Supplier Selection Sue Hurrell, Value Wales What am I covering? - - PowerPoint PPT Presentation

Sue Hurrell, Value Wales

Simplifying Supplier Selection

What am I covering?

• Background
• “Supplier Selection” – what we set out to

achieve

• SQuID – what is it?
• The risk-based approach
• Summary of content
• The project – where we are now
• Questions

Bit of background

• Perennial question – how can we reduce

barriers to entry, especially for SMEs?

• Barriers to procurement opportunities

report - 2009

• Pre-qual always the main culprit
• Seen as over-complex, bureaucratic,
• paque etc – but buyers have to:

– Manage risk and process costs – Be fair, transparent and operate within the law.

Other “Barriers” recommendations

• Need for wider advertising, particularly of

lower-value contracts.

• Greater clarity around the assessment

process.

• Better feedback and communication

generally.

Supplier Selection

Research, specification, advert etc – what do we want? Selection – are they capable? Award – what’s the best offer? Shortlisting – can we narrow the field down a bit?

Selection rules

• Treaty principles – all procurement
• Regulations – application depends on contract

value and market

• No muddling or duplication of selection and

award questions

• Law is restrictive about what can be asked at

each stage.

• Transparency of requirements and assessment

at all stages is essential.

The problem:

• Common mistake – including requests for info

“just in case” or “because we’ve used it before”, in the belief it “covers all the bases”.

• But if you don’t know:

– why you’re asking for the info; – what you will do with it; and – how you will assess or score it…

• …you waste everyone’s time, and
• …risk a legal challenge.

Costs of supplier selection

• based on on-going survey of (~ 40) suppliers,

Sell2Wales and Bravo data. (statistical significance?)

• Average cost for completing a PQQ is approx £1600 for

non-construction and £2700 construction (too conservative?)

• An average of 16 PQQ responses are completed per

procurement.

• At least £20m is spent annually, in Wales by suppliers,
• n PQQs for OJEU procurements alone.
• Approx 20% of this cost is incurred by suppliers simply

trying to figure out whether or not to bid.

Key objectives

• More standardisation AND more tailoring!
• Efficiency for both public sector and bidders
• Consistency of approach
• Minimise legal risk of challenge
• Better feedback leading to improved tenders
• Increase competitiveness in all markets…
• … and especially of Welsh SMEs – maximising

economic benefit of procurement in Wales.

Some principles

We wanted to encourage buyers to:

• think about specific contract requirements and

associated risks;

• favour YES/NO (pass/fail) questions and thresholds that

enable non-compliant suppliers to self-deselect ;

• reduce use of open-ended “exam questions”;
• reduce use of essay questions to back up a yes/no

answer;

• reduce focus on policies and statements of intent; and
• increase focus on facts - past experience and

performance.

What is SQuID ?

• Supplier Qualification Information

Database

– although it’s not a database yet!

• A common core set of questions
• NOT a standard form/template
• Risk-based tool for buyers

What is SQuID? (2)

• Currently rather a lot of paper!

– Part 1, introduction – Part 2, guidance for buyers – Part 3, the question set

• Similar documents for construction-specific
• Work underway on the on-line version on

www.sell2wales.co.uk, which will

– summarise Part 2 into a single “wizard” (to be used for every new project) – Store suppliers’ data in “answer pots” for re-use.

How was it developed?

• Long-list of questions based on some standard PQQs in

use

• Groups of experts (public and private sector) looking at

categories:

– Finance – Capacity and capability – Management (quality, PM) – Equality – Sustainability – Health and Safety

• Long-list down to shortlist
• A year’s “active consultation” – feedback and 400

(mainly public sector) staff trained.

• An identical parallel construction exercise

How is SQuID used by buyers?

• Use the risk-based guidance (Part 2 of paper

doc, or “wizard” on the on-line version): to

– analyse requirement and the associated risks, and choose questions that address them – leave out questions that are not relevant

• Add in any necessary project-specific questions
• Include guidance for bidders
• Issue your PQQ (using the system) and receive

responses – assess off-line.

How is SQuID used by suppliers?

• Paper version – read the guidance and answer

the questions as usual.

• Sell2Wales version (when we have it):

– Log on and complete your full profile (your “Master answer pot”) at any time – Respond to an advertised opportunity and fill in the PQQ using your stored data – Store your new answers as an “answer pot” – Manage your answer pots to update your “Master answer pot”.

