Tips and Traps

Tips and Traps
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Lack of clarity may lead the successful tenderer to seek profitable variations once the contract has been signed and the client begins to specify ‘additional’ needs. Such variations can be expensive , so don’t begrudge time spent on preparing the request documentation.
There are no hard and fast rules, but a statement of requirements of about three pages of information may be suitable for simple, low value consultancies. Background material will enable consultants to see the bigger picture and help them prepare proposals that are ultimately of more benefit to the client.
A long list of evaluation criteria can complicate the selection process unnecessarily. Consultants will need to provide lengthier bids, so that more time is spent by the potential client in reading and understanding their claims. The effort involved in documenting the evaluation committee’s assessments against the criteria also increases.
Too many evaluation criteria can also dissuade consultants from bidding. In one case, an agency listed over 30 selection criteria, many of them repetitive. Although the job was a six-figure one, a large firm decided not to bid because it would not have been able to recover the estimated four weeks of work involved in preparing a proposal. Framing an appropriate number of evaluation criteria in a logical order, with minimum duplication, assists tenderers to present better submissions. It also makes it easier for you in the selection process stage. So don’t skimp on time spent drawing up the evaluation criteria.
Selection committees can save time and effort by signalling their needs with respect to the length of bids . For example: ‘We expect proposals to be no longer than about five to seven pages … (excluding attachments such as CVs)’. Agencies that are significantly more prescriptive than this (for example, by specifying the exact number of pages, font size, etc) are likely to reduce the field of bidders. Like most people, consultants prefer to work in an environment that is not overly restrictive. Except for the marginal operators, many consultants are not so desperate for work that they will bid for jobs if they think that working with a particular agency will be a frustrating experience. So don’t send the wrong signals about your agency in your tender documents.
Preparing a bid costs money. Most consultants won’t mind responding to a tender if they know that there is a genuine intention to proceed with the project and a fair chance of winning the job. Apart from the fact that tenders should always be genuine, agencies that frustrate bidders are likely to receive fewer bids in the longer term. This is not an academic point: some top tier firms have in the past avoided bidding for jobs tendered by certain Government agencies. It is also likely that a frustrated bidder will, sooner or later, take legal action, because the CPGs now make it mandatory to proceed to completion by awarding a contract once the process has begun, provided that at least one submission satisfies the tender requirements, including value for money.
Many experienced consultants are less keen to respond to open tenders because of the low expected value (probability of winning, multiplied by contract value) to them. However, most will respond more positively if they are invited to participate in a select tender process. An option in complex procurement processes is to first seek Expressions of Interest as part of an open tender process. A response to an Expression of Interest requires less work than a tender bid, so that a larger field of consultants can be attracted. Only the shortlisted ones will subsequently face the cost of submitting a final proposal.
Many consultants will not bid if they have tendered unsuccessfully several times with specific agencies. If your aim is to maintain a pool of interested consultants who have a knowledge of your area (to avoid becoming overly dependent on one supplier), then each must have a reasonable probability, but no certainty, of winning any specific tender. One consultant’s rule of thumb is that, unless his firm wins at least one out of three invitations to tender, it refuses to incur further tendering costs in the future. In other words, a longer-term perspective of obtaining value for money by fostering competition may require deliberate allocation of work on a rotational basis, rather than on purely (short-term) competitive grounds.
It is possible to signal an agency’s requirements without necessarily restricting the field of bidders. For example, if an agency places a premium on minimising the risk of disruption to a project due to departure or illness of consulting staff, then tender documentation should mention this, and use a formulation something like: ‘We expect that the successful tenderer will have satisfactory back-up arrangements to cover any loss of project staff’. This approach does not exclude small or specialist firms (which can form a contingency partnership with other consultants), but does signal a preference for a consultant with readily available back-up staff or ready access to expertise.
