Procurement process for construction works and services and contract management

This section details the key stages in the procurement process and post award contract management.

Procurement Guidance Notes

A series of Procurement Guidance Notes (PGNs) has been produced by Central Procurement Directorate which provide specific advice in relation to key stages in the procurement process and post award contract management. To summarise, these include:

• PGN 04/16 ‘Selection and Tender Evaluation Procedures’
• PGN 01/13 ‘Integrating Social Considerations into Contracts’
• PGN 05/12 ‘Simplified Approach to Procurements Over £30,000 and Under EU Thresholds’
• PGN 04/12 ‘Procurement Control Limits and the Basis for Contract Awards’
• PGN 01/12 ‘Contract Management - Procedures and Principles’
• PGN 03/11 ‘Direct Award Contracts’

Note: Regarding the implementation of the above guidance under these and other PGNs, PGs / Associations should refer to the Public Procurement Policy and Procurement Guidance Notes sections on the Public Procurement Policy page of this Procurement Guide.

The PGN’s are updated regularly by CPD and PGs/ Associations should always refer to the CPD website for the latest versions.

PGN 04/16 ‘Selection and Tender Evaluation Procedures’

PGN 04/16 provides guidance to Departments, selection and tender evaluation panel members and procurement practitioners on the principles involved in the selection and tender evaluation stages of a procurement process. It focuses on the selection and tender evaluation process for contracts with an estimated value over the EU thresholds

PGN 04/16 ‘Selection and Tender Evaluation Procedures’ aims to ensure that the selection and tender evaluation process is fair, and that the risk of complaints and legal challenges, which are both very time consuming and costly, is reduced.

PGN 04/16 provides guidance in relation to the Selection and Tender Evaluation Panels, including roles and responsibilities of the panels and conflicts of interest. It also provides guidance on selection and tender evaluation stages, which includes PQQs; exclusions; selection and award criteria; life cycle costing; organisation, qualification and experience of staff; selection and tender evaluation methodology.

Social housing construction works and services contracts should be advertised on the Procurement Group / Association website, NIFHA website and local press taking particular care to ensure sufficient coverage where cross border interests may exist.

PGN 04/16 should be read in conjunction with PGN 04/12, PGN 05/12 and PGN 03/13 (see below).

PGN 01/13 - Integrating Social Considerations into Contracts

PGN 01/13 contains guidance to support the integration of social considerations and the inclusion of the Buy Social model in particular in procurement. Further information on social considerations can be found in the Sustainable Procurement in Construction section of the Housing Association Guide.

PGN 05/12 ‘Simplified Approach to Procurements over £30,000 and Below EU Thresholds’

PGN 05/12, which should be read in conjunction with PGN 04/12, provides guidance regarding a simplified approach to the procurement of goods, works and services with an estimated contract value over £30,000 but under the EU threshold values This approach supports the Procurement Board’s objective of achieving greater consistency in procurement.

In addition to the various approaches to be followed (see Annexes A-D), PGN 05/12 advises on when to use the guidance, general principles to be followed and award and debriefing procedures.

Note: NIHE as CoPE has, following agreement with representatives from Procurement Groups on 16 May 2012, introduced modifications to the various PCLs and associated procedures to be followed under PGNs 04/12 and 05/12. PGs / Associations may choose to follow the original or modified procedures having given due consideration to the risk profile of each approach.

The attention of PGs / Associations is drawn to the note below in relation to NIHE deviations from PGNs 04/12 and 05/12.

PGN 04/12 ‘Procurement Control Limits and Basis for Contract Awards’

The Procurement Control Limits (PCLs) are designed to ensure:

• an effective competition (competition is the best way of achieving and demonstrating best value for money);
• a balance is struck between the value of the contract and the transactional cost of undertaking the procurement procedures; and
• a proportionate approach is taken to procurement for low value requirements.

PGN 04/12 includes procedures to be followed under various Procurement Control Limits (PCLs) below the EU Thresholds. In the value band over £30,000 and below EU Thresholds PGN 04/12 refers to simplified tender processes being conducted in accordance with PGN 05/12.

Contracts over the EU Thresholds must be awarded on the basis of Most Economically Advantageous Tender (MEAT), which can include assessment on the basis of price/cost only as well as other methods including the ‘best price/quality ratio’ which can include social and environmental requirements provided they relate to the subject matter of the contract. For contracts below the Thresholds, the basis of award must be either the Best combination of Price and Quality (BPQ) or Lowest Acceptable Price. Contracts should only be awarded solely on the basis of price/cost if they are very simple straightforward projects.

Annex A to PGN 04/12 provides guidelines for purchases below £5,000 in value.

