Simplifying the tendering process but maintaining ... · GO2.3.36 - Tendering (Excludes Construction) Procedure code: OP-GO2.3.4 - Request for Quotation (Excludes Construction) CMPS

Simplifying the

tendering process

but maintaining

compliance . . . .

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Tendering

Compliance – with what?

Health Services are not required to comply with Victorian

Government Purchasing Board policies.

HPV has the legislated authority to compel health services to undertake

a range of mandatory actions in relation to procurement.

Those actions are detailed in HPV policy documents.

Lingering references to the VGPB remain in health service DOAs

Estimated Purchase Value Minimum requirement

Up to $2,500 One verbal quote

Between $2,500 and $25,000 One written quote

Between $25,000 and $150,000 Three written quotes

More than $150,000 Public tender

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Tendering

HPV compliance is difficult !

HPV mandates: policies, procedures, processes, reviews and thought

bubbles.

There are 163 individual items that health services are required to be

compliant and they are scattered though-out the five policies

requiring considerable effort to extract.

No clear distinction between big purchases, i.e. millions and small

purchases, i.e. a few dollars.

You will be audited on your compliance.

HPV has five policies and associated guidance material

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1 Policy:

• Governance Framework

1 Procedure• Procurement Complaints

4 Reports:

• Annual report, endorsed by the CEO, to HPV on

• compliance with HPV policies

• compliance with HPV collective agreements

• details of the procurement plan

• contracts entered into or varied

• Annual report to the CEO, from the Procurement Department, on procurement performance and capability

8 Other Documents:

• Major procurement categories

• Procurement strategy

• Procurement activity plan (annual plan published on website)

• Capability development plan (as required)

• Supplier engagement plan

• Contract management strategy

• Complexity assessment by procurement category

• Capability assessment (of the Health Service’s procurement abilities)

Tendering

HPV require the following documentation:

That’s only 14 items of the 163 so what are the others?

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3 Market Analysis Review

3.3 a.

consider the outcome of the initial complexity assessment to determine if

the assessment at the category level establishes the basis for being able to

approach the market

Compliant – Noted. This is

conducted in the planning phase

and also incorporated in the

Business Case stage.

b.

conduct further market analysis to improve understanding of the

capability and capacity of the market to supply and to identify

opportunities for market based solutions

c.reassess each procurement requirement with regard to the market

analysis Compliant – Noted. This is

conducted in the planning phase

and also incorporated in the

Business Case stage.d.

undertake further complexity analysis at the level of the individual

procurement activity where either the category assessment provides

insufficient detail to determine the optimal approach to market or the

rules of use of an HPV collective agreement require it

e.

consider engaging an independent probity advisor or probity auditor

based on the complexity of the procurement and the risk to the

organisation

Compliant –

Refer to 2.2 - Procedure -

Strategic Procurement and

Contract Management -

Final Draft 17.02.24.doc

f.

prepare a statement of grounds, or business case, which supports the

decision to proceed with the procurement and identifies the optimal

market engagement strategy

Compliant – refer to Online

Business Case (BCOSS) processes

g.consider how assets associated or accrued as part of the procurement

activity will be managed and/or disposed

Compliant – refer to Online

Business Case (BCOSS) processes

Extract from HPV Policy 2: Procurement Strategic Analysis

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Tendering

A considerable amount of intellectual property has been invested in sorting out

HPV mandated requirements and how they could be accommodated

163 items that you must be able to demonstrate compliance with

• Request for Quotation

• Tendering - excluding construction

• Tendering for Construction

• Purchasing and Prepaid debit cards

• Information Communication Technology Procurement

• Contracts Management and Execution

• Procurement Complaints (HPV mandated)

Apart from the checklist WH created the following 7 procedures:

To tackle this problem Western Health created a checklist . . . . .

