Part 11 - Contracts Procedure Rules

2.1

Every purchase made by the Council is legally a contract. Purchases, whether for goods services or works, which cost less than £25,000, do not require a contract under seal and can be procured using the Council's official order. Guidance notes on ordering are available and must be complied with.

2.2

All contracts for purchases that are valued at £25,000 or above must be in writing and sealed with the Common Seal of the Council.

2.3

The expected value of a contract is calculated by totalling all capital and revenue expenditure over the expected life of the contract. This will include licences and maintenance fees, if applicable. For open-ended contracts, the value should be calculated over a notional four-year period.

2.4

Categories of Contracts

2.5

For any contract anticipated to exceed the EC limits, advice must be sought from the Best Value unit before any tendering or procurement action is initiated.

2.6

All contracts or agreements should ensure that the processing of data in any way will only be under the instructions of the Council and will comply with the Data Protection Act 1998. It should be noted that for this purpose, processing includes obtaining, recording, or holding data.

3.1

All projects that will result in the letting of a contract in excess of £25,000 should be properly planned. The Council has an established methodology, the Project Initiation Document (PID) which should be used to identify the objectives, timescale and resources for the project. (See Appendix 1).

3.2

All contracts that are planned should be identified in the relevant Service Unit Performance Plan.

3.3

All contracts should have a nominated officer to act as project manager. All works contracts should have a different officer nominated to review the final account before it is authorised for payment. It is the responsibility of Service Units to ensure that the final account is correct prior to authorisation of the final payment.

3.4

Where contract management is to be carried out on behalf of a client in another Service Unit, then responsibilities for approving variations to contracts and payment of the final sum should be agreed as part of the PID.

3.5

Legal and Property Services should be consulted on the form of contract at the planning stage of the contract. Agreements should not be reached with suppliers/ contractors or consultants on the form of contract without seeking legal advice.

4.1

For each contract a specification should be drawn up which clearly identifies the Council's requirements.

4.2

The scope of the specification should reflect as accurately as possible the approved budget for the project. Where the scope of the project has changed in comparison to the budget originally approved, for example significant additional works have been identified, then advice should be sought from Financial Services before proceeding with the tender process. This will help to avoid problems when tenders are received in excess of the budget available.

4.3

Where applicable, the specification should identify relevant European, UK or other standards.

4.4

The specification should also identify the Council's timescale or deadline for completion of the project, where relevant.

4.5

Prior to the issue of invitations to tender, the specification should be costed to ensure there is a genuine estimate of the value of the contract. This then provides a benchmark against which all tenders can be evaluated.

5.1

The appointment of consultants should comply with the Council's guidance "Protocol on the Use of Consultants".

5.2

At least three quotations for services should be sought.

5.3

The appointment of the successful consultant should follow an evaluation process that complies with the method outlined in the revised "Protocol on the use of Consultants".

5.4

The contract with the consultant should require them to maintain a suitable level of professional indemnity insurance. Advice on insurance matters should be obtained from the Council's Insurance Officer in Financial Services.

6.1

This section applies to contracts for the purchase of goods, where the value of the contract is £25,000 or greater. The contract may include either a single item, which is valued at greater than £25,000 or it may contain a quantity of lower value items that cumulatively exceed £25,000. It is not acceptable to raise two or more official orders to purchase goods in order to avoid compliance with contract regulations.

6.2.1

Advice should be sought from Legal and Property Services on the form of contract required. A contract under seal may not be required for the purchase of goods on many occasions, but there may be occasions when Legal will advise it. The contract terms should clearly establish delivery requirements, insurance liability and the stage at which the goods are transferred into the Council's possession.

6.3.1

A shortlist of contractors willing to supply the goods needs to be drawn up. There are three methods of obtaining a list of contractors:

6.3.2

Placing a public notice in at least one relevant newspaper or trade journal.

6.3.3

Using a purchasing arrangement that has already been approved by Committee, for example a corporate purchasing contract.

6.3.4

Where goods can only be precisely specified by make & model then approval of Management Team may be obtained for the use of written quotations rather than tendering. All other aspects of the Contract Regulations would still apply.

6.4.1

It may be possible to specify the goods required precisely, in which case the key factors to be considered will be price and delivery timescale. A simple shortlisting process may be appropriate. Where the goods required are difficult to specify precisely or where there are different options available, for example IT software, then detailed consideration of the shortlisting and decision criteria need to be made in advance.

6.4.2

Once expressions of interest have been obtained it is necessary to finalise a shortlist of suitable applicants. Only those who meet the shortlist criteria should be invited to submit a tender.

6.4.3

Shortlisting criteria must be determined in advance and included in the public notice or information issued to those expressing interest.

6.4.4

A financial evaluation is mandatory for all companies before inclusion on a shortlist. This must be obtained from Financial Services.

6.4.5

Other criteria that are recommended are appropriate references, evidence of relevant expertise or experience. Where applicable, criteria, which reflect the obligations or policies of the Council, should be included. For example, health & safety; human rights; personnel policies and sustainable development can be included. Potential candidates can be asked to demonstrate that they comply with applicable legislation or regulations or good practice and this information used to assess their suitability for inclusion on the shortlist. Officers need to ensure there is an appropriate balance between the provision of the goods (quality) and other factors. (See Appendix 2).

6.4.6

The process of shortlisting should be recorded and the reasons for rejecting or accepting contractors onto the shortlist should be documented.

6.4.7

Once criteria have been satisfied and the shortlist completed then the criteria should not be used again at the final selection stage. For example, once a candidate has demonstrated that they are capable of providing the goods in accordance with the specification, they should not be discarded on grounds of capability to deliver at the final selection stage. All the candidates on the shortlist should meet the Council's requirements for that contract leaving the final decision to be determined by the Most Economically Advantageous Tender.

