COUNCIL 7 DECEMBER 2006 PROCUREMENT STRATEGY

COUNCIL

7 DECEMBER 2006

PROCUREMENT STRATEGY

Portfolio Holder: Councillor Alan Jarrett, Finance Report from: Neil Davies, Chief Executive Author: Steve Davies, Head of Procurement 1. Summary 1.1 This report provides Council with a progress report on implementation

of the National Procurement Strategy (NPS). 2. Decision Issues 2.1 Changes to the procurement process will necessitate changes to

Contract Rules, Financial Limits and Employee Delegation Scheme, therefore, an amendment to the Constitution. The amended Contract Rules (see Appendix 3) and Financial Limits and Employee Delegation Scheme (both in Appendix 4) are therefore a matter for full Council.

3. Background 3.1 The Government launched the National Procurement Strategy for local

government in 2003. The strategy details four main themes: Providing leadership and building capacity; Partnering and collaboration; Doing business electronically; and Stimulating markets and achieving community benefits. Contained within each theme area is a number of milestones with implementation target dates.

3.2 The Council confirmed its support for the principles of the NPS in

September 2004. The Cabinet considered an implementation update report on 19 July 2005 and also approved the e-procurement strategy and concordat with local small and medium size businesses.

3.3 This paper provides Council with an update and focuses upon

outstanding work streams.

4. National Procurement Strategy - Implementation Status 4.1 Under each theme there are a number of headline targets and detailed

provisions. Medway’s progress in implementing each theme is detailed below.

4.2 Key Theme One Providing Leadership and Building Capacity 4.2.1 The NPS requires Members and senior Officers’ commitment to

procurement excellence by managing procurement strategically and resourcing it adequately.

Headline Targets:

i) Adopt a corporate procurement strategy that is owned by Members and Officers and whose implementation is monitored regularly.

Status: Completed and on going ii) Carry out a health check on progress against delivery of the NPS Status: Completed and on going

iii) Collaborate with the Regional Centre of Excellence in procurement

and project management. Status: Completed and on going

4.3 Theme Two Partnering and Collaboration 4.3.1 The NPS advocates the delivery of better services to citizens through

the creation of sustainable partnerships or collaboration between councils, public sector bodies and suppliers across all sectors.

Headline Targets:

i) The Procurement Strategy should set out the Council’s approach to partnering.

Status: Completed ii) The Procurement Strategy should set out the Council’s approach to

collaboration and its position with regard to its new trading powers. Status: Completed iii) Every strategic review of service should include a robust and

challenging appraisal of the service delivery options. Status: Partial Completion. iv) Average time taken from OJEU notice to contract award reduced by

10% (2005 target from 2003 base). Status: Incomplete

v) Identify collaboration opportunities with neighbouring councils for shared commissioning of services.

Status: Complete and On-going vi) Average time taken from OJEU notice to contract award reduced by

25% (2006 target from 2003 base) Status: Incomplete

4.4 Key Theme Three - Doing Business Electronically 4.4.1 The strategic objectives of this theme are two-fold. Firstly there is the

achievement of efficiencies in the procure-to-pay cycle (i.e. the cycle from procurement to payment for goods/services/works) and reduction in transaction costs. Secondly there is the use of e-marketplaces to assist councils to access framework agreements and contracts.

Headline Targets:

i) Achieve efficiencies in the procure to pay cycle Status: Partial Completion

ii) Use e-marketplaces to assist councils to access frameworks. Status: Incomplete

iii) Implement an appropriate e-procurement solution as part of the

Councils’ e -government programme. Status: Partial Completion iv) Make use of a purchasing card or suitable electronic alternative for

low value purchases. Status: Partial Completion

4.5 Key Theme Four – Stimulating Markets and Achieving Community

Benefits 4.5.1 The NPS advocates greater engagement with suppliers both locally

and further a field. It recognises procurement’s role in helping to deliver the Council’s corporate objectives including the economic, social and environmental objectives set out in the Community Plan.

Headline Targets:

i) Where relevant consult staff during procurement projects and build employment considerations into the procurement process and contracts.

Status: Completed ii) Publish a ‘Selling to the Council’ guide on the corporate website

together with details of bidding opportunities and contract details for each contract.

Status: Completed iii) Procurement strategies should address

a. The relationship of procurement to the Community Plan, work force issues, diversity equality and sustainability.

b. How the Council will encourage a diverse and competitive supply market

Status: Completed iv) Sustainability should be built into the Council’s Procurement

Strategy, processes and contracts. Status: Completed v) The Council should conclude a Compact with the local voluntary

and community sector. Status: Completed vi) Procurement process for partnerships to include best practice

provisions. Status: Partial Completion vii) The Council should have signed up to the National Concordat for

SME’s. Status: Completed

5. National Procurement Strategy - Future Work Streams 5.1 As has been demonstrated some areas require further action. A

number of work streams are therefore proposed to ensure the successful implementation of the strategy. Details are given below and an implementation timetable is set out in Appendix 1.

5.2 New Risk Based Gateway Procurement Process 5.2.1 The Council’s current procurement process is a value based process,

i.e. value thresholds determine which procurement process should be followed e.g. if your procurement is above £15,000 and below £100,000 you are obliged to seek three quotations. Though value is extremely important it is only one of many factors, or risks, that are important to an organisation. To gain a truer picture of risk one should consider other factors, for example impact upon the public, complexity of delivery model, availability of supply solutions, whole life costs etc. By defining procurement in terms of overall risk, the Council is able to make informed decisions about the allocation of resource and scrutiny. Such risk based procurement models are advocated by the NPS and considered best practice and a key area for future work.

