Simplifying the tendering process but maintaining ... · GO2.3.36 - Tendering (Excludes Construction) Procedure code: OP-GO2.3.4 - Request for Quotation (Excludes Construction) CMPS
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Simplifying the
tendering process
but maintaining
compliance . . . .
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Tendering
Compliance – with what?
Health Services are not required to comply with Victorian
Government Purchasing Board policies.
HPV has the legislated authority to compel health services to undertake
a range of mandatory actions in relation to procurement.
Those actions are detailed in HPV policy documents.
Lingering references to the VGPB remain in health service DOAs
Estimated Purchase Value Minimum requirement
Up to $2,500 One verbal quote
Between $2,500 and $25,000 One written quote
Between $25,000 and $150,000 Three written quotes
More than $150,000 Public tender
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Tendering
HPV compliance is difficult !
HPV mandates: policies, procedures, processes, reviews and thought
bubbles.
There are 163 individual items that health services are required to be
compliant and they are scattered though-out the five policies
requiring considerable effort to extract.
No clear distinction between big purchases, i.e. millions and small
purchases, i.e. a few dollars.
You will be audited on your compliance.
HPV has five policies and associated guidance material
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1 Policy:
• Governance Framework
1 Procedure• Procurement Complaints
4 Reports:
• Annual report, endorsed by the CEO, to HPV on
• compliance with HPV policies
• compliance with HPV collective agreements
• details of the procurement plan
• contracts entered into or varied
• Annual report to the CEO, from the Procurement Department, on procurement performance and capability
8 Other Documents:
• Major procurement categories
• Procurement strategy
• Procurement activity plan (annual plan published on website)
• Capability development plan (as required)
• Supplier engagement plan
• Contract management strategy
• Complexity assessment by procurement category
• Capability assessment (of the Health Service’s procurement abilities)
Tendering
HPV require the following documentation:
That’s only 14 items of the 163 so what are the others?
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Tendering
3 Market Analysis Review
3.3 a.
consider the outcome of the initial complexity assessment to determine if
the assessment at the category level establishes the basis for being able to
approach the market
Compliant – Noted. This is
conducted in the planning phase
and also incorporated in the
Business Case stage.
b.
conduct further market analysis to improve understanding of the
capability and capacity of the market to supply and to identify
opportunities for market based solutions
c.reassess each procurement requirement with regard to the market
analysis Compliant – Noted. This is
conducted in the planning phase
and also incorporated in the
Business Case stage.d.
undertake further complexity analysis at the level of the individual
procurement activity where either the category assessment provides
insufficient detail to determine the optimal approach to market or the
rules of use of an HPV collective agreement require it
e.
consider engaging an independent probity advisor or probity auditor
based on the complexity of the procurement and the risk to the
organisation
Compliant –
Refer to 2.2 - Procedure -
Strategic Procurement and
Contract Management -
Final Draft 17.02.24.doc
f.
prepare a statement of grounds, or business case, which supports the
decision to proceed with the procurement and identifies the optimal
market engagement strategy
Compliant – refer to Online
Business Case (BCOSS) processes
g.consider how assets associated or accrued as part of the procurement
activity will be managed and/or disposed
Compliant – refer to Online
Business Case (BCOSS) processes
Extract from HPV Policy 2: Procurement Strategic Analysis
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Tendering
A considerable amount of intellectual property has been invested in sorting out
HPV mandated requirements and how they could be accommodated
163 items that you must be able to demonstrate compliance with
• Request for Quotation
• Tendering - excluding construction
• Tendering for Construction
• Purchasing and Prepaid debit cards
• Information Communication Technology Procurement
• Contracts Management and Execution
• Procurement Complaints (HPV mandated)
Apart from the checklist WH created the following 7 procedures:
To tackle this problem Western Health created a checklist . . . . .
