Procurement from a Property Development Management Perspective
Procurement, from my perspective, is the process of buying services or goods within a corporate environment. To appoint an architect, I must go through a procurement process to get them onboard working on a development scheme.
There is a clear difference between procurement in the public sector and the private sector. Housing associations, HS2, Central government, local councils or wholly council-owned development companies are what I would term as the public sector. The private sector is effectively a private developer or house builder.
Within the public sector, we are driven by three words “Public Procurement Regulations (“PCR)”. PCR (2015) dictates how we purchase goods and services. We also have to adhere to the Official Journal of the European Union (“OJEU”) requirements. We have to obtain three-six quotes on lower value orders below £164k on services or £4.1m on construction works contracts, but services or works above these limits will have to use an OJEU compliant framework.
There are no hard and fast rules in the private sector that stop you from engaging with anyone (subject to checks and due-diligence). The private sector is generally driven by relationships and striking a good deal. In contrast, the public sector is driven by securing the most economically advantageous tender (“MEAT”), an audit-proof process. However, many developers may not have the red tape found in the public sector, but there are internal processes that ensure value for money is achieved. Overall, it is generally more straight forward to procure services in the private sector.
Below shows the typical levels of contracts in the public sector:
- Low value- Below £10k
- Medium value - £10k- £50k
- High-value contract- £50k and above
Three quotes requirement (Public Sector)
There is a requirement to obtain three-six quotes for services for more than £10,000 but less than £164k. To obtain quotes, you need to write a brief, set your criteria for selection, provide a deadline and send these details to the suppliers.
Wherever I find myself in my professional life, I will ensure I obtain three quotes for all services or orders. Getting three quotes allows me to ensure that I am achieving value for money. It is essential that your brief is clear, and you have straightforward evaluation criteria to ensure that you can differentiate between the bidders.
In some circumstances, you can do a direct award for orders below £10k meaning you can give the contract to one party without needing to instigate a competitive process. The direct award thresholds vary depending on the organisation.
All public sector contracts over £164k for services and £4.1m for construction works contracts have to be procured in adherence with OJEU requirements. This means that anyone within the EU can bid for the services you require unless you can have a framework that limits the participants.
The way many public sector companies get the right type of services is to use an OJEU compliant framework with a selected number of providers who would have gone through a rigorous process to be on the framework. In the public sector, we tend to call off frameworks by doing mini completions.
It will be interesting to see whether we will be required to adhere to OJEU requirements now that the UK has left the union.
I have set evaluation criteria and have reviewed countless submissions from bidding consultants and contractors. I generally set my criteria to be 70% quality and 30% price for consultancy services.
Quality criteria will see me setting some weighted questions for response by the bidders. At the same time, price is just scoring based on the price submitted. The lowest price gets the highest pricing score.
As mentioned above a bidder will score highest on price if they submit the lowest price, but this does not guarantee success. Pricing too low raises questions on whether you can deliver quality service plus you will also have to do well in the quality section.
In quality scoring, this is where I think the winner come through shining. This is where most of the points are won. So answer the question being asked with as less waffle as possible, and you’ll do fine.
The evaluation criteria will involve setting what you will be assessed against and the score for each criterion. It is up to you to levy appropriate weighting to each question you expect back.
The evaluation process is a when you’ve received responses to those questions, and it’s up to the acquiring party to assess the submissions. My suggestion to anyone who bids for work with both public and private development organisations is to answer the question and understand the motivation behind the question.
The best submissions I’ve read are those that answer the question I’ve asked and then go over and beyond to display their understanding through providing examples and even suggestions for improving the outcomes desired.
Please see the below worked example:
Bidder 4 would have won the tender exercise based on submitting a reasonable price yet giving good responses to the pre-set quality questions.
· Architectural services for a small parcel of land
· 70% quality and 30% price.
· Quality weighting- Q1(20%), Q2(15%), Q3(25%) and Q4(10%)
· Scores between 1-5. 5 being the excellent and 1 being the worst.
I must say that I least enjoy writing briefs for quotes and tenders. However, I most enjoy reviewing submissions to see how bidders have responded to the questions I have set.
The art in these submissions is to not copy and paste from other submissions you’ve done as It is obvious when bidders have done this. When a consultant responds directly to my questions, I generally score them well. A consultant gets top marks if they provide a submission that not only answers my question but have gone over and beyond by showing that they understand the overall brief.
Why is it so hard to get work with the public sector?
I have many contacts ask why it is so hard to get work with the public sector. My response to this is that companies should consider getting on the dynamic purchasing system and keep an eye on the due north or contracts finder. For those who wanted to be on an OJEU compliant framework, please have click here. These websites allow you to see when opportunities are put out and give you the chance to bid.
Alternatively, you can do the old fashion thing and just network and provide CPD content that allows you to get in front of the right people. You will be surprised how networking and CPD can get you in front of the right people.
Whatever sector you are in, it is safe to say that you should always get three quotes. Working with one person is likely to breed familiarity, which does not allow fees to be competitive.
For those submitting tenders, make sure your submission is explicit and take time to answer the questions asked as directly as possible. From my perspective, I do not enjoy reading 10-page responses to one question, so please keep it concise and proportionate to the weighting of the question.
Finally, going too low on your price does not guarantee you success. You have to ensure your quality submission is good also.