6.4.8

In addition to the companies shortlisted, it may be appropriate to identify an additional one or two companies as reserves. These may be invited to tender if one of the shortlisted companies withdraws soon after the issue of an invitation to tender.

6.5.1

If insufficient interest in the advert is received or respondents are not considered suitable, it may not be possible to form a shortlist. The following issues should then be addressed:

• Have reasonable steps been taken to advertise the contract? For example was the advert placed in an appropriate journal?
• Are there particular conditions in the market, which make it difficult to get a response?
• Was the advert and information supplied to those making enquiries suitable? Could improvements be made?
• Have different goods been combined in one package when few contractors are able to supply both?

6.5.2

Depending on the outcome of this analysis there are three options:

6.5.3

Re-advertise, making whatever changes are considered appropriate to the advert or specification.

6.5.4

Approach Committee for an exemption to be granted to the method of tendering as per (ref).

6.5.5

Approach Committee for an exemption to be granted to the numbers of companies to be invited to tender as per section 9.

6.6.1

A minimum of three companies should be invited to tender. The maximum number is six.

6.6.2

All invitations to tender should include the Council's approved Tendering Instructions; Tender Form and Conditions, together with a tender return envelope. (See Appendix 3)

6.6.3

Contractors must be allowed a reasonable period for the completion and return of tenders. For straightforward projects, allow a minimum of four weeks, but for more complex projects, a longer period should be allowed.

6.6.4

The invitation to tender should include a detailed specification, as per section 4.

6.6.5

The basis for awarding the tender needs to be clearly set out in the Invitation to Tender. If factors other than price are to be included then they must be specified. It is important that all tenderers are treated equally and fairly and they must know the basis on which they are submitting a bid to the Council.

6.7.1

All tenders must be returned in a plain sealed envelope, bearing the word "Tender"and the subject to which it relates.

6.7.2

The Tender envelope must not bear any name or mark indicating the sender. If a tender is received bearing a mark then the matter should be referred to the Head of Legal and Property Services and Chief Auditor for a decision on whether the tender should be excluded.

6.7.3

All tender envelopes must be addressed to "The Chief Executive, Bourne Hill".

6.7.4

All tender envelopes received will be marked with the date and time received by the Council.

6.7.5

Tender envelopes will be held securely by an officer appointed by the Chief Executive.

6.8.1

Tenders will be opened at one time, on or after the closing date and time.

6.8.2

Tenders that have been received after the date and time specified will be opened and recorded solely to establish the sender's identity. It will not be considered a valid tender and will be eliminated. The tender should then be returned to the sender with a letter explaining that it was received late and has therefore been excluded.

6.8.3

Tenders will be opened by:

• the Chief Executive or an officer designated by him; and
• the chairman or vice-chairman of the appropriate committee or such member or members as may have been designated.

6.8.4

No other officers are approved to open tenders or attend tender opening.

6.8.5

Once opened the tenders will be recorded in the official register, which will be signed by the officer and member who opened the tenders.

6.9.1

All tenders received should be assessed to ensure they have complied with the tender instructions.

6.9.2

All tenders should be evaluated to select the Most Economically Advantageous Tender. The evaluation should use appropriate criteria in order to determine this: lowest price only or using the methodology set out in Appendix for the inclusion of non-financial factors. This decision must be made prior to the issue of Invitations to Tender. When considering the inclusion of non-financial factors, officers should have regard for Part II of the Local Government Act 1988, which excludes some non-commercial matters from local authority contracting.

6.9.3

It is advisable to seek advice from Financial Services on tender evaluation at an early stage.

6.9.4

Evaluating the price

The price for all compliant tenders should be evaluated in comparison with the priced specification. Where the specification is divided into categories or types of goods, then a comparison should be made across each of these categories. This will identify any material differences from the priced specification and will identify whether the tender has been front-loaded to secure early payment. (See Appendix 4)

6.9.5

As a minimum, the two lowest tenders should be subject to an arithmetic check to ensure that the total price offered is properly calculated. Where the total prices of tenders are close then all tenders should be subject to an arithmetic check.

6.9.6

The lowest tender should then be subject to a detailed evaluation of prices to ensure that the tender has been properly priced and there are no material variations in price from the benchmark specification.

6.9.7

Where the tender evaluation presents evidence of possible collusion between contractors or of any other irregularity, advice must be sought from Internal Audit or Legal and Property Services.

6.9.8

Evaluating non-financial factors

Non-financial factors (such as quality) can be used at the tender evaluation stage in the following circumstances:

• The factors have not already been used at the short-listing stage;
• The methodology developed by the Construction Industry Board and endorsed by the Audit Commission is used (See Appendix 5); and
• This decision has been made prior to the issue of invitation to tender and the criteria and weightings established prior to the opening of tenders

6.9.9

Weightings of up to 30% are authorised for non-financial factors, a minimum weighting of 70% allowed for price.

6.10.1

If only one compliant tender has been received then it can still be accepted, so long as the minimum number of three companies has been invited to tender. This tender should have been priced competitively and therefore the principle of the need for competition will have been satisfied.

6.10.2

Where the lowest compliant tender exceeds the budget available, advice should be sought from Financial Services. There are three possible courses of action:· Obtain additional budget from virement or supplementary estimate. This must be within the limits stated in Financial Regulations. Financial Services will advise on these;

• Reject all tenders received and re-tender. This will be appropriate where the Service Unit has high confidence in the accuracy of their priced specification; or
• Identify goods specified that can be omitted from the contract or otherwise reduced to lower the total cost to an acceptable level. This should only be considered where the goods were desirable and not essential and will not need to be carried out and hence funded separately. Since this could amount to a change to the specification you may need to ask all tenderers to quote for the changes.

