Procurisk
Home About Procurisk News Contact Us
Procurement News

Items from 2013

Everything you wanted to know about variant bids in 5 Q&As!
We’ve put together 5 questions, (and answers), on variant bids which should be helpful to both buy-side and supply-side.  I would be interested in any other questions (and answers!) you may have. I would also be interested in examples of where variant bids have offered solutions that are outside the box. Variant bids are an increasingly high profile facet of public sector competitive tendering as innovative solutions are sought to deliver radical solutions and deliver enhanced value for money. I sincerely trust that what follows will be deemed helpful. Please share this information with whoever you think will benefit from it.

Everything you wanted to know about variant bids in 5 Q&As!
Question 1.  What do we mean by ‘variants’?

Answer 1.  The Public Contracts Regulations 2006, Regulation 10 deals with 'Variants'.

This states at (1) that where a contracting authority intends to award a public contract on the basis of the offer which is the most economically advantageous in accordance with regulation 30(1) (a) it shall indicate in the contract notice whether or not it authorises economic operators to submit offers which contain variants on the requirements specified in the contract documents and a contracting authority shall not accept an offer which contains a variant without that indication.

At (2) is states that where a contracting authority authorises a variant in accordance with paragraph (1) it shall state in the contract documents the minimum requirements to be met by the variants and any specific requirements for the presentation of an offer which contains variants.

At (3) it states that a contracting authority shall only consider variants which meet its minimum requirements as stated in the contract documents in accordance with paragraph (2). This  reinforces the fact that the minimum requirements must be clear.
Question 2. What official guidance is available on variant bids?

Answer 2. The European Commission has published the 'Guide to the Community Rules on Public Procurement of Services' Directive 92/50/EEC. On the first page it states that 'This guide has no legal value and does not necessarily represent the official position of the Commission' (!).

On page 50 (6.1.4) there is some detail on 'Offers containing variants.' It is worth a read, noting that the highlights include:

  • 'Contracting authorities are obliged to state in the general or contractual documents the technical specifications of the services they are looking for. Nevertheless, it is important for economic operators and users that services may also be offered which do not correspond to those identified by the contracting authority but which satisfies its requirements.'

  • 'Subject to certain conditions, the Services Directive allows tenderers to propose variants. The first condition is that variants can only be permitted when the contract is awarded on the basis of the economically most advantageous offer.'


There is an absence of detail in this guidance.
Question 3.  Are there any examples of variant bid practice here in the UK?

Answer 3.An ITT issued by the Department for Business Innovation & Skills stated:

'You are encouraged to be innovative in your thinking when preparing your bid and to provide any suggestions and solutions that may provide a more cost efficient and value for money solution. Any such proposal which alters the requirements of the specification must be in the form of a variant bid, must be clearly marked "variant bid", and must be submitted at the same time as the fully compliant bid requested in this ITT.

This approach has its merits although it is necessary elsewhere in the ITT to fully explain the tender evaluation model.
Question 4.  Are there any examples of practice outside UK central government?

Answer 4. In researching tenders issued by local authorities we identified one that had more detail than the DBIS one at (3) above.   There are four parts to the 'Variant Bid' section.

(1) XXX will only accept variant bids (at its sole discretion) if they meet the minimum specification detailed in the TENDER SPECIFICATION (or in the absence of defined minimum specification in the TENDER SPECIFICATION, meet and exceed all criteria of the TENDER SPECIFICATION).

(2) Variant tenders will be evaluated against the published evaluation criteria.

(3) Variant tenders submitted which do not meet the minimum specification detailed in the TENDER SPECIFICATION (or in the absence of a defined minimum specification in the TENDER SPECIFICATION) will be deemed non-compliant and not capable of acceptance by XXX.

(4) The variant bid must be set out in writing, as a separate document to the TENDER and accompanied by a new 'Form of Tender' submitted and marked "Variant Bid". For the variant bid offered the full scope of the proposal, costings, delivery and, or, implementation timetable and/or other proposals must be submitted in accordance with the terms set out in the tender documents.

The clever part of this is the final sentence which can be usefully developed to deal with specific circumstances.
Question 5. Has ‘variants’ been tested in Court?

Answer 5. There is a relevant legal case in the High Court of Justice in Northern Ireland 'Natural World Products Ltd v ARC 21 [2007] NIQB 19.

The judgment is 18 pages long and is founded on a variant bid not being evaluated properly. The unsuccessful bidder was supported by the Judge who determined that the contract could not be awarded and the authority must return to the evaluation of the variant bid. This emphasises the importance attached to the evaluation model and the manner in which the evaluation of any variant bids received.

 
Everything you wanted to know about variant bids in 5 Q&As!

The take-away: Variant bids are a useful tool in competitive tendering to promote (or to propose) innovation approaches…but ensure you take advice to manage the risks (and opportunities).

