|
This chapter gives guidance for tender evaluation panels. (54)
 | Tender evaluation panels evaluate and decide bids.
| Criteria include capability, technical assessment, quality and financial appraisal.
| Open, honest and helpful debriefing.
| | |
|
EVALUATION
Underlying principles
7.1 The purpose of evaluation is to select the bid that is most likely to deliver value for money, which is the optimum combination of whole life cost and quality to meet the customer/user's requirement – that is, better quality services at optimal cost. It is essential that this is undertaken fairly and should be seen to be so. The evaluation process must
be systematic, objective and well-documented to provide a clear and logical audit trail.
Evaluation panels
7.2 In each case a Tender Evaluation Panel should be established to evaluate the bids. It should – as a matter of best practice – be different from the Tender Opening Board (see Chapter 5). Senior managers should ensure that the panel has the necessary expertise to evaluate bids. It should comprise a Chairman and at least two other members, depending on the size and nature of the contract. The views of customers/users should be represented.
Independent observers
7.3 Departments may wish to consider introducing formal procedures for independent observers to witness (rather than participate in) the proceedings of tender evaluation panels. This should be at the discretion of Departments, having regard to the views of
tenderers. Independent observers might be proposed by the private sector and recognised trade unions, or, if none, other independent staff representatives, but they should be selected for their independence and qualifications. Their primary role should be to provide independent assurance that tender evaluation has been conducted fairly. Observers must give assurances beforehand that they will not breach commercial confidentiality.
CRITERIA
7.4 Evaluation should be based on a range of criteria which support the delivery of value for money for the service/s in question. The evaluation criteria should be agreed before bids are invited and included in the ITT (see Chapter 5), and stated in the OJEC advert and in the tender documents. These should normally include capability, technical, quality and financial appraisals. People issues and environmental issues may also be relevant.
Capability
7.5 Whether bidders have the capability to deliver the services in question, to adapt to change, and to offer innovations should have been tested at the pre-qualification stage but any new evidence will be relevant and should be considered.
Technical
7.6 The technical assessment should assess whether:
| bidders' proposals would meet the technical requirements in the specification;
| bidders have sufficient technical capacity to meet the requirements;
| the feasibility of any modifications proposed by bidders against the outcome and outputs specified;
| that the proposed facilities and manpower are adequate.
| | | |
Quality
7.7 The quality assessment should establish whether bidders can deliver the service to the required quality standards. The calibre of quality plans and the realism of proposals for delivering continuous improvement in quality should be examined.
People issues
7.8 Appraisals should take into account bidders' proposals for handling staff transfers in relation to the contract, where applicable.
Environmental issues
7.9 Where it is relevant to the performance of the contract and to the Department's own "green housekeeping" strategy, then the proposed environmental practice of the bidder should be taken into account.
Financial appraisal
7.10 The financial appraisal should establish whether proposals are financially sound and will deliver value for money, balancing whole life cost and quality. In market tests, adjustments may be needed to maintain equity between bidders.
Coverage
7.11 The appraisal should follow the principles set out in "The Green Book" (55) and should involve:
| A thorough check that all relevant costs have been included in the bids and that these costs are realistic. If a bid appears comparatively low, it will be important to verify that the supplier will be able to deliver the service both in the short and the long term.
| Checking that appropriate adjustments have been made to ensure that bids are comparable.
| A full assessment of any bid proposal which might result in significant cost changes during the period of the
contract/SLA, for instance, from changes in technology.
| The availability of broadly comparable occupational pension arrangements for future service in the new employment, and availability of bulk transfer arrangements on terms agreed by GAD should be taken into account (see Chapter 3). Employees and unions will regard a satisfactory outcome on these issues as being of considerable importance. GAD's advice should be sought on the potential for achieving a satisfactory outcome on pensions for each bid, as this element and its related cost can be of significance in the overall evaluation.
| An assessment of the effects of any proposed indexation formula over the life of the
contract/SLA.
| | | | |
Appraisal
7.12 Departments should estimate the net present value of the cost of accepting each bid, on a fully comparable basis (56). The appraisal period should not normally be limited to the period of the contract if different bids could be expected to give rise to different patterns of costs or benefits. The basis for the appraisal and the broad factors which will be taken into account should be clearly set out in the contract documents. In central Government's contracting, the appraisal period should normally be 10 years. This is because the benefits from an efficiency exercise, including contracting out, are likely to continue to be reaped in subsequent contract periods. It may not be realistic, and may limit opportunities, if all the up-front costs of an efficiency exercise have to be recouped within a relatively short contract period. Depending on the circumstances, different appraisal periods may be used: these should never be less than five years, but will not usually exceed 10 years.