For ease of reference the NIHE modifications follow in tables 6, 7, 8 and 9 which are on the HAG - Procurement Guide - tables page:

• table 6 – PCLs goods and non–construction services
• table 7 – PCLs construction works
• table 8 – PCLs - construction services
• table 9 - guidelines for purchases below £5,000 in value

PGN 01/12 ‘Contract Management Procedures and Principles’

The purpose of PGN 01/12 is to provide those responsible for the day to day management of goods, works and services contracts with guidance on contract management procedures. Effective management of the client – contractor relationship is critically important to ensuring successful contract delivery and best value for money.

All contracts should have a nominated contract manager (a project manager fulfils this role in the case of construction contracts) whose responsibility it is to ensure full compliance with the contract. It is the contract manager’s responsibility to ensure that any failure is dealt with promptly and in accordance with the contract. PGN 01/12 provides a structured approach which will promote best practice contract management.

PGN 01/12 provides lists of outputs, objectives, essential aspects and the appropriate level of contract management. It also provides detailed guidance in relation to Changes, Variations and Extensions within the Contract. Legal issues may arise if the value or scope of the contract is either reduced or increased significantly. Before amending or varying an existing contract to the point where the amendment could constitute a new contract, the guidance recommends that procurement advice is sought from the CoPE. Uncontrolled contract variations are one of the most significant risks to Value for Money and have, in the past, attracted criticism from NIAO and Public Accounts Committee.

Whilst PGN 01/12 includes some guidance in relation a ‘Process for the Management of Contracts’, the ‘Assessment of a Contractor’s Performance’ and ‘Dealing with Unsatisfactory Performance’ Associations, as contracting authorities, are responsible for the effective management of its contracts and contractor performance. It is therefore required to develop its own protocols for dealing with unsatisfactory contractor performance. This should include arrangements for escalating poor performance to senior management and, where appropriate, to the Board. The association should consider appropriate sanctions such as the exclusion of contractors from future procurement competitions for a given period.

Management information is essential to help ensure that work is carried out to the required standards and that sufficient controls are in place and documented to give assurances in regard to quality and cost.

PGN 03/11 ‘Direct Award Contracts’

The award of a contract without competition runs contrary to the EU Treaty key principles of non-discrimination, equal treatment and to NI Public Procurement Policy principles. Consequently the Procurement Board has agreed that all procurement should be subject to competition except in circumstances set out in the Regulations where competition is not required or where there are convincing reasons to the contrary.

PGN 03/11 provides guidance on what constitutes a Direct Award Contract (DAC), what needs to be considered before one is awarded and the consequences of doing so. It also sets out the process for approving DACs, including approval levels, and details the role of Centres of Procurement Expertise (CoPEs).

A DAC, sometimes referred to as Single Tender Action (STA), is a public contract that is awarded without a competition and can be valued above or below the relevant EU Threshold. A DAC must involve negotiating with the supplier. Such negotiations should seek a better deal for taxpayers. Approval from an association’s Accounting Officer will always be required in instances when contracts are awarded without competition, however, PGN 03/11 also sets out circumstances not regarded as DACs and therefore do not require Accounting Officer approval.

In all other cases, those considering the award of a contract without competition must seek Accounting Officer approval. Requests for approval should incorporate procurement advice, and legal advice where appropriate, together with a consideration of the circumstances and an assessment of the risks involved. All procurement requires an appropriate business case with appropriate approval; this also applies to the award of a contract without a competition.

PGN 03/11 includes specific advice in relation to Contract Variations and advises that good contract management is critical to ensuring good value for money and for avoiding, perhaps inadvertently, the creation of a new contract which has not been subject to the procurement rules and is therefore a STA (see Pressetext Case at Annex C to PGN 03/11).

Where a contract award is made without competition a written record setting out the reasons and justification should be retained as it may be needed in the event of a legal challenge. It also means a record is retained for audit purposes.

PGs / Associations are required to provide the SHDP Procurement Strategy Programme Board with quarterly reports listing all STAs / DACs awarded, with associated summary of circumstances leading to the award, by Associations during the reporting period.

PGN 03/11 also advises that where a contract is awarded under the provisions of Regulation 14 a contract award notice must be placed in OJEU and the CoPE.

PGN 01/10 ‘Information Disclosure throughout the Procurement Process and the Application of the Rules on the Standstill Period’

The Remedies Directive 2007/66/EC published on 20 December 2007 contained a number of provisions intended to improve the effectiveness of review procedures concerning the award of public contracts. This was transposed by the Public Contracts (Amendment) Regulations 2009 and thereby amended the Public Contracts Regulations 2006.

CPD developed PGN 01/10 to provide interim guidance until the review procedures could be incorporated into a single set of regulations. The Public Contracts Regulations 2015 now includes the provisions of the Remedies Directive 2007 (see Regulations 85 to 87).

Given this development, CPD has now withdrawn this PGN.