. The roles and responsibilities are divided between the parties to reflect a common sense view of contracting. The conditions are designed so that any problems that may arise can be resolved realistically and with a sense of fairness.

Key Features

A key feature of the general conditions of contract for goods is determining when property and risk in the goods passes. Delivery provisions are thus crucial. Key features of general conditions of contract for services are the quality of the personnel, access to the premises of Council and the confidentiality of information.

(b) Consultancy Services

Specialised skills not available in-house

Local Governments commonly require the services of consultants in a variety of professional services, for example legal services, accounting services, architectural or drafting services and engineering services.

This Guide includes an example of general conditions of contract for consultancy services based upon Australian Standard 4122-2000, General Conditions of Contract for the Engagement of Consultants.

(c) Building and Construction Services

As discussed in Section 3 titled Scope of Procurement, different conditions of contract are used for major and minor building and construction services contracts.

Major Building and Construction Services (“Major Works”)

Australian Standards have produced a range of general conditions. These conditions are useful, as they are the product of a wide-ranging consensus between experts from industry, governments and user groups. They are updated regularly with the latest technical and international industry information. Commonly, Australian Standards are used for major building and construction services.

Given the complexity of these conditions and of developing a detailed technical specification, it is strongly recommended that Council instruct a professional consultant to develop major building and construction services tender documentation if the necessary expertise is not available in-house.



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Minor Building and Construction Services (“Minor Works”) General Conditions

Provided in this Guide is a template for requesting tenders for minor building and construction services together with a set of minor building and construction services general conditions of contract. These general conditions are provided as an example only and Local Government may use these or any other general conditions they deem appropriate to their particular purchase.

The role of the Authorised Officer

The Authorised Officer plays an important role in the contract under the general conditions of contract for the provision of minor works. In many respects, the Authorised Officer plays two roles: one as agent of the Council and another as certifier and administrator pursuant to the contract.

The Authorised Officer has a duty at common law and pursuant to the conditions of the contract to act honestly, fairly, impartially, objectively and without bias, and to consider and balance the respective parties interests.

Communication is an essential part of the Authorised Officer’s administrative role. This is particularly relevant when the Authorised Officer acts as the Council’s agent. In this role, the Authorised Officer should notify the Council of defects, inform and warn the Council and ensure Council does not, through its own actions or lack of action create a position of default.

Building and Construction Industry Payments Act 2004

The Building and Construction Industry Payments Act 2004 (the “BCIP Act”) implies terms in construction contracts (as defined in the BCIP Act), provides for the adjudication of payment disputes under construction contracts and otherwise regulates construction contracts. In particular, if a person has undertaken to carry out construction work, or supply related goods or services under the contract, the person has an entitlement to a progress payment. The amount of the progress payment must be determined by reference to the content of the contract or, if the contract does not provide for the matter, an amount calculated on the basis of the value of construction work carried out or undertaken and related goods and services supplied or undertaken to be supplied in accordance with the provisions of the BCIP Act. The BCIP Act determines the due date for payment if the contract does not already address that issue. A person who claims to be entitled to a progress payment may serve a payment claim on the person who, under the construction contract, is or may be liable to make the payment. After receipt of a claim the BCIP Act regulates the rights and obligations of the parties if the construction contract does not properly address that issue.

Queensland Building Services Authority Act 1991

The Queensland Building Services Authority Act 1991 regulates the form and content of building contracts including the giving of directions, limits on retention amounts and securities, suspension of works and progress payments. It is recommended that the Local Government instruct professional consultants to assist with the development of tender documentation in circumstances where the contract involves building and construction related works if it does not have the necessary expertise in–house. The terms and conditions included in the general conditions of contract for the provision of minor works are an example of the minimum terms and conditions which should be used when Council is issuing a tender for the provision of minor works.



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Subcontractors’ Charges Act 1974

The object of the Subcontractors’ Charges Act 1974 is to secure payment of moneys due to subcontractors by placing the onus on the principal (in this case Council) to retain certain moneys payable to the contractor until the Court in which the claim is heard directs to whom and in what manner the same is to be paid. A subcontractor is entitled to a charge on moneys payable to the contractor by the principal under the contract. If a subcontractor intends to claim a charge on any money payable to the contractor, the subcontractor must give notice of such claim to the principal, the contractor and the Court. Where a notice of claim of charge is given, the principal is required to retain, until the Court in which the claim is heard directs to whom and in what manner the same is to be paid, a sufficient part of the money that is or is to become payable by the principal under its contract, to satisfy the claim. A principal who fails to retain the amount it is required to retain will be personally liable to pay to the subcontractor the amount of the subcontractor’s claim.

Insurance/ Risk

Given the complexity and risk of construction contracts, Council should seek advice from experts in the insurance/ risk field regarding particular insurances and the level of insurance required.

6.3.3 CONDITIONS OF TENDER

Conditions of Tender are separate to the Conditions of Contract

The conditions of tender are a separate set of conditions to the conditions of contract. The conditions of tender detail how the tender information shall be provided, what information has to be provided, and when it shall be provided.

Clearly set out the rules of tendering to the tenderer

The conditions of tender include conditions relating to: (a) the tender period; (b) delivery; (c) late tenders; (d) how tenders will be evaluated; and (e) the award of a tender. In essence, they set out the rules of tendering for each particular requirement and ensure that an even playing field is created for each tenderer. For this reason, it is important that Local Governments carefully consider the content of their conditions of tender.

Conditions of Tender provided for in the Guide

This Guide includes examples of conditions of tender for: (a) goods, services and goods and services; (b) the engagement of consultants; and (c) the provision of minor works.