Additional costs
7.13 The assessment of financial costs will involve taking account not only of the costs specified in each bid, but also other costs which will accrue to the Department as a result of accepting or rejecting a particular tender.
Adding costs to external bids
7.14 In market tests, any additional costs that will need to be added to an outside supplier's bid may include the following.
| If TUPE does not apply, the costs of redeploying existing staff or making them redundant (less any potential savings, for example, in recruitment).
| If TUPE does apply the cost of any detriment payments that the Department, advised by GAD, considers should be made to compensate staff for changes to terms and conditions in respect of future occupational pension provision, on transfer to an external contractor (see Chapter 3).
| The costs of any significant losses of economies of scale.
| Any significant costs currently incurred by the in-house provider which would not be saved if the functions were to be carried out by an external supplier, for instance, if alternative use could not be made of property or of telecommunications and information technology (IT) equipment covered by long-term
contracts/SLAs. However, before doing this, Departments should make every effort to find alternative uses for, or to dispose of, assets so as to minimise such costs. Where the disposal or re-use of surplus accommodation is not possible, costs of continuing to hold the property in question must also be taken into account.
| If the in-house organisation uses centrally provided support services, the net costs of redeploying or making staff in these areas redundant, in the event of an external win.
| | | | |
7.15 Such costs should only be taken into account for the period for which they are likely to be incurred. For instance, the costs involved if alternative use, in the short term, cannot be made of IT equipment is unlikely to be incurred throughout the whole period of the contract or
SLA, as alternative use may be found for it in the medium to long term.
Adding costs to in-house bids
7.16 There may also be some costs that should be added to in-house bids. These may include unrealisable savings. Again, such costs should only be taken into account for the period for which they are likely to be incurred.
Costs falling on other Departments
7.17 Any cost implications for other Departments and the Exchequer as a whole should have been identified and resolved before the ITT was issued (see Chapter 1). If, exceptionally, wider implications come to light while bids are being evaluated, which cannot be taken into account, the evaluation should be suspended and the matter referred to the Accounting Officers concerned. They should agree how the costs or other implications are to be handled, so as to secure better quality services at optimal cost for the Departments concerned and the Exchequer as a whole. Neither should have a veto. Their decision should be made known to all bidders and provide a basis for the evaluation to proceed.
Support services
In-house teams untying from central services
7.18 Departments will need to take particular care when assessing costs in relation to an in-house bidder who has identified significant savings to be made from untying from central services, but where the financial systems for internal charging are not yet in place. In such cases, Departments should nonetheless consider letting the in-house bidder untie from central support services, and ensure that any decision not to do so can be justified on value for money grounds.
Services requested by external bidders
7.19 Generally, Departments should not agree to requests from external bidders to use premises or plant other than those specified in the ITT. However, if such a request is accepted, the full cost should be taken into account during evaluation, including the residual value at the end of the contract term.
The treatment of VAT
7.20 When comparing internal bids with external bids, there must be consistency in the treatment of VAT. Services bought in by Departments are usually eligible for a VAT refund. Where this is so, VAT should be excluded when comparing with in-house and external bids.
7.21 In some cases, the costs of both the in-house and bought-in provision of a service will contain VAT on the purchase of goods. VAT on these may be eligible for a refund if they are incidental to the supply of a contracted service, which is itself exempt from VAT.
Thebuying-in VAT costs in the in-house bid should be excluded from the cost comparison. (They will be excluded from the private sector bid because the evaluation will consider the VAT- free bid price.)