5.2.2 In addition the NPS obliges councils to adopt a ‘Gateway’ review

process; where projects are reviewed and scrutinised at selected pre determined stages and passage from one stage to the next is only possible having successfully passed through the appropriate gates.

Gateway Review 5.2.3 Within any project process there are a number of logical points when

one could pause a process, review progress to date, and assuming one is content with progress, authorise onward progression. Such a review process is known as a ‘Gateway Process’ and the review points as ‘Gateways’. The Council has experience of Gateway Reviews in Customer First and the Older People’s Plan.

5.2.4 Gateway processes differ but a basic rule of thumb suggests a gate at

the following stages in the procurement process: • Project Commencement (Gateway 0) • Options Appraisal/Feasibility (Gateway 1) • Competitive Process (Gateway 2) • Contract Award (Gateway 3) • Contract Management/ Post Project Review (Gateway 4).

5.2.5 At each Gateway the Project Manager is required to submit a report to

a ‘Gatekeeper’ (normally a review board or similar committee), who reviews progress through a process of challenge, before sanctioning progression to the next stage.

Proposed New Procurement Process 5.2.6 Ideally all procurement/commissioning projects regardless of value

would be subject to risk assessment and passage through a full gateway process. However such a process would be unwieldy, bureaucratic and result in significant additional work. It is appropriate to apply greater resources to procurement projects of a higher expenditure, whilst obliging those procurements of a lower expenditure to operate within the ‘spirit’ of the risk based gateway process.

5.2.7 Relating matters to current Contract Rules, one approach would be to

adopt a risk based gateway procurement process for projects with a contract term value (not annual value) greater than £100,000, with procurements with a total contract term value less than £100,000 following existing Contract Rules.

5.2.8 However there may be instances where senior Officers or Members

identify procurement/ commissioning projects with a term value of less than £100,000 that are deemed to be politically sensitive or of significant risk and apply the full risk based gateway process.

The Gatekeeper role 5.2.9 It is proposed there will be five levels of Gatekeeper selectively

performing various roles within the new risk based gateway procurement process; Directorate Management Teams, Procurement section, Procurement Board, the officer scrutiny panel – Procurement

Standards Group and Cabinet. In addition some procurement exercises may benefit from external Gateway Reviews.

5.2.10 The Procurement Board and officer scrutiny panel will be newly

constituted groups. The proposed membership and terms of reference for each is detailed within Appendix 5.

Procurement Process for Projects Classified as High Risk 5.2.11 Reports are required for review and scrutiny by the appropriate

gatekeeper at each Gateway. High Risk reports will require a detailed analysis.

Summary of Gateway Approval for High Risk Procurements:

Approval Route Gateway 0 – Project Commencement

Approval to commence a procurement given by Directorate Management Team

Gateway 1 – Options Appraisal / Feasibility

Approval to proceed to the next stage obtained following successful passage through Procurement Board and approval by Cabinet. External review proposed at this point if appropriate.

Gateway 2 – Competitive Process

The Councils procurement professionals – Procurement section - will approve the procurement strategy and procurement tools.

Gateway 3 – Contract Award As per Gateway 1 Gateway 4 – Contract Management

As per Gateway 1. Paper submitted annually to Cabinet throughout contract term.

Procurement Process for Projects Classified as Medium Risk 5.2.12 Reports are required for review and scrutiny by the appropriate

gatekeeper at each Gateway. Medium Risk reports will require less detailed narrative than High Risk reports.

Summary of Gateway Approval for Medium Risk Procurements: Approval Route Gateway 0 – Project Commencement



Approval to proceed to the next stage obtained from officer scrutiny panel – Procurement Standards Group (PSG). Value of external review considered at this point.


Procurement section will approve the procurement strategy and procurement tools.

Gateway 3 – Contract Award As per Gateway 1, with the addition of Cabinet approval if either the contract value exceeds financial thresholds or PSG decides Cabinet approval is appropriate.

Gateway 4 – Contract Management

As per Gateway 1. Paper submitted at contract term mid point.

Procurement Process for Projects Classified as Low Risk 5.2.13 The proposed process provides scrutiny but without the rigidity and

structure of the High and Medium Risk processes.

Summary of Gateway Approval for Low Risk Procurements:

Approval Route Gateway 0 – Project Commencement



Approval to proceed to the next stage obtained from Directorate Management Team


Procurement section will approve the procurement strategy and procurement tools.

Gateway 3 – Contract Award As per Gateway 1, with the addition of Cabinet approval if contract value exceeds financial thresholds

Gateway 4 – Contract Management

As per Gateway 1.

Procurements with a Contract Term Value Less than £100,000 5.2.14 Procurements with a total contract term value less than £100,000 will

not be required to undergo a full Risk Analysis and equally will not be

subject to the Gateway process detailed above. They will instead continue to follow the existing Contract Rules for procurements less than £100,000, i.e. seeking quotations as value dictates and making award decisions on a best value basis. Officers will however be encouraged to procure in the spirit of the Gateway process, engaging in structured options appraisal, contract award and contract management as required by Directorate Management Teams.