6.3.4 DEVELOPING SELECTION CRITERIA AND EVALUATION METHODOLOGY

Aids assessment

The use of well-defined selection criteria enables tenderers to focus their tender response, which assists Local Governments to assess their relative merits. Further, a Local Government needs to be accountable for its decision making to the public and to those that submit tenders. An absence of selection criteria removes the decision making trail, as there is no effective basis for awarding the tender.



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What selection criteria should address

Generally, the selection criteria will address the following areas:

(a) compliance with contractual terms and conditions; (b) the technical merit of the goods or services offered; (c) the capability of the tenderer to fulfil the specified requirements, including

technical and management competence, financial viability, relevant skills, experience and availability of key personnel; and

(d) an assessment of the risks or constraints associated with each offer. Selection criteria should highlight the major deliverables associated with the purchase

Selection criteria should highlight the key risks, critical success factors and major deliverables associated with the purchase. Local Government employees need to take care to ensure they will be useful and practical tools in evaluation. Over ambitious or inappropriate criteria may be difficult to apply and may be unhelpful in the evaluation process.

The three types of selection criteria: compliance, qualitative and price

There are three major types of selection criteria:

(a) compliance criteria; (b) qualitative criteria; and (c) price criteria.

Compliance Criteria

Compliance criteria relate to the fundamental conditions of the quotation or tender. They are usually assessed on a ‘Yes/No’ basis; i.e. either that criterion is fully satisfied or not satisfied at all.

Typically, compliance criteria are easy to objectively measure as meeting or exceeding the minimum acceptable standard offers no further advantage to the Local Government buyer.

For example: (a) compliance with contractual and technical specifications; (b) meeting relevant Local Government procurement policies; (c) attendance at site inspection/site visit; (d) compliance with necessary licences and standards, and (e) financial capacity to perform the contract.

Qualitative Criteria

These criteria involve technical aspects of the goods or services and may be weighted. This means that a total of 100% must be distributed by percentage to each qualitative criterion. Probity is enhanced if weightings are included in the request for tender. However, if weightings are disclosed in the request for tender then the Local Government is obliged to evaluate each tender on the basis of the disclosed weightings. Alternatively, if no weightings are disclosed in respect of criteria which are identified in the request for tender then it is preferable to list the criteria in order of priority. (See also Section 6.3.10 titled Evaluating the Tender) Generally, qualitative criteria are more likely to be assessed subjectively and higher performance gives more benefits to the Local Government buyer. For example: (a) organisational capacity; (b) demonstrated relevant prior experience; (c) infrastructure within Queensland to service the Council; (d) quality of contract; and (e) management methodology. In any event, and regardless of whether specified criteria are disclosed in the request for tender or not, the Local Government must have regard to the principles specified in section 106 of the Act when entering into contracts for the carrying out of work, or



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the supply of goods or services. Weightings reflect the relative degree of importance of each qualitative criterion. At this stage, consideration should also be given to whether or not cost is to be weighted.

Price Criteria

Price criteria may be weighted where the cost of the item is an important consideration for the Local Government. Two methods for assessing price criteria are set out below.

Non weighted price method

Using this method, tenders are firstly assessed against the qualitative criteria (not including cost). Secondly, the costing submitted by each tenderer is considered and a judgement decision is made as to which tender represents the best value for money. It is recommended that this method be most commonly used, as it allows a fuller consideration of capability and risk to be conducted in isolation from price details.

Weighted price method

Under this method, cost is assessed and scored as a criterion alongside the other qualitative criterion. Consequently, it is necessary to consider the importance of cost to the contract when assigning weighting. This may depend on the complexity of what is being purchased. For example, if a routine product is being purchased price may play a more important role in evaluation. However, the purchase of a more complex or unique service may require a qualitative criterion such as experience to be more highly weighted.

6.3.5 DEVELOPING A PRICE SCHEDULE

Choosing the correct price schedules allows consistency in evaluation.

In order to allow consistency in evaluating tenders, it is essential that the most appropriate format of the price schedule is included in the tender documentation. The price schedule plays an important role in determining the nature of the contract. There are a number of questions that a Local Government employee should address to determine the appropriate price schedule:

The difference between a schedule of rates and a bill of quantities

(a) do you want an hourly rate or price per unit for the performance of the

service/purchase of the goods?

A schedule of rates basis of payment is generally used for items of work where quantities cannot be exactly determined, and a variation of quantities may occur when work under the contract is performed. The tenderer is required to bid a unit cost or hourly rate for the required goods or services, rather than a total cost.

Quantities in a schedule of rates are estimated quantities only, and the tender documentation must clearly state that no guarantee of quantities of work is provided and that the Contractor will be paid only for work actually performed.

A schedule of rates is not dissimilar in appearance to a bill of quantities. The major difference between a bill of quantities and a schedule of rates is that in a schedule of rates there is no statement of quantities or, if there is, they are an estimate only.



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The difference between fixed price and lump sum prices

(b) do you want an all-inclusive price?

Generally, a fixed price indicates that there will be no price adjustment. Under a fixed price tender, the tenderer carries all of the risks of price escalation. These types of price schedules should not be used when the contract is over a long period of time as this may result in inflated prices and disputes. The tender document may request that prices be fixed for a nominated time period and variable thereafter.

A lump sum price means that the price tendered by the Contractor is a lump sum for all the work stipulated in the tender document. The lump sum price method of payment is normally appropriate for work packages or specific items of work which can be fully described and specified. When using this method, the employee should ensure that the tender document is accurate and there are no ambiguities in the information provided to tenderers. Any variations to the work package after the issuing of tenders can be costly to the Local Government.

