Insurance tendering, is it such a challenge? London - May 2016

Insurance tenderingMay 2016, London

Timetable11:00 – 11:30 Registration & coffee11.30 – 11.35 Welcome & introductions 11.35 – 12.30 Pitfalls and traps of the tender process

12.30 – 13.15 Lunch

13.15 – 14.00 The practicalities of running an insurance tender 14.00 – 14:45 An insurer’s review of a tender

14.45 – 15.00 Coffee

15.00 – 16.30 Tender evaluation workshop16.30 - 17.00 Q&A/close followed by drinks and canapés

Pitfalls and traps of the tender process

Peter Ware+44 (0) 115 976 [email protected]

Nick Hurley+44 (0) 20 7871 [email protected]

What we will cover• The basics• Timescales• Selection and award criteria• Evaluation• Challenge/remedies

Not everything…just some bits that often cause problems!

The basics

The basics• Public procurement = purchase of goods, works and

services by public sector bodies

• EU rules designed to open up public procurement to EU-wide competition

• Rules updated last year, new directive adopted by European Commission on 17 April 2014

The basics• UK implementing legislation = The Public Contracts

Regulations 2015 (PCR 2015)

• Procedures available are open, restricted, competitive procedure with negotiation, competitive dialogue, and innovation partnership

• Threshold applicable to local authorities procuring insurance services = £164,176 (as of 1st January 2016)

The basicsAlways keep the over-arching TFEU principles in mind:

•freedom of movement of goods•freedom of establishment•freedom to provide services

•and deriving from those:–equal treatment, transparency, non-discrimination, mutual recognition, proportionality

Timescales

NORMAL MINIMUM TIME IF ELECTRONIC TENDER PERMITTED

IF URGENT WHERE PIN PUBLISHED IF SUB CENTRAL AUTHORITY

OPEN PROCEDURE Minimum time limit for receipt of tenders 35 days

Minimum time limit for receipt of tenders 30 days



-

RESTRICTED PROCEDURE Minimum time limit for requests to participate 30 days

- Minimum time limit for requests to participate 15 days

Minimum time limit for requests to participate 30 days


Minimum time limit for tenders

30 days



10 days


10 days

Minimum time limit for tenders to be set by agreement with tenderers. In the absence of agreement minimum time limit

10 days

CP WITH NEGOTIATION & INNOVATION PARTNERSHIPS

Minimum time limit for request to participate 30 days

- Minimum time limit for request to participate 15 days



Minimum time limit for initial tenders 30 days

Minimum time limit for receipt of initial tenders 25 days


10 days


10 days

Minimum time limit for tenders to be set by agreement with tenderers. In the absence of agreement minimum time limit

10 daysCOMPETITIVE DIALOGUE Minimum time limit for requests to participate 30 days

- - - -

No explicit time limits for submission of initial/subsequent tenders

- - - -

TimescalesBUT note the word “minimum”…

and don’t forget the Treaty Principles

Selection and award criteria

Selection and award criteria• It should be easy, right? • But it often goes wrong, we most commonly see problems

with:– the use of selection and award criteria and staying within the

parameters of what is legally compliant – drafting criteria with sufficient clarity to allow bidders to

understand what they are being asked to produce as a submission;

– the articulation of how submissions are to be evaluated and then following that methodology when carrying out the evaluation; and

– informing unsuccessful bidders of the final result without prompting a challenge

Selection and award criteria

Selection and award criteria• Selection criteria relate to the bidder - used to

assess ability to perform the contract (e.g. experience, economic standing and qualifications)

• Award criteria relate to the tender - used to identify tender that is the most economically advantageous (e.g. price, technical specifications)

Put simply…"can they do it" and "how will they do it"

Selection and award criteria• Key cases:

– Gebroeders Beentjes v the Netherlands [1988] ECR 4635: examination of a bidder's suitability and the award of the

contract are separate processes nonetheless, they can be undertaken simultaneously

– Lianakis v Dimos Alexandroupolis (Case C-532/06): contracting authority wrong to assess bidders' experience at

award stage i.e. experience for experience-sake

but nuanced…see regulation 67(3)(b) PCR 2015

Selection and award criteriaFurther points to note:

•Where PQQs (i.e. stipulating selection criteria) are used they should comply with government guidance (and model PQQ)

•Award of all public contracts must now be to the “most economically advantageous tender” (the “MEAT” approach)

•Award criteria shall be “linked to the subject-matter of the public contract”

Evaluation

Evaluation• The primary aim of any effective tender evaluation

should be to determine the tender which (i) best meets the needs of the public body and (ii) achieves value for money.