Performance bonds (57)
7.22 Departments should not normally require suppliers to produce any form of performance bond. Where a performance bond is required, Departments will need to exercise careful judgement in assessing the costs and benefits of using bonds, many of which will not be quantifiable. They should seek appropriate financial and legal advice on the use, choice and drafting of bonds for particular contracts. Decisions to require bonds must be part of an overall approach to risk management and should take account of available resources to reduce the risk of default, including proper pre-qualification of
tenderers.
7.23 When necessary and justified, a performance bond is provided at contract award for an agreed percentage of the total contract value. The performance bond should have an expiry date. There are two basic forms of performance bond that can be considered:
| the conditional on-default bond, which can usually be called only following a serious breach by the contractor; and
| the conditional on-demand bond, which should include in their terms and conditions a mechanism for calling, a requirement for the client to identify the reason for calling, a cooling off period. These bonds place a significant burden on contractors and should only be used sparingly.
| |
Unconditional on-demand bonds are essentially unfair and must not be used.
Risks (see Chapter 4)
7.24 When comparing the relative costs of bids, various assumptions should be made about future costs and perceived workload in accordance with the "Green Book".
MAKING DECISIONS
7.25 Evaluation panels should be prepared to make reasoned
judgements, always supported by objective outputs from the systematic scoring of bids against weighted criteria reflecting their relative importance for the delivery of the service.
Bid clarification
7.26 Before recommendations regarding the preferred bidders are made, the evaluation panel may seek clarification of bids. This should not amount to revising bids and care must be taken not to affect the preceding selection process materially or discriminate against other bidders. If the number of questions appears unreasonable, it may suggest defects in the specification, weakness in the evaluation or poor faith on the part of the Department.
Recommendations
7.27 The tender evaluation panel must produce a detailed record of their decisions and the reasons for them, and evidence that the competition has been approached in a transparently fair and open manner. This should be in a "commercial in confidence" note to senior managers, covering:
| a summary of the competition, including the selection of the activities for competition; specifying and packaging; tender conditions and documentation; selection procedures; tender evaluation;
| details of the bids;
| the identity of the proposed successful bidder, with reasons for the recommendation, and whether there are to be any post tender negotiations (see Chapter 8, below);
| in the case of market tests, proposals for and advantages of retaining the
work in-house or awarding the contract externally;
| contract monitoring arrangements;
| the effect on the existing organisation.
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7.28 Senior management must record formal approval before the contract or SLA is awarded to the successful bidder. The level at which approval is to be given should depend on the value of the
contract/SLA in relation to the delegated powers of the chair of the evaluation panel.
7.29 Departments should consider the circumstances in which they should inform their Ministers prior to making decisions where particular sensitivities are likely to arise. When a contract has been awarded, all bidders should be advised immediately.
PUBLICISING RESULTS
7.30 Contract award notices in the prescribed form should be despatched to the Official Journal of the European Communities not later than 48 days after contract award (unless the value of the contract is less than the threshold). Award information should, as good practice, also be forwarded for publication in Government Opportunities whether the contract is above or below the EC thresholds.
DEBRIEFING AND FEEDBACK
7.31 Departments should ensure that all bidders – unsuccessful and successful – are debriefed as soon as possible after the contract has been awarded. (58) Delayed debriefing may not be helpful to bidders or to the Department. If a bidder makes a written request for debriefing, it must be provided within 15 days of the Department's receipt of the request. Debriefing unsuccessful bidders should cover:
| why the bidder was unsuccessful;
| what the bidder would have to do to succeed next time.
| |
Debriefing should be as open as possible, covering performance across the range of selection criteria and contract prices.
7.32 Inaccurate debriefing can result in complaints and infraction proceedings against the UK (unless EC Procurement Rules do not apply). Debriefing must be carefully planned and carried out by senior and experienced procurement personnel. Debriefing should be undertaken by informal interviews rather than in writing, but Departments should keep a record of the debriefing.
(1) At the end of debriefing interviews, bidders should be asked for constructive comments on the competition and any ideas they might have on achieving value for money in subsequent tenders (see Chapter 9).
7.34 Any bidders believing that they have been unfairly treated should be advised, in the first instance, to contact the head of the unit responsible for the competition in the Department. If, afterwards, they remain dissatisfied, they should be requested to contact the Principal Finance Officer and/or Permanent Secretary or, in the case of Agencies, the Chief Executive.