In deciding which price method to use it may be useful to have regard to which price mechanism (if any) the particular industry generally uses.

6.3.6 ADVERTISING THE TENDER

Requirement to advertise tenders

Section 177 of the Finance Regulation prescribes that the invitation to tender must be made by an advertisement in a newspaper circulating generally in the Local Government’s area and allow at least 21 days from the date of publication of the advertisement for the submission of tenders.

Contents of the advertisement

The advertisement must include the following details: (a) a brief description of the goods or services required; (b) particulars identifying a person from whom more detailed information as to

tendering may be obtained; (c) information as to where and how tenders may be submitted; (d) the date and time by which tenders must be submitted; and (e) a reference to section 177(7) of the Finance Regulation (changes to

tenders).

It is recommended that if a mandatory pre-tender briefing is to be conducted, this be stipulated in the advertisement. (See Section I and the document titled Draft Tender Advertisement Pro Forma)

Option to change tender must be included within the advertisement

If Council wishes to give itself the right to change its request for tender before making a decision on the tender, section 177(7) of the Finance Regulation relevantly provides that the invitation to tender must state that the Local Government might later invite all tenderers to change their tenders. Further details regarding changes to tenders are contained in Section 6.3.7 below.

Minimum time to be allowed for submitting tenders

The tender period (for the submission of tenders) must be at least 21 days from the date of publication of the advertisement (section 177 of the Finance Regulation).

In general, the tender should be open for a sufficient period to enable suppliers to respond effectively. This will vary depending on the nature and complexity of the goods or services being purchased.

Recommendations for Closing Time for submissions

It is also recommended that the closing time:

(a) not be on a Monday and be at least one day after an industry holiday or rostered day off;

(b) not be immediately before or after a public holiday; and (c) be at least one week after a recognised industry year end close down.



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6.3.7 ADDENDA

Any information that may provide a competitive advantage should be conveyed to all potential tenderers

If, during the tender period: (a) the Local Government’s circumstances change; or (b) information or clarification is provided to one tenderer that could materially

change the understanding of the requirement or provide an advantage; or (c) the Local Government decides (whether due to a tenderer’s request or

changes to the requirements) to extend the closing time for tender submission,

this information should be provided to all potential tenderers. Reasonable steps must be taken to ensure that all people and organisations that have sought the tender documents are informed of the changes.

Changes to the Tender Specifications

Section 177(7) of the Finance Regulation relevantly provides that before making a decision on a tender, the Local Government may invite all the persons who have submitted a tender to change their tender to take account of a change in the tender specifications. However, the Local Government may only invite persons who have submitted a tender to change their tender if: (a) the Local Government has invited tenders for the contract; and (b) the invitation to tender states that the Local Government might later invite all

tenderers to change their tenders. Allow sufficient time for response

If the request for tender (including but not limited to the tender specification) is amended, allow sufficient time for tenderers to be able to incorporate the changes into their tenders. If there is a fundamental or significant change to the request for tender (including but not limited to the tender specification) then the Local Government must consider whether parties other than the suppliers who actually received copies of the request for tender may now be interested in submitting a tender in response to the request for tender. If, on an objective assessment, the answer to this question is yes then the Local Government should discontinue its current tender process and reissue the request for tender. The crucial issue is whether the Local Government objectively considers that it is likely that a greater number of persons or organisations would have been likely to respond to the request for tender if the request for tender had originally been issued with the amended tender specification.

A register of all suppliers who have collected or been issued a tender should be maintained

A register should be maintained of all suppliers who have collected or been forwarded a copy of the tender document. This will enable potential tenderers to be advised of any alterations to the tender, via the issue of an addendum.

What the addendum should include

Each addendum issued should include a form for the return by the potential tenderer indicating receipt of the addendum (See Section I and the document titled Addendum Pro Forma). Each addendum should: (a) be written; (b) be issued to all persons who have received the tender documentation; (c) have the same closing time for acknowledgement of receipt of the addendum

and amendment of tenders; and (d) not be issued less than five (5) days prior to the closing time for submission

of tenders. Depending upon the complexity of the changes, consideration should be given as to whether or not it is necessary to extend the closing time originally specified in the tender documentation.



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Section 119(1)(d) of the Finance Regulation relevantly provides that a Local Government’s annual report must contain a list of all action taken under section 177(7) during the year, that is, a list of each occasion on which the Local Government invited all persons who had submitted a tender to change their tender to take account of the change in the tender specification.

6.3.8 PRE-TENDER BRIEFINGS

Provide an opportunity to clarify specific questions

Some projects require detailed information to be provided to tenderers or site visits to be undertaken. These pre-tender briefings are optional and may not be appropriate for all tenders. Such an information session is usually held during the tender period.

Briefing sessions are an important opportunity for potential tenderers to ask detailed, project specific questions that will aid them in the preparation of their tender.

Attendance may be made compulsory or voluntary

Pre-tender briefings may be made compulsory for all potential tenderers to attend. However, it is recommended that briefings only be made compulsory where it is deemed absolutely necessary by the Local Government employee and the information that the employee wishes to disseminate can not be provided in the tender documentation. If a mandatory briefing is required, the tender document should clearly state that the pre-tender briefing is mandatory and the consequence of non-attendance. Attendance at a mandatory briefing should be made a compliance criteria (See Section 6.3.4 titled Developing Selection Criteria and Methodology)

It is necessary to ensure that the date of the pre-tender briefing is a considerable time after advertising of the tender invitation to allow tenderers to gain an understanding of the requirement.

It is recommended that: (a) a register of attendance be maintained; (b) all questions be noted down; and (c) a written response to any amendments or clarification be circulated to all

persons who attended the session or who received the tender documentation via addenda.