5.2.15 In order to subject a greater degree of this category of spend to the

rigour and scrutiny of the gateway process, the Procurement section will be putting in place a programme of work to identify aggregation, framework and collaboration opportunities for procurements of less than £100,000.

5.3 Forward Procurement Plan (FPP) 5.3.1 The FPP is structured by each Directorate and seeks to identify the

nature of the procurement, the Contract Manager and contact details, the link to Council strategy, project status (including a traffic light rating system) and details of when the project is planned to complete each of the Gateways 0, 1, 2, 3 and 4. The Procurement section will update the Contract Register once a project has received approval at Gateway 3, to ensure it is kept up to date.

5.4 Contract Register 5.4.1 An accurate and timely corporate Contract Register is an integral part

of an effective planning process. Work is underway to improve the accuracy of the current register. The Contract Register will contain details of all contracts where delivery of service/works or supply occurs over a period of time, both for contracts with a defined term or defined delivery outcome that takes a period of time to complete, e.g. a construction project. Contracts for one-off procurements will not be recorded on the register.

5.5 Transparency 5.5.1 Both the Forward Procurement Plan and Contracts Register will be

uploaded onto the intranet on a monthly basis. A cut down version of the Forward Procurement Plan (FPP without details of current status and traffic light rating) will also be made available to the public via the Councils website.

5.5.2 The Forward Procurement Plan and Contract Register will together

provide the Council with visibility of procurement activity that will allow the Council to make informed decisions about aggregation (i.e. combining instances of similar expenditure type and profile) opportunities that may deliver improved Value For Money.

5.6 Stimulating Markets and Achieving Community Benefits 5.6.1 It is proposed to carry out a series of initiatives to meet these aims:

• details of the Councils forthcoming procurement projects above £100,000 in value will be published on the Council’s website; thus supporting the Council’s desire to be more transparent and communicate with the public.

• working with Economic Development colleagues, the local

Federation for Small Business and other interested parties, a programme of Meet the Buyer Events.

• periodically procurement will work with economic development

unit to host ‘How to do business with the Council’ awareness/training sessions. At these sessions Procurement will advise suppliers on how best to bid to the Council. Sessions will specifically focus upon the Councils main procurement documents – the Prequalification Questionnaire and the Invitation to Tender document.

5.7 Review of Standard Documentation 5.7.1 There is a requirement to review and revamp the Councils’ standard

procurement documentation to make documents easier to read, easier to understand and easier to use. There is also a need to update the documents in line with current Council priorities in terms of equalities, environment and sustainability, social and economic policy, TUPE, whistle blowing etc. Document specific guidance and a comprehensive Procurement Manual are also required to aid understanding and ease of use.

5.8 Procurement Training 5.8.1 Currently no formal procurement training is available and there is a

need for training to raise skills and awareness across the Council. In addition to giving a basic grounding in procurement, the courses need to place procurement best practice in the context of how procurement is practised at Medway Council.

6. Advice and analysis 6.1 The proposals within the paper are advocated by the National

Procurement Strategy and represent best practice. By adopting best practice the Council will be at the forefront of public sector procurement.

6.2 Adopting the changes will provide consistency of approach, structure

and efficiency to the procurement process, thus enabling efficient allocation of resources and application of scrutiny.

6.3 Risk management is an integral part to the procurement process.

Procurements are risk assessed at commencement and risk is continually monitored, reviewed and assessed at each of the prescribed gateways.

6.4 Impact assessment is an integral part of the proposed new

procurement process. At Gateway 0 procurement projects are equality and diversity, environmental (sustainability) and health and safety impact assessed. Potential suppliers are assessed in this respect as part of the Pre-qualification Questionnaire process and as required, as part of the Invitation to Tender process.

7. Consultation 7.1 The proposals contained within this report have been subject to

extensive consultation. A programme of consultation has taken place with Directors, Assistant Directors, appropriate Service Managers, the Councils Procurement Standards Group and Economic Development colleagues.

7.2 The Cabinet considered this report on 28 November 2006 and made

the following recommendation to Council (decision no. 231/2006):

q The Cabinet recommended to full Council the approval of the proposed amended Contract Rules as set out in Appendix 3, and the amended Financial Limits and Employee Delegation Scheme, as set out in Appendix 4, and note the phased implementation of the new process and the subsequent need to operate two sets of Contract Rules, Financial Limits and Employee Delegation Scheme – the existing set and the new amended sets – during this period.

7.3 The Cabinet also made the following decisions (decision no.

232/2006):

a) The adoption of a risk based Gateway procurement process for all procurements where anticipated contract term value is above £100,000.

b) The adoption of a transparent and timely procurement planning process.

c) The adoption of the procurement training ‘Driving Licence’ and associated programme of procurement awareness workshops.

d) The need to engage in a work stream to review alternative methods of electronic procurement be noted.

8. Financial and legal implications 8.1 The strategy aims to achieve value for money through the adoption of

best practice. As discussed above, adopting the changes to process will provide consistency of approach, structure and efficiency to the procurement process, thus enabling efficient allocation of resources and application of scrutiny.

8.2 The proposed changes to the procurement process will require

amendment to Contract Rules, Financial Limits and the Employee Delegation Scheme and therefore the Councils Constitution. The proposed new Contract Rules are attached in Appendix 3 and the amended Financial Limits and Employee Delegation Scheme in Appendix 4.