6.10.3

Post tender negotiations that seek to reduce the price without a corresponding decrease in the specification must not be undertaken.

6.10.4

Dissatisfaction with the way that a tender has been priced may mean that the lowest tender may not be acceptable without further clarification. If it is necessary to clarify pricing with the contractor then officers are recommended to ensure that clarifications are made in writing and that a third party witnesses any meetings and it is documented. If a tender has not been fully priced it should be rejected as a non-compliant tender.

6.10.5

Where errors are found in the tender the action taken should be determined by whether the overall price is dominant or whether the pricing document is dominant. In the former case the contractor should be asked whether he will stand by the tender or withdraw. Where the pricing document is dominant the contractor should be advised of the item and revised total and asked whether they wish to abide by the new tender sum or withdraw. Note: the standard tender form requires the distinction to be made at the invitation to tender stage.

6.10.6

Where the lowest two tenders have quoted the same price, then the decision should be based on quality.

6.11.1

For contracts for goods, Performance Bonds will not normally be used. The reason for this is that payment for goods would be after delivery, thus minimising the risk to the Council. If more complex delivery and payment terms are to be negotiated, then the Service Unit Head responsible should certify whether a Performance Bond would be appropriate. Advice on this should be sought from Legal and Property Services.

.11.2

Where a bond is not going to be used then alternative arrangements to protect the Council's interests will be required. This can take the form of:

• The application of a higher rate of retention. For example, 10 per cent instead of 5 per cent; or
• Where a bond is required it should be included in the specification of goods and services required.

6.12.1

Liquidated damages are not normally required when purchasing goods, however, there may be occasions when they should be included in a contract. For example when goods need to be delivered by a crucial date. Please contact Legal and Property Services for advice on this.

6.13.1

Goods may come with a form of guarantee or warranty. The terms of these should be reviewed to assess the level of protection offered. Once received, Service Units are responsible for retaining them in a secure place. If the goods are related to a Council property then the guarantee or warranty should be passed to Legal & Property Services for retention with the title deeds.

6.14.1

All assets should be recorded in an inventory and asset register (if applicable). The information should also be passed on to the Exchequer Services Manager in Financial Services to ensure appropriate insurance is in place.

6.15.1

Where the tender to be accepted is either the lowest tender or the highest scoring tender using the price and other factors mechanism, then the project manager is authorised to accept the tender.

6.15.2

Where it is proposed to accept another tender than the one detailed in 6.15.1 above, then approval must be sought from the appropriate Committee.

6.15.3

In many cases a standard acceptance of tender letter can be used (See Appendix 6). Advice should be sought from Legal and Property Services if this is not considered suitable.

6.16.1

On acceptance of a tender, all contracts involving stage payments for goods should be entered into the Contracts Register held by Exchequer Services. It is the responsibility of the officer managing the project to ensure the details are provided. This will avoid delays occurring when contract certificates are submitted for payment.

6.16.2

Single payment contracts need not be entered into the Contracts Register unless they form part of a larger capital scheme and can be paid on invoice.

6.17.1

As part of the contract agreement process the project manager will need to agree payment terms. Stage payments should reflect the delivery or installation of goods, either on a regular basis (for example monthly) or at the end of completed tasks.

6.17.2

Payment in advance for goods should not be agreed.

7.1

This section applies to contracts for services, whether for a one off supply, or for a regular service and where the value of the contract is £25,000 or greater, irrespective of the annual cost of the service supplied. These rules apply for contracts up to the current value of EC Directives.

7.2.1

A shortlist of contractors willing to tender for the work needs to be drawn up. There are two alternative methods of obtaining a list of contractors:· Placing a public notice in at least one relevant newspaper or trade journal; or · Using a select list. A select list should be compiled on both technical and financial criteria and should be approved by Committee (Executive).

7.3.1

Once expressions of interest have been obtained it is necessary to finalise a shortlist of suitable applicants. Only those who meet the shortlist criteria should be invited to submit a tender.

7.3.2

Shortlisting criteria must be determined in advance and included in the public notice or information issued to those expressing interest.

7.3.3

A financial evaluation is mandatory for all companies before inclusion on a shortlist. This must be obtained from Financial Services

7.3.4

Other criteria that are recommended are appropriate references, evidence of relevant expertise or experience. Where applicable, criteria, which reflect the obligations or policies of the Council, should be included. For example, health & safety; human rights; personnel policies and sustainable development can be included. Potential candidates can be asked to demonstrate that they comply with applicable legislation or regulations or good practice and this information used to assess their suitability for inclusion on the shortlist. Officers need to ensure there is an appropriate balance between the provision of the goods (quality) and other factors. (See Appendix 2)

7.3.5

The process of shortlisting should be recorded and the reasons for rejecting or accepting contractors onto the shortlist should be documented.

7.3.6

Once criteria have been satisfied and the shortlist completed then the criteria should not be used again at the final selection stage. For example, once a candidate has demonstrated satisfactory financial standing, they should not be discarded on grounds of financial capability at the final selection stage, unless of course their financial status has altered significantly. All the candidates on the shortlist should meet the Council's requirements for that contract leaving the final decision to be determined by the Most Economically Advantageous Tender.

7.3.7

In addition to the companies shortlisted, it may be appropriate to identify an additional one or two companies as reserves. These may be invited to tender if one of the shortlisted companies withdraws prior to submission of tenders.