6.3.9 CLOSING AND OPENING THE TENDER

Tenders are not to be opened until after the Closing Time

The Chief Executive Officer of the Local Government is responsible for safe custody of: (a) all records about the proceedings, accounts and transactions of the Local

Government (including any tender response received by the Local Government); and

(b) all documents owned or held by the Local Government. Tenders are not to be opened, examined or assessed until after the closing time for submission of tenders. It is good practice, upon receipt of a tender, for a Local Government employee to record on the tender, the time and date it was received.



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Email or facsimile tenders

The Guide and the sample documentation included in the Guide do not address the issue of the receipt of tenders by email or facsimile. In fact, the conditions of tender included in the Guide specifically provide that Council will not consider any response to a request for quotation, tender or expressions of interest invitation if the response is only received by email or facsimile. Further, the sample documentation included in the Guide gives Council an option to require that a tenderer or respondent, as the case may be, must also provide an electronic copy of the response of the tenderer or respondent, as the case may be, in a specified electronic format (as well as in hard copy).

Opening of tenders and the tenders register

It is good practice when opening tenders to ensure that:

(a) more than one employee of the Local Government is present; and (b) details of all tenders received are recorded on a tender register.

Council has a discretion whether to open tenders publicly or not. If the conditions of tender specifically provide that tenders will be opened publicly then Council must open tenders publicly. Conversely, if the request for tender provides that tenders will not be opened publicly then Council is not under an obligation to open tenders publicly. Similarly, Council is not obliged to announce prices tendered by tenderers except in circumstances where the conditions of tender specifically provide that tendered prices will be announced.

Tenders register

A tenders register may include details such as: (a) Contract name and number; (b) Advertisement date; (c) Name and address of tenderer; and (d) Date and time the tender was received The original tender documents received should be placed on the Local Government’s file and the copies distributed to the evaluation panel members.



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Late tenders should be clearly marked

The sample conditions of tender in the Guide specifically provide that:

(a) a tenderer’s tender response must be in the tender box by the closing time; and

(b) Council may extend the closing time at its discretion; and

(c) Council reserves the right to consider a tender which is not in the tender box by the closing time if, in the opinion of Council, there is satisfactory evidence that:

(i) the tender was dispatched by prepaid post or courier service in sufficient time to effect delivery to the tender box by the closing time under normal circumstances; and

(ii) at the closing time the tender was still in the course of delivery. It is recommended that tenders received after the closing time be stamped “late tender” and the time and date of receipt recorded. If Council extends the closing time then it must do so by addendum and the addendum must be issued to each supplier who has received or been provided with a copy of the request for tender. Council should not extend the closing time simply to facilitate the acceptance of a late tender response from a particular tenderer. It is important that employees return any tenderers’ telephone calls and acknowledge any tenderers’ correspondence during the tender period.

6.3.10 EVALUATING THE TENDER

Evaluation must be conducted fairly

The primary rule in evaluating tenders is that all tenders must be treated fairly, impartially, objectively and with due diligence. If the request for tender specifies selection criteria or weightings then tenders must be evaluated against the selection criteria and weightings specified in the request for tender. Sections 174(4) and 177(9) of the Finance Regulation relevantly provide that if a Local Government decides to accept a tender or quotation, it must accept the tender or quotation most advantageous to it. In deciding the tender or quotation most advantageous to it, the Local Government must have regard to the principles mentioned in section 106 of the Act. However, the Local Government may decide not to accept any tender or quotation available to it.

Formation of evaluation panel

The number of persons allocated to the evaluation panel will depend on the needs of the Local Government, as well as the nature and complexity of what is being purchased and the risks associated with it.

It is recommended that at least three Local Government employees be appointed to evaluate complex purchasing tenders. However, for non-routine or high risk procurements it is recommended that the evaluation panel consist of a sufficient number of employees with the requisite mix of skills to evaluate that tender. For large, complex or sensitive contracts, an independent person, who can provide external scrutiny to demonstrate the integrity of the process, may be appointed.

One person should be nominated as chairperson of the evaluation panel. The chairperson will be responsible for ensuring that decisions are made in a timely manner and for the preparation of the final recommendation report. It is recommended that the chairperson of the evaluation panel arrange for an Evaluation Panel Guide (See Section I and the document titled Evaluation Panel Guide) to be compiled to assist the panel in evaluating tenders. This helps ensure standardisation and fairness as well as providing guidance to all panel members.



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Assess compliance - non complying tenders may be rejected

Tender submissions are expected to comply with all conditions of the request for tender. Non-compliance with significant conditions may result in the tender being eliminated from further consideration. It is important that the Local Government is directly involved in the selection of the conditions of contract and does not simply accept those which are presented by the tenderer. The evaluation panel should, as far as possible, prior to scoring qualitative criteria, determine which tenders do not comply with the requirements of the request for tender.

Develop an evaluation matrix

In order to fairly evaluate each tender and select a successful tenderer, each tender must be evaluated against the criteria and weightings stipulated in the request for tender. New selection criteria should never be introduced at the evaluation stage. Such a practice is procedurally unfair and, most likely, a breach of the conditions of tender.

It is useful when evaluating tenders, to develop an evaluation matrix that details each of the selection criteria and records the scores each tenderer receives against each criterion. Example matrices for weighted and non-weighted price methods are shown below. Weightings do not always need to be disclosed.