8.3 Implementation of the new process will be staggered over a three-

month period commencing 1 January 2007. Consequently throughout this period both the amended and current Contract Rules, Financial Limits and Employee Delegation Scheme will operate in tandem. The current Contract Rules, Financial Limits and Employee Delegation Scheme will apply to those directorates that have yet to go live with the new process and the amended rules, limits and scheme for directorates upon going live with the new process – see Appendix 1.

9. Recommendation 9.1 That Council approves the amended Contract Rules as set out in

Appendix 3, and the amended Financial Limits and Employee Delegation Scheme, as set out in Appendix 4, and note the phased implementation of the new process and the subsequent need to operate two sets of Contract Rules, Financial Limits and Employee Delegation Scheme – the existing set and the new amended sets – during this period.

Lead officer contact Steve Davies, Head of Procurement Procurement Section, 3rd Floor Civic Centre, 01634 332700 [email protected] Background papers Medway Council Procurement Strategy - available via the Councils website www.medway.gov.uk National Procurement Strategy – available at www.communities.gov.uk

APPENDIX ONE IMPLEMENTATION PROGRAMME Work Stream

Target Completion Date

New Risk Based Gateway Procurement Process: Prior to implementation: Directorate by directorate DMT Awareness Sessions, Lunchtime Briefing Sessions, Directorate Awareness Workshops. Amended Contract Rules, Financial Limits and Employee Delegation Scheme in operation within directorates in accordance with the new procurement process implementation dates. Forward Procurement Plan Implementation and publication on the Internet and Intranet Contract Register Draft register compiled and approved by DMT’s. Register published on the intranet and internet. Review of Standard Documentation Council documents redrafted, published and in use. Schools standard documents created and in use. Procurement Manual drafted and published Procurement Training Driving Licence and Awareness Workshop programme in place Schools Best Practice Procurement Awareness programme in place.

Three month phased implementation 1st January 2007: Finance & Corporate Services and Chief Exec’s Directorates 1st February 2007: Regeneration & Development Directorate 1st March 2007: Children’s Services and Community Services Directorates 1 January 2007 1 January 2007 1 January 2007 1 June 2007 1 January 2007 8 December 2006 1 June 2007

Meet the Buyer Events First quarterly event completed. ‘How to do business with the Council’ Awareness sessions First quarterly event completed. Purchase to Pay System expanded to cater for electronic ordering and receipt of invoices. e-tendering Pilot complete 28 February 2007. Roll out following appropriate awareness campaign. e-auctions Evaluation and completion of pilot 28 February 2007. Roll out following appropriate awareness campaign. Purchasing Cards Evaluation completed by 28 February 2007. Roll out following awareness campaign. e-Market Places Evaluation completed by 28 February 2007. Roll out following awareness campaign.

28 February 2007 28 February 2007 1 March 2007 1 April 2007 1 April 2007 1 April 2007 1 April 2007

APPENDIX TWO RISK BASED PROCUREMENT PROCESS – PROCESS FLOW DIAGRAMS

APPENDIX THREE PART 7 - CONTRACTS RULES 1. Introduction 1.1 These procedures represent the Council's Contract Rules and are designed to secure competition, quality and value for money in the award of contracts for the supply of goods, works or services. 1.2 The letting of contracts is subject to the Council’s Procurement Strategy. That Strategy involves the adoption of a risk based Gateway procurement process for all procurements where the anticipated contract term value is above £100,000. 1.3 The Monitoring Officer in consultation with the Cabinet will from time to time produce guidance on good practice in letting of contracts either generally or in the form of a Procurement Manual. All contracts shall be let and managed in accordance with this guidance. Full details of the Council’s Procurement Strategy and the related procurement processes are set out in the Council’s Procurement Manual. 1.4 Every Member of the Council and every officer and employee of the Council must comply with these Contract Rules. 1.5 Any third party (e.g. a consultant) who is engaged in the letting, management or supervision of a contract on behalf of the Council must comply with these Contract Rules as if s/he were an officer of the Council. 1.6 Subject to Contract Rule 15.2 , these Contract Rules apply to all procurement decisions, regardless of the source of funding, or the status of the contractor (i.e. they apply equally to selection of both main contractors and nominated sub contractors or suppliers). 1.7 All procurement activity must be carried out not only in accordance with these Contract Rules but also in accordance with all relevant European and UK Directives, law and Regulation, the Council's financial regulations, the Council's Procurement Strategy and other relevant guidance. In the event of a conflict European and UK Directives, law and Regulation will take precedence over these Rules. 2. Conduct of members and officers 2.1 These Contract Rules seek to safeguard members and officers from suggestions of impropriety and to ensure that contractors comply with Council policies and conditions. 2.2 Any member or officer involved in the letting of contracts is expected to seek best value for money and continuous improvement, and to behave in a demonstrably fair and even handed manner whatever the contract value. 'Value for Money' is the optimum combination of whole-life costs and quality to meet the Council's specified requirements.