 

About Brian Farrington

Brian Farrington is one of the world’s longest established procurement and supply chain consultancy and executive training specialists. 33 of the current FTSE100 have retained our services, as well as leading organisations in the UK, North America, southern Africa and Asia. Established in 1978, we have proven expertise and experience in strategic procurement and risk management.

Brian Farrington solutions and services are formed through consultancy, training & development, coaching – all underpinned by proprietary technology. Our four core areas of procurement risk management capability are:

•Strategic review and commercial governance

•Performance delivery and transition

•Major project support including managing contractual risk

•Learning & development in support of organisational aims.

For more details about procurement risk management and Procurisk® Stephen Ashcroft can be reached at on 01744 20698 and email
Read More >
ICT PROJECTS CAN DAMAGE YOUR HEALTH!
ICT PROJECTS CAN DAMAGE YOUR HEALTH!

This is not a tongue in cheek (no pun intended) poke at ICT projects, it is a serious outline analysis of another IT project that has failed. An authoritative report has been issued by the Victorian Auditor General in Australia, “Clinical ICT systems in the Victorian Public Health Sector??, Report 2013 14:8.

We are highlighting some of the points made and then making our comments for general consumption on ICT projects generally. Our comments are not only directed at the specific project in Victoria. The positive note is the lessons that can be learnt. If people are minded to do so.

“In 2003 government committed to roll out clinical ICT systems in all major Victorian hospitals by 2007.?? We are sure this was a considered objective, probably supported by a business case to justify the proposed expenditure. Perhaps there was a Project Risk Register and even better a Procurement Risk Register. If there was it should have been informed by past ICT failures around the world. There is absolutely nothing unique about such projects failing to deliver the outcomes on time and at the agreed budget.

“By October 2013 the ICT system had been installed at four health services instead of all 19 major Victorian hospitals as planned, and the system had only been implemented at one of these health services.??  You may wish to stand back in shock and amazement! What has happened in TEN YEARS? The contract detail would be a fascination, as would the contract change notes. Did the vendor pay damages for late delivery or was the contract ‘silent on the matter’ as a Barrister once said to us? Being silent on a matter, is more refined than ‘someone forgot’ to include it in the contract.

“DH (Department of Health) failed to complete the expected implementation……..due to poor planning and an inadequate understanding of system requirements. DH significantly underestimated project scope, costs and time lines, as well as the required clinical and other work flow redesign and change management efforts.?? There is serious food for thought here. We have little doubt that there would be an extensive team on the project, including ICT specialist and consultants, and that they would effectively liaise with stakeholders. There probably was, also involved, specialists in project management. Our great concern on every ICT project in which we engage is defining the technical requirements. It is almost 100% certain that the specification will change innumerable times. In terms of costs, whatever figure is presented the cynic will multiply it by 3 or 4 (see our article on HS2).

“DH has not demonstrated:

  • An auditable trail of authorisation by government of key changes in the program scope and direction

  • Effective financial monitoring and oversight practices to generate reliable and consistent expenditure data

  • Appropriate attention and action in relation to previous review recommendations and other guidance

  • Effective governance and contract monitoring to ensure vendor performance.??


This is an interesting litany of failures. Thinking outside the specific project, these are pointers to where world class practice should be. The logic isn’t new, so why are these practices not in place for many IT projects? We suggest that one reason is the short sightedness of project managers whose are afraid to say this project is likely to be a disaster so let us abandon it! Any failure of financial monitoring is potentially catastrophic – so where was audit whilst all this is taking place?

“By October 2013 the system cost $145.3 million. Despite its significantly reduced scope this is 150% more than the original budget.?? Nothing new here we suggest for many ICT projects. As will be seen below the figure quoted here is not the end of the story. It raises the pertinent issue about someone having the courage to terminate contracts where costs and time lines are out of control.

“DH is not able to definitively advise how much has been paid to the vendor against the approved contract cap.?? Pardon me!! Let me pinch myself. A financial project system that fails to monitor payment to a supplier beggars belief. A telephone call to the vendor would have probably got an answer within minutes. Of course, our UK readers will recognise that the UK Government has a current ‘difficulty’ with payments to suppliers on the electronic tagging contract. It appears they know what has been paid. Their difficulty is that it appears that the Justice Ministry don’t know what was being paid for (see the NAO report). Watch this space. The Serious Fraud Office is due to report. We have noted that currently the consultants PwC have been paid circa £2m (so far) to answer the question.

“DH cannot demonstrate that it is aware of relevant details of project costs.??  This facet of cost is not infrequently unknown when in-house resources do not have to account for their time on specific projects. Even when there is this requirement there is the danger that time is booked, wrongly, to different projects to hide the reality. This facet of accountability drives into financial systems and the integrity of project management.

“Under the ICT system arrangement the vendor was given overall project responsibility.?? This approach opens the door to a conflict of interest. The vendor is likely to be self-serving and unlikely to draw attention to failures to perform, escalating costs, major risks emerging, etc. It is a potential significant error of judgement.

