Bob Moodie & Vicky Byers NJM European, Economic & Management Consultants Ltd Selling to the Public Sector – helping Leicestershire SMEs unlock their potential Public Sector Contracts: Collaboration, Subcontracting & Policy Compliance

Public Sector Contract Opportunities: Collaboration & Subcontracting The Key Themes in Todays Workshop The Procurement Context Identifying opportunities Collaborating and Subcontracting Articulating policies

A New Procurement Environment Policy/LegalEconomic/Financial EU Competition Policy (Procurement) Coalition Govt. / Local Govt. (Transparency – Invoices £500+) Coalition Govts aspiration to award 25% of central Govt. contracts to SMEs Leicestershire County Councils Sustainable Commissioning & Procurement Strategy ( ) Price & Value for Money (VFM) & M.E.A.T. Comprehensive Spending Review Rationalisation & Framework Agreements Contract Bundling (Economy of Supply) Ability to deliver economies and efficiency savings SocialTechnological Corporate Social Responsibility Sustainability, Equality & Diversity Innovation & non contractual outcomes E-Portals E-tendering & E-auctions Real time reporting

EU Procurement Thresholds SuppliesServicesWorks Central Government plus some Quangos (see Schedule 1 List) 125,000 (£101,323) 125,000 (£101,323) 4,845,000 (£3,927,260) Other Public Sector e.g. Local Authorities, Universities, FE, etc 193,000 (£156,442) 193,000 (£156,442) 4,845,000 (£3,927,260) Thresholds relate to Total Contract Values (including any extension options), are applicable from 1 st of January 2010 and are NET of VAT Principles: Open competition, non-discrimination, equal treatment and transparency. Note: Exchange Rates

Procurement Procedure ProcedureCharacteristicsWhen the procedure is adopted OpenAll qualified applicants must be given the opportunity to bid For lower risk procurement where supplier capability is less important or where the focus is on price RestrictedTwo stage process with facility to shortlist (PQQ + Tender) Most common Where capability of supplier is key determining factor in the delivery of the contract, market response likely to be huge to allow short-listing NegotiatedTwo stage process with facility to negotiate at second stage Specification is not clear or some creative, artistic or expert input is required. Competitive Dialogue Two stage process with facility to enter into a dialogue with potential suppliers to consider potential solutions and refine specification before invitation to tender Complex procurement where suppliers expertise has significant impact on the development of the specification Framework Agreement Call-Off or Mini competition amongst preferred suppliers (selected from open/restricted procedure) Capability and Capacity is important and is generally a recurring/constant requirement (max 4 years; including extension options)

Who? Opportunity Identification

Context & Opportunity Public procurement, estimated at over £175 billion per annum (13% of UK GDP). Leicestershire County Council spends over £300 million each year on goods, works and services. From to , the Council will need to make savings of around £82m, including £22m from commissioning and procurement. Leicester City Council estimated procurement budget for the Authority is £260 million p.a. ( ). NHS Leicestershire & Rutland Procurement Partnership influences spend of approximately £250 million on goods and services each year.

Opportunities: Public Se ct or 9 Local Authorities: Leicestershire County Council Leicester City Council North West Leicestershire District Council Charnwood Borough Council Melton Borough Council Blaby District Council Harborough District Council Oadby & Wigston Borough Council Hinckley & Bosworth District Council 3 Universities: Leicester, Loughborough, De Montfort 7 FE colleges: Stephenson, Loughborough, Brooksby Melton, North Warwickshire & Hinckley, South Leicestershire, Leicester, Loughborough University School of Art & Design Schools Other: NHS (subject to major review) Housing Associations / RSLs The Emergency Services

Public Sector Organisation Threshold (goods & supplies) Procurement Process & Source Leicestershire County Council <£1k £1k – £20k >£20k - £100k >£100k - EU threshold (£156,442) 1 Oral / Written Quote 3 Written Quotes or Request for Quotation Formal Tender Process Or Leicester City Council< £10k £10k - £49k £50K - EU threshold (£156,442) Up to £250k (works only) Oral / Written Quotes (officer discretion) 3 Written Quotes or Formal Tender Process (officer discretion) or University of Leicester£5k - £25k >£25k – EU threshold (£156,442) 3 Oral / Written Quotes Formal Tender via departments or Local Procedures

Opportunities for consortia Private Sector OpportunitiesThird Sector Opportunities Increasingly public sector contracts are being won by large Prime contractors in the areas of Construction ICT Recruitment Sometimes a prime contractor may commit to using local SMEs to sweeten their offer A consortium of SMEs may be able to create a critical mass and compete with larger companies Large companies and charities are winning public sector contracts in the areas of Healthcare Social Care Education SMEs and smaller charities/social enterprises may be contracted to deliver parts thereof Local Authorities are encouraging smaller charities to collaborate and form consortia to deliver services