NON-WEIGHTED PRICE METHOD Example only

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Ran

kin

g

20% 25% 15% 15% 10% 10% 5% 100%

Tenderer A

Tenderer B

WEIGHTED PRICE METHOD Example only

Selection Criteria and Weighting Tenderers Name

Meth

od

olo

gy

Exp

eri

en

ce

of

key

pers

on

nel

Pre

vio

us

co

mp

an

y

exp

eri

en

ce

Sele

cti

on

Cri

teri

on

3

Sele

cti

on

Cri

teri

on

4

Sele

cti

on

Cri

teri

on

5

Sele

cti

on

Cri

teri

on

6

Sele

cti

on

Cri

teri

on

7

Pri

ce (

$)

To

tal

Weig

hte

d

Sco

re

Ran

kin

g

10% 25% 25% 10% 10% 10% 5% 5% 100%

Tenderer A

Tenderer B

Scoring the tenders

A scoring range should be agreed to by the evaluation panel. The scores relate to each tenderer’s level of compliance against each criterion. The chairperson should ensure that all members of the evaluation panel are aware of the scoring range to be utilised.



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Two examples of scoring ranges are shown below. 10 POINT SCORING RANGE - Example only

Score Description of Score

0 Inadequate or non-appropriate offer, many deficiencies, does not meet criterion

2 Marginal offer, some deficiencies, partly meets criterion

4 Fair offer, few deficiencies, almost meets criterion

6 Good offer, no deficiencies, meets criterion

8 Very good offer, exceeds criterion

10 Outstanding offer, greatly exceeds criterion

5 POINT SCORING RANGE - Example only

Score Description of Score

0 Offer did not address the criterion

1 Offer contained insufficient or unclear information

2 Acceptable offer

3 Good offer

4 Very good offer

5 Excellent offer

Stage 2 -Score the qualitative criteria

This is the second stage of the tender evaluation process. The evaluation panel members should read each tender and individually score the qualitative criteria, recording individual scores in the evaluation matrix. Once individual panel members have scored, the panel should meet to agree on an acceptable score for each tender. This may be achieved by consensus or by averaging each panel member’s score. Any dissenting member’s vote can be recorded in the evaluation report. Whilst there is a risk in the consensus approach that a “dominant voice” on the evaluation panel may overly influence an evaluation panel member’s assessment, there is a risk in the average approach that differentials between tenders will be diminished. To overcome the “dominant voice”, which may arise when using the consensus approach, it is recommended that each panel member should complete the assessment matrix prior to the meeting of the panel, and the score assigned by each member should be disclosed before a joint discussion assigns scores for each criterion.

Weighted cost method

When using the weighted cost method, there are two commonly used scoring approaches:

(i) cost range scoring; and (ii) average based scoring.

Cost range scoring

Using the cost range scoring approach, the lowest price is allocated maximum points, whilst the highest price is allocated minimum points. All other prices are allocated points, which reflect their relative position between the minimum and the maximum.



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Calculating cost range scores

To calculate cost range scores: (a) rank the tendered prices from lowest to highest; (b) assign maximum points to the lowest price and minimum points to the

highest price; (c) calculate the range between the highest and the lowest prices. This will give

a range figure; (d) divide the range figures (from (c)) by the maximum possible point score.

This will give a price per point figure; (e) for each tendered price that has not been scored, calculate the difference

between it and the highest cost; and (f) divide the difference calculated in (e) by the price per point figure from (d).

This gives the score for the tendered price.

Example using cost range scoring

Tender Rank Present Value Cost ($) Score (out of 5)

A 1 1,886,487 5.00

B 3 2,217,895 1.95

C 2 1.929,083 4.61

D 4 2,430,138 0.00

Average based scoring

Using the average based scoring method, the mean of all tendered prices is calculated and each tendered price is then scored according to its proximity to the average.

Calculating average based scores

To calculate average based scores: (a) rank the costs from highest to lowest; (b) calculate the mean tendered price by totalling all tendered prices and dividing

that total figure by the number of tendered prices. This will give the average tendered price;

(c) assign the middle score in the scoring range to the average tendered price (e.g. 2.5 out of 5 is the average price);

(d) for each tendered price calculate the difference between it and the average tendered price;

(e) determine the percentage difference between each tendered price and the average tendered price;

(f) calculate the percentage difference between each tendered price and the average tendered price. This will give a percentage figure;

(g) ignore negative signs in the percentage figure and multiply the percentage figure by the assigned middle score for each tenderer; and

(h) if the tendered price is below the average tendered price, add the percentage figure (from (f)) to the assigned middle score. This figure is the final cost score; or

(i) if the tendered price is above the averaged tendered price, subtract the percentage figure (from (f)) from the assigned middle score. This figure is the final cost score.

Example using average based scoring

Tender

Cost

Ranking

Cost ($)

$ difference

from average

% difference from average

Score out of 5

A 1 1,886,487 -229,414 -10.84 2.77

B 3 2,217,895 101,994 4.82 2.38

C 2 1,929,083 -186,818 -8.83 2.72

D 4 2,430,138 314,237 14.85 2.13

In this example, the average price is $2,115,901, which was assigned the middle score of 2.5, with a scoring range of 0 to 5.



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Assessing cost using the non weighted cost evaluation method

If the non-weighted cost method is to be used, the evaluation panel will need to make a series of value judgements and consider a number of factors including: (a) the qualitative ranking of each tender; and (b) the pricing submitted by each tenderer. Once the tenders have been ranked, the evaluation panel must make a value judgement as to the cost affordability, qualitative ranking and risk of each tender, in order to determine the tender which is most advantageous to the Local Government.

Presentations by tenderers

If the evaluation panel feels it necessary, it may be worthwhile for one or more tenderers to make a presentation to the evaluation panel. This will enable the panel to question the tenderer with regard to any areas of uncertainty. All presenters should be given the same time and the same brief. The evaluation panel may revisit their scoring after hearing presentations of tenderers.