“DH contract management processes were not effective in addressing the vendor’s performance issues.?? It is monotonous how many times there is adverse comment on contract management relating to public service contracts. Why should this be so? Ignorance regarding the skill level required is definitely a factor. The financial constraint on in-house contract management is another factor to be taken into account. It has been argued that circa 10% of the project value should be allocated to contract management. The inability of some organisations to conduct robust contract review meetings is welcome by the non-performing contractor.

“The selected vendor’s clinical ICT system was described as a commercial off the shelf solution. However, it still required configuration to fit the requirement.?? On this depressing note we end our extracts from the report. The configuration issue will ring alarm bells with many ICT project managers and procurement specialists. We simply ask what sort of procurement process is it that ends up with a contract, knowing that configuration will be required? It raises many questions, not least who owns the IPR in the developed software, how will the configuration be charged and what impact will there be on the time lines?

This isn’t a happy read. Caveat Emptor!!!!

 If you are embarking on an ICT Procurement and need some help in avoiding such problems please give me a call, Ray Gambell on 01744 20698 or email me at r.gambell@brianfarrington.com. We have number of ways we can help including  our Procurisk® risk identification software service.

 
Read More >
A tool to manage performance and defects
We have been guiding a client through a procurement process involving construction. The issue of Collateral Warranties arose. The subsequent debate and negotiations have persuaded us that a briefing note will help our clients and visitors to our website.

A collateral warranty can be defined as

“an agreement associated with another primary contract??


The warranty is usually executed as a deed and no consideration is required to render the warranty enforceable. The limitation period is 12 years. It is used to define an agreement ancillary to another principal contract. For a third party, it imposes an extended duty of care and a broader liability on two separate parties involved in a contract.

A tool to manage performance and defects

Collateral warranties do not have a long history and there isn’t an extensive legal case history. Such warranties can be traced back to the 1980’s noting the Shanklin Pier case in 1951 (see later).

Essentially only parties to a contract can claim losses for breach of the contract. Particularly in construction, it is often necessary to establish contractual relationships between, for example, architects, builders, funders, developers and tenants. The collateral warranty is the legal document which creates the contractual relationship.

We need now to issue a “health warning??. You MUST seek professional and legal advice IF you wish to pursue collateral warranties in a future deal(s).

You may wish to consider (amongst other things) the following:

  • An undertaking to meet the obligations of the warrantor under the primary contract

  • The maintenance of insurance to cover off the risks – Professional Indemnity

  • Exclusions or limitations on liability (if applicable)

  • Permission to assign the warranty

  • Step-in rights for the funder to take on the employer’s role

  • “No greater liability?? clause to ensure the warrantor is under no greater liability than the primary contract

  • Copyright which allows the Employer to use design documents the Sub-contractor/Sub-consultant prepares.


A test case worth reading is How Engineering Services Ltd and Southern Insulation (Medway) Ltd [2010] EWHC (TCC).  As always these cases are never straightforward. Developers engaged “McAlpine?? as the main contractor who sub-contracted the mechanical and electrical (including the air-conditioning) services to “How?? who then sub-sub-contracted to “Southern??. “Southern did the work of insulating the steel pipework which was to carry chilled water around the building for air conditioning purposes. Problems arose which led to the replacement of pipework at a cost of some £3.5m.The development was occupied by Linklaters (solicitors) as lessees. Linklaters issued proceedings against McAlpine which had provided to Linklaters a written collateral warranty. How gave to Linklaters a Collateral Warranty a collateral warranty to the effect that How would carry out its sub-contract works in accordance with the sub-contract it had entered into with McAlpine. Cutting a very long story short, the judgment supported the use and efficacy of collateral warranties.

Addleshaw Goddard comment on the “No greater liability?? clause as follows.

“An issue that has dogged collateral warranties is the penchant for insurers for insisting on the inclusion of so-called no greater liability clauses. The inspiration for such provisions is thought to be that PI policies commonly exclude, in one way or another, cover for claims under any collateral warranty which imposes any obligations which are more onerous or longer-lasting than any related liability under the principal contract??.

There is no shortage of draft collateral warranties on the internet but you must exercise due care before recommending their use or “adapting?? them for your use. A useful example is a University of Leeds Deed, attributed to Eversheds LLP (dated 24 September 2007). There are 13 clauses namely:

  • Consideration

  • Contractor’s Warranties

  • Intellectual Property Rights

  • Notices

  • Assignment

  • Other Rights and Remedies

  • No approval

  • Prohibited Materials

  • Limitation

  • Governing Law and Interpretation

  • Third Party Rights

  • Professional Indemnity Insurance

  • Step-in Rights


We referred earlier to the Shanklin Pier Ltd V Detel Products Ltd [1951] 2 All ER 471, Kings Bench case. McNair J commented “This case raises an interesting and comparatively novel question whether or not an enforceable warranty can arise as between parties other than those parties to the main contract for the sale of the article in respect of which the warranty is alleged to have been given.?? Shanklin Pier contracted with George M Carter (Erectors) Ltd., to repair and re-paint the pier. Separately Shanklin Pier contracted with Detal Products, the paint known as “DMU?? which Detel warranted would have a life of seven to ten years and would prevent corrosion and creeping of rust. Carters were instructed to use the “DMU?? product. Its life was of very short duration. Note that there was no contract between Shanklin Pier and Detel. Nevertheless McNair J  held that there was a collateral warranty provided by Detel and Shanklin Pier and Detel were ordered to pay the cost of the corrective work.