• It should identify the best available and affordable business solution within applicable legal constraints, via a robust and defensible award process.

Evaluation• Must use MEAT approach• Price only?PCR 2015 seems to not allow for award on the basis of

lowest price but this is not strictly the case• Required to decide weightings to attribute to

quality/price • No fixed or generally recommended splits – will

be dictated by requirements of individual procurement

Evaluation• Advance disclosure of criteria and weightings:

– Commission v CAS Succhi di Frutta (Agriculture) [2004] EUECJ C-496/99P

may not alter the general scheme of ITT by unilaterally amending an essential condition for award

– Lettings International Ltd v London Borough of Newham [2008] EWHC 1583 (QB)

the weighting of sub-criteria should also be disclosed, although arguably beyond what is required by EU law

– OGC guidance affirms the need to disclose award criteria, weightings and scoring to bidders as early as practicable

EvaluationCriteria Evaluation Criteria Weighting Meeting the cover specification (see Questions ##)

The Council will be awarding high marks, in accordance with the scoring scheme, for:

•Meeting specification in full•Offering additional cover benefits not set out in the specification

The Bidders Score will be reduced, in accordance with the scoring scheme, for:

•Failure to meet the specification in full including omissions of cover (for example###)•Onerous policy conditions or exclusions (for these purposes onerous shall mean….)

20 %

• Example evaluation criteria:

EvaluationCriteria Scoring Maximum Cover Full points will be awarded where a tenderer

meets ALL of the requirements of the specification.Points will be deducted for any areas where an insurer is unable to offer cover exactly as requested.Points will be taken off in multiples of 10. Minor differences in cover will result in a 10 point reduction, major differences in cover will result in up to 100 points being deducted. [The precise deduction will be based upon the perceived impact that any difference may have on the Authority.] Example of a minor difference: Locks and keys cover is limited to £500Example of a major difference: No cover for alternative accommodation/loss of rent If a tender is deemed to contain serious omissions which will expose the Authority to excessive risk/cost, it may be rejected. An example of this may be that no Fire peril is offered.

200

• Example scoring methodology:

Evaluation• Best practice evaluation – key aspects:

– start early– test it– advance disclosure– audit trail

Challenge/remedies

Challenge/remedies• PCR 2015 provide that compliance with procurement

rules and any applicable EU principles is a duty owed by contracting authorities to economic operators from member states.

• A breach "is actionable by any economic operator which, in consequence, suffers or risks suffering loss or damage“

BUT subject to limitation periods

Challenge/remedies• Proceedings must be started within 30 days of date when

economic operator “first knew or ought to have known” that grounds for proceedings had arisen (i.e. from when claimant had knowledge of basic facts which clearly indicate an infringement).

• Time limit may be extended by court where there is good reason for doing so, but not so as to permit proceedings more than 3 months after date when the economic operator “first knew or ought to have known.”

• Proceedings are “started” when claim form is issued and, where proceedings are started, economic operator must serve claim form on contracting authority within 7 days of date of issue.

Challenge/remedies• The award decision notice must include:– award criteria– reasons for the decision (including the characteristics and relative advantages

of the successful bid) – scores obtained by the recipient and the successful operator– name of successful operator – details of when the standstill period is expected to end – any reasons for technical non-compliance

• Standstill period ends at midnight on 10th day after date of compliant award decision notice sent (email or fax) to bidders

• Automatic suspension of tender process applies once proceedings are issued and remains in force until court brings it to an end

Remedies: pre-contract • Regulation 95: Automatic Suspension

– Awareness – Linked to standstill?

• Regulation 96: Interim orders– Ending standstill– Modifying standstill– suspending the procedure

• Regulation 97: Before Contract– Setting aside the contract – Order an amendment to any document– Award damages

• Pre action disclosure and Pre action protocol

Remedies: post-contract • Ineffectiveness?

• If ineffectiveness applies, civil financial penalty and/or shortening of the contract

• Damages

Remedies: post-contract• Ineffectiveness (i.e. post-contract remedy) – special limitation

period applies – either 30 days from contract award notice/being informed or 6 months from contract start date

• Grounds for ineffectiveness (subject to derogations):– where contract awarded without prior publication of a contract

notice where one was required (i.e. illegal direct award)

– award without complying with rules on standstill/suspension (i.e. operator deprived of possibility of starting/pursuing proceedings)

– award of call-off contracts with a value in excess of the applicable threshold under a framework or dynamic purchasing system in breach of applicable requirements.