Reference checks

The tenderers’ credentials and claims of skill and experience may be verified. Checking claims with recent referees may be conducted as part of the selection process. Questions should be prepared in advance and be relevant to the selection criteria. All referees should be asked the same questions.

Finance checks

The tenderer’s financial credentials may be verified. Check the tenderer’s financial referees using an independent credit assessor.

Choice of the most advantageous tenderer

Once the tenders have been ranked, the evaluation panel must make a value judgement as to the cost affordability, qualitative ranking and risk of each tender, in order to determine the tender which is most advantageous to the Local Government.

Clarification

To assist the Local Government in deciding which tender would be the most advantageous to it to accept, a tenderer may be requested to clarify the information provided in the tender. The conditions of tender in the Guide specifically provide that:

(a) Council may issue to a tenderer before the closing time additional information and information clarifying or correcting information previously provided, to assist tenderers in preparing their tender response;

(b) if Council issues information to tenderers, each tenderer must take the information into account in the preparation of its tender response; and

(c) after the closing time, Council may (without limiting its options):

(i) request clarification or further information from any tenderer; and

(ii) invite all tenderers to change their tenders in response to an alteration to the specification or any of the terms and conditions of the request for tender; and

(iii) negotiate with one or more tenderers upon any aspect of their tender. However, when exercising its rights under the conditions of tender, Council is, in any event, still obliged to treat all tenderers fairly, impartially, objectively and with due diligence. A good example is a scenario where Council elects to substantially alter its tender specification as a result of consideration of a tender received from a tenderer. If, objectively speaking, Council substantially alters its tender so as to more closely align the tender specification with a tender received from a particular tenderer, it is not fair or impartial for Council to negotiate only with the relevant tenderer to the exclusion of other tenderers. Whilst each case will depend on its own particular facts and circumstances, there will be instances where it would be prudent for Council to



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reissue the tender rather than simply continue with negotiations with a particular tenderer. In the event of a clarification, it is suggested that the following information be documented: (a) why was clarification sought; (b) what was clarified and where changes were made; (c) who was involved in the clarification process; and (d) when the communication took place and in what form.

Documented information on clarifications should be included as part of the tender evaluation report.

Negotiation – minor variations

In some instances, it may be necessary to negotiate with a particular tenderer. It is crucial that the probity of the tender process is maintained throughout the negotiation process. The Local Government, after it has chosen a particular tenderer, but before it has entered into a contract, may make minor variations to the goods or services required or the terms and conditions of the tender documentation. What constitutes a “minor variation” is a question of fact and degree in each case. A minor variation should not alter the original scope of the requirement particularised in the request for tender materially. This would disadvantage other tenderers, as they would not have had an opportunity to tender for the varied requirements. Only minor variations can be the subject of any negotiations. If the chosen tenderer is unwilling to enter into a contract to supply the varied requirement, or the Local Government and the chosen tenderer cannot agree on the content to be included in the contract as a result of the variation, the Local Government may choose the tenderer (if any) whose tender the Local Government considers would be the next most advantageous. In any event, if any of the tender documentation is varied (and in particular the specification), the variation should be recorded in writing and form part of the contract entered into between the successful tenderer and Council. In particular, the chosen tenderer should amend its tender response by written notice or letter to Council and Council’s letter of acceptance to the successful tenderer should accept the tender response of the successful tenderer as varied by the subsequent written notice or letter from the successful tenderer to Council. Alternatively, Council may prepare a formal contract document and submit the document to the tenderer prior to acceptance of the tender. After acceptance of the tender, Council can submit the formal contract document to the successful tenderer for execution and return.

In-house tenderers should remain at arms length from the entire tender process

The principles outlined above also apply to the evaluation of in–house bids; i.e. bids from sections within the Local Government issuing the request for tender. It is important to ensure that the in-house section: (a) is not involved in the tender development; (b) is not involved in the tender evaluation ; and (c) submits a tender on a fully commercially costed basis.



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6.3.11 RECOMMENDATION REPORT

Formal signed report

It is recommended that upon completion of the evaluation, the selection of the successful tenderer be documented in a formal report. The report should accurately reflect the conclusions made by all members of the evaluation panel, with adequate details to substantiate these conclusions. The report should indicate the ranking of tenders based on the weighted score for each tender. All panel members should sign the foot of the report to show that they concur with the decision and the decision-making process. Any dissenting reasons should also be documented. (See Section I and the document titled Recommendation Report)

6.3.12 FORMAL APPROVAL

Approval of recommendation report

The recommendation report should be submitted to the approving body or person for formal approval; i.e. Manager, Chief Executive Officer or Council. Local Government employees will need to refer to their own internal policies and procedures for specific direction.

Note, a decision about a tender may be made at a meeting of Council which is inconsistent with a recommendation in a report given to Council if section 70 of the Local Government (Operations) Regulation 2010 applies and Council complies with the requirements of section 70(3), that is, ensure the minutes of the meeting include a statement of the reasons for not adopting the relevant recommendation. It is good practice to record the price of the winning tender within the register.

Tenders Register

6.3.13 AWARD OF CONTRACT

Notice in writing of award of contract to all tenderers

Once the appropriate body has ratified the recommendation, the contract can be awarded to the successful tenderer.