A tool to manage performance and defects

The take-away: Collateral warranties are a useful tool to manage performance and defects...but ensure you take advice before entering into agreements with your suppliers.

 

About Brian Farrington

Brian Farrington is one of the world’s longest established procurement and supply chain consultancy and executive training specialists. 33 of the current FTSE100 have retained our services, as well as leading organisations in the UK, North America, southern Africa and Asia. Established in 1978, we have proven expertise and experience in strategic procurement and risk management.

Brian Farrington solutions and services are formed through  consultancy, training & development, coaching – all underpinned by proprietary technology . Our four core areas of procurement risk management capability are:

•Strategic review and commercial governance

•Performance delivery and transition

•Major project support including managing contractual risk

•Learning & development in support of organisational aims.

For more details about procurement risk management and Procurisk® Stephen Ashcroft can be reached at on 01744 20698 and email

 

BREAKING:  London Calling: Would you like to figure out what we can do together?   Or just to share our hard knock life :)  Steve Ashcroft is facilitating workshops for an overseas client in London and will be 'at leisure' from early afternoon onwards.  Please will you have a look at your diary for 16 -20 December inclusive.  Interested in meeting up in London? Let's set something up. Coffees on me!  Steve
Read More >
Has Brian Farrington changed procurement risk management forever?
When Brian Farrington announced at the end of 2012 that Procurisk® had been live for a month or so, a number of leading people in the supply chain risk space questioned how such a significant change could have happened without it having been detected earlier.

Stephen Ashcroft Head of Brian Farrington procurement risk team talked about Procurisk® being the first time a completely new approach to identifying procurement risk had been introduced, worldwide, and that it impacted on categories of spend and project types.

However, the visible impact of this change has been less significant than many recent technology stories, such as SAP/Ariba or OB10/Tungsten launches and the Trade Extensions innovations.

Has Brian Farrington changed procurement risk management forever?

Immediate repercussions weren’t as big as expected.

There seems to be a contrast between the vision of the change as stated by Brian Farrington and its repercussions within the senior procurement/CPO business community.

This leads us to conclude that although Procurisk® is a significant move, it is an upgrade in capabilities and that we will see the full impact of this change over the coming months and years.

What will Procurisk® allow people engaging and managing suppliers/vendors and contractors to do?

Procurisk® enables and equips people involved in procurement to understand supplier risk more closely, with greater understanding of words like 'how' 'why', 'where' and ''when', as well as the risk that sits behind these word.

As we know mismanaged risk, creates losses and cause severe reputational damage.  A structured and rigorous evaluation process of procurement risks has not been readily available, so to be able to access actionable data to identify and manage procurement risk is – right now – with all the noise of horsemeat, fraud and Asian supply chain risk looking good for Brian Farrington clients.

Why did Brian Farrington launch Procurisk®?

Brian Farrington recognised that clients expectations are that ‘solutions’ are provided in a blended format, typically with a technology platform.  The intellectual capital that resides in the ‘grey-haired’ team at Brian Farrington and their deep research findings in best practice procurement risk management ensures its Procurisk® product is robust, with  conversational-based diagnostics as a innovative cloud app, following its long-term technology push (working closely with Lancaster University in the UK.

Brian Farrington has made no secret of the fact it desires to become a ‘one-stop’ niche problem solving procurement specialist. With services formed through consultancy, training & development, coaching - all underpinned by their investment in technology to work with clients’ to solve procurement problems; all of which has been written about over the last year and a half.

Procurisk® makes great use of natural intuitive abilities to interface with the easy to use system – the output of a spider diagram to help ‘visualise’ where the risk lies across a comprehensive suite of datasets has been getting some great feedback.  One client said “ the COO presented with the output diagram, set the challenge – ‘get that red section to green by the next report date’ – pretty good actionable data!??



How do procurement organisations actually plan to buy a high-risk high-value product or service?

Risk is an ever present consideration, regardless of where we provide our services.  Examples are safety critical equipment on aircraft, traceability of pharmaceutical feedstock and business continuity plans for strategic suppliers.  How do procurement organisations actually plan to buy a high-risk high-value product or service?  Well, it's a high level skill with a breadth of commercial, contractual, financial and technical challenges.

A specification should be written, including acceptance criteria. It imposes an early discipline. By definition, this must involve stakeholders and regardless of whether it is a project, goods or services that are being purchased the logic remains. If, for example, professional services providers are awarded a contract we may ask what are their deliverables? We have seen this defined as a ‘Report’. Clearly this is totally inadequate, recognising many consultants that many are in breach of contract for not providing high quality advice.