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2 Market Approach A BSupporting Evidence of

Compliance and Progress Status

2.3Mandated health services must develop and apply an appropriate market

approach that:

a.encourages participation from the market segment relevant to the

procurement activity

Compliant – refer to WH

Intranet Procedures & Templates:-

Procedure code: OP-

GO2.3.36 - Tendering

(Excludes Construction)

Procedure code: OP-GO2.3.4

- Request for Quotation

(Excludes Construction)

CMPS Templates

b.adopts a market engagement strategy that is cost effective for buyer and

supplier

c.

applies a market approach that engages with potential suppliers in a fair and

equitable manner, and eliminates unnecessary barriers to participation by

Small to Medium Enterprises (SMEs) and local businesses

d.have processes in place to ensure the confidentiality and security of bids from

suppliers

e.provides sufficient time for potential suppliers to prepare a submission taking

into account the complexity of the procurement activity and market factors

f.makes any material change to a procurement requirement available to all

suppliers selected or registered to participate in the procurement process

2.4When requesting the market to provide information or bid for a procurement

activity, a mandated health service must detail requirements that:

Extract from HPV Policy 3: Market Approach

Tendering

http://inside.wh.org.au/policies-procedures-forms/WHDocuments/Tendering (Excludes Construction).docxhttp://inside.wh.org.au/policies-procedures-forms/WHDocuments/Request for Quotation (Excludes Construction).docxhttp://inside.wh.org.au/departmentsandservices/Contracts/Pages/Forms-and- Templates.aspx

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HPV mandate that you must do a Market Analysis (before every purchase)

Just being HPV compliant will not automatically mean you have conducted a

good tender, (one that correctly manages all the probity issues).

We will tick off the HPV requirements but there are additional important issues.

HPV mandate that you must do a Complexity Analysis (before every purchase)

There are pages of guidance material you can read if you wish but . . . .

All of your staff that make purchases must, theoretically, conduct a Market

Analysis and a Complexity Analysis before every purchase.

• How long will it take?

• What expertise do you need?

• Do you conduct training sessions?

Tendering Procedure (and yes, simplifying as promised)

What is it and why do it?

What is it and why do it?

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MARKET ANALYSIS (the simplified version – 6 questions)

Market analysis consists of obtaining information on the following:

1. Who are the major suppliers in this market?

2. Does a competitive market between these suppliers exist?

3. Is there significant price variation between suppliers?

4. Consider likely innovations since previous procurement

5. Is there a possibility of obtaining significant non-price benefits?

6. Is there a significant switching cost if WH moves supply away from the

incumbent?

A record should be kept of the Market analysis

It gives you the information you need for the Complexity Analysis !

Ultimately there is actually just one reason for doing the Market Analysis

WH distilled (simplified) the Marketing & Complexity Analysis down to the

essentials. No training needed.

Tendering

This is the “What is it” question answered, but why did we do this?

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Tendering

Leveraged (Tender)

High volume or high frequency

Many suppliers

Can exercise market power

Can influence supplier performance

Can minimise switching costs

Used by multiple health services

Strategic (Tender)

Significant for health service or sector

High value

Competitive market

Critical to operation

New area of procurement for HPV

Potential for non-price benefit

Transactional (no Tender)

Low volume or low frequency

Low value

Low risk

Substitutable/commoditised

Low processing cost

Focused (no Tender)

Limited users

Limited suppliers

High switching costs

Highly customised

Scope for innovation

Can manage supply chain risks

Can manage compliance/performance

Can manage switching costs

Risks of bottleneck

The Complexity Analysis is supposed to tell you what type of purchase you are

going to make shown as a matrix of four possibilities:

This replaces the

VGPB $150K test.

And what is the Complexity Analysis?

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Tendering

COMPLEXITY ANALYSIS (the simplified version)

If the answer to all questions below is Yes then the purchase is to be by tender .

At the first No response there is no need to proceed to later questions.

Purchasers should be able to substantiate, (retain evidence), for answers given.