When can SQuID be used ?

For any formal tendering:

• Open procedure – as first part (selection) of invitation

to tender

• Restricted procedure – as PQQ at

selection/qualification stage

• Sub-threshold procurements

16

Risk-based approach

• What are we doing at selection?

–Minimising the risks associated with a supplier failing to deliver or causing some other cost or embarrassment.

• Most organisational procedures

based around value, not risk.

Assessment tool - risk of supplier failure

None = 0 Low = 1 Moderate = 2 High = 4 Very High =8 Penalties or costs incurred by the buyer if supplier failed Less than £5,000 Around £10,000 Around £25,000 Around £50,000 Near to or

• ver

£100,00 Goodwill / reputational impact on Buyer of supplier failing; impact on public and consumers. No external impact on failed contract. Very limited impact on public; public perception unlikely to be affected. Some impact

• n public;

small negative impact on public perception. Moderate impact on public; moderate negative impact

• n public

perception. High impact

• n public;

significant negative impact on public perception. Incremental cost of providing a temporary alternative service/capability Less than £5,000 Around £10,000 Around £25,000 Around £50,000 Near to or

• ver

£100,00 Procurement costs associated with buying a temporary and/or alternative service or capability Less than £5,000 Around £10,000 Around £25,000 Around £50,000 Near to or

• ver

£100,00

0 - 3 points (up to approx £35k impact): no check of financial standing 4 – 7 points (approx £35-85k impact): light-touch check of financial standing 8 or more points (approx £100k impact and over): in-depth check of financial standing

• Scenario 1 – prescribing software

– Software to support critical [Prescribing/Social Services] function. – Value £75k. – Mainly “off the shelf” product but some bespoking needed. – Term: 3 years with option to extend to 5. – Maintenance and support required over contract term. – Several suppliers in the market but business- critical and would take 5-6 months to replace. – Installation required (including some time working on purchasing body’s premises).

• Scenario 2 - Staff uniforms

– Term: 3 years fixed. – Value £60k. Purchase only. – These are basic, widely available garments which only require finishing in the appropriate colours and the purchasing body’s logo and wording to be attached. – Relatively easy to re-procure and non-critical because of stock held. – However – garments manufactured in Far East (though finished in EU) and purchasing body’s policies require sustainability and labour policy / conditions to be scrutinised closely.

Low-risk financial appraisal

• Light touch check:
• Profitability over 2 years (opportunity for

losses to be explained, or put into the context of available assets)

• Acid-test ratio (short-term liabilities and

assets)

• Credit checks or D&B “risk of failure”?

Possible concerns around transparency.

High-risk financial appraisal

• Comprehensive analysis of accounts by

experts – in-house or third party.

– Balance sheet of bidding company (and parents) – Historical cash and profitability – Other structural issues, market context etc

• Opportunity for mitigating steps (bonds,

guarantees)

Capacity and capability

• Experience (answers may not be

“storeable”)

• Record of successful delivery (deductions

for damages, cancelled contracts)

• Turnover (relevant)
• Certification/qualifications/skills/capacity

The other sections

• Management (quality), equality, sustainability,

H&S

• Treated similarly:

– Do you have convictions? – What have you done to put things right since? – Do you check the credibility of sub-contractors? – Do you have a third-party accredited system (ISO9001, ISO14001 or equivalents etc)? – If not, do you have your own process? Does it include the elements we need? Can we see a copy please? – What’s your record (H&S)?

What’s next?

• Finalising the question sets and guidance –

summer

• Getting them in use on current systems and built

into our e-tendering system (Bravo)

• Building the new functionality on Sell2Wales

(end of the year?)

• Data sharing with other systems
• Include other supplementary question sets

(social care, food, local transport?)

Is this another white elephant in the making?

• Very widespread buy-in to the principles and current

question sets. WG support, manifesto commitments etc.

• Wide take-up already, and enthusiasm about the

prototype of the on-line system.

• Sell-out courses
• Why?

– We consulted widely – joint ownership of the outcome – There is more risk of challenge out there – It’s a completely flexible solution – What’s not to like?!

• Challenges are getting the on-line system working and

the links with 3rd party systems.

• Scotland and N Ireland developing their own systems

based on ours.

So.. Hopefully not!