The trading and contractual history of the proposed supplier should be set out. There is a constant failure to undertake appropriate due diligence both prior to contract award and subsequently.  What happens when a strategic supplier goes into administration?

There is a serious need for comment on the cost of the procurement. If there is a budget, where did that originate? Is it a guess or is it informed? Have we engaged in a through life cost study? What are the key cost drivers? Who will devise the cost model to include with the RFP/ITT? If a contingency is to be provided how was this determined? – in other words is it a standard 10% overspend allowance?  Construction and IT offer serious examples of purchase prices getting out of control, increases of 150% are not uncommon.

The planned contractual safeguards should be set out. If we are using standard forms of contract or standard terms and conditions of purchase, are these adequate? The answer is probably not. There are many factors to consider including, acceptance testing, warranty, limit of liability, insurance, key personnel, dispute resolution, termination, step in rights, right of audit and payment of damages. Procurement should take this initiative, basing their approach on a comprehensive risk assessment.

Key elements of a plan to ensure procurement risk is visible should include a thorough risk assessment considering such matters as the supplier’s business continuity plan, dependencies between the parties, technical specification deliverables, programme management, inspection and testing and key personnel.  Here is were Procurisk® really comes into its own ensuring a consistent and effective approach much quicker than traditional risk management methodologies.

Conclusion

Has Brian Farrington changed procurement risk management forever? While we haven’t yet seen Procurisk® drastically change the rather pedestrian approach to procurement risk management (risk log anyone? Yes I think we had one back at the tendering stage!), there are some clear implications and the industry should take note. If we consider there are three key stages to managing risk effectively:

1)    Early and systematic identification, analysis and assessment of risks and the development of plans for dealing with them.

2)    The allocation of responsibility to the party best placed to manage the risks.

3)    Ensure that the costs incurred are commensurate with the importance of the contracted services and the risks involved.

Procurisk® appears to be ideally placed to enhance the rigour of procurement risk processes.

Recommended research:

Procurisk briefing paper

3 procurement risks to make you shiver

About Brian Farrington

Brian Farrington is one of the world’s longest established procurement and supply chain consultancy and executive training specialists. 33 of the current FTSE100 have retained our services, as well as leading organisations in the UK, North America, southern Africa and Asia. Established in 1978, we have proven expertise and experience in strategic procurement and risk management.

Brian Farrington solutions and services are formed through  consultancy, training & development, coaching - all underpinned by proprietary technology . Our four core areas of procurement risk management capability are:

•Strategic review and commercial governance

•Performance delivery and transition

•Major project support including managing contractual risk

•Learning & development in support of organisational aims.

For more details about procurement risk management and Procurisk® Stephen Ashcroft can be reached at on 01744 20698 and email



 
Read More >
Psst! Have you got 35* seconds to invest in helping your good friends at Brian Farrington?
Psst!  Have you got 35* seconds to invest in helping your good friends at Brian Farrington?

https://www.surveymonkey.com/s/YNQ29SY

We have learned that surveys are a very important tool for running our business.  As a Buyer I cans see the value in participating in any survey.  I guess it depends on what the purpose and outcome might be.  If I feel that my opinion is genuinely valued then I'm more prone to participate.

So, here’s your chance – to tell it like it is:

I’ve got (just) seven short, sharp questions for you here, pretty much all tick boxes about www.brianfarrington.com.  No names, no pack drill – we are not focussed on ‘capturing’ your contact data – we are super-keen to gain an insight to what you think about us, which would be really helpful to us – and might even help you too (a findings summary will follow in November).

Thanks, your personal time is very much appreciated.

Steve

PS *35 seconds is about 5 seconds a survey question - plus press the send button ;)

PPS the survey is here: https://www.surveymonkey.com/s/YNQ29SY

 

 
Read More >
Certainty in an uncertain world?
Businesses and public sector organisations want to work with buyers and suppliers with as little dispute as possible. A key requirement is clarity of terms used in discussions and documents relating to trading relationship and contractual agreements. Ultimately there needs to be sufficient clarity to enable a Judge to enforce their agreement – the worst case scenario!

Certainty in an uncertain world?

If you are interested in disputes over meaning and application of common commercial contract usages here is a good example from a case between Vogon International v Serious Fraud Office [2004] EWCA Civ.

In summary:

  • The two parties agreed a contract to set and populate an MS Exchange database (whatever one of those is!) at £1,500 per database

  • Vogon interpreted the word ‘database’ to mean a .pst file and so raised an invoice of £314,000

  • The SFO interpreted ‘database’ to mean each complete MS Exchange database and requested an invoice of £22,500

  • Regretfully the two parties went to court (by the way would you ever take the SFO to court?)

  • Subsequently the Court of Appeal agreed with SFO.


The take-away: Because Vogon and SFO failed to clarify a shared interpretation of one word – database – they went to court incurring all those costs and aggravation. Not recommended!