1. Is there a competitive market for the product?

If No then purchase via Quotation

2. Is it possible to obtain a significant price or very significant non price benefit?


3. Is the cost of switching suppliers outweighed by the potential price or non-

price benefit? If No then purchase via Quotation

4. Is either the cost or the operational impact significant to the health service?


All you need from the Complexity Analysis is: Do you go to Tender or not?

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Tendering

PURCHASING PROCESS (Quotation or Tender)

All purchasing must follow one of only two possible pathways, either Quotation or

Tendering. Detailed procedures have been developed to direct the choice of

purchasing pathway and how to appropriately conduct the purchase.

Please refer to: Request for Quotation procedure

Request for Tender procedure

Note that construction is specifically excluded from these procedures.

(The Director of Capital Development will oversee all construction purchasing

using similar but slightly different procedures).

Note that purchases below $2,000 do not need a quotation to be obtained or a

tender to be run.

Insert the following (something similar) into your DOA

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Tendering

Insert into your DOA (if you’re game) something that delivers this:

Don’t allow the Board to approve tenders

Have a business case go to the Board to approve the expenditure.

The business case argues “why we should purchase”.

The tender answers to the question of “from whom do we purchase?”

Don’t have the Board approve the tender result.

The Board is not well placed to challenge the TEP finding.

The TEP reviewed in detail all the submissions, attended demonstrations,

questioned suppliers and its work is overseen by a probity advisor.

Tendering is predicated upon the TEP being able to successfully determine

an appropriate outcome. Don’t allow the Board to second guess this.

It is possible to mount an argument that the tender process itself needs high

level approval focussed on correct procedure being followed. In other words

the Board may wish to satisfy itself that the process was valid.

Tender results are determined by a Tender Evaluation Panel (TEP).

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Tendering

Tender Governance Panel

• Executive responsible

• Legal Counsel or other probity advisor

• Divisional Director or Operational Head

Do not participate in the tender evaluation

Sit above and ensure the correct processes are followed

Tender Evaluation Panel

• The Tender Lead will create a Tender Evaluation Panel.

• Minimum of 3, preferred maximum of 6.

• Reflects the stakeholders of the product or service being tendered and must

be selected on the basis of their expertise and knowledge of the likely

evaluation criteria.

• An external party may be selected to be a member the Evaluation Panel

A little bit about process – 2 Panels

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Tendering

• the criteria that will be used to assess the tender.

• the evaluation categories, criteria and the weighting allocated to each

• critical categories, if any, which must reach a satisfactory evaluation score for

the tender to be accepted (beware “Mandatory”)

• the weighting between financial and non-financial evaluation criteria.

• the tender fee (used to weed out time wasters)

• whether the evaluation will select a single preferred supplier or short list

• if a tender briefing session and/or site visit by suppliers is appropriate

• if a standard contract template will suffice

Tender Initiation – the panels meet together and determine:

and have a Confidentiality and Conflict of Interest form completed by each

Governance and Evaluation panel member

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Tendering

Key elements to the process

• All suppliers must have access to identical information

• Answers to questions asked must be made available to all suppliers

• No negotiation post tender award

• Best and final offer is problematic but is acceptable provided no new criteria

are introduced and all (short listed) are asked to submit

• Selection criteria (needs its own slide)

• Tender evaluation panel must prioritise tender assessment

• Do not accept “I’m too busy”, “I’m on annual leave”

• Reference checks

I’m not going through the entire Tendering process but, despite the many, many,

many hours of work that went into developing it, if you ask me, I’ll give it to you!

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Tendering

Selection Criteria – the number one problem in tendering

and how Western Health handles it

Financial and Non-Financial

Every criterion is weighted

Every criterion is scored (out of 10)

Determining the best tender offer is on one hand mathematical but scoring is down

to individual judgement/responses to submissions and only the submissions

Some criterion may be labelled “mandatory” although it is better to use “critical”

You MUST severely limit the number of criteria!!

WH allows 10 criteria categories and a maximum of 3 criteria to each

group = total of 30 criteria

Importantly only the criteria categories need a weighting.