7.4.1

If insufficient interest in the advert is received or respondents are not considered suitable, it may not be possible to form a shortlist. The following issues should then be addressed:

• Have reasonable steps been taken to advertise the contract? For example was the advert placed in an appropriate journal?
• Are there particular conditions in the market, which make it difficult to get a response?
• Was the advert and information supplied to those making enquiries suitable? Could improvements be made?
• Have differing services been combined in one package when few contractors are able to supply both?

7.4.2

Depending on the outcome of this analysis there are three options:

7.4.3

Re-advertise, making whatever changes are considered appropriate to the advert or specification.

7.4.4

Approach Committee for an exemption to be granted to the method of tendering as per (ref).

7.4.5

Approach Committee for an exemption to be granted to the numbers of companies to be invited to tender as per para.9.1.

7.5.1

A minimum of three companies should be invited to tender. The maximum number to be invited is six.

7.5.2

All invitations to tender should include the Council's approved Tendering Instructions, Tender Form and Conditions, together with a tender return envelope. (See Appendix 3)

7.5.3

Contractors must be allowed a reasonable period for the completion and return of tenders. For straightforward projects, allow a minimum of four weeks, but for more complex projects, a longer period should be allowed.

7.5.4

The invitation to tender should include a detailed specification, as per paragraph 4.

7.5.5

The basis for awarding the tender needs to be clearly set out in the Invitation to Tender. If factors other than price are to be included then they must be specified. It is important that all tenderers are treated equally and fairly and they must know the basis on which they are submitting a bid to the Council.

7.6.1

All tenders must be returned in a plain sealed envelope, bearing the word "Tender"and the subject to which it relates.

7.6.2

The Tender envelope must not bear any name or mark indicating the sender. If a tender is received bearing a mark then the matter should be referred to the Head of Legal and Property Services and Chief Auditor for a decision on whether the tender should be excluded.

7.6.3

All tender envelopes must be addressed to:
The Procurement Department
Salisbury District Council
PO Box 2117
Salisbury
SP2 2DF

7.6.4

All tender envelopes received will be marked with the date and time received by the Council.

7.6.5

Tender envelopes will be held securely by an officer appointed by the Chief Executive.

7.7.1

Tenders will be opened at one time, on or after the closing date and time.

7.7.2

Tenders that have been received after the date and time specified will be opened and recorded solely to establish the sender's identity. It will not be considered a valid tender and will be eliminated. The tender should then be returned to the sender with a letter explaining that it was received late and has therefore been excluded.

7.7.3

Tenders will be opened by:

• the Chief Executive or an officer designated by him; and
• the chairman or vice-chairman of the appropriate committee or such member or members as may have been designated.

7.7.4

No other officers are approved to open tenders or attend tender opening.

7.7.5

Once opened the tenders will be recorded in the official register, which will be signed by the officer and member who opened the tenders.

7.8.1

All tenders received should be assessed to ensure they have complied with the tender instructions.

7.8.2

All tenders should be evaluated to select the Most Economically Advantageous Tender. The evaluation should use appropriate criteria in order to determine this: lowest price only or using the methodology set out in Appendix for the inclusion of non-financial factors. This decision must be made prior to the issue of Invitations to Tender. When considering the inclusion of non-financial factors, officers should have regard for Part II of the Local Government Act 1988, which excludes some non-commercial matters from local authority contracting.

7.8.3

It is advisable to seek advice from Financial Services on tender evaluation at an early stage.

7.8.4

Evaluating the price

The evaluation of price needs to ensure that the services can be provided satisfactorily within the tender price quoted.

7.8.5

The price for all compliant tenders should be evaluated in comparison with the priced specification. Where the specification is divided into categories or types of services, then a comparison should be made across each of these categories. This will identify any material differences from the priced specification and will identify whether the tender has been front-loaded to secure early payment. (See Appendix 4)

7.8.6

As a minimum, the two lowest tenders should be subject to an arithmetic check to ensure that the total price offered is properly calculated. Where the total prices of tenders are close then all tenders should be subject to an arithmetic check.

7.8.7

The lowest tender should then be subject to a detailed evaluation of prices to ensure that the tender has been properly priced and there are no material variations in price from the benchmark specification.

7.8.8

Where the tender evaluation presents evidence of possible collusion between contractors or of any other irregularity, advice must be sought from Internal Audit or Legal and Property Services.

7.8.9

Evaluating non-financial matters

Non-financial factors (such as quality) can be used at the tender evaluation stage in the following circumstances:

• The factors have not already been used at the short-listing stage;
• The methodology developed by the Construction Industry Board and endorsed by the Audit Commission is used (See Appendix 5); and
• This decision has been made prior to the issue of invitation to tender and the criteria and weightings established prior to the opening of tenders

7.8.10

Weightings of up to 30% are authorised for non-financial factors, a minimum weighting of 70% allowed for price.

7.9.1

If only one compliant tender has been received then it can still be accepted, so long as the minimum number of three companies has been invited to tender. This tender should have been priced competitively and therefore the principle of the need for competition will have been satisfied.

7.9.2

Where the lowest compliant tender exceeds the budget available, advice should be sought from Financial Services. There are three possible courses of action:

• Obtain additional budget from virement or supplementary estimate. This must be within the limits stated in Financial Regulations. Financial Services will advise on these;
• Reject all tenders received and re-tender. This will be appropriate where the Service Unit has high confidence in the accuracy of their priced specification; or
• Identify parts of the services specified that can be omitted from the contract or otherwise reduced to lower the total cost to an acceptable level.

This should only be considered where the services were desirable and not essential and will not need to be carried out and hence funded separately. Since this could amount to a change to the specification you may need to ask all tenderers to quote for the changes.

7.9.3

Post tender negotiations that seek to reduce the price without a corresponding decrease in the specification must not be undertaken.