The following meanings and effects of typical words may be helpful in clarifying matters and more importantly raise the  awareness to clarify terms, trading relationships and contractual agreements:

Estimate This is a price submitted by the seller but who may word it as subject to confirmation. The buyer needs to establish if it is a price capable of acceptance and whether it is ‘firm’ or ‘fixed.’ The danger of placing a contract on this basis is that the seller requires an uplift when s/he is in possession of further information.

Quotation It must be established if the quotation is an offer to sell or an invitation to treat. Often the supplier will couch it in terms of ‘This quotation is not an offer.’ The buyer must read the quotation for any qualifying comments that seek to place risk with the buyer.

E&OE This means Errors and Omissions Excepted. This is a significant qualification and should not be accepted by the buyer. To accept the statement is leaving the door open to the seller to change any aspect of the quotation.

Agreement in Principle This is another qualifying comment. It means that it is not formally accepted, thus leaving the door open to the seller to withdraw the agreement in principle if something arises in discussions or negotiations that impact on the provisional agreement.

Reasonable Price There is no such thing as a reasonable price! The price will be set according to many things including the market conditions, seller’s pricing strategy, risk profile of the contract, liabilities, etc. This term is best avoided by the buyer – although strongly recommended to be promoted the seller!

At a Price to be Agreed This should not be accepted by the buyer. It leaves the buyer vulnerable to any price submitted by the seller. On the occasions when a price cannot be agreed prior to signing a contract an Instruction to Proceed may be placed with a financial cap attached to it, thus giving the buyer an opportunity to, later fix the price on a rational basis.

Without Prejudice This is a phrase used to enable parties to negotiate settlement of a claim without implying any admission of liability. Letters and other documents headed ‘without prejudice’ cannot be adduced as evidence in any court action without the consent of both parties.

Letter of Intent When properly written this does not create legal relationships, it merely gives comfort to the other party that they may win a contract. In the USA they are called ‘comfort letters.’ For it to be a letter of intent it must not instruct the seller to take any actions, otherwise it becomes an Instruction to Proceed which does create legal relationships.

Subject to Contract The use of these words is not a valid acceptance of a contract. An acceptance made subject to any variation is treated as a counter offer. The buyer must know the rules of offer and acceptance.

Subject to Negotiation This is a further qualification and cannot be treated as acceptance. Until the negotiations are complete and the outcomes documented and agreed by both sides there is not an offer that can be accepted by the buyer.

Food for thought? For support and guidance around trading relationships and contractual agreements, including tendering activities and ‘disputes’ please contact us.

What can we do for you?  We can probably help you achieve your objectives – through our consultancy, training and coaching services – let’s start a conversation.

If you can spend a few minutes on the phone with me, I can assess the potential ROI of working with us.

If this is interesting to you, please email me and I’ll set something up.

Or call me on 01744 20698

Thanks

Steve

Certainty in an uncertain world: About Brian Farrington

Brian Farrington is one of the world’s longest established procurement and supply chain consultancy and executive training specialists. 33 of the current FTSE100 have retained our services, as well as leading organisations in the UK, North America, southern Africa and Asia.

Established in 1978, we have proven expertise and experience in strategic procurement, sustainability and risk management. Brian Farrington solutions and services are formed through consultancy, training & development, coaching, interim resource and recruitment.

Our four core areas of strategic procurement, sustainability and risk management capability are:

• Strategic review and commercial governance

• Performance delivery and transition

• Major project support including managing contractual risk

• Learning & development in support of organisational aims.
Read More >
Should you attend (another!) Bid Conference?
Should you attend (another!) Bid Conference? A 4-point guidance note for Vendors

The purpose of vendor/supplier briefings (or bid conferences as they are also referred to) will typically be to ensure potential vendors/bidders have a clear understanding of the bid process and provide an opportunity for clarification of points pertaining to the requirement.

#1 Their value in helping you bid effectively

Bidding for contracts is a costly activity. Attending events is an additional cost that must be used to deliver value to your assessment of the bid opportunity. Typically, they take place at the client organisation’s premises.

Briefings and conferences are important for several reasons, but mainly because they (should) help vendors improve their competitive performance. The events are an integral part of a quality approach to procurement, one firmly based on improving clarity and closely linked with establishing effective communication throughout the process.

By attending or considering attending there are several areas that may be usefully be explored in order to arrive at a better understanding of the bid strategy including the bid/no bid decision. Areas include:

•             Deciding whether to bid.

•             Rethink your approach so that the bid has more chance of success.

•             Gaining clarity of the timescales and demands for an adequate response.

•             Building upon prior knowledge (if any).

•             Asking questions and seeking clarification where necessary.

•             Further understanding the personal and organisational ‘drivers’ of the client.

The organisation providing the vendor briefing or bid conference will follow their organisation’s specific guidelines for such events. There is no overarching template to the structure of events.