2.3 Directors must ensure that these Rules and the provisions and guidance (particularly that in the Council’s Procurement Manual) relating to the award and management of contracts are properly understood and used in their directorates. To minimise risks to the Council and further ensure best value for money Directors must ensure that all members of their staff involved in the procurement process undertake the Council’s procurement training programme. The Council’s Head of Procurement will be responsible for the provision of such training and fuller details of the training requirements and the courses to meet those requirements are set out in the Council’s Procurement Manual. 2.4 Any officer who knowingly assembles or disassembles a scheme in order to avoid or diminish the requirements of these rules or otherwise disregards the provisions of these Rules or the guidance in the Procurement Manual may be liable to disciplinary action. 2.5 Any member or officer who has, or may appear to have, a conflict of interest, personal or prejudicial interest in the award or management of a contract must declare such interest to the relevant Director and Monitoring Officer (in the case of Members). They must not take part in any decision-making or other process with regard to that contract, or seek to influence others in relation to it. 2.6 No member or officer shall take any personal or private benefit from any contract entered into by the Council. 2.7 No person shall, whether that person is employed by or is a member of the Council or thereafter unlawfully disclose or make any commercial use of any information of whatever kind or description which has been given to that person in confidence by the Council or by any officer or member of the Council, or where such confidential information has come to the knowledge of that person whilst engaged in the course of their employment, to any person who is not authorized or entitled to receive or make use of such information. 2.8 Any member or officer who believes there has been a breach of these Contract Rules should report the matter to the Monitoring Officer. 3 Financial provisions 3.1 No procurement shall be started and no order shall be placed or quotation or tender invited unless the Director acting reasonably believes that there is sufficient budgetary provision to permit the award of a contract. 3.2 In applying these Rules the value shall be determined as the value of the contract over its entire contract term including any possible extension.

3.3 All proposed contracts above £100,000 shall be subject to the Risk Analysis process set out in the Council’s Procurement Manual. This requirement will apply whether or not any of the other Contract Rules are waived. Contracts less than £15,000 3.4 These Rules do not oblige a Director to seek quotations or tenders for contracts with a value of up to £15,000. This is subject to the overall duty to secure value for money. Contracts between £15,000 and £100,000 3.5 A minimum of three quotations shall be sought unless an exemption to this requirement or alternative means of procurement, which is set out in these Rules, applies. This is subject to the overall duty both to comply with the spirit of the Council’s Procurement Strategy and to secure value for money. 3.6 Although procurements with a value between £15,000 and £100,000 will not be required to undergo a full Risk Analysis and will not be subject to the Gateway process outlined in the Council’s Procurement Manual, officers are encouraged to informally subject the procurement to a full Risk Analysis. In any case where the Risk Analysis identifies the risk of the procurement process as being either ‘High’ or ‘Medium’, the procurement process shall then be subject to the appropriate Gateway procurement processes set out in the Council’s Procurement Manual and a full tender exercise must be followed. Contracts greater than £100,000 3.7 Subject to Contract Rule 5 below, relating to the compulsory use of Framework agreements where these are in place, officers shall invite at least three written tenders from suitable persons or organisations unless there is only one supplier. 3.8 The procurement process shall be subject to the Gateway procurement process set out in the Council’s Procurement Manual, unless, pursuant to Contract Rule 12 the Monitoring Officer agrees an exemption to this requirement. 3.9 The European Union will from time to time set contract values above which threshold EU procurement provisions must be followed. The current values are:

(a) Service and supply contracts £[144,459] (b) Works contracts £[3,611,474].

The Monitoring Officer is authorised to insert new figures in this Contract Rule 3.9 when the EU changes these figures without having to seek the prior approval of Council. 4. Tendering Procedures 4.1 Except where an alternative method of procurement is authorised by these Contract Rules or by the Monitoring Officer the presumption shall be

that either the open procedure as specified in Contract Rule 4.2, or the restricted procedure as specified in Contract Rule 4.3 shall be used. Full details of these procedures and the steps to be taken to comply with them are set out in the Council’s Procurement Manual. The Public Contracts Regulations 2006 (the Regulations) must be complied with at all times. The Open Procedure 4.2 This is a procedure leading to the award of a contract whereby all interested contractors must be invited to tender for the contract. The Restricted Procedure 4.3 This is a two-stage procedure leading to the award of a contract whereby only contractors selected by the Council may submit tenders for the Contract. Pre-Qualification Questionnaires (PQQs) 4.4 Where the Restricted Procedure is used, PQQs must be issued to all persons responding to the notice in the Official Journal of the European Union. Tenders shall be invited from suitable contractors following evaluation of the responses to the PQQ. Evaluation shall be subject to and in accordance with the guidance in the Council’s Procurement Manual. The Competitive Dialogue Procedure 4.5 This is a procedure in which any contractor may make a request to participate; and whereby the Council conducts a dialogue with the contractors participating in that procedure with the aim of developing one or more suitable alternative solutions capable of meeting its requirements and which is the basis upon which the contractors chosen by the Council are invited to tender. It is for use in the award of particularly complex contracts where there is a need for the Council to discuss all aspects of the proposed contract with contractors. 4.6 Where the relevant Director and the Monitoring Officer certify that a procurement relates to a particularly complex contract then competitive dialogue as permitted by the Regulations may be used. The Negotiated Procedure 4.7 This is a procedure leading to the award of a Contract whereby the Council negotiates the terms of the Contract with one or more contractors selected by it. 4.8 The negotiated procedure with prior advertisement may be used where the relevant Director and the Monitoring Officer certify that it is impractical to use the open, restricted or competitive dialogue procedures and any of the following circumstances apply:

· The procedure has been discontinued because irregular or inadequate tenders have been received, the terms of the proposed contract have not changed and all organisations that submitted tenders are invited to negotiate.