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KEY MESSAGES
| The aim of evaluation is to select a bid that will give value for money – it should be fair and be seen to be fair.
| Where VAT can be recovered by Departments, it should be excluded when comparing external and in-house bids.
| Availability of bulk transfer arrangements on terms agreed with GAD should be taken fully into account in bid evaluation.
| Evaluation panel decisions must be reasoned and supported by objective evidence from appraising bids against weighted criteria.
| Evaluation panels must produce detailed records of the decisions. Names of successful bidders should be published.
| All bidders should be fully and accurately debriefed – unsuccessful bidders need to understand how they could succeed next time – and any bidders who feel they have been unfairly treated should be told how to take forward their complaint.
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SOURCES OF FURTHER INFORMATION
| CUP Guidance Note: No 40 The Competitive Tendering Process.
| CUP Guidance Note: No 48.
| CUP Guidance Note: No 55 Debriefing.
| CUP Guidance Note: No 56.
| CUP Guidance Note: No 60 Supplier Appraisal.
| Appraisal and Evaluation in Central Government: "The Green Book",
HM Treasury, 1997.
| Market Testing Costing Guidance, HM Treasury, 1994.
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|
![[Contents]](contents.gif)
8. CONTRACTS
This Chapter is for those awarding contracts and for contract managers.
| Award procedures for contracts and service level agreements.
| Contents.
| Contract management.
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CONTRACTS AND SLAs
Meanings
8.1 A contract is an agreement enforceable at law for services (or goods) in return for
a consideration. A service contract comprises a service component and terms and conditions. For the purposes of this guidance, contracts are made between Departments and outside bodies following a competition. As the Crown cannot contract with itself, an
in-house team winning a market test, or a successful bidder from another Government Department, is awarded a Service Level Agreement
(SLA), – in effect, a quasi contract.
In this guidance: "Contractor" refers to the service provider and includes in-house
teams working to SLAs; "Client" refers to the Department awarding the contract or
SLA; "Contract" means the agreement made with an external provider; "SLA" means the agreement with an in-house provider or a provider from another Government Department.
Aim
8.2 The aim of awarding a contract or SLA, and of its subsequent management, is to ensure that the services required are delivered by the contractor in accordance with the quality, performance and value for money standards agreed with the Department, and to deal with any problems. This should be done through effective working relationships, which respect the different roles of client and contractor.
AWARD PROCEDURES (59)
Post tender negotiation
8.3 Following evaluation, but prior to the formal award of the contract or
SLA, post tender negotiation (PTN) with preferred providers can be conducted, in accordance with Treasury guidance (60), provided PTN does not distort competition, particularly on price. Discrimination on grounds of nationality must be avoided in all cases (61).
Formal procedures
8.4 A successful external bidder must not be allowed to start work without a formal written contract and until proof of insurance requirements are satisfied, or – if the successful external bidder is from another Government Department – a formal SLA has been agreed. It is also essential that Departments have fulfilled their responsibilities arising at the start of the contract, for example, that sites are made available.
8.5 An in-house SLA should not commence until the in-house organisation has formally accepted its terms.
Transition arrangements
8.6 The transition to the contract or SLA will require careful management to minimise any risks of deterioration in service quality (and undue disruption to staff) during the transitional period. The length of transitional periods should be geared to the nature and complexity of the activity or services in question.
CONTENTS OF CONTRACTS AND SLAs
8.7 Contracts/SLAs set out exactly the agreement reached through competition and negotiation and must include:
Establishing robust contracts or SLAs
8.8 Robust contracts will not only reduce the risks of things going wrong, but also the bureaucracy needed in their management. In particular, ensuring that the following aspects are addressed will help to establish sound and robust contracts.
| Language – use plain English and avoid jargon.
| Specifications should be expressed in outcome and output terms and should enable both parties to have confidence that contracts or SLAs accurately reflect service requirements. They should allow clarity in establishing appropriate performance standards and indicators and permit the development of simple, yet effective monitoring arrangements.
| Contract length should be that which will deliver best value for money in the circumstances and is often not normally less than five years:
| | |
| Advantages | Disadvantages |
| Longer contracts |
| Stability and continuity.
| Greater chance of private sector investment and innovation because of longer pay back period.
| Potentially greater savings overall.
| Useful if transfer period required.