#2 The need for your planning and consideration of questions

If a vendor attending an event wants to ask a question, of course, they should. However, we would counsel that the question(s) are thoroughly planned and considered before being raised in open forum. Here you must reflect on the potential value of the answer to your question to you and your competitors.

Furthermore, listening to the briefing and subsequent questions raised by other attendees and the respective responses is key to the value of attending such events.

In addition, typically, vendors will be invited to submit written questions to the Client, by a certain date, in regard to clarification or other matters about the bid opportunity. The timescales for submitting questions and receiving answers is not prescriptive for public sector Clients. Questions, with their source anonomised and subsequent answers are circulated to all vendors for their information as an aid to fairness and transparency.

#3 Identify the benefits to accrue from your attendance (at vendor briefings and bid conferences)

There are a number of benefits that will accrue to your business. They will include:

•             meeting some or all of the decision maker(s) associated with the specific procurement. Whilst there may be insufficient time to personally discuss matters with them you will gain an understanding of their demeanour and business approach.

•             usually giving you a personalised background to the procurement, affording you an opportunity to clarify points that may not be in the bid documents or otherwise not be available.

•             having the chance to identify the other organisations likely to compete for the contract.

•             becoming aware of external advisors to the potential client organisation, such as financial, legal and procurement advisors

•             having the opportunity to raise matters that have not been included either in the bid documents or in the briefing.

You may be advised at the outset if particular topics are ‘off limits’. In deciding to asking questions, be mindful that your competitors may be alerted to a line you are taking and that that may help them subsequently.

•             The procurement process may be explained in more detail than that included in the bid documentation (or OJEU advertisement in the public sector).

•             If you listen carefully you may hear a side comment from others that you realise has not arisen in your thinking and strategy.

•             The nature of questions and subjects raised by others may be a good indication of concerns that others may have and you realise it is a strong point in your eventual bid. There is, later, the opportunity to emphasise these points in the bid.

•             You may hear political dimensions of the procurement that had not previously been known. That affords you the chance to tailor parts of your bid to deal with these points.

•             The evaluation criteria for the bid may be explained in detail which also affords the opportunity for tailoring your bid.

•             You may hear of other procurements arising in the future which gives you advance warning of likely opportunities and resource needs.

#4 Should you attend (another!) Bid Conference: Our advice

Sit right at the front, smile and nod agreeably throughout the presentation - use two ears and one mouth. In that order. Don't ask a question in open forum unless you really need to  - or are desperate to show off ;) .

At the end of the conference, having carefully listened to all the questions and answers (hence you are sitting at the front - typically no microphones for the oft-whispered questions asked from the attendees)  be the first to shake hands (offering your business card) and congratulate the key decision-maker on how valuable the briefing was!  Then, and only then, you can ask your question(s) which will ideally illicit your competitive advantage.

Interesting? If you are open to telephone meeting, to find out how our services have helped improve bidding and tendering results please call me on 01744 20698 or  email me. 

Kind Regards

Steve

PS For a free copy of our report “11 key facets of your proposal – to a Corporate Buyer?? please click here

 
Read More >
HS2 project – An estimated cost?
HS2 Project - An estimated cost?

The track record (no pun intended) of major railway projects being delivered to budget is very poor. The UK Transport Secretary, Patrick McLoughlin, has disclosed that the cost of the HS2 railway line between London, the Midlands and the North has risen by a third to more than £40 billion. We confidently predict that the final project outturn actual cost will exceed £80 billion. We have considered the timescales. It “is intended?? to link London to Birmingham by 2026, with branches to Manchester and Leeds, via Sheffield “planned?? by 2032.

Why are we pessimistic about the ‘estimated cost’?  Reasons are advanced by the Department of Transport, for the additional cost as ‘significant changes to the line, including more tunnels to avoid disturbing the environment and those living near the line. We offer ten risks for the Transport Secretary to urgently explore:

  • Major contractor enters into administration

  • Flawed specifications lead to excessive contractor claims

  • Department of Transport fail to adequately contract manage

  • Unanticipated security costs to cope with protestors

  • External advice on cost and programme is flawed

  • Signalling systems fail to work and have to be redesigned

  • Strikes by contractor’s labour delay the project

  • The contract details omit to cope with through life costs

  • Consultants and legal fees far exceed the budget

  • The rolling stock fails to meet safety standards.


The HS2 project is not short of reports. In January 2012 the DfT published “Economic Case for HS2: Updated appraisal of transport user benefits and wider economic benefits.?? At page 32 it states that Davis Langdon the HS2 cost and risk consultant has “updated and extended the HS2 set of base rates for the capital construction costs.?? It also states that “a further review has been undertaken of contractor overheads, design and client-related costs.?? It continues, “As a result of the recent DfT cost challenge process, a number of adjustments have been made to alter London to West Midlands estimate.??

Were Davis Langdon paid for the work associated with the cost challenge process? Page 34 is a revelation! “The enhanced level of services, which have been included in the Y network, mean that we require more rolling stock to operate the network than we had previously estimated.?? It continues, “As a result we estimate the costs of rolling stock for the full Y network would be just over £8 billion including risk and optimism bias.?? What exactly do the last four words actually mean?