7.9.4

Dissatisfaction with the way that a tender has been priced may mean that the lowest tender may not be acceptable without further clarification. If it is necessary to clarify pricing with the contractor then officers are recommended to ensure that clarifications are made in writing and that a third party witnesses any meetings and it is documented. If a tender has not been fully priced it should be rejected as a non-compliant tender.

7.9.5

Where errors are found in the tender the action taken should be determined by whether the overall price is dominant or whether the pricing document is dominant. In the former case the contractor should be asked whether he will stand by the tender or withdraw. Where the pricing document is dominant the contractor should be advised of the item and revised total and asked whether they wish to abide by the new tender sum or withdraw.

7.9.6

Where the lowest two tenders have quoted the same price, then the decision should be based on quality.

7.10.1

For contracts for services, the Service Unit Head responsible should certify whether a Performance Bond would be appropriate. Advice on this should be sought from Legal and Property Services.

7.10.2

Where a bond is not going to be used then alternative arrangements to protect the Council's interests will be required. This can take the form of:

• The application of a higher rate of retention. For example, 10 per cent instead of 5 per cent; or
• Where a bond is required it should be included in the specification of services required.

7.11.1

Every contract should include provision for liquidated damages to be paid by the contractor in case the service is not performed to the specification

7.11.2

The liquidated damages specified in the contract must be a reasonable estimate of the costs that would actually be incurred by the Council in the event of non-performance by the Contractor. The damages are normally calculated as a cost per day or per week. Advice on calculating reasonable estimates is available from Financial Services.

7.11.3

All contracts will contain a clause that where there has been a breach of contract by the contractor, the Council may engage an alternative supplier to either remedy the defect or to deliver the remainder of the service outstanding. Where this results in additional costs to the Council, then recovery of these costs will be sought from the contractor.

7.12.1

The Council may have the benefit of a guarantee or warranty. The terms of these should be reviewed to assess the level of protection offered. Once received, Service Units are responsible for retaining them in a secure place. If the goods are related to a Council property then the guarantee or warranty should be passed to Legal & Property Services for retention with the title deeds.

7.13.1

Where the tender to be accepted is either the lowest tender or the highest scoring tender using the price and other factors mechanism, then the project manager is authorised to accept the tender.

7.13.2

Where it is proposed to accept another tender than the one detailed in 7.13.1 above, then approval must be sought from the appropriate Committee.

7.13.3

In many cases a standard acceptance of tender letter can be used (See Appendix 6). Advice should be sought from Legal and Property Services if this is not considered suitable.

7.13.4

Unsuccessful tenderers should be notified promptly. A list of compliant tender prices and tenderers should be provided but should not be matched. Where factors other than price have been used in the tender evaluation, then an appropriate level of debriefing should be offered to each tenderer.

7.14.1

On acceptance of a tender, all contracts for single services should be entered into the Contracts Register held by Exchequer Services. It is the responsibility of the officer managing the project to ensure the details are provided. This will avoid delays occurring when contract certificates are submitted for payment.

7.14.2

On-going service contracts need not be entered into the Contracts Register and can be paid on invoice.

7.15.1

As part of the contract agreement process the project manager will need to agree payment terms. Stage payments should reflect the completion of services, either on a regular basis (for example monthly) or at the end of completed tasks.

7.15.2

Payment in advance for services should not be agreed.

8.1

This section applies to any construction related contracts whether for new build, refurbishment or maintenance.

8.2.1

A shortlist of contractors willing to tender for the work needs to be drawn up. There are two alternative methods of obtaining a list of contractors:

• Placing a public notice in at least one relevant newspaper or trade journal; or
• Using a select list. A select list should be compiled on both technical and financial criteria and should be approved by Committee (Executive).

8.3.1

Once expressions of interest have been obtained it is necessary to finalise a shortlist of suitable applicants. Only those who meet the shortlist criteria should be invited to submit a tender.

8.3.2

Shortlisting criteria must be determined in advance and included in the public notice or information issued to those expressing interest.

8.3.3

A financial evaluation is mandatory for all companies before inclusion on a shortlist, unless already obtained as part of the Select List. The financial evaluation must be obtained from Financial Services.

8.3.4

Other criteria that are recommended are appropriate references, evidence of relevant expertise or experience, performance against the Key Performance Indicators developed by the Construction Best Practice Programme. Where applicable, criteria, which reflect the obligations or policies of the Council, should be included. For example, health & safety; human rights; personnel policies and sustainable development can be included. Potential candidates can be asked to demonstrate that they comply with applicable legislation or regulations or good practice and this information used to assess their suitability for inclusion on the shortlist. Officers need to ensure there is an appropriate balance between the delivery of the service (quality) and other factors. (See Appendix 2)

8.3.5

The process of shortlisting should be recorded and the reasons for rejecting or accepting contractors onto the shortlist should be documented.

8.3.6

Once criteria have been satisfied and the shortlist completed then the criteria should not be used again at the final selection stage. For example, once a candidate has demonstrated satisfactory financial standing, they should not be discarded on grounds of financial capability at the final selection stage, unless of course their financial status has altered significantly. All the candidates on the shortlist should meet the Council's requirements for that contract leaving the final decision to be determined by the Most Economically Advantageous Tender.

8.3.7

In addition to the companies shortlisted, it may be appropriate to identify an additional one or two companies as reserves. These may be invited to tender if one of the shortlisted companies withdraws prior to submission of tenders.

8.4.1

If insufficient interest in the advert is received or respondents are not considered suitable, it may not be possible to form a shortlist. The following issues should then be addressed:

• Have reasonable steps been taken to advertise the contract? For example was the advert placed in an appropriate journal?
• Are there particular conditions in the market, which make it difficult to get a response?
• Was the advert and information supplied to those making enquiries suitable? Could improvements be made?
• Have differing works been combined in one package when few contractors are able to supply both?