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|
| Risk of rigidity and loss of ability to respond to changes in the market.
| Prices could cease to be optimal.
| Strategic dependence.
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| Shorter contracts |
| Avoids tying Departments to a supplier.
| Able to respond to changes.
| A short competitive cycle enables Departments to think again.
| | |
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| Limited commitment from contractors.
| Investment becomes risky for contracts.
| Limited scope for innovation.
| Less likelihood of risk transfer.
| Risk of limited quality service at less than optimal costs.
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| Pricing mechanisms – The contract price should be clearly stated. In addition, if required, any mechanisms for varying the price during the contract term should also be set out. These mechanisms should relate directly to service delivery expressed in unambiguous outputs, and to the achievement of the key performance indicators and targets contained in the contract.
| Incentives for continuous improvements – Contractors should be encouraged to generate innovation and continuous improvements in efficiency and quality, over and above what is provided for in the contract. If these are agreed after the award of the contract they should be attached in an addendum.
| Responding to changes – Usually, service requirements will evolve over time so a degree of flexibility to respond to change should be built into contracts and
SLAs. While the possibility of change should be considered when pricing contracts or
SLAs, trying to specify all possible changes in advance would lead to unwieldy, difficult to manage contracts and the likelihood of premium pricing for contract variations.
| Risks (see Chapter 4 ) should be placed with whichever party can best manage the risk and has agreed to accept the risk, in order to achieve value for money. The contract should be clear about where risks are placed.
| Terms and Conditions are covered in detail in CUP Guidance Notes 44 for SLAs and 59D for contracts with external providers. Departments will need to select the appropriate conditions for the services in question and apply them according to the circumstances of the contract.
| Documentation should be the minimum needed to ensure that the service can be achieved and the contract can be managed, without being over-long. Excessive documentation will have to be paid for by the Department in its own costs and through the contractors' charges.
| Openness – The contract should not contain any undertaking not to reveal the contract price (see Chapter 2).
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NATIONAL AUDIT OFFICE
8.9 The contracting-out of services does not in any way reduce the accountability of Departments' (or Agencies') Accounting Officers to Parliament for their use of public funds. The NAO's role is to provide information, assurance and advice to Parliament on the way Government Departments, Agencies and some other public bodies account for and use taxpayers' money. The NAO achieves this through the certification audit of accounts (financial audit) and by examining the economy, efficiency and effectiveness of projects, programmes and activities (value for money examinations).
8.10 Departments should ensure that the NAO continues to have access to documents to enable it to carry out financial audits and value for money examinations. Departments may themselves hold these documents even though the work has been contracted out. However, where such documents are not held by the Department the NAO will need to have a right of access to the relevant papers and records held by the contractor and this should be provided for in the contract. If in doubt on this, Departments should consult HM Treasury (62).
8.11 Whatever rights of access are needed for
NAO, they must be limited to papers and records which relate to the Department. NAO will not report on the supplier's own financial affairs, or conduct a value for money examination of his/her business. In those cases in which NAO has access rights, it is likely that they would have to be exercised for the purposes of financial audit on a regular basis and that access for value for money purposes would arise less frequently in the context of specific studies.
ACCESS FOR INTERNAL AUDITORS
8.12 Contracts must provide Departments with access to contractors' documentation for their own internal audit purposes to confirm the contractor's compliance with the contract (63).
CONTRACT MANAGEMENT
(64)
Vital ingredients
8.13 Contract management is the process of ensuring that the
contract/SLA delivers better quality service at optimal cost. The parties involved are:
| (the client's) contract manager – who monitors and reviews the performance of
the contract;
| the contractor under the contract/SLA;
| customers/users.
