In the second of a two-part series, Kieran McGaughey completes his 10 top tips for contracting via the procurement process.
6. Involve the right people
We all get a little excited about a new purchase. Our clients are often the same when buying new products, or new services. Like a child on Christmas morning, there is no desire to wait any longer than necessary. This enthusiasm can sometimes translate into the urge to get the contract terms waved through. Often these come as email attachments, accompanied by the line of doom:
“Big Davey in IT has had a look - he said it looks fine”
“Janice on reception said the contract should be good to go”
“Doris the cleaning lady says these data processing terms look pretty standard”
Unfortunately, this is a bit like me being asked to comment on the scientific formula behind the new Pfizer vaccine…
“Yeah – looks good to me!”
It’s also a sure sign that your contract will have more holes than a block of Swiss cheese…
Contracts are complex legal documents and not for the faint hearted. Indemnities, direct and indirect loss, liability caps, UCTA 1977, time of the essence, reasonable v best endeavours…. Does the person passing comment really understand these terms? Do they appreciate the potential ramifications? The honest answer is usually “no”. In which case, I’m afraid they should be nowhere near reviewing your council’s contracts. Clients do of course have an important part to play in the contracting process. However, this should be in their individual areas of expertise – such as drafting/reviewing the specification, service levels etc. The terms and conditions themselves require legal input. Indeed, your council’s Constitution might well mandate that certain contracts be approved by Legal.
I am always surprised (and not pleasantly) how many non-lawyers acting for suppliers seek to become involved in negotiating terms and conditions. Again though, I have seen this inside Councils too. You should ensure your authority avoids falling into this trap. Or pretty soon your management team might know all about liability and loss…(!)
7. Take “special” care….
Many local authorities will use so-called “special” terms and conditions, to sit alongside their standard terms and conditions of contact. There are pros and cons to this approach. My preference would be that special terms are only ever used to supplement your standard terms; rather than contradict or override them.
Example A: (supplementary approach)
You’re procuring a social care framework. The council’s standard terms and conditions do not contain any detailed provisions around safeguarding, staff DBS checks etc. To ensure these areas are suitably covered, you insert special terms as a contract schedule.
Example B: (contradictory approach)
You’re procuring a services contract. Your council’s standard terms provide for unlimited contractor liability. Following pre-market engagement, you decide to introduce a liability cap of 200% contract value. You publish two documents:
- Your standard terms (with unlimited liability)
- Your special terms (stating that there is a liability cap)
You can see the confusion that Example B might cause amongst bidders. Indeed, I have seen this recently in practice when procuring off a national framework. A bidder requested a contract amendment which had already been made (presumably not having noticed the relevant special terms…)
The risk profile of a contract can obviously affect the tendered price. You should therefore always make it clear to bidders precisely what they are being asked to sign up to. In cases like Example B then, I think it is simply best to amend the actual liability clause itself (in the standard terms). This should ensure clarity and consistency.
8. Have it your own way
It is important that the staff involved appreciate that contracts are not merely a formality at the end of the procurement process. Rather, they represent a very important document in the allocation of risk and protecting your authority’s interests. In the so-called “battle of the forms”, you want to ensure your council’s terms prevail over those of your suppliers. This is perhaps best dealt with in the context of public procurement by having a robust invitation to tender (ITT). Some of the points you might wish to cover in the ITT include:
- That your terms and conditions will apply
- Where these can be found within the tender documents
- That there will be no negotiation
- That bidders agree by bidding they will be bound by those terms and conditions without further amendment
- That no terms and conditions advanced by bidders during the process will apply
- The potential consequences (including a right to reject them) where bidders do amend your terms and make non-compliant or caveated bids
The latter point arose in this year’s Rail Franchising Litigation – one of the most complex and high value procurement challenges of recent times. An aggrieved bidder was rejected from the procurement after seeking to amend the pension risk profile within the published terms and conditions. The ITT had provided (in broad terms) that such non-compliance might result in rejection, and the Court found that rejection to be lawful. This is a helpful decision for local authorities. However, where you seek to exercise such discretion, you need to remember to include it in the first place!
9. Don’t negotiate! (unless you can….)
Under The Public Contracts Regulations 2015, there are five different types of contract award procedure. Most procurements however will operate under either the:
- Open procedure (where all interested bidders can submit a tender); or
- Restricted procedure (a two-stage process where only bidders shortlisted at the first stage bidder can submit a tender)
Either way, neither of these routes permit negotiation with bidders. There are procurement procedures which do permit negotiation – such as the competitive dialogue procedure, or the competitive procedure with negotiation. These are less common however and typically reserved for more complex needs where an off-the-shelf solution does not exist.
In the bulk of cases then your council should not be negotiating with bidders. Take care to ensure that the “clarification” stage does not become the “negotiation” stage. Some bidders will be more than happy to conflate the two!
Where negotiations arise during the contract term itself, you should always be alive to the parameters of Regulation 72. This will help inform the scope of what is, and isn’t, achievable in those negotiations. Drawing a supplier’s attention to these provisions early can be of tactical use to narrow and limit their requests.
10. Put the right processes in place
It was touched upon last week in Part 1, but it really is important to reinforce the importance of this:
- Do your staff know which contracts to use in any given case?
- Is it clear which bits need populated or amended?
- Are procurement officers/evaluators warned about bids where the supplier wants to change the council’s terms?
- Where it is not possible to impose your council’s terms, who is reviewing the supplier’s terms before sign-off? Is there an agreed process? Does this reflect any requirements in your council’s Constitution/contract procedure rules?
- Do people know who to speak to when queries arise? (Clue: the answer is probably the same person reading this article, rather than Big Dave in IT…)
As the lawyers we really need to get a grip of what contracts are coming in, and going out, of the organisation. Having processes in place, guidance, appropriate training etc can pro-actively manage a lot of the risks discussed in this series of articles. Sometimes these can be simple, yet effective, measures. For example, on the NEPO procurement portal, there is a prominent tick box which tells you if the supplier has accepted the published terms. Staff can be asked to check this before releasing the tenders, to help ensure bids are compliant.
I know, I know, you don’t have the time for any of this. But where a contractual dispute arises, or a procurement challenge, you might find yourself having to make the time. And your council might find itself needing to find the money too….
I recall seeing a post on LinkedIn recently from a brash American litigator, warning his debtors:
“Pay now, or pay more later!”
There’s an element of truth there. So, invest the time and resources now in getting robust processes in place. Prevention, as they say, is better than the cure!
(Speaking of cures, now where is that vaccine….)