Considerable leverage is available to a Government agency at the stage of issuing a Request Document, and prior to acceptance of a bid. Good use can be made of this in areas which do not directly affect the bidding process. For example, attaching the draft contract to the request documentation and requesting confirmation that it is acceptable to bidders, can identify any problems before the evaluation process begins. At the pre-selection stage, bidders are more likely to be amenable to negotiating positively on contract terms, so that a better outcome can be obtained for the client. Ascertaining the acceptability of the contract prior to the selection process can also eliminate tenderers who will refuse to negotiate later and hence save time.
Should the likely budget for the consultancy be revealed in the Request Document?
- Despite the additional work imposed on the Public Service manager, it is probably preferable in most cases to devote resources to better specifying the agency’s requirement. (A consultant can be hired to assist with this, if necessary.) Clearly specified requirements will allow competent consultants to better gauge the extent of work required.
- Consultants argue that, because their bids are based primarily on expected cost, a budget provides an indication of the scope of the job (in terms of consulting days allocated to it). A more realistic proposal — better suited to the client’s needs — can be prepared if the budget is known. Without any knowledge of the likely value of the project, it is argued, consultants may make very different assumptions about the extent and quality of the work required; valid comparisons between those bidding then become all but impossible. For example, it would be difficult to compare bids from two consultants, one of whom assumed that a project would be worth $500,000, and the other assumed a smaller job of about $40,000 in value. At least an order of magnitude ‘ballpark figure’ is required.
- Some Public Service managers, however, point out that making the likely budget known beforehand invariably results in virtually all the tenderers quoting much the same price. It is always possible that a highly suitable bidder would have bid much lower because of existing knowledge or skills. On the other hand, most experienced consultants will have similar views about the cost of a job, as long as a detailed specification is provided in the request documentation.
- Further, Public Servants, particularly when they do not have a good knowledge of the market, can seriously under- or over-estimate the value of a project or the extent of work required. One apocryphal recounts an instance where the value of a project was grossly underestimated: after the project had been expanded to many times its original value, the client became suspicious that the consultant (who was relatively far more experienced in the field) had known all along what the value would eventually be, but had put in a very low initial bid to win the contract because of his expectation of an increase in scope after commencement.
- A possible compromise is to make known a fairly broad range (say $50,000 to $80,000) to signal the expected order of magnitude of the contract, without diminishing too much the scope for price competition. However, even this approach may be flawed, unless the client is reasonably knowledgeable about consulting in the subject area or has access to some prior industry advice.
Apart from probing to gain an insight into the likely budget, consultants will normally be interested in finding out about issues like the underlying or background reasons for the consultancy, the nature and strength of the business case for letting the consultancy, the likely overall scope of work, the amount of support or assistance that the agency envisages as its contribution to the project, the extent to which innovative methodologies or ideas are expected (they cost more than ‘vanilla solutions’), the formal and informal decision-making processes within the organisation, and the likelihood that a Report or other output will actually be implemented. As well as clear tender specifications, face to face meetings are usually the best means for presenting such information, because discussion is possible. But don’t forget to record the outcomes and to circulate them formally to attendees.
Don’t forget about the implications of the GST . Unless the bidder is registered for GST, your agency will not be able to claim a GST input tax credit for the consultancy fee paid. To maximise cash-flow benefits to your agency, the contract should specify that GST tax invoices are to be issued by the consultant as soon as any payment is due. You also need to ascertain whether any services that you provide to the consultant will be subject to GST; for example, use of computers, electricity, or accommodation, particularly if the consultant is working on-site.
Ownership of intellectual property (if any) that is developed during a project should be addressed in the contract.
Before issuing the tender, undertake a sanity check : would you bid for this work if you were a good consultant who was not desperate for work.