· Exceptionally where the nature of the contract is such that does not permit overall pricing.

· Where the service specifications cannot be defined with sufficient precision to permit the award of a contract using the open or restricted procedure.

· Where works are to be carried out for non-commercial research, testing or development.

5. Framework agreements (select lists) 5.1 For the purposes of these Contract Rules 'Framework agreement' means an agreement with a supplier or suppliers where prices and terms are agreed for the provision of an estimated quantity of supplies, services or works without commitment until confirmed in a separate purchase order. 5.2 Directors must ensure that where a framework agreement, regardless of estimated value, is to be set up within their directorate, the Monitoring Officer and the Head of Procurement are notified at the earliest opportunity. 5.3 Where a framework agreement has been established by the Council for the supply of goods, works or services the presumption will be that those goods, works or services regardless of value will be procured through this agreement. 5.4 Framework agreements set up by other bodies can be used subject to their use being demonstrated to provide the best value for money to the Council through their submission and subsequent approval through the Gateway procedure, as detailed in the Council’s Procurement Manual. 5.5 Officers must ensure tha t orders under framework agreements are placed using procedures set out in the relevant framework agreement documents. 5.6 A framework agreement cannot be established for longer than four years. 6. Forward Procurement Plan 6.1 The Head of Procurement will hold and maintain a Forward Procurement Plan containing details of procurements to be undertaking in a rolling 18-month programme. Directorates will review this plan monthly and advise the Head of Procurement of any necessary changes to the said Plan. 7. Contract Documents 7.1 Subject to Contract Rule 7.2, unless the prior approval of the Monitoring Officer is obtained the Council’s standard tender and contract documentation must be used. 7.2 National forms of Contract (e.g. Institute of Civil Engineers, National Housing Federation, Royal Institute of British Architects, etc.) may be used subject to any amendments to the said national forms being first agreed by the Monitoring Officer. 8. Procedures For Dealing With Tenders

8.1 Procedures for the receipt, opening, safe storage and return of tenders are fully set out in the Council’s Procurement Manual. 8.2 The Council is not obliged to accept tenders received out of time and the presumption is that they will be rejected and returned to the sender. 9. Clarification of Tenders and Post Tender Negotiations 9.1 Following receipt of tenders contractors will normally only be given the opportunity to correct arithmetic errors. The Council can require final tenders, once received, to be clarified and fine tuned, provided that this does not involve changes to the basic features of the tender or call for tender variations which are likely to distort competition or have a discriminatory effect. 9.2 Post tender negotiations will not normally be permitted. The Monitoring Officer may in circumstances that s/he considers to be exceptional permit such negotiations. Where such permission is given any guidance or directions given by the Monitoring Officer must be followed. 10. Standstill Period 10.1 Subject to the exceptions below, a minimum 10 days mandatory standstill period between communicating the award decision to all tenderers and contract conclusion shall be observed. The mandatory standstill period does not apply:

• to below threshold procurements • to procurements outside the full scope of the procurement directives • where single tendering takes place under Contract Rule 12.2.

10.2 Full details of the steps to be taken to comply with the requirement set out in Contract Rule 10.1 are set out in the Council’s Procurement Manual. 11. Contract Award 11.1 In any cases where the Gateway procurement process is not undertaken Directors shall have delegated authority to award contracts up to a value of £100,000. 11.2 In any cases where the Gateway procurement process is undertaken in respect of contracts up to a value of £100,000 and identifies the risk of the procurement process as being ‘Medium’, the award of contracts will be made by the Officer Scrutiny Panel. 11.3 In any cases where the Gateway procurement process identifies the risk of the procurement process as being ‘High’ and for all contracts which exceed the following thresholds the award of contracts will be made by Cabinet or Council for non-executive contracts -

• Service and supply contracts of a value in excess of £250,000 • Works/construction contracts of a value in excess of £500,000

11.4 In any cases where the Gateway procurement process identifies the risk of the procurement process as being ‘Medium’ and for contracts within the

following thresholds, the award of contracts will be made by the Officer Scrutiny Panel -

• Service and supply contracts of a value between £100,000 and £250,000

• Works/construction contracts of a value between £100,000 and £500,000

11.5 In any cases where the Gateway procurement process identifies the risk of the procurement process as being ‘Low’ and for contracts within the following thresholds, the award of contracts will be made by the relevant Director-

• Service and supply contracts of a value between £100,000 and £250,000

• Works/construction contracts of a value between £100,000 and £500,000

11.6 Each Director will keep a record of contracts awarded under delegated authority and will on a monthly basis advise the Council’s Head of Procurement of contracts awarded. 11.7 Contracts in excess of £250,000 in value or those of ‘Medium’ or ‘High’ risk shall be made under seal, otherwise Directors and their nominees shall be authorised to sign contacts for sums less than that figure. 12. Waiver of Contract Rules 12.1 The person or body authorised to award that contract can in consultation with the Monitoring Officer waive Contract Rules where it is considered to be in the best interests of the Council to do so provided that the waiver does not breach any EU or UK Directive, statute or Regulation. 12.2 Negotiations leading to the award of a contract can be entered into with one or more potential contractors without advertisement in the following exceptional circumstances:

• To invite to negotiate previous interested parties where the original process has been discontinued.