Where? Opportunity Identification

Finding Opportunities Where should you look / who should you know? PUBLISHEDUNPUBLISHED SOURCES Tender websites & Supplier portals Networking / relationship building Organisational / Sector websitesProcurement Teams / Category Managers Tenders Electronic Daily (TED)Operational departments and units Local / National press / Press releases Market analysis / competitor intelligence Trade PressPartners / sub contractors Meet the buyer events / briefings Second / Third Tier Contractors / Supply chains

Contract Notices KEY TENDER WEBSITES Name:Source:Used by: Source Leicestershirewww.sourceleicestershire.co.ukLAs, NHS in Leicestershire Eastern Shires Purchasing Organisation NHS in Leicestershire, OJEU tenders Leicestershire County & Rutland NHS In-Tendwww.in-tend.co.ukUniversities, Colleges, Schools, LAs (some in Leicestershire and nationally) Blue Lightwww.blpd.gov.ukPolice, Fire & Rescue Services (including Leicestershire Constabulary & across UK) Supply to Governmentwww.supply2.gov.uk Lower value government tenders (*website will be replaced by Contracts Finder March 2011) OJEUwww.ted.europa.euAny public sector contract above EU Threshold

Identifying Collaborative/Subcontract Opportunities Who presently holds the contracts in your target area? Whos won contract/expanding (Contract Awards) and business press Who is contracting/Who is buying? What contracts are likely to come forward? Anticipating new requirements? e.g. NHS reorganisation Who are the key contacts? LA Outsourcing Flagship projects (e.g. Olympics, Crossrail)

A new and critical source of intelligence As part of Coalition Government commitment to transparency in public expenditure (as of February 2011) every Local Authority must publish details of invoices of £500+ Information can be used to identify competitors and/or potential collaborators/subcontract opportunities

Identifying Opportunities & Raising Your Profile A Strategic Approach

Collaborating or Subcontracting: Be Systematic & Get Organised What is your target market? Who are your competitors and potential business partners? In your target market who are the key buyers (personnel at Department level and Procurement Officers) - engage procurement personnel and seed ideas Find out about approved (accredited) supplier lists/framework agreements

Register and publish on tender e-portals Set up internal processes and individual(s) to monitor tender portals, alerts, sources and review feedback Networking - meet the buyer events, business/sector networking e.g. Chamber of Commerce Collaborating or Subcontracting: Be Systematic & Get Organised

To bid or not to bid? A Strategic Approach

Strategic Decision Making Is the tender a good fit in relation to your companys activities? Can you meet the eligibility criteria (technical qualifications, policy compliance e.g. Quality Assurance, Insurance) ? Do you have a good track record in relation to the opportunity? Do you have the trading history (e.g. 2 years Accounts)? Do you have the capability and capacity to deliver the contract if successful? Can you make sense of the budget and can you deliver the contract on time?

Strategic Decision Making What are the risks? Who are your competitors? What percentage of your turnover does the contract represent? Do you need a partner(s) or will you use subcontractors? Does tender permit consortia/subcontractor response? Are there special requirements e.g. limitations on subcontracting, legal framework, etc ?

Solo or Collaborative Bidding? Form a consortium if: You dont have the capability or capacity You cant meet the 20% rule Options: Consortium Joint Bidding Lead Contractor & Subcontractor Legal basics – will you be jointly and severally liable? Memorandum of understanding (MoU) / Partnership agreement / (Non Disclosure agreement (NDA); Agreement not to compete in other tender) Service level agreement (SLA)/contract NB consortium should be properly constructed, led and managed Strategic Decision Making

Collaborative Bidding

What is Collaboration? InformalFormal Recognition of mutual interest Trust (founded on relationships between key individuals) Informal Agreement Networking & Referrals Mutual subcontracting Legally defined Consortium (increasingly required by LAs) Joint venture Partnership / Merger Vertical Integration

Collaborative Bidding: Benefits Increase capacity and scope to bid without stretching resources Overcoming PQQ impediments i.e. a shared trade history may overcome some problems (accounting history and 20% rule) Combined strengths: capability (skills), increased capacity and experience Business Development: Access new clients and markets

Share development and delivery cost and dilute risk Getting input into your tender Mutual learning and innovative approaches Take out a competitor Improve chance of success Needs Must... A new landscape for the Third Sector... Collaborative Bidding: Benefits

Collaborative Bidding: Challenges Identifying a partner (Time + Effort) Engaging a partner (Risks) – floating the idea (informal meeting) and formal meeting to negotiate and establish Agreement Getting Agreement on roles, responsibilities Getting Agreement on liabilities (jointly and severally liable) Trust relationship (how well do you know your partner – can you be confident they can and will deliver)

Complex decision-making, loss of autonomy, compromises and concessions Sharing sensitive information & know how (protecting your IP?) Logistics (preparing proposal, contract negotiation and contract delivery) Buyer preferences (prefer 1 contractor) – risk averse Legal framework/document (Leicestershire County Council) Collaborative Bidding: Challenges

Choosing the Right Partner

Choosing the right partner Do you already have an existing relationship e.g. Trust & Shared Values (important in Third Sector)? Can they and are they likely to deliver? What is their reputation in the market? Who do they already work for/with? (comparable client/service, etc) Are they financially secure? What Accreditations do they have?