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2 Market Approach A BSupporting Evidence of
Compliance and Progress Status
2.3Mandated health services must develop and apply an appropriate market
approach that:
a.encourages participation from the market segment relevant to the
procurement activity
Compliant – refer to WH
Intranet Procedures & Templates:-
Procedure code: OP-
GO2.3.36 - Tendering
(Excludes Construction)
Procedure code: OP-GO2.3.4
- Request for Quotation
(Excludes Construction)
CMPS Templates
b.adopts a market engagement strategy that is cost effective for buyer and
supplier
c.
applies a market approach that engages with potential suppliers in a fair and
equitable manner, and eliminates unnecessary barriers to participation by
Small to Medium Enterprises (SMEs) and local businesses
d.have processes in place to ensure the confidentiality and security of bids from
suppliers
e.provides sufficient time for potential suppliers to prepare a submission taking
into account the complexity of the procurement activity and market factors
f.makes any material change to a procurement requirement available to all
suppliers selected or registered to participate in the procurement process
2.4When requesting the market to provide information or bid for a procurement
activity, a mandated health service must detail requirements that:
Extract from HPV Policy 3: Market Approach
Tendering
http://inside.wh.org.au/policies-procedures-forms/WHDocuments/Tendering (Excludes Construction).docxhttp://inside.wh.org.au/policies-procedures-forms/WHDocuments/Request for Quotation (Excludes Construction).docxhttp://inside.wh.org.au/departmentsandservices/Contracts/Pages/Forms-and- Templates.aspx
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Tendering
HPV mandate that you must do a Market Analysis (before every purchase)
Just being HPV compliant will not automatically mean you have conducted a
good tender, (one that correctly manages all the probity issues).
We will tick off the HPV requirements but there are additional important issues.
HPV mandate that you must do a Complexity Analysis (before every purchase)
There are pages of guidance material you can read if you wish but . . . .
All of your staff that make purchases must, theoretically, conduct a Market
Analysis and a Complexity Analysis before every purchase.
• How long will it take?
• What expertise do you need?
• Do you conduct training sessions?
Tendering Procedure (and yes, simplifying as promised)
What is it and why do it?
What is it and why do it?
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MARKET ANALYSIS (the simplified version – 6 questions)
Market analysis consists of obtaining information on the following:
1. Who are the major suppliers in this market?
2. Does a competitive market between these suppliers exist?
3. Is there significant price variation between suppliers?
4. Consider likely innovations since previous procurement
5. Is there a possibility of obtaining significant non-price benefits?
6. Is there a significant switching cost if WH moves supply away from the
incumbent?
A record should be kept of the Market analysis
It gives you the information you need for the Complexity Analysis !
Ultimately there is actually just one reason for doing the Market Analysis
WH distilled (simplified) the Marketing & Complexity Analysis down to the
essentials. No training needed.
Tendering
This is the “What is it” question answered, but why did we do this?
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Tendering
Leveraged (Tender)
High volume or high frequency
Many suppliers
Can exercise market power
Can influence supplier performance
Can minimise switching costs
Used by multiple health services
Strategic (Tender)
Significant for health service or sector
High value
Competitive market
Critical to operation
New area of procurement for HPV
Potential for non-price benefit
Transactional (no Tender)
Low volume or low frequency
Low value
Low risk
Substitutable/commoditised
Low processing cost
Focused (no Tender)
Limited users
Limited suppliers
High switching costs
Highly customised
Scope for innovation
Can manage supply chain risks
Can manage compliance/performance
Can manage switching costs
Risks of bottleneck
The Complexity Analysis is supposed to tell you what type of purchase you are
going to make shown as a matrix of four possibilities:
This replaces the
VGPB $150K test.
And what is the Complexity Analysis?
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Tendering
COMPLEXITY ANALYSIS (the simplified version)
If the answer to all questions below is Yes then the purchase is to be by tender .
At the first No response there is no need to proceed to later questions.
Purchasers should be able to substantiate, (retain evidence), for answers given.
1. Is there a competitive market for the product?
If No then purchase via Quotation
2. Is it possible to obtain a significant price or very significant non price benefit?
If No then purchase via Quotation
3. Is the cost of switching suppliers outweighed by the potential price or non-
price benefit? If No then purchase via Quotation
4. Is either the cost or the operational impact significant to the health service?
If No then purchase via Quotation
All you need from the Complexity Analysis is: Do you go to Tender or not?
