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SECTION E - RISKS IN THE PROCUREMENT PROCESS

Contents of this section

1. DEFINITIONS
2. BACKGROUND
3. THE STAGES OF THE PROJECT AND THEIR RISK

3.1 Procurement Process Including Outcome of Procurement Process (Stage 1)
3.2 Final Procurement Process and Induction Reports (Stages 2 and 3)

4. SUMMARY

1. DEFINITIONS

"Bid Shopping" - the practice of trading off tenderers prices against others in an attempt to seek lower prices.

Any exercise of a power or function of The University has certain risks which must be identified early in a procurement project and managed throughout that project. This paper sets out the issues and risks (and an overview of how these can be managed).

3. THE STAGES OF THE PROJECT AND THEIR RISK

3.1 Procurement Process Including Outcome of Procurement Process (Stage 1)

3.1.1 This stage of the project is the one which presents the most risk. It is important to ensure that the evaluation criteria are appropriately identified and weighted to ensure that value for money is delivered to the University following the evaluation of the bids. Value for money does not mean simply the cheapest price but is a balance of technical and service capability and delivery with commercial compliance and price.

3.1.2 There is also a great risk of litigation at this stage and previous quotation/tender processes have been subject to litigation due to various failures during the procurement stage. These failures have included not identifying the evaluation criteria in advance in the RFQ/RFT, breaching a tenderer's confidence, not properly managing a conflict of interest, awarding a contract to a non-preferred tenderer, disclosing information to tenderers at inappropriate times during the tender process, 'bid shopping' between tenderers following the closing date, and in the case of tenders not evaluating them in accordance with the tender evaluation methodology.

3.1.3 It will be critical to ensure that the RFQ/RFT is specifically considered for each project. This document contains the conditions of contract that eventually form the contract for the project. Therefore it is important from an early stage to consider these conditions having particular regard to risk allocation. These considerations will focus on insurance, indemnity and security provisions but will also go beyond that to a consideration of requirements and role allocations.

3.1.4 To ensure a proper "paper trail" and as a risk management tool all questions from tenderers regarding a Project should be received in writing. Generally the questions and answers should then be distributed to all tenderers to ensure fairness and probity unless commercial-in-confidence issues are present.

3.1.5 A pre-tender briefing should be held by the University to enhance compliant and well informed tenders and to provide tenderers with an opportunity to view the site (if relevant).

3.1.6 Throughout the quotation/tender process the University must ensure that all tenderers are treated fairly and dealt with equally. This will result in the risk of a challenge to the process being minimised. A probity adviser, if deemed necessary, plays a key role in this regard.

3.1.7 In relation to tenders it is critical that a sufficient number of members are on the Faculty/Division Tender Committee and the University Tender Committee and that they have the appropriate skills to properly evaluate the tenders.

3.1.8 The University must also ensure that the Tender Evaluation Methodology is signed by all Tender Committee members prior to receipt by the Tender Committee of tenders. This is important to avoid allegations that the method of evaluating was tailored to suit a particular tenderer.

3.1.9 In the evaluation of tenders the technical and/or commercial evaluation should be conducted prior to the financial evaluation to avoid any allegations that the Tender Evaluation Committee artificially favoured a Tender through the technical scoring because of price. That is pricing information of tenders will be kept separate from the tender copies and not accessed by a Tender Committee until after the tenders have been scored against the technical and commercial criteria. This means that the issue of price will not impact on the evaluation of non-price issues.

3.1.10 Tenders should be placed in a secure environment and only accessed by personnel authorised by the University.

3.1.11 Prior to receipt and evaluation of quotations/tenders the requesting party/all Tender Committee members should be required to sign a Code of Conduct document in which any conflicts of interest must be disclosed. Any actual or potential conflict must be disclosed and will be dealt with by the Tender Committee or probity adviser if one is retained, on a case by case basis.

3.1.12 Tenderers should be required to certify in quotations/tenders that they have not entered into any collusive practices in relation to their bid.

3.1.13 Minutes of all meetings will be taken and file notes kept of decisions (with reasons). This will ensure that there is an auditable paper trail for the process.

3.1.14 Obtaining value for money should be the guiding principle for the University of Newcastle's procurement. A Tender Evaluation Methodology should be drafted to ensure that the tender representing best value for money to the University is selected for a Project.

3.1.15 Any clarifications and negotiations with preferred tenderers must be conducted in good faith and in accordance with University guidelines. All agreements should be documented and drafted into the final contract.

3.1.16 An unsuccessful tenderer can 'sabotage' a quotation/tender process, and delay the award of a contract, by commencing proceedings alleging that the quotation/tender process was not conducted properly. This happened in the recent NSW case of Cubic Transportation Systems Inc v State of New South Wales [2002] NSWSC 656). The risk of this can be minimised by ensuring that the process is compliant and comprehensively defending any preliminary court actions seeking to stop the award of contract.

3.1.17 Contract information regarding the successful tenderer required to be published by the University (such as the identity of the successful tenderer) should be published.

3.1.18 All unsuccessful tenderers may, upon request, and at the discretion of the Manager, Financial Operations, be offered a post-tender briefing conducted in accordance with University guidelines and probity considerations.

3.1.19 The Contract will be drafted to contain all of the terms of the agreement reached between the University and the preferred tenderers.

3.1.20 Generally all risks at this stage should be addressed to ensure the delivery of a fully compliant and best practice procurement process with minimal risk of challenge.

3.2 Final Procurement Process and Induction Reports (Stages 2 and 3)

3.2.1 The production of a final report will be a particularly important as it will provide a full report of all of the processes that were undertaken throughout the project and summarise the results. This document could be issued to different members of the University, the Council as well as be open to inspection by tenderers and members of the public (possibly under a Freedom of Information application). A full Tender Evaluation Report should comprise attachments including key documents throughout the process such as the Tender Evaluation Methodology and Probity Report (if applicable).

4. SUMMARY

4.1 The procurement process has inherent risks which can be mitigated and managed by developing and adhering to appropriate policies and procedures.