Award of the contract can be made via: (a) the issuing of a letter of acceptance. The letter of acceptance together with

the request for tender, successful tenderer’s tender response or offer and any subsequent correspondence between the parties will constitute “the contract” (See Annexure 1, Form 9 for Letter of Acceptance Pro Forma); or

(b) the execution of a formal contract. A formal contract may be required for more complex purchases. Each formal contract will vary depending on the nature of the requirement. Professional legal advice may be required. Care must be taken to ensure consistency between the request for tender document, the tenderer’s response and conditions contained in the formal contract.

Tenderer Feedback

All tenderers should be advised promptly in writing of the Local Government’s decision. Verbal feedback to tenderers prior to the awarding of a contract is to be avoided.



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6.3.14 FORMAL DE-BRIEFING

Feedback to unsuccessful tenderers

After the award of a contract, unsuccessful tenderers may be informed as to the weaknesses in their tender. This feedback should be through the chairperson and a nominated member of the evaluation panel, upon request of the unsuccessful tenderer. It is important that the Local Government employees return tenderers’ telephone calls and acknowledge tenderers’ correspondence. The feedback should be limited to the facts of the unsuccessful tender. Any comparisons should be made against the selection criteria rather than with the successful tenderer. Explicit advice about future tenders should be avoided. Employees should at all times ensure that tenderers are dealt with objectively and with courtesy.

6.3.15 CONTRACT ADMINISTRATION

Contract administration strategy

It is good practice to formulate a contract administration strategy. The strategy should detail a methodology for: (a) contract implementation;

(b) the administration of the contract whilst it is in operation;

(c) any contract reviews or extensions; and

(d) evaluations of the contractual performance.

6.4 APPROVED CONTRACTOR LIST Establishing a panel

Council may compile a list of approved contractors suitably qualified to provide a service (as distinct from the supply of goods). Council must comply with the requirements of section 180 of the Finance Regulation which relevantly provides that the list must be compiled by: (a) inviting expressions of interest from suitably qualified persons, by an

advertisement in a newspaper that circulates generally in the local government area;

(b) allowing expressions of interest to be given to the Local Government for at least 21 days after the invitation is advertised; and

(c) choosing persons for the approved contractor list on the basis of the sound contracting principles.

Review effectiveness of panel at regular periods

No time limit is prescribed in the Finance Regulation regarding the length or period of operation of an approved contractor list. It is recommended that any arrangement for a list of approved contractors be reviewed every 2 years. If Council establishes an approved contractor list, Council may make contracts for the supply of the services provided by the approved contractors without complying with the requirements of sections 174, 175 or 177 of the Finance Regulation.



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6.5 EXPRESSIONS OF INTEREST Expressions of interest (EOI) Council Resolution required

Council may invite expressions of interest before inviting tenders if it resolves that it would be in the public interest to invite expressions of interest before inviting written tenders. Council must record its reasons for making the resolution. Expressions of interest must be invited in the way provided under section 177 of the Finance Regulation. Council may prepare a shortlist from the persons who responded to the invitation and invite tenders from the persons on the shortlist. The intent of the expression of interest process is to provide Council with a mechanism to determine potential tenderers (i.e. those organisations with the skills, experience and capacity to deliver the requested goods and/or services) without the expense of tendering.

Ability to gauge market costs and save costs for suppliers

By having an expression of interest stage, the Local Government is able to finalise the tender documentation with confidence of market capability and competition. Another major benefit of the expression of interest process is to minimise the cost to industry suppliers of preparing very detailed responses to requests for tender when they have little chance of success. A third benefit is that it enables collection of information about the direction of the project and provides an opportunity to refine the specification.

Once a preliminary selection of tenderers has been made from the prospective tenderers, the Local Government may then issue a request for tender to the short listed acceptable respondents.

6.5.1 DEVELOPING THE EXPRESSIONS OF INTEREST INVITATION

The expression of interest structure is determined by value and complexity

The expressions of interest invitation should be designed to elicit information from the prospective tenderers, which will enable Council to identify suppliers with the capacity to satisfactorily deliver the requirements. The structure and content of the expressions of interest invitation will vary according to the complexity and value of the required goods and services. In general, the expressions of interest invitation is a simplified version of the request for tender. It is often beneficial, when developing the expressions of interest invitation, to give consideration to what information may be requested from short listed acceptable respondents at the subsequent tender stage. The specification contained in the expressions of interest invitation will often be less detailed than those which may be contained in the subsequent tender. Council may also use the expressions of interest invitation to seek conceptual suggestions about the final form of the project, in circumstances where Council is looking to potential suppliers to provide expertise in relation to a particular area.

Two stage process in expressions of interest invitation

It is important that the expressions of interest invitation clearly states that this is a two-stage tendering process, which will involve short listed acceptable respondents being invited to tender.



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6.5.2 CONTRACTUAL CONDITIONS

Nature of contract determines type of general conditions

The issue of an expressions of interest invitation does not commit the Local Government to proceeding with a request for tender. Further, unlike the tender stage, an expressions of interest invitation will not form the basis of a legally binding contract. Consequently, it is not necessary to include conditions of contract in the expressions of interest invitation. However, in some circumstances, it may be prudent to advise the prospective tenderers at the expression of interest stage of the conditions of contract that may be included in the request for tender if the project proceeds.

6.5.3 CONDITIONS OF INVITATION

Similar to Conditions of Tender for other public tenders

Generally, the conditions associated with the issue of an expressions of interest invitation will be similar to the conditions of tender included in public tenders. (See Section 6.3.3 titled Conditions of Tender)

6.5.4 DEVELOPING SELECTION CRITERIA AND EVALUATION METHODOLOGY

Aids Assessment

It is necessary to include selection criteria in expressions of interest as a tool for selecting acceptable respondents for short listing to the request for tender stage. The use of well-developed selection criteria enables prospective tenderers to focus their response to the expressions of interest invitation, which aids a Local Government’s assessment of their relative merits. In most respects, developing selection criteria and evaluation methodology is similar to the public tender process. (See Section 6.3.4 titled Developing Selection Criteria and Evaluation Methodology) It should be noted that the weighted price method should not be utilised for expressions of interest because tenderers are not bound by the indicative pricing submitted in response to an expressions of interest invitation. Expressions of interest responses should firstly be assessed against compliance criteria and then non-price qualitative criteria.