Who would you be working with (individual expertise, experience, attitude and commitment)? Could one opportunity form the basis for collaboration around other opportunities? Would the PQQ present problems for them e.g. Directors conduct, Trading History (Administration or Liquidation), Credit worthiness, Contract(s) terminated for default, Employment Tribunal (you may need to check)? Choosing the right partner

Preparing a Collaborative Proposal

Preparing a collaborative proposal Agree Objectives Client Requirement is mutually understood Designing a solution Roles and responsibilities in preparing the proposal (potential headache) Milestones for preparation of proposal Who will lead proposal (legal implications/framework)? Project management, governance and communications Risk management

How will contract be managed and operated? (e.g. Partnership Agreement) Who will contribute what and when to deliver contract requirements? Is it clear who gets what? Balance of inputs? Are you the Senior or Junior Partner? Contract negotiation, client liaison and decision making? Getting a seat at the table Dispute resolution? What if one partner defaults or the contract is terminated? Preparing a collaborative proposal

Working as a Sub-contractor

Subcontracting: What is the Prime Contractor looking for? Specialist capability or capacity that cant be found or is not available in-house e.g. Niche expertise/experience Cost effective (Value for Money) – makes total price more competitive Quality & Reliability Local Knowledge (relationships) / Local Delivery (coverage) Improved capability and capacity Speed and flexibility Added Value Dilute risk The right attitude and commitment

Subcontracting: Advantages Minimal input into tender (no resource pressure during preparation of tender) Extend your scope of contract opportunities which would otherwise be unavailable to you (particularly important for new and small companies going for larger contracts) Diversify your customer base – new customers, new territories Expand your portfolio of work and experience

Subcontracting: Disadvantages No or minimum control of shape of tender offer No input into contract negotiations Potential cash flow difficulties Subverting/diluting your brand Lack of direct client liaison Loss of control in decision making

Are you named in bid or do you have formal (side) agreement detailing your role? What are your rights if main contractor defaults or client determines to terminate the contract (liabilities and indemnities)? Subcontracting: Disadvantages

Collaborating & Subcontracting: are you bid ready? Skills, Experience & Track Record (business & key individuals) – case studies and CVs Quality Assurance & Accreditation (Professional Standards) Business continuity (IT security) Health & Safety Equal Opportunities Environment & Sustainability Insurances Financial stability & probity Supply chain arrangements Project management systems and reporting

Policies

Health & Safety, Equality & Diversity & Environment Policies Can you articulate the business benefits of these policies as they may relate to the conduct of the contract?

Articulating your values & principles Health & Safety No accidents, injuries or claims Minimises risk of disruption to delivery Good working environment (reduced levels of absenteeism and increased productivity e.g. Minimising stress) Equality & Diversity Staff retention, reduced levels of absenteeism, Enthusiastic and committed workforce Corporate Social Responsibility Values underpin contract delivery Environment Reduced cost, overhead and contribution to Public Authority Commitment to reducing carbon footprint

Do you have a Health & Safety Policy? Weak Answer: Yes, see Appendix 1 Good Answer: The Health & Safety of our staff and customers is a vital part of the companys quality process. We operate a comprehensive Health & Safety Policy (see Appendix 1) covering all aspects of our products (services) and operations and it is reviewed biannually. For an SME employing less than 5 people: Although we are not required legally to have a Health & Safety Policy, we take this matter very seriously and have adopted a Health & Safety Policy in the interests of our staff and clients (see Appendix 1) Accentuate the Positive

What Quality Assurance arrangements does your company operate? If no accreditation is held please explain why not and what alternative steps you take to ensure quality at work? Weak Answer: We operate our own quality system. We have determined that formal accreditation is inappropriate to our companys needs. Complaints are the responsibility of the Managing Director. Good Answer: We regard quality as a vitally important part of our business activity and we operate a comprehensive and strict internal quality assurance process covering all aspects of our business activity (details can be found in Appendix 2). We are committed to a process of continuous improvement and we are in the process of applying for ISO 9001 (we expect to be assessed in May of this year) Accentuate the Positive

Business Continuity What is your Approach to Risk Management in terms of Business Continuity? Do you have a formal Business Continuity Management Programme? If YES, enclose a copy of your plan/programme document Within the last 3 years have there been any occasions when you business operation has been disrupted? If YES what were the circumstances and what was the effect upon your customers? Do you have a strategy for ensuring continuity of supply from your critical suppliers?

Risk: What is your Approach Risk identified for: Mitigation (i.e. what will you do) Impact (High, Medium, Low) Classification of risk: Reputation (R), Operation (O), Finance (F) Client Delivery Supplier Partner / Subcontractor

Some final thoughts Be clear about when to bid and not to bid Make early decisions about whether to go solo / consortium / subcontractor Find out who will buy your products and services and start building relationships early Find out who your competitors are with a view to developing collaborative / subcontracting relationships Understand what the buyer is looking for and bespoke bid accordingly (always answer the question asked!) In preparing bids recognise that nothing less than a professional approach will suffice Remember you do not have to go it alone

Tender Sources

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