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Successful contract management depends on the soundness of the agreement made between client and contractor and on the effectiveness of their relationship. Their roles and responsibilities should be clearly defined in the contract or SLA and understood. Contract management should not mean clients telling service providers how to deliver service – nor contractors telling Departments what to expect. Effective contract management should ensure:
| Client/Contract manager | Contractor |
| There is regular dialogue with suppliers and users so that potential problems are anticipated promptly and their effects are
minimised. Service suppliers are notified of problems promptly and given timescales for rectification. Such occurrences should be well documented.
|
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| Services are delivered to the price and quality standards agreed and that all other contractual requirements are met. If contract conditions are not met, prompt remedial action should be taken.
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| The relationship with service providers is managed proactively to encourage flexibility and responsiveness to meeting the changing needs of users.
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| Both parties fulfil their obligations by agreeing mechanisms for change as well as all aspects of costs.
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| Both parties fulfil their obligations by agreeing mechanisms for change as well as all aspects of costs.
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| The effectiveness of the contract management arrangements are monitored, including the costs incurred.
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| An audit trail is maintained, recording all dealings with service providers.
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| An audit trail is maintained, recording all dealings with clients.
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| Adequate preparations are made for retendering sufficiently in advance of the date for contract renewal.
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Contract managers and contract management teams
8.14 Contract managers in Departments should be appointed to ensure that the requirements of
contracts/SLAs are met and to act as the focal points for all dealings with service providers. Whenever possible, the contract managers appointed should have been involved in the competitive tendering process from the outset. The seniority of contract managers will depend on the complexity and significance of the contract. In some cases (for instance, large high value contracts) it may also be necessary to appoint a senior contract manager responsible for monitoring overall performance and representing the Department's interests. Contract managers should be well qualified to undertake the role and have a sound understanding of procurement. It is also important that they have the right attitude and interpersonal skills, such as negotiating and communication skills.
8.15 Contract managers may need to be supported by suitably resourced and qualified teams. This is a judgement that should take account of:
| the contract's value, its complexity and the number of interfaces it will have within
the Department, the risks involved, complexity of the pricing mechanisms, the length of the contract and, the Department's and the contractor's management style or approach;
| the risks involved in applying more or less control;
| the need to keep the costs of contract management under control and avoid disproportionate management costs that would erode value for money.
| | |
Contractors
8.16 Contractors are responsible for delivering the service in keeping with their contracts or
SLAs. They should ensure that the needs of customers are met and monitor service levels, by means of direct links with users, if appropriate. Service managers should be appointed to deal with operational problems and liaise with contract managers.
Customers/users
8.17 Service components of contracts or SLAs should be published in order to keep customers/users informed of the service and standards they should expect. Customers/users should be actively involved in contract management arrangements. Formal arrangements should be made for them to offer feedback on contractors' performance or on changes in their requirements. If relevant, there should be arrangements for complaints and redress in individual cases when services do not meet
contract/SLA standards. The degree of customer/users' participation will depend on the nature of the customers/users and services in question. For example, where there are a large number of geographically dispersed customers/users involved, user groups may be the best way of canvassing their views.
Management styles
8.18 Departments should ensure that the style, or approach, adopted in contract management is appropriate to the contract in question and will build trust and effective relationships with service providers (see Chapter 4). Factors such as the nature and value of services being provided and the risks involved with service provision should be considered. Heavy-handed and over-detailed monitoring arrangements that are likely to lead to defensive reactive provider relationships should be avoided. Occurrences during the course of contracts may call for changes in approach, for instance, in dealing with a deterioration in service levels. However, contract management teams should aim for overall consistency in their management style and avoid unjustified radical shifts that would undermine the contractual relationship. Examples of management styles are:
Partnering (see Chapter 4)
Particularly appropriate when working to meet shared aims, in a climate of change, when flexibility is required. Departments still need to be robust in specifying their requirements and in their contract management. | Adversarial
Appropriate in robust negotiation or when there is serious or persistent poor performance, but avoid aggressive negotiation, which would create risks for the contract. |
Hands off
Appropriate for multi-user services where there is no predominant user, so that contract management acts in a
co-ordinating capacity. | Hands on
Appropriate when contract manager is being used as a filter to control user demands or in instances of poor performance. |
Proactive
Appropriate for large, high profile, business-critical services. | Passive
Appropriate for stable situations, meeting existing needs. |
Open
Appropriate for contracts in a changing environment or for contracts which are business-critical. Departments and contractors share information fully and operate open-book accounting. | Formal
Appropriate for stable services, which are not fundamental to the Department's business. Little disclosure and the relationship would not be close. |
Multi-level
Appropriate for large, complex contracts, when relationships operate at many levels and, perhaps, across more than one contract. | Single level
Smaller, simple contracts, with only one major interface. |
|
Monitoring arrangements
8.19 Contractors should supply contract managers with regular information on:
| achievement of quality, performance and cost standards;
| customers'/users' feedback.