6.5.5 REQUESTING INDICATIVE PRICING

Facilitates assessment

It is not always necessary to request pricing at the expressions of interest stage. As expressions of interest do not bind expression of interest respondents, any pricing requested will be indicative only. Short listed acceptable respondents will have an opportunity to submit firm pricing at the request for tender stage.



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6.5.6 ADVERTISING THE EXPRESSIONS OF INTEREST INVITATION

Public notice must be given

Expressions of interest must be invited in the way provided under section 177 of the Finance Regulation. In particular, the invitation must: (a) be made by an advertisement in a newspaper circulating generally in

Council’s local government area; and

(b) allow at least 21 days from the day of publication of the advertisement for the submission of a response to the expressions of interest invitation.

(See Section 6.3.6 titled Advertising the Tender)

Copy of the notice

A copy of the notice seeking expressions of interest should be placed on the tenders register.

6.5.7 ADDENDA

The process for changing an expressions of interest invitation (including the specification included in the expressions of interest invitation) should follow the same process as for changing a request for tender. (See Section 6.3.7 titled Addenda)

6.5.8 BRIEFINGS

The procedure for pre-expression of interest submission briefings to clarify the expressions of interest invitation is the same as the procedure for pre-tender briefings to clarify tender documentation. (See Section 6.3.8 titled Pre-Tender Briefings and Section 6.3.4 titled Developing Selection Criteria and Evaluation Methodology)

6.5.9 CLOSING AND OPENING THE EXPRESSIONS OF INTEREST INVITATION

It is recommended that the guidelines in Section 6.3.9 titled Closing and Opening the Tender, also be employed for the closing and opening of expressions of interest.

6.5.10 EVALUATING THE EXPRESSIONS OF INTEREST

Determine which respondents are capable of satisfactorily supplying the goods or services

The primary rule in evaluating any response to an expressions of interest invitation is that all responses must be treated fairly, impartially and objectively. Each response to an expressions of interest invitation must be evaluated against the selection criteria and weightings which were determined in the formation of the expressions of interest invitation. (See Section 6.3.10 titled Evaluating the Tender) Council may prepare a shortlist from the persons who responded to the invitation and invite tenders from the persons on the shortlist.



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Form a Panel

The number of persons allocated to the evaluation panel will depend on the complexity of what is being purchased and the associated risks. It is often beneficial to ensure that the panel members will be available to sit on the evaluation panel for the request for tender (if required), to ensure continuity. As expressions of interest are generally non-routine or high risk purchases, it is recommended that the evaluation panel consist of a sufficient number of employees with the requisite mix of skills. For routine purchases, it is recommended that at least two Local Government employees be appointed. One person should be nominated as chairperson of the evaluation panel. The chairperson will be responsible for ensuring that decisions are made in a timely manner and for preparing the final recommendation report. It is recommended that the chairperson of the panel compile an evaluation guide (See Section I and the document titled Evaluation Panel Guide) to assist the panel in evaluating expressions of interest. This helps to ensure standardisation and fairness, and provides guidance to all evaluation panel members.

Develop an evaluation matrix

In order to fairly evaluate each response to an expressions of interest invitation, each response must be evaluated against the criteria and weightings stipulated in the expressions of interest invitation. (See Section 6.3.10 titled Evaluating the Tender for some examples of evaluation matrices)

Scoring the EOIs

A scoring range should be agreed to by the evaluation panel. (See Section 6.3.10 titled Evaluating the Tender for examples of scoring models) The scores relate to each prospective tenderer’s level of compliance with the criteria. The chairperson should ensure that all members of the evaluation panel are aware of the scoring range to be utilised.

Clarification

The process for clarification of a response to an expressions of interest invitation is the same as the process for clarification of a tender response. (See Section 6.3.7 titled Addenda)

6.5.11 RECOMMENDATION REPORT

A list of acceptable respondents to be compiled

The acceptable respondents should be listed in a document that: (a) details the reasons for their inclusion on the list; (b) contains a summary of the evaluation matrices; (c) contains their contact details; and (d) contains a brief outline of the key points of their response to the expressions

of interest invitation. This data will also be useful for notification of persons who should be informed of the particulars of the short listed persons, or informed of the decision not to proceed to the request for tender stage.

6.5.12 FORMAL APPROVAL

Formal notification of shortlist to approving body if applicable

If required under Local Government internal process and procedures, the recommendation report should be submitted to the approving body or person for formal approval; eg Manager, Chief Executive Officer, Council.



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Notification of decision

Council should notify each person who submitted a response to the expressions of interest invitation that, as may be the case: (a) Council has decided not to invite tenders; or (b) Council has prepared a shortlist from the persons who responded to the

invitation and may invite tenders from the persons on the shortlist; or (c) Council has prepared a shortlist from the persons who responded to the

invitation and the person is not on the shortlist.

6.5.13 DEVELOPING A REQUEST FOR TENDER

Stage 2-Developing tender documentation

If Council invites tenders from the persons on the shortlist, Council still needs to accept the tender most advantageous to it, having regard to the sound contracting principles set out in section 106 of the Act.

Last Modified On: 01/11/2010

Revision Number: 2010.01