Strategic Sourcing of Technology in Housing Sector

Sourcing of technology/telecoms in the public sector may seem a technical and onerous task, but it offers an opportunity to save time and money and to address out-of-date specifications.

“…the UK Government has accepted the European Commission’s view that Registered Social Landlords are to be regarded as Bodies Governed by Public Law and therefore must comply with the requirements of the EU Public Procurement Directives…”

Social Housing Procurement (local authorities, housing associations, trusts, etc) should comply with the Public contracts Regulations 2006.

Procurement by public bodies should be:
-  Non-discriminatory
- Transparent
- Competitive

Typical Strategic Issues

  1. Coherent, defined processes for all areas of technology spend?
  2. Resource focus on higher profile spend
  3. IT strategy is a separate entity from Sourcing strategy
  4. Little formal supplier performance management
  5. Existing contractual documentation not well organised / indexed
  6. Poor spend visibility, islands of data
  7. IT sourcing not considered strategic
  8. Risk Management is a separate exercise
  9. Much attention historically on enhancing PO process

IT Sourcing – the Top 10 Disasters

  1. Assumption that negotiations can be successfully concluded after work has started
  2. Inadequate requirements
  3. Chipping away at a heavily biased ‘standard’ supplier contract
  4. Undocumented assurances from suppliers
  5. Rushing:  more attention on speed of delivery than definition of requirements
  6. Focus on legal terms above the commercial and service elements of the contract
  7. Over-ambition
  8. Allowing suppliers easy access to premises, influential staff and confidential information
  9. Losing interest / giving up if negotiations drag on
  10. ‘Contract in the cupboard’ – once it’s signed there is no supplier performance management

Reviewing Legacy Contracts

A brand new contract will usually be well matched to the requirements for the goods / services.

After signature though, requirements can ‘drift’….

  • Organisations tend to acquire more IT contracts as time passes
  •  50 to 200 IT suppliers on the books is typical, with at least one contract per supplier
  •  Looking at your legacy contracts to look for ‘requirements drift’ can be a big money saver, and / or identify risk areas

Why Bother with Contracts?

  • Key Points
    - Define each party’s expectation
  • Service description
  • Specification / service levels
  • Price
    - Provide framework post-signature
  • Governance
  • Change control
  • Price change and benchmarking
    - Deal with what happens if it all goes wrong
  • Dispute resolution
  • Termination
  • Remedies and liability limits
  • Contract formation
    - Need not be in writing – beware email exchanges
    - Use of ‘subject to contract’
    - Bridging the gap – Instructions to Proceed
    - Formal requirements follow…

Compliance – does it matter?

  • Newham Council – approached a Housing Association in Stoke on Trent to rehouse 500 families from Newham
  • West Coast Rail – Awarded to First Group – challenged by Virgin and awarded contract retracted
  • MPS – Stab vests
  • Clackmannanshire Council v Sidey – restricted procedure used

    Consequences?
  • Rip up contract and start again
  • Uninstall / remove the solution – go back out to market
  • Personal career inhibitor?

RFP Risks in the Public Sector

Be aware of what you are asking for – you only have a limited power to extend beyond what is stated In the tender request.

Alcatel Period – Once the Vendor has been selected, all unsuccessful parties must be notified and given a minimum period of either 10 or 15 working days to raise an objection.
No conference with any relevant vendor during the tender period outside of the stated process.
Timescales –minimum periods – vary by which OJEU approach you use.
PIN (Prior Information Notice) or electronic transmission can reduce these

Tendering Approaches

1. Open – commodity products and services
2. Restricted – any party may respond, only ones meeting selection criteria will proceed
3. Competitive Dialogue – two stage process; discussion (similar to Restricted) then tender
4. Negotiated – this is subject to severe restrictions
5. Frameworks – pre approved suppliers for you to use – compliant
6. G-Cloud – predefined catalogue of suppliers with day rates

1. Open Procedure

This method is suitable if:

  1. Requirement is relatively straightforward
  2. Smaller number of bids is anticipated
  3. Work to prepare bids is modest

The public body announces a project/contract and allows bidders to compete for the contract

Strengths
- For suitable contracts it is straightforward and quicker

Weaknesses
- Bidders are required to provide a lot of input, even if the probability of success is low
-  May be time consuming if a high number of applicants pass


2. Restricted procedures

  • Two part process
  • Pre-Qualification Questionnaire (PQQ) – selecting suitable suppliers – “selection” stage
  • Invitation to Tender (ITT) – appointing the right contractor – “appointment” stage

Suitable for most contracts where getting the right company involved is important

Strengths
- Allows suitable companies to be selected before full tenders are invited and evaluated
- Makes the process more manageable
- Reduces workload for contractors and encourages participation

Weaknesses
- Can take  along time to complete the process

3. Frameworks

  • Pre approved compliant supplier lists, with pre negotiated T&C’s & prices
  • Several frameworks exists
    - GPS RM860 Connectivity
    - RM1498 Telecoms
    - Fusion21
  • You run a ‘mini competition’

Strengths
- Fast
- Lower risk

Weaknesses
- Less competition
- Reduced T&C’s negotiation
- Restricted to framework suppliers only

Requirements – how formal?

Whatever it is you are buying or renewing, there are requirements.They may seem obvious, (mobile phones), or complex (IT outsource)

For almost all IT spend, consistent definition and documentation is key. Why?

Pre-Qualification Questionnaires

Advertise contract and invite “expressions of interest”, issue PQQ to assess:

  • Business stability (do they do what you want and will they continue to do so)
  • Financial strength (set parameters)
  • Insurances (consider what is required)
  • References (consider what they offer)
  • Experience (is it relevant)
  • Technical suitability (do they have suitable skills)
  • Mandatory questions and discretionary exclusions

Consider using the Cabinet Office (GPS) format

Invitation to Tender

  • Selected suppliers only invited
  • Can be price only
  • Can include assessment of Most Economically Advantageous Tender (MEAT) – Quality/VFM
  • Includes all legal T&Cs

The more details that you can provide the keener will  be the bids.

Evaluation

Questions

  • Make questions relevant
  • Make them easy to understand
  • Make it clear what you are looking for
  • Beware responses that impress but don’t answer the question – stick to the pre-agreed criteria
  • Only assess what you are told by the bidder – don’t use prior knowledge of the bidder

Evaluation models

  • MEAT
  • Determine the model before issuing PQQ/ITT
  • Only evaluate each item at one or other stage – not both
  • Establish both models at the same time to give comprehensive coverage and to ask suitable questions at relevant stage
  • Weight questions according to their importance
  • At ITT stage, determine the weight of price vs. Quality elements, e.g. 60% 40% Quality

Negotiation & Contracting

This phase is crucial as:

  • It is the culmination of all earlier work
  • All responses / promises are cemented into a legally binding agreement
  • Include ongoing management and exit

FACT: A typical IT contract has 50 to 100 ‘configuration’ points or clauses.

  • on average, you may negotiate on 20 to 50 of these.
  • clauses can be grouped as legal, commercial or service

Common reasons why OJEU gets avoided

  • “Expensive” – but the process does not cost – time is the expense
  • Complicated – in reality only two extra elements for Open and Restricted Tendering: Contract Notice and Contract Award Notice
  • Time Consuming – Actually not much longer than normal tendering if done properly
  • “We don’t want European Companies bidding: they couldn’t deliver in the UK” – Remember the requirement to be non-discriminatory for any procurement
  • “We don’t understand the process”– being non compliant risks a supplier challenge. Very costly and painful