| |
As agreed in the contract, sufficient information must be provided to enable contract managers to act early in the event of any critical shortcomings in service performance. However, an overly bureaucratic approach, placing too much emphasis on gathering volumes of excess management information and with excessive checking should be avoided. Contract management teams should avoid duplicating the collection of information by the contractor. Devising systems to manage by objective or by exception can assist to minimise the flow of information and reduce the task of analysis and interpretation.
8.20 In-house organisations working to a SLA: Departments should ensure that accounting systems are in place to record the elements of cost included in in-house bids so that the full costs of provision can be calculated and monitored.
Provisions for service failure
8.21 Departments should consider the effect of major breakdowns in services and develop contingency plans. Appropriate clauses should be included in contracts and
SLAs. Contract managers should identify the options available under the contract in the event of providers failing to perform.
| In most cases, service providers should be informed in writing and given a specific period in which to recover the failure and improve.
| Termination is the ultimate sanction, but should not be used without full consideration of the consequences. In the case of unacceptable performance of in-house organisations under
SLAs, Departments should examine the causes and consider early termination of the
SLA.
| Departments must be able to secure the reimbursement to the Department of any over-payments to a contract or of any over-payments by a contractor who is responsible for recommending payments to third parties,
eg, by including a claw-back clause in each contract.
| | |
8.22 No matter how good the pre-qualification process was, inevitably, some companies will fail. It is not illegal to trade with an insolvent company (as it might trade its way back to health again), but there is always the danger that the company might incur debts that it would not have done if the Government had not continued to contract with it. Therefore, if there is any doubt about the financial stability of a company during the competitive tendering process, the use of bank or parent company guarantees should be considered, though the cost of such guarantees will be reflected in the contract price.
|
KEY MESSAGES
| The contract should set out the service to be provided, the price, the quality performance and value for money standards agreed, terms and conditions, and other provisions.
| Post tender negotiations can be used to improve the contract or to clarify aspects, but must not renegotiate the contract in ways that are not open to other bidders.
| Successful bidders should not start work without a formal contract or
SLA.
| Successful contract management depends on the relationship between the parties and the management style or approach adopted.
| The job of the contract manager is to ensure the contract is carried out. It is the job of the service provider to carry out the contract.
| There should be provisions in the contract to deal with service failure.
| | | | | |
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SOURCES OF FURTHER INFORMATION
| Competing for Quality Policy Review, HMSO, 1996, ISBN 0-11-430142-5.
| CUP Guidance Note: No 1.
| CUP Guidance Note: No 19.
| CUP Guidance Note 30: Specification Writing.
| CUP Guidance Note 61: Contract Management.
| CUP Guidance Note 51: Disputes Resolution.
| CUP Guidance Note 58: Incentivisation.
| CUP Guidance Note 59D: Documentation: Model Conditions of Contract.
| CUP Guidance Note 61: Contract Management.
| | | | | | | | |
|
Footnotes
(54) See CUP Guidance Note 40
(55) Appraisal and Evaluation in Central Government, "The Green Book", HM Treasury, 1997
(56) See Appraisal and Evaluation in Central Government, "The Green Book", HM Treasury, 1997
(57) See CUP Guidance Note 48
(58) See CUP Guidance Note 56
(59) See CUP Guidance Note 59D
(60) CUP Guidance Note 59D
(61) See CUP Guidance Notes 1 and 19
(62) HM Treasury, TOA Division
(63) See CUP Guidance Note 59D
(64) See CUP Guidance Note 61
|