Exhibit 3.1 — Consider the following before issuing the request documentation

The clarity of the requirement; it sometimes helps to specify what is not required.

Does the request documentation allow for (or discourage) innovative solutions or approaches? Where possible, avoid specifying inputs or analytical approaches; focus on the output or outcome required.

Is it written around the capabilities of an identifiably specific consultant?

Does the draft contract contain clauses that provide sufficient flexibility to alter specified outputs (but without changing the nature of the tender process)?

Will you be able to judge quality of output? You may need to specify existing technical standards (such as the Commonwealth Style Guide) in the contract.

The timeframe specified; clients often underestimate the time required to complete work,and consultants may take more time than either party expected.

Are your specified outputs really important? It can add to costs if you over-specify your needs.

Have you given your agency’s legal and probity advisers or procurement manager enough time to check the documentation?

Consistency of the project with relevant Australian Government policies.

Would it help later evaluation processes to include a checklist for potential suppliers to certify completion of required tasks of the submission and agreement to draft contract?

Have you provided a web address or other means of disseminating information (for example, responses to questions by potential suppliers) so that all potential suppliers have equal access to new information after the request documentation has been issued?

Under the CPGs there is no discretion to accept late tenders, unless the tender is late solely because of the agency’s own mishandling. Make sure your tender box is emptied exactly at the time specified.

Table 2 — Preparing Tender Documentation: Risks and Mitigation

Type of risk	Likely consequence	Mitigation strategy
Failure to specify all relevant contract requirements in request documentation	Possible need to re-seek tenders or negotiate with winning tenderer	Consult legal and probity advisers at an early stage before issuing documentation Possibly allow industry expert to preview requirements Draft documents to provide ability to vary conditions Draft documents to provide ability to abort process at any time
Failure to conform to Commonwealth Procurement Guidelines	Project attracts interest from Parliamentary committees or ANAO	Consult legal and probity advisers early in the process, particularly for complex procurements Check with legal and probity advisers before any non-standard action such as acceptance of late submissions
Biased or unclear specification of requirements	Claims of unethical or unfair dealing Possible legal action Limited response from potential tenderers Loss of time in the long term	Use functional and performance specifications and criteria Check with legal and probity advisers Establish submission evaluation committee to check request documentation, including evaluation criteria, prior to issue In complex cases, engage a consultant to help define or refine request documentation
Terms and conditions which are unattractive to suppliers	Loading of costs on offers Refusal to tender Highly qualified offers Legal action after commencement of contract Costly disputes	Check with the market before formal tender process Investigate possibilities for sharing risk Require tenderers to warrant in their submissions that they have assessed risks and allowed for them in tender price
Inadequate information provided or failure to answer suppliers’ queries	Claims of unethical behaviour, favouritism or unfair practices Refusal to tender Higher quoted costs or qualified offers Loss of time in long term	Develop a probity plan that includes quality control measures for dissemination of information and for ensuring its accuracy Pre-prepare standardised correspondence and information packs Additional information provided to any tenderer should be distributed as soon as possible to others Advise all potential tenderers of all responses to all queries received (but respect confidentiality: use Blind Copy facility if using email) Specify in request documentation the agency’s designated staff for all contact with bidders For separate briefings, ensure that someone else is present (even for telephone conversations: use the loudspeaker facility) Document on file all separate briefings provided, including all telephone conversations Include in request documentation a clause that tenderers are to rely on their own information and investigations
Premature contractual commitment	Tenderer(s) claim existence of a preliminary or implied contract Legal action to recover costs from agency	Establish in request documentation that the agency is not legally bound until a written agreement has been signed Stipulate in request documentation that tenderers must bear all costs of their submissions Avoid encouraging tenderer to begin work in anticipation of award of contract In staged contracts, avoid giving the consultant working on the current stage any impression or promise of follow-on to the next stage
Breach of commercial confidentiality	Claims of unethical behaviour, favouritism or unfair practices Possible legal action	Develop clear agency procedures for receipt, registration, storage, opening, filing, and handling of offers All offers kept sealed and secure until designated opening time Staff access to documents on a ‘need to know basis’ Request documentation makes clear what is considered to be confidential, including contract conditions
Breach of s. 52 of Trade Practices Act 1974 by agencies which provide services for remuneration or as a business	Ministerial representations Possible legal action, as in the Hughes case against the Civil Aviation Authority: see AGS (1997a), and Ross (2004)	Avoid engaging in ‘misleading or deceptive’ conduct regarding the tender process Ensure full disclosure to all parties of all changes in the tender process Ensure adequate debriefing at end of procurement process (see ch. 5) Disclaimer in request documentation regarding process contracts
Consultant technically becomes an employee	Increased legal responsibility Increased cost	Check with legal adviser where contract is being extended, on-site facilities are made available, consultant carries out investigation on behalf of Australian Government, leave periods are approved by the agency, etc.
Change to procedures or conditions specified in Request for Tender	Breach of Process Contract Legal action against agency or Ministerial representations	Consider contents of request documentation carefully prior to issue Check request documentation with legal adviser If change is required after issue, consult probity adviser and ensure fair and equal treatment of all tenderers

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