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Tendering
PURCHASING PROCESS (Quotation or Tender)
All purchasing must follow one of only two possible pathways, either Quotation or
Tendering. Detailed procedures have been developed to direct the choice of
purchasing pathway and how to appropriately conduct the purchase.
Please refer to: Request for Quotation procedure
Request for Tender procedure
Note that construction is specifically excluded from these procedures.
(The Director of Capital Development will oversee all construction purchasing
using similar but slightly different procedures).
Note that purchases below $2,000 do not need a quotation to be obtained or a
tender to be run.
Insert the following (something similar) into your DOA
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Tendering
Insert into your DOA (if you’re game) something that delivers this:
Don’t allow the Board to approve tenders
Have a business case go to the Board to approve the expenditure.
The business case argues “why we should purchase”.
The tender answers to the question of “from whom do we purchase?”
Don’t have the Board approve the tender result.
The Board is not well placed to challenge the TEP finding.
The TEP reviewed in detail all the submissions, attended demonstrations,
questioned suppliers and its work is overseen by a probity advisor.
Tendering is predicated upon the TEP being able to successfully determine
an appropriate outcome. Don’t allow the Board to second guess this.
It is possible to mount an argument that the tender process itself needs high
level approval focussed on correct procedure being followed. In other words
the Board may wish to satisfy itself that the process was valid.
Tender results are determined by a Tender Evaluation Panel (TEP).
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Tendering
Tender Governance Panel
• Executive responsible
• Legal Counsel or other probity advisor
• Divisional Director or Operational Head
Do not participate in the tender evaluation
Sit above and ensure the correct processes are followed
Tender Evaluation Panel
• The Tender Lead will create a Tender Evaluation Panel.
• Minimum of 3, preferred maximum of 6.
• Reflects the stakeholders of the product or service being tendered and must
be selected on the basis of their expertise and knowledge of the likely
evaluation criteria.
• An external party may be selected to be a member the Evaluation Panel
A little bit about process – 2 Panels
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Tendering
• the criteria that will be used to assess the tender.
• the evaluation categories, criteria and the weighting allocated to each
• critical categories, if any, which must reach a satisfactory evaluation score for
the tender to be accepted (beware “Mandatory”)
• the weighting between financial and non-financial evaluation criteria.
• the tender fee (used to weed out time wasters)
• whether the evaluation will select a single preferred supplier or short list
• if a tender briefing session and/or site visit by suppliers is appropriate
• if a standard contract template will suffice
Tender Initiation – the panels meet together and determine:
and have a Confidentiality and Conflict of Interest form completed by each
Governance and Evaluation panel member
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Tendering
Key elements to the process
• All suppliers must have access to identical information
• Answers to questions asked must be made available to all suppliers
• No negotiation post tender award
• Best and final offer is problematic but is acceptable provided no new criteria
are introduced and all (short listed) are asked to submit
• Selection criteria (needs its own slide)
• Tender evaluation panel must prioritise tender assessment
• Do not accept “I’m too busy”, “I’m on annual leave”
• Reference checks
I’m not going through the entire Tendering process but, despite the many, many,
many hours of work that went into developing it, if you ask me, I’ll give it to you!
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Tendering
Selection Criteria – the number one problem in tendering
and how Western Health handles it
Financial and Non-Financial
Every criterion is weighted
Every criterion is scored (out of 10)
Determining the best tender offer is on one hand mathematical but scoring is down
to individual judgement/responses to submissions and only the submissions
Some criterion may be labelled “mandatory” although it is better to use “critical”
You MUST severely limit the number of criteria!!
WH allows 10 criteria categories and a maximum of 3 criteria to each
group = total of 30 criteria
Importantly only the criteria categories need a weighting.
The criteria in the category are scored and then the group is averaged
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Tendering
Selection Criteria – the number one problem in tendering
10 criteria categories and a maximum of 3 criteria to each = total of 30
criteria but - a number are pre-populated (can be changed)
No. NON-FINANCIAL Score Weight
Financial v Non-financial weighting determined first.