8.4.2

Depending on the outcome of this analysis there are three options:

8.4.3

Re-advertise, making whatever changes are considered appropriate to the advert or specification.

8.4.4

Approach Committee for an exemption to be granted to the method of tendering as per (ref).

8.4.5

Approach Committee for an exemption to be granted to the numbers of companies to be invited to tender as per 9.1.

8.5.1

A minimum of 3 companies should be invited to tender for contracts up to £500,000. For contracts of £500,000 up to the EC limit, four companies should be invited to tender. The maximum number of tenders to be invited is six.

8.5.2

All invitations to tender should include the Council's approved Tendering Instructions; Tender Form and Conditions, together with a tender return envelope. (See Appendix 3)

8.5.3

Contractors must be allowed a reasonable period for the completion and return of tenders. For straightforward projects, allow a minimum of four weeks, but for more complex projects, a longer period should be allowed.

8.5.4

The invitation to tender should include a detailed specification, as per section 4.

8.5.5

The basis for awarding the tender needs to be clearly set out in the Invitation to Tender. If factors other than price are to be included then they must be specified. It is important that all tenderers are treated equally and fairly and they must know the basis on which they are submitting a bid to the Council.

8.6.1

All tenders must be returned in a plain sealed envelope, bearing the word "Tender" and the subject to which it relates.

8.6.2

The Tender envelope must not bear any name or mark indicating the sender. If a tender is received bearing a mark then the matter should be referred to the Head of Legal and Property Services and Chief Auditor for a decision on whether the tender should be excluded.

8.6.3

All tender envelopes must be addressed to:
The Procurement Department
Salisbury District Council
PO Box 2117
Salisbury
SP2 2DF

8.6.4

All tender envelopes received will be marked with the date and time received by the Council.

8.6.5

Tender envelopes will be held securely by an officer appointed by the Chief Executive.

8.7.1

Tenders will be opened at one time, on or after the closing date and time.

8.7.2

Tenders that have been received after the date and time specified will be opened and recorded solely to establish the sender's identity. It will not be considered a valid tender and will be eliminated. The tender should then be returned to the sender with a letter explaining that it was received late and has therefore been excluded.

8.7.3

Tenders will be opened by:

• the Chief Executive or an officer designated by him; and
• the chairman or vice-chairman of the appropriate committee or such member or members as may have been designated.

8.7.4

No other officers are approved to open tenders or attend tender opening.

8.7.5

Once opened the tenders will be recorded in the official register, which will be signed by the officer and member who opened the tenders.

8.8.1

All tenders received should be assessed to ensure they have complied with the tender instructions.

8.8.2

All tenders should be evaluated to select the Most Economically Advantageous Tender. The evaluation should use appropriate criteria in order to determine this: lowest price only or using the methodology set out in Appendix for the inclusion of non-financial factors. This decision must be made prior to the issue of Invitations to Tender. When considering the inclusion of non-financial factors, officers should have regard for Part II of the Local Government Act 1988, which excludes some non-commercial matters from local authority contracting.

8.8.3

It is advisable to seek advice from Financial Services on tender evaluation at an early stage.

8.8.4

Evaluating the price

The evaluation of price needs to ensure that the works can be accomplished satisfactorily within the tender price quoted.

8.8.5

The price for all compliant tenders should be evaluated in comparison with the priced specification. Where the specification is divided into categories or types of services, then a comparison should be made across each of these categories. This will identify any material differences from the priced specification and will identify whether the tender has been front-loaded to secure early payment. (See Appendix 4)

8.8.6

As a minimum, the two lowest tenders should be subject to an arithmetic check to ensure that the total price offered is properly calculated. Where the total prices of tenders are close then all tenders should be subject to an arithmetic check.

8.8.7

The lowest tender should then be subject to a detailed evaluation of prices to ensure that the tender has been properly priced and there are no material variations in price from the benchmark specification.

8.8.8

Where the tender evaluation presents evidence of possible collusion between contractors or of any other irregularity, advice must be sought from Internal Audit or Legal and Property Services.

8.8.9

Evaluating non-financial factors

Non-financial factors can be used at the tender evaluation stage in the following circumstances:

• The factors have not already been used at the short-listing stage;
• The methodology developed by the Construction Industry Board and endorsed by the Audit Commission is used (See Appendix 5)
• This decision has been made prior to the issue of invitation to tender and the criteria and weightings established prior to the opening of tenders

8.8.10

Weightings of up to 30% are authorised for non-financial factors, a minimum weighting of 70% allowed for price.

8.9.1

If only one compliant tender has been received then it can still be accepted, so long as the minimum number of companies, as detailed in section 8.5.1, have been invited to tender. This tender should have been priced competitively and therefore the principle of the need for competition will have been satisfied.

8.9.2

Where the lowest compliant tender exceeds the budget available, advice should be sought from Financial Services. There are three possible courses of action:

• Obtain additional budget from virement or supplementary estimate. This must be within the limits stated in Financial Regulations. Financial Services will advise on these.
• Reject all tenders received and re-tender. This will be appropriate where the Service Unit has high confidence in the accuracy of their priced specification.
• Identify parts of the services specified that can be omitted from the contract or otherwise reduced to lower the total cost to an acceptable level. This should only be considered where the services were desirable and not essential and will not need to be carried out and hence funded separately. Since this could amount to a change to the specification you may need to ask all tenderers to quote for the changes.

8.9.3

Post tender negotiations that seek to reduce the price without a corresponding decrease in the specification must not be undertaken.

