Conducting the tender

Chapter Summary

Expectations

301
We expected that the Council would have:

• Marketed the business opportunity available through the tender in a comprehensive manner.
• Carried out the tender process with careful attention to the proper conduct of public business.
• Used selection criteria designed to ensure that the franchise agreement meets the long-term interests of ratepayers and water users.

Findings

302
The marketing approach adopted by the Council generated enough interest from suitable tenderers for the tender to be considered a success.

303
The tender process was carried out within the terms of the Council’s approved procedures.

304
Councillors selected the successful tenderer after receiving comprehensive written tenders and hearing oral presentations from the four preferred tenderers and asking appropriate questions of the tenderers and officers. The primary criterion used was the ability of the tenderers to meet the terms of the franchise and tender documents. No documented final selection criteria were used.

Recommendations

305
We recommend that, when a local authority is conducting a tender for franchising a service, it should:

• Prepare a marketing plan setting out how it intends to maximise exposure of the tender to potential tenderers.
• Adopt a range of selection criteria (including both price and non-price attributes) which are designed to ensure that any preferred tenderer will:
  • meet the strategic objectives for service delivery;
  • be committed to providing a quality service; and
  • employ innovative and alternative ways to provide the service.

Marketing

Expectation

306
We expected that the Council would have marketed the business opportunity available through the tender in a comprehensive manner.

307
Good management practice would involve preparing a formal marketing plan, setting out how the Council intended to attract as many potential tenderers as possible – the greater the number of suitable tenderers, the greater the likelihood of meeting more of the long-term interests of ratepayers and water users.

Findings

308
Council officers marketed the franchise tender. The marketing consisted of:

• placing advertisements in all major New Zealand newspapers;
• placing advertisements in major Australian newspapers;
• placing an advertisement in a national British newspaper; and
• faxing copies of the tender advertisement to a large number of British and French water companies.

309
Although no formal marketing plan was produced, the marketing carried out was comprehensive and attracted interest from a number of prospective franchisees.

310
The marketing produced tenderers of the required quality and experience and who were prepared to pay an acceptable fee. Seven tenders were submitted. Accordingly, the tender may be regarded as successful.

Due Process

Expectation

311
We expected that the Council would have carried out the tender process with careful attention to the proper conduct of public business.

312
For major contracts, a clear record should be kept of all key steps during all stages – to ensure that the process is open and transparent, and to demonstrate that the agreement finally reached between the parties represents best value for the ratepayers.

Findings

313
Our investigations indicated that the tender process was carried out within the procedures approved by the Council.

314
The Council’s solicitors recommended that all consultation with potential tenderers before tenders closed should be documented. Council officers told us that the Council chose to supply information only on the state of the assets. No other discussions were entered into, so no recording was required.

315
The Council was open to tagged bids⁸, but joint venture projects between the Council and the tenderer were rejected as not meeting the tender requirements.

Commentary

316
Local authorities should be aware that an absence of records of the various stages in a tender process could expose an authority to criticism that the result may not be in the best public interest nor represent best value for money. In addition, it may leave the authority open to legal action from other tenderers.

Selection Criteria

Expectation

317
We expected that the Council would have used selection criteria designed to ensure that the franchise agreement meets the long-term interests of ratepayers and water users.

318
It is important that local authorities select tenderers based on agreed criteria which are consistent with the strategic objectives for service delivery. The selection criteria should allow tenderers to suggest innovative and alternative options.

319
Price is a key criterion. However, non-price attributes can be important factors in choosing a contractor. Collectively, non-price attributes represent the contractor’s commitment to quality assurance.

Findings

320
The sole stated selection criterion for those invited to make oral presentations to the Council was that they met the terms and conditions of the tender documents and draft franchise agreement.

321
All seven tenders were considered by the Council, and oral presentations were made by the four preferred tenderers on 19 March 1997.

322
No further documented selection criteria were used to choose the tenderer whose bid was eventually accepted.

323
Council officers told us that Councillors selected the successful tenderer after hearing the four presentations, asking questions about the qualities and strengths of each tenderer, and taking advice from officers.

Commentary

324
The inclusion of non-price selection criteria is an opportunity for local authorities to achieve quality assurance, service delivery and other objectives which they should have developed at the pre-tender stage.

325
The evaluation of bids based on the selection criteria should be objective and rigorous – especially having regard to the comments in paragraph 258. Councillors should have the benefit of an expert evaluation of the proposals to help them arrive at a final decision – they should not decide who will be awarded the contract on a whim or as the result of a “slick presentation”. Few elected representatives have the experience to competently evaluate the differences of detail between alternative bids without such advice.

326
Local authorities should consider documenting the entire decision-making process – including meetings, presentations and question and answer sessions with tenderers – as this will provide further transparency and assurance over the selection process. There is also an increasing legal emphasis on recording the selection criteria used within any tendering process.

8: A tagged bid is where a tenderer has assessed a contract or agreement and has highlighted issues which it would like to change or discuss alternatives to those specified in the documents.