Total weight by non-financial category to add to the non-financial weight, i.e. 70 or 80 etc.
1. HUMAN RESOURCESa
=weight
1.1
A statement noting the specialist skills, experience and other expertise of
the tendering organisation’s staff, with particular emphasis on delivering
the tender specifications
b
1.2
A statement on past performance in the management of human resources
to conform with the following legislation: Fair Work Act 2009 (Cth) & Equal
Opportunity Act 2010 (Vic)
c
1.3
A statement on past performance in the management of human resources
to conform with the following legislation: Occupational Health & Safety Act
2005 (Vic) & Accident Compensation Act 1985 (Vic)
d
Average then weighted score for this category e=(b+c+d)/3 f =a x e
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Tendering
Selection Criteria – the number one problem in tendering
Other “suggested” criteria categories:
• Technology
• Legal
• Risk and Transition
• Continuous improvement, cost reduction, quality
• Occupational health and safety
The 10th criterion is the financial offer
The criteria people get stuck on – equipment specs
Take the specs and group them into 1, 2 or 3 categories
Remember a maximum of 3 per category
Or take all the specs and make a single criterion – “Must meet these specs”
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Tendering
Selection Criteria – the number one problem in tendering
The problem with “Mandatory”
Let’s say the mandatory criterion is “Must have previous experience in
delivering this type of project”
That previous experience may have been disastrous but they meet the criterion
What you really want is someone who has done it before and done it well – it
needs to be scored not just met. It is not a Yes/No question.
Critical Categories
Due to their importance certain categories are considered Critical and each
must achieve an average score, (not the weighted score), that exceeds 5 from
each Tender Evaluation Panel member for the tender to be accepted.
The reference numbers for the criteria categories deemed to be critical are
listed below:
The WH Tendering Procedure contains the following note:
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Tendering
The Tender Documents
Part 1 General Information
This gives details of the tendering body and contact person.
Part 2 Tender Conditions
This contains the conditions under which the tender will be run
e.g. briefing sessions, FOI, submission conditions, complaints
Part 3 Tender Specification
Each criterion that the tender must fulfil is listed along with space
for the respondent to address each criterion.
Part 4 Statements
Statements from respondents on a range of matters
The statements do not form part of the tender evaluation process
e.g. Corporate information, contact details, referees
Part 5 Draft Contract
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Tendering
Reference Checks
The Tender Manager will conduct a reference check of the preferred supplier.
The result of the reference checks will be distributed to the Governance and
Evaluation panels.
The Evaluation Panel will score the reference checks with all scores needing
to be above 5 for the tender to be accepted.
Scores will be advised to the Tender Manager by email.
If the preferred supplier fails the reference check hurdle the Tender Manager
will consult with the Governance Panel in deciding what action, if any, needs to
occur.
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Tendering
Timelines
Timelines – Post Business Case approval to proceed
Tender Planning Tender Lead appointed Immediately the Business Case is approved
Tender Panels selected 1 week post Tender Lead appointment
Tender Initiation meeting 2 weeks post Panel appointment
Tender Released 2 weeks post Initiation meeting
Tender Briefing Optional 1 week post tender release
Site Visit Optional 1 week post tender release
Tender Open Period4 weeks for complex tenders, 2 weeks
otherwise
Tender Evaluation PeriodSingle supplier outcome
4 weeks for complex tenders, 2 weeks
otherwise
Short list supplier outcome 6 weeks (includes second stage evaluation)
Tender Report 1 week post evaluation completion
Maximum Tender Timeline becomes 16 weeks if tender outcome is within Business Case limits.
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Tendering
Summary of the simplified but still compliant tender process
1. Market Analysis – 6 questions
2. Complexity Analysis – 4 questions
3. Only 2 purchasing pathways – tender or quote
4. Don’t let the Board approve tenders
5. No more than 30 criteria in 10 categories
6. Equipment specs highly summarised
7. Set clear timelines / deadlines
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