8.9.4

Dissatisfaction with the way that a tender has been priced may mean that the lowest tender may not be acceptable without further clarification. If it is necessary to clarify pricing with the contractor then officers are recommended to ensure that clarifications are made in writing and that a third party witnesses any meetings and it is documented. If a tender has not been fully priced it should be rejected as a non-compliant tender.

8.9.5

Where errors are found in the tender the action taken should be determined by whether the overall price is dominant or whether the pricing document is dominant. In the former case the contractor should be asked whether he will stand by the tender or withdraw. Where the pricing document is dominant the contractor should be advised of the item and revised total and asked whether they wish to abide by the new tender sum or withdraw.

8.9.6

Where the lowest two tenders have quoted the same price, then the decision should be based on quality.

8.10.1

For contracts for works up to £500,000, the Service Unit Head responsible should certify whether a Performance Bond would be appropriate. Advice on this should be sought from Legal and Pro1perty Services. On contracts of £500,000 and above a performance bond should be obtained.

8.10.2

Where a bond is not going to be used then alternative arrangements to protect the Council's interests will be required. This can take the form of:

• The application of a higher rate of retention. For example, 10 per cent instead of 5 per cent.
• Where a bond is required it should be included in the specification of works required.

8.11.1

Every contract should include provision for liquidated damages to be paid by the contractor in case the works are not performed to the specification.

8.11.2

The liquidated damages specified in the contract must be a reasonable estimate of the costs that would actually be incurred by the Council in the event of non-performance by the Contractor. The damages are normally calculated as a cost per day or per week. Advice on calculating reasonable estimates is available from Financial Services. An approved formula may be used.

8.11.3

All contracts will contain a clause that where there has been a breach of contract by the contractor, the Council may engage an alternative supplier to either remedy the defect or to deliver the remainder of the works outstanding. Where this results in additional costs to the Council, then recovery of these costs will be sought from the contractor.

8.12.1

Where the tender to be accepted is either the lowest tender or the highest scoring tender using the price and other factors mechanism, then the project manager is authorised to accept the tender.

8.12.2

Where it is proposed to accept another tender than the one detailed in 8.12.1 above, then approval must be sought from the appropriate Committee.

8.12.3

In many cases a standard acceptance of tender letter can be used (See Appendix 6). Advice should be sought from Legal and Property Services if this is not considered suitable.

8.12.4

Unsuccessful tenderers should be notified promptly. A list of compliant tender prices and tenderers should be provided but should not be matched. Where factors other than price have been used in the tender evaluation, then an appropriate level of debriefing should be offered to each tenderer.

8.13.1

On acceptance of a tender, all works contracts should be entered into the Contracts Register held by Exchequer Services. It is the responsibility of the officer managing the project to ensure the details are provided. This will avoid delays occurring when contract certificates are submitted for payment.

8.14.1

As part of the contract agreement process the project manager will need to agree payment terms. Stage payments should reflect the completion of works, either on a regular basis (for example monthly) or at the end of completed tasks.

8.14.2

Payment in advance for works should not be agreed.

9.1

Waiving of Standing Orders can only be approved by Committee (or Executive) or using the Special Delegation Procedure. Where the contract exceeds the EC Limits, the tendering process will have to comply with EC requirements, over and above the Council's own Standing Orders.

9.2

To receive exemption from complying with Standing Orders on contracts officers must demonstrate that there are exceptional circumstances where the usual tendering procedures would not be in the best interests of the Council. Officers are required to specify the Standing Orders and contract regulations they request to be waived rather than a general exemption.

9.3

Special Circumstances are defined below where Management Team have been authorised to approve a deviation from the approved tendering procedures. These include:

9.3.1

Entering into a contract for works, services or goods can be authorised by Management Team if they are required in an emergency. The Special Delegation process should be undertaken as soon as possible afterwards.

9.3.2

Management Team may approve extending the life of a contract, which was awarded following a competitive tender. No contract can be extended for more than two years without Committee (Executive) approval.

10.1

Selection of a partner for the provision of services or on construction project may still be entirely compatible with these contract regulations. At the advertisement, shortlisting and invitation to tender stages it will be necessary to make clear the desired partnership arrangement and it is likely to be appropriate to make the selection of the partner on grounds of non-financial factors as well as price.

10.2

Where a partner is to be selected not through a tendering process, but through negotiation, then it will be necessary to gain authorisation from Committee / Executive as detailed in the section above. It will be necessary to demonstrate that the process of negotiation will achieve better value than the selection of a partner through a tender process. For contracts in excess of EU Limits (see Section 2), advice should be sought from the Best Value unit before any action is taken.

10.3

Please seek advice from Internal Audit and Legal and Property Services at an early stage.

11.1

Following the award of a contract, arrangements need to be put in place to ensure the satisfactory management of the contract up until the completion of the service or works and the payment of the final account. The following paragraphs relate primarily to contracts for works and some services.

11.2.1

Prior to the commencement of the service or works all necessary legal and insurance documentation should be in place.

11.2.2

The officer responsible for the contract should monitor the contractor to ensure:

• Performance is in accordance with the specification;
• Any variations to service levels or works are authorised and documented;
• Payments are monitored against the contract sum and approved budget;
• Payments are only authorised for completed services or works that have met the necessary standards; and
• Payments are made in accordance with the contract terms and on time.

11.2.3

The Project Manager should make regular reports to their Service Unit Head or Project Sponsor on the performance of contracts.

11.3.1

The Project Manager or other officer nominated in the Contract will be responsible for authorising all variations to the contract. The Project Manager should make regular reports to the Project Sponsor, including the value and number of variations and the value of the anticipated final account.