In March 2012 “A report to Government by HS2 Ltd - HS2 Cost and Risk Model Report??, was submitted to Government by HS2 Ltd (It was published in January 2013). At page 2 (Para 6) it states “Our current estimate for the full Y network is, therefore, estimated at between £30.9 billion and £36.0 billion, with a mean value of £33.4 billion.?? You will be enlightened to learn that optimism bias is the tendency of project planners to be optimistic about the costs. Really? Could a different interpretation be advanced – don’t provide real figures otherwise the project will be dead in the water!



Patrick McLoughlin issued a statement “As a responsible Government, we must be prudent. This means allowing the right level of contingency and for that reason the Government has set an overall indicative amount for the project of £21.4 billion for phase one and £21.2 billion phase two, a total of £42.6 billion in 2011 prices which includes £14.4 billion of contingency.?? If rolling stock is added to this figure the project cost is now circa £50 billion.

There is an enlightening report published in January 2012 by the California State Auditor into the “High-Speed Rail Authority Follow-Up.?? Does this sound familiar? “The high-speed rail network (program) overall financial situation has become increasingly risky. The cost estimates for phase one increased to between $98.1 billion and $117.6 billion.?? In terms of procurement (our specialism) it states that “It has delegated significant control to its contractors and may not have the information necessary to make critical decisions about the program’s future.?? Of equal concern is the age-old problem of managing contractors and subcontractors. Will the following audit report comment come to pass on HS2? We are confident it will! The audit report states “The Authority continues to struggle to provide an appropriate level of oversight – it is significantly understaffed and has struggled to oversee its contractors and subcontractors, who outnumber its employees by about 25 to one.??

More evidence of a failure to manage large rail projects can be found in the New South Wales ‘Millennium Train’ contract. It was reported by the NSW Auditor that capital costs had risen by 24 per cent and total project costs by 17 per cent.

Procurement risks lie at the heart of every major project. That is a fact. The “HS2 Cost and Risk Model Report?? suffers, with regard to procurement risks, from brevity. At Appendix D: Phase one programme level risks; there are two only procurement risk category facets. The first is “Inappropriate procurement structure selected/tender rates not achieved.?? The second is “Continental construction rates achieved.?? Whilst there is a consequence listed there is no integration strategy! At Appendix E: Phase two programme level risks. This has a completely different layout than Phase one. At Appendix E there is a risk description – “there is a risk/issue that ………….?? There are only two procurement related risks/issues. The first is “cost escalation for general material price fluctuations.?? This has a probability of 25% occurrence. We say dream on! The second risk/issue is “Inappropriate procurement strategy used. Tender rates exceed plan or contractor insolvency.?? This has a probability of 10% occurrence. We say dream on!

HS2 project – An estimated cost?

Criticism of the HS2 project is largely unwelcome. The political arguments centre on economic benefits (the NAO are unconvinced) and jobs being generated. We are 100% sceptical about the ability of HS2 Ltd to effectively manage cost and risk.

In conclusion, we say £80 billion minimum for the project, always assuming it isn’t cancelled.


 

About Brian Farrington Ltd


Brian Farrington Ltd is one of the world’s longest established procurement and supply chain consultancy and training specialist. Clients who have retained our services include 33 FTSE100 firms as well as multi-national corporations in North America, southern Africa and Asia. Established in 1978, we have proven expertise and experience in sustainable procurement, procurement and supply chain risk management and strategic tendering.

BFL solutions and services are formed through consultancy, training & development, coaching, interim resource and recruitment.

Our four core areas of procurement and supply chain capability are:

  • Strategic review and commercial governance

  • Performance delivery and transition

  • Major project support including lead negotiator roles

  • Learning & development in support of organisational aims.


A carefully evaluated bank of 18 fully qualified Associates complements and augments the core team to ensure flexibility of resources for our clients.

 

Why people with procurement and supply chain issues want to work with the people at Brian Farrington.

There are three themes that clients tell us over and over again.

First, they tell us they believe they are making a smarter investment working with Brian Farrington — bringing a thorough understanding of their procurement and supply chain issues and a proven track record of enabling excellent returns on their investment.

Second, our clients are confident that they are working with specialists that bring experience, expertise and stay focused on client success; not on the next income target.

Finally, people, – people just like you – tell us they actually like working with us. They find us easy to work with and collaborative in solving issues that may arise in procurement and supply chain.

To know more please contact Steve Ashcroft on 01744 20698 or s.ashcroft@brianfarrington.com

 

 

 

 
Read More >
Page 1 of 6
12345>Last Page >


Procurisk ® is a registered trademark of Brian Farrington Ltd.
Copyright © 2018 Brian Farrington Ltd. All rights reserved.

Brian Farrington Ltd
Rainford Hall, Crank, St Helens, United Kingdom, WA11 7RP

Privacy Policy       Terms and Conditions       Contact Us