• Where there is a nil response to an advertisement provided that the original terms are not substantially altered for the negotiated procedure.

• Where for technical or artistic reasons or reasons connected with the protection of exclusive rights the contract can only be awarded to one economic entity.

• In a case of extreme urgency brought about by unforeseen circumstances, which are not attributable to Medway when there is insufficient time to secure quotations or tenders.

• Where supplies are acquired from a closing down sale in circumstances permitted by the Regulations.

• Where the contract is for replacement goods or installations and contacting with an alternative supplier to the supplier of the initial goods or installation would either result in incompatibility with

existing goods or installations or lead to disproportionate technical difficulties in the operation and maintenance of existing goods or installations.

• Where the provision of services is reserved to the winner of a design contest as specified in the regulations.

• Where the Council has entered into a contract and additional works or services not exceeding 50% of the value of the original contract are needed through unforeseen circumstances and can not be separated from the original works or services without major inconvenience to Medway or are necessary for the later stages of performance of the contracts.

• Contract extensions permitted by the Regulations. • In any other circumstances permitted by the Regulations.

12.3 In the circumstances set out in Contract Rule 12.2 a Director shall first seek the agreement of the Monitoring Officer to enter into the proposed contract. The Monitoring Officer shall report annually to Council on the number of contracts awarded under delegated powers following procedures set out in Contract Rule 12.1 and 12.2. 12.4 Where a potential extension to a contract has been specifically included in the contract, the Director in consultation with the portfolio holder may authorise that extension regardless of its value provided both that there is budgetary provision and the extension has been demonstrated to offer best value for money to the Council through the submission and subsequent approval of a Gateway 4 Contract Management paper, as detailed in the Council’s Procurement Manual. 13. Contract Award Without Competition - Exceptional Circumstances 13.1 A Director shall have authority to award without competition a contract where a placement is sought for an individual with a registered care provider of their choice under the National Health Service and Community Care Act 1990, or where the particular needs of an individual (either an adult or a child) require a particular social care package, or where an individual has special educational needs which are only available from a particular provider in the opinion as appropriate of the Director of Community Services or the Director of Children’s Services. In each case a record of the reasons for the choice of provider will be maintained on the individual’s case notes. A record of the annual cumulative expenditure with each provider will be maintained by each directorate and made available for audit. 13.2 A Director shall, in relation to the appointment of a particular individual artiste (or a particular individual group of artistes) have authority to award without competition a contract where the value of each individual contract does not exceed £250,000. 13.3 The Assistant Director, Legal, Contracts and Property Services, may engage a barrister without competition. The appointment will be made on the basis of which barrister is in the opinion of the Assistant Director, Legal, Contracts and Property Services, best able to provide the necessary expertise

and value for money. The Assistant Director, Legal Contracts and Property Services, will maintain a departmental record of the amounts of expenditure with external barristers. 14. Schools, joint procurements and Council services 14.1 Schools letting contracts under delegated budgets must either comply with these Contract Rules or alternatively adopt a local procedure, which provides for equivalent security and probity in the handling of tenders and compliance with legal requirements. 15. Joint Procurements 15.1 Where the Council is working in partnership with another person or organisation then any procurement which is being undertaken in support of the aims of that partnership must either comply with these Contract Rules or comparable rules maintained by the partner organisation to ensure security and probity in handling tenders and compliance with legal requirements. 15.2 Where the Council is entering into a contract as agent for another public body or government department, these Contract Rules apply only in so far as they are consistent with the requirements of the body concerned. 16. Council Services 16.1 Where the Council is providing works, supplies or services to another person or organisation the Council shall ensure it secures the best price reasonably obtainable.

APPENDIX FOUR AMENDED CONSTITUTION CHAPTER 3 PART 5 – FINANCIAL LIMITS (Page 71) – [Amendment to paragraph 5.2 and 5.3] PART 5 - Financial limits 5.1 Land acquisition and disposal ? ??Limit of authority for Cabinet to act – up to £1,000,000 ? ??Limit of authority for directors to act – up to £100,000 5.2 Acceptance of Tenders

• Limit of authority for a director to accept a tender where the Gateway procurement process has not been undertaken - £100,000

• Limit of authority for a director to accept a construction/works tender where the risk classification is ‘low’ - £500,000

• Limit of authority for a director to accept any other tender where the risk classification is ‘low’ - £250,000

• Limit of authority for the Officer Scrutiny Panel to accept a construction/works tender where the risk classification is ‘medium’ - £500,000

• Limit of authority for the Officer Scrutiny Panel to accept any other tender where the risk classification is ‘medium’ - £250,000

• In all cases where the risk classification is ‘high’ approval by Cabinet 5.3 Sealing of contracts All proposed contracts that exceed £250,000 or have a risk classification of ‘Medium’ or ‘High’, and any other proposed contract that a Director considers should be sealed. 5.4 Budget transfer limits ? ??Limits applicable to the Cabinet:

(a) Budget transfers (virements) (i) Revenue item up to £500,000 (ii) Capital item up to £1,000,000

? ??Limits applicable to directors:

(a) Budget transfers (virements) (i) Revenue item up to £250,000 (ii) Capital item up to £150,000

5.5 Writing off irrecoverable debts ? ??Director: Debts relating to the services which are the responsibility of the director – up to £5,000. ? ??Director of Finance and Corporate Services in consultation with the Director responsible for services to which the debt relates:

Council tax - within the approved provision agreed by Council when setting the Council tax base

Business rates - within the provisions recommended by the Office of

the Deputy Prime Minister Other debts of the Council - Up to £25,000

5.6 Other financial limits (a) Merit Award Panel (education and leisure)

? ??Limit of value of additional discretionary awards - £1000 to be met from the Medway Merit Award Reserve

(b) All directors

? ??Ex gratia payments to staff - £250 limit (c ) Chief Executive

? ??Claim against the Council, limit of power to authorise payment exceeding £5,000 ? ??Ex gratia payments to members for loss suffered in the course of their duties - £250 limit (in consultation with group leaders)

(d) Director of Finance and Corporate Services

? ??Variations to the terms of leases or sub leases etc, including surrenders, renewals etc, up to a limit of £10,000 per annum on any single transaction

(e) Director of Development and Environment

? ??Limit of authority to authorise dayworks based contracts in case of urgency £5,000

AMENDED CONSTITUTION CHAPTER 3, PART 4 – EMPLOYEE DELEGATION SCHEME (page 70) – [A new sub-paragraph 11 has been added.] Description of delegation Responsibility

delegated from ? ??To determine applications for professional sideshows Cabinet and amusements in open spaces or recreation grounds in the borough. 10.12 Allotments: ? ??To manage the allotment services of the Council in Cabinet compliance with current legislation and the policies of the Council. 10.13 Medway Partners for Growth Scheme: Cabinet ? ??Applications to the scheme to be considered and determined by the Assistant Director (Economic Development and Neighbourhood Renewal) in consultation with the Portfolio Holder. 10.14 Sports and leisure facilities, children's play activities and halls of the Council: ? ??Manage the sports and leisure facilities, children's play Cabinet activities and halls of the Council in compliance with current legislation and the policies of the Council. 10.15 Arts and entertainment: ? ??Manage the arts and entertainment services of the Cabinet Council including the management of theatres in compliance with current legislation and the policies of the Council. 11. Officer Scrutiny Panel 11.1 Contract Award

• Subject to the provisions of paragraph 5.2 of Cabinet Part 5 - Financial Limits, to award service/supply contracts and works/construction contracts. 4.1 So far as this scheme relates to delegations to employees for Cabinet functions it is provisional pending confirmation by the Leader of the Cabinet.

APPENDIX FIVE PROCUREMENT BOARD AND OFFICER SCRUTINY PANEL MEMBERSHIP AND TERMS OF REFERENCE Procurement Board: Membership Chair Cllr Alan Jarrett Director of Finance and Corporate Services Neil Davies AD Legal, Contracts & Property and Monitoring Officer Deborah Upton AD Central Finance Mick Hayward Head of Procurement Steve Davies Community Services Representative To be confirmed Children’s Services Representative To be confirmed Regeneration and Development Representative To be confirmed Terms of Reference § The Procurement Board will to provide critical review, analysis and

scrutiny of High Risk Procurement activity across the Council with a view to ensuring the provision of best value goods, services and works.

§ The Procurement Board will subject procurement projects to such review, analysis and scrutiny at Gateway 1 Options Appraisal, Gateway 3 Contract Award and Gateway 4 Contract Management.

§ Project Managers responsible for the submission of papers will be required to attend meetings to present to their paper and answer questions.

§ The board will have the authority to either recommend approval of papers presented to it or reject papers, either outright or pending clarification and further submission.

§ Those papers recommended for approval will be forwarded to the next Cabinet meeting for approval to progress to the next stage in the procurement process.

§ The Procurement Board will meet on a three weekly basis aligned to the Cabinet meetings.

Officer Scrutiny Panel – Procurement Standards Group: Membership Chair (Dir. of Finance and Corporate Services) Neil Davies AD Legal, Contracts & Property and Monitoring Officer Deborah Upton AD Central Finance Mick Hayward Head of Procurement Steve Davies Community Services Representative To be confirmed Children’s Services Representative To be confirmed Regeneration and Development Representative To be confirmed

Terms of Reference § The Procurement Standards Group (PSG) will provide critical review,

analysis and scrutiny of Medium Risk Procurement activity across the Council with a view to ensuring the provision of best value goods, services and works.

§ The PSG will subject procurement projects to such review, analysis and scrutiny at Gateway 1 Options Appraisal, Gateway 3 Contract Award and Gateway 4 Contract Management.

§ Project Managers responsible for the submission of papers will be required to attend meetings to present to their paper and answer questions.

§ PSG will have the authority to approve papers presented to it or reject papers, either outright or pending clarification and further submission at Gateway 1 Options Appraisal and Gateway 4 Contract Management.

§ At Gateway 3 Contract Award, PSG will have the authority to reject papers either outright or pending clarification and subsequent resubmission.

§ At Gateway 3 Contract Award PSG will have the authority to approve papers presented to it where the contract term value is less than £250,000 for goods and services and less than £500,000 for works.

§ At Gateway 3 Contract Award PSG will have the authority to recommend approval in respect of those procurements where the contract term is above these thresholds.

§ Those papers recommended for approval will be forwarded to the next Cabinet meeting for approval to progress to the next stage in the procurement process.

§ The Procurement Board will meet on a three weekly basis aligned to the Cabinet meetings.