11.3.2

The Project Sponsor should agree significant variations before authorisation by the Project Manager. Significant variations can be defined as:

• Variations that equal or exceed 10% of the contract sum and result from unforeseen circumstances disclosed during the period of the contract or subsequent legislation;
• Additions to the original specification, which equal or exceed 5% of the contract sum; or
• Other circumstances as might be agreed between Project Sponsor and Project Manager.

11.3.3

Where the anticipated final account exceeds the contract sum, the Project Sponsor should ensure that the Head of Financial Services is notified as soon as possible. This will enable any budgetary implications to be assessed at an early stage.

11.3.4

There may be occasions when either the Project Sponsor or Head of Financial Services feels that Committee/Executive should be advised of significant variations or of contract overspends. The following criteria should be used when making this assessment:

• The contract sum has been exceeded (or is anticipated to be exceeded) by 10% or £50,000 whichever is the smaller.
• Additional services or features not in the original specification are recommended, which either cannot be contained within the contract sum by savings elsewhere within the contract, or which exceed 10% of the contract sum.

11.4.1

Valuations should be undertaken according to the timetable specified in the contract. The authorised officer, usually the Project Manager or consultant, will then issue certificates. There should be sufficient documentation to support the certificate showing the works or services completed and included in the valuation. Any items that are disputed should be clearly documented.

11.5.1

Interim payments and the final payment will be due after the issue of the appropriate certificate by the Project Manager (or consultant Engineer or Architect). An appropriate VAT invoice to the value of the certificate should then be obtained, authorised by an appropriate officer of the Council and passed to Financial Services for payment, together with a copy of the certificate. Care should be taken to ensure that the payment is made by the due date. The payments will be entered in the Contract Register prior to payment.

11.6.1

Officers involved in the management of contracts should be mindful of the risks of claims for additional payments from contractors. The risk of successful claims should be minimised if good project management techniques are used. In particular the following actions are suggested:

• The Council and its agents should respond promptly to 'Requests for Information' or similar to avoid this being used as a basis for a claim.
• Variations, site instructions etc should be issued promptly.
• Detailed site records are maintained showing progress, plant & workers on site, weather and any issues or problems raised by the contractor.

11.6.2

Where a claim is received then the reasons given and the amount claimed should be assessed. Where the amount of a single claim is significant (in excess of £25,000) or where the cumulative total of claims is 10% of the contract sum, then the Head of Financial Services and Head of Legal and Property Services, as well as the Project Sponsor should be advised. This consultation should take place before any agreement is made with the contractor. If there is concern about the level of claims, then officers are advised to seek guidance before these limits are reached.

11.6.3

All claims for extensions of time and additional costs must be well documented.

11.7.1

As the works or services near completion the Project Manager should ensure that the necessary testing, inspection and commissioning is undertaken. This is necessary to ensure that works or services are completed to the required standard prior to handover and that any 'snagging' defects are recorded and agreed.

11.7.2

The project should continue to be monitored during the maintenance or defect liability period specified in the contract to ensure that all defects are remedied. At the end of this period the contractor should have remedied all defects. Where works or services are outstanding then a report should be made by the project manager to the Project Sponsor or Service Unit Head to detail outstanding work and a proposed course of action. Measures should be taken to either agree the completion of works or services with the contractor or to complete the jobs by other means and recover the costs accordingly. Failure to take action at this time may result in the Council losing it's contractual right to seek recourse from the contractor.

11.8.1

Project Managers should aim to prepare and agree the final account with the contractor within the time limit specified in the contract. To do this requires the preparation of the final account to be carried out during the actual works rather than being left to the end.

11.8.2

Management controls should ensure that the final account is complete and accurate with full documentation. Once agreed by the Service Unit and after any necessary consultation or approval for increased costs (as per paragraph 11.3.1), then the final certificate should be issued to the contractor.

11.8.3

Internal Audit will not verify all final accounts prior to payment. Project Managers and their managers within the Service Unit must expect to take full responsibility for the accuracy and completeness of the final account. All contracts and payments will remain subject to audit scrutiny to ensure that contract management controls are in place and Standing Orders and Contract Regulations are being complied with.

12.1

All projects should be subject to evaluation against the original objectives, timetable and resources. For small or short-term projects the evaluation may only be carried out at the end of the project, large scale or longer-term projects should be evaluated during the course of the project as well as at the end.

12.2

During the course of the project, the project sponsor should carry out an evaluation at significant milestones. In doing so reference should be made to the Project Initiation Document which identified the original milestones and timetable for the project.

12.3.1

To ensure that the Council is achieving best value from its contracts a post completion review should be carried out as soon as practically possible after completion of the contract. This will help to ensure there is continuous improvement of contract management within the Council and to ensure that the completed facility or equipment is utilised effectively.

12.3.2

The project review should consider the following:

• Whether the project has or is likely to succeed in achieving the expected benefits, taking into account the final cost;
• Whether the criteria used to initiate the scheme at the Project initiation stage were reasonable, taking into account current information;
• A comparison of the final cost against the estimated cost;
• A comparison of the timings against those originally planned, with explanations for changes;
• Consider revenue forecasts and running costs against those originally estimated; and
• Identify the impact on further projects of any findings from this review.

12.3.3

A review should also be undertaken of the performance of the contractor to assist in future selection of tenderers. This is of particular relevance when the contractor is included on a select list. The review should cover the performance on costs, timetable, quality of work and working relationships. (See Appendix 8)

12.3.4

A similar review should also be carried out for the project team, including any specialist consultants used. (See Appendix 8).

12.4.1

In Service Units where contracts are regularly undertaken, performance indicators for projects should be developed and reviewed regularly. For example on construction projects the Key Performance Indicators published by the Construction Best Practice Programme may be used.