The criteria in the category are scored and then the group is averaged

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10 criteria categories and a maximum of 3 criteria to each = total of 30

criteria but - a number are pre-populated (can be changed)

No. NON-FINANCIAL Score Weight

Financial v Non-financial weighting determined first.

Total weight by non-financial category to add to the non-financial weight, i.e. 70 or 80 etc.

1. HUMAN RESOURCESa

=weight

1.1

A statement noting the specialist skills, experience and other expertise of

the tendering organisation’s staff, with particular emphasis on delivering

the tender specifications

b

1.2

A statement on past performance in the management of human resources

to conform with the following legislation: Fair Work Act 2009 (Cth) & Equal

Opportunity Act 2010 (Vic)

c

1.3

A statement on past performance in the management of human resources

to conform with the following legislation: Occupational Health & Safety Act

2005 (Vic) & Accident Compensation Act 1985 (Vic)

d

Average then weighted score for this category e=(b+c+d)/3 f =a x e

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Other “suggested” criteria categories:

• Technology

• Legal

• Risk and Transition

• Continuous improvement, cost reduction, quality

• Occupational health and safety

The 10th criterion is the financial offer

The criteria people get stuck on – equipment specs

Take the specs and group them into 1, 2 or 3 categories

Remember a maximum of 3 per category

Or take all the specs and make a single criterion – “Must meet these specs”

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The problem with “Mandatory”

Let’s say the mandatory criterion is “Must have previous experience in

delivering this type of project”

That previous experience may have been disastrous but they meet the criterion

What you really want is someone who has done it before and done it well – it

needs to be scored not just met. It is not a Yes/No question.

Critical Categories

Due to their importance certain categories are considered Critical and each

must achieve an average score, (not the weighted score), that exceeds 5 from

each Tender Evaluation Panel member for the tender to be accepted.

The reference numbers for the criteria categories deemed to be critical are

listed below:

The WH Tendering Procedure contains the following note:

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The Tender Documents

Part 1 General Information

This gives details of the tendering body and contact person.

Part 2 Tender Conditions

This contains the conditions under which the tender will be run

e.g. briefing sessions, FOI, submission conditions, complaints

Part 3 Tender Specification

Each criterion that the tender must fulfil is listed along with space

for the respondent to address each criterion.

Part 4 Statements

Statements from respondents on a range of matters

The statements do not form part of the tender evaluation process

e.g. Corporate information, contact details, referees

Part 5 Draft Contract

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Reference Checks

The Tender Manager will conduct a reference check of the preferred supplier.

The result of the reference checks will be distributed to the Governance and

Evaluation panels.

The Evaluation Panel will score the reference checks with all scores needing

to be above 5 for the tender to be accepted.

Scores will be advised to the Tender Manager by email.

If the preferred supplier fails the reference check hurdle the Tender Manager

will consult with the Governance Panel in deciding what action, if any, needs to

occur.

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Timelines

Timelines – Post Business Case approval to proceed

Tender Planning Tender Lead appointed Immediately the Business Case is approved

Tender Panels selected 1 week post Tender Lead appointment

Tender Initiation meeting 2 weeks post Panel appointment

Tender Released 2 weeks post Initiation meeting

Tender Briefing Optional 1 week post tender release

Site Visit Optional 1 week post tender release

Tender Open Period4 weeks for complex tenders, 2 weeks

otherwise

Tender Evaluation PeriodSingle supplier outcome

4 weeks for complex tenders, 2 weeks

otherwise

Short list supplier outcome 6 weeks (includes second stage evaluation)

Tender Report 1 week post evaluation completion

Maximum Tender Timeline becomes 16 weeks if tender outcome is within Business Case limits.

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Summary of the simplified but still compliant tender process

1. Market Analysis – 6 questions

2. Complexity Analysis – 4 questions

3. Only 2 purchasing pathways – tender or quote

4. Don’t let the Board approve tenders

5. No more than 30 criteria in 10 categories

6. Equipment specs highly summarised

7. Set clear timelines / deadlines