Challenge/remedies• Challenge checklist:

– identify– do not ignore– react quickly & communicate clearly– provide assistance but not too helpful– collate (and don’t destroy) relevant information– consider FOIA– seek legal advice & don’t waive privilege– brief colleagues and emphasise confidentiality– take appropriate action

Questions?

A quick introduction to the case study

Prepared by Aon Risk SolutionsNational

The Practicalities of running an Insurance TenderBill Sulman

Alison Goodwin

Aon Risk Solutions | NationalProprietary & Confidential | May 2016

36Copyright Aon UK Limited. All rights reserved.Aon UK Limited is authorised and regulated by the Financial Conduct Authority.

Before you start

Leave enough time– minimum 6 months for a ‘comfortable’ process

(if planned)

Choose your process– OJEU vs CCS Framework

Use a Broker!– Opens up the market and reduces your risk



Plan

Who do you need to involve– Remember Fair Presentation

Timetable– How long will it take you to gather data

Objectives– Do you want ‘more of the same’ or will you use this as an opportunity to

look at your Total Cost of Risk?



Data

General

– Understanding of your objectives

– Details of any changes/optional quotations you would like

– Profile of your organisation

– Risk Management – policies, procedures and successes!

– Information about the process (portal details etc.)



Data

Property

– Full property listing for each section in Excel format showing individual property sum insured and postcode

– Business Interruption – calculation methodology

– Money – details of safes and money handling procedures

– Works in Progress – List of anticipated contracts

– FG/Crime – Limits and any special requirements



Data

Casualty

– Turnover/Budget

– Wages and Salaries

– Details of any unusual activities/partnership working/trading companies etc.

– Land Charges activity

– Professional Indemnity – List of activities and fee income

– Limits of Indemnity



Motor

Fleet list

Accumulation Limit

Limits of Indemnity – what is reasonable?



Engineering

Full list of locations/plant in Excel format with postcodes



Personal Accident/Travel

Capitals sums

Wages and Salaries

Numbers of people for non paid categories (e.g. Members, Volunteers)

Travel Pattern– EU, Non EU, Worldwide



Claims Experience

ABI Claims experience from your current insurers

Detailed claims experience in Excel format (one line per claim) for all classes of business

Ground up claims data (in Excel format) if not provided by insurers

Commentary on any ‘large’ claims

Minimum 5 years, ideally 10 years

Triangulations – some systems can providethese for you!



Post Tender Clarification

Clarification or negotiation?

Make sure that what you are doing fits with your chosen procurement method.

Submit clarifications in writing and ask for a written response so that you have an audit trail.

Make sure time is allowed for this step.

BAFO – when is it appropriate?



Case Study Activity

Prepare a tender timetable using the blank document provided.



Feedback



Questions

An Insurer’s Review of a Tender

17th May 2016

Philip FarrarNational Development DirectorRisk Management Partners Ltd

1. What we look for in a tender?

2. How we use the information.

3. How the information impacts upon the pricing and the programme design.

4. How you the customer can help both improve price and quality/programme offered.

17th May 201650

Discussions Points

1. Do we know the account?1. What do we know about the account and have we

quoted previously?

2. What happened last time around? Lessons to learn?

3. Who is the broker? Have they the necessary experience?

4. What is the risk profile of this client and how much experience have we of that type of account/risk profile?

5. Do we want this account?

6. Is it a project tender – e.g. NPC?17th May 201651

Tender – Initial Thoughts?

1. Timetable.1. Is the timetable achievable.2. How do we deliver the tender?3. How do we raise and ask questions?4. Movements of tender team – holidays?5. It is being rushed and if so why?6. Is there any missing information identified

which we will be waiting for?7. Anything in the tender rules we need to be

aware of ? E.G. also deliver a hard copy.

17th May 201652

Tender - Timetable

1. Does the tender make sense?1. Does the tender look and feel right?2. At first glance is all the necessary information

present?3. Do we need to complete any PQQ’s, sign any

declarations?

2. Award Criteria1. Is It fair?2. How can we maximise our score?3. What do we know about this type of award

criteria and how will the broker/insured approach certain aspects of the award?

4. Blend of quality and price17th May 201653

Tender - General

1. Risk Features1. Children’s Services2. Highways3. Blue Light4. Large Claims Propensity5. In House Claims Handling

17th May 201654

Tender – Risk Features

1. Detailed Review of the Technical Aspects – Programme design

1. Is it sensible?2. Can we offer alternatives?3. What extensions are required? - Do we charge for them?

Are they relevant?4. Is all the risk information contained

1. Exposure information2. Claims Experience3. Highways4. Children’s Services5. Property Surveys6. Risk Management Information relevant to the risk.

17th May 201655

Tender – Technical Review

1. Claims Experience:1. Does it all add up and make sense?2. Does it reflect the changing risk profile?3. Has the experience been adjusted for outsourced or in sourced services?4. Is there any IIHH and if yes under what parameters?5. How experienced is the IHH team – what are their qualifications/experience – does

it match the level of DA requested?6. 10 year listing and triangulations?

2. Do we have a listing of all claims in excel? Does the list match the totals?

3. If IHH and insurer handling have all duplicated claims been removed from the two experiences?

4. Large loss information and prognosis?

5. Has any explanation been offered around claims patterns or links to risks management activity?

17th May 201656

Tender – Claims Experience

1. During the Process1. Is the prospect responsive to questions2. Willing to help and provide information.3. Is there an insurer day or has there been an insurer

day?1. How much notice were we given?

2. Do we feel that throughout this process this client has been willing to engage with the market or are they going through the motions?

17th May 201657

Tender - Duration

1. Do we feel we have been able to offer the best price we can and the best level of cover?

2. Who has signed off the terms?

3. Can we offer a package discount for more than one LOT? How complicated will this be?

4. Is there anything about the risk which:1. Means we don’t wish to write the cover or….2. We cannot due to lack of risk information?

17th May 201658

Tender – Quotation Stage

1. Prior to final submission of terms can the tender be reviewed from start to finish by fellow director or regional director?

2. Is the tender a ‘project’? – e.g. NPC - has everything been completed

3. Are we in line with the timetable?

4. Do we feel we have put our best terms and service forward – irrespective of terms?

17th May 201659

Tender – Quotation Stage

1. Deal with all queries as thoroughly and efficiently as possible.

2. Tender results – Lessons to learn – good or bad

3. Share information internally.

4. Start the next tender!!!!!!!

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Tender – Post Tender Submission

1. General1. An Insurer day – we like to meet you!!

2. Give yourselves enough time to complete the exercise – Start EARLY.

3. Try and supply as much information as possible first time around but if not able please respond to our requests for information and be patience with us.

4. Be willing to accept variants and innovations

5. Work out what it would require for you to move carrier PRIOR to the tender being issued.

6. Use a broker.

7. Understand your own risk profile.

17th May 201661

Tender – How you can help yourself

1. Claims Information – Claims Information - Claims Information

1. 10 year experience2. Excel claims listings3. Large claims commentary4. Cleansing of Experience for outsourced services5. Triangulations if possible6. Explain claims patterns7. Link Risk Management Activity to claims pattern if

you can.

17th May 201662


1. Property1. Surveys2. Schedules which match the totals3. Comment on additional perils if being requested4. If no surveys constructions details of target risks

2. Motor1. Schedule of vehicles - Current

17th May 201663


1. Casualty1. Highway’s risk Management2. Childrens Services3. Any unusual features?4. Health & Safety systems

2. Engineering1. Up to date schedule of plant and inspection

frequency.

17th May 201664


1. In House Claims Handling?1. When you started doing it and why?2. Experience of team – CV’s3. Management controls?4. How a claim is signed off and at what Authority levels?5. Investigation systems you use.6. Fraud protocols deployed7. Approach to litigation 8. IT systems for managing claims9. Approach to reserving?10. Diary systems utilised11. Closure procedure12. Good results and lessons learnt form losses.

17th May 201665


All of these

factors w

ill affect

your claims

profile

17th May 201666

Questions

Philip FarrarNational Development DirectorRisk Management Partners Ltd

Tel No. 07841581364

E-mail [email protected]

Tender evaluation workshop

Q&A

Contact detailsPeter Ware+44 (0) 115 976 [email protected]

Alison Goodwin+44 (0) 1322 [email protected]

Nick Hurley+44 (0) 20 7871 [email protected]

Bill Sulman+44 (0) 117 [email protected]

Government & Nonprofit

Insurance tendering, is it such a challenge? London - May 2016