Faster Procurement Process Study Report

OGC Faster Procurement Project
Procurement Process Study
Faster Procurement
Procurement Process Study Report
Contents
1
2
3
4
5
6
Executive Summary
Introduction
Scope
Approach
The Macro Environment
The Critical Path Model
6.1
The Critical Path in IT-enabled Business Change Projects
6.2
Stage 0 Pre-Advertisement Preparation
6.3
Stage 1 advertisement to Proposals
6.4
Stage 2 Proposals to Negotiation
6.5
Stage 3 Negotiation to Award
7 The Critical Path in PFI Construction Related Projects
8 Application of Lean Principles
9 Opportunities from e-Procurement solutions
10
Conclusions
11
Acknowledgments
Annex A Process Recommendations
Annex B - CP for IT-enable Projects
Annex C - CP for Construction Projects
3
4
4
5
5
8
8
11
13
15
16
18
20
20
21
21
22
26
27
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Executive Summary
1.1
In December 2003 the Cabinet Office Regulatory Impact Unit and OGC
published a joint report entitled, Making A Difference Reducing
Bureaucracy in Central Civil Government. This captured a concern of
the procurement community that there was insufficient guidance from
OGC on actions that could be taken to reduce procurement timescales.
An action1 was published in the report for OGC to carry out a study of
the procurement process between advertisement and award to identify
such actions.
1.2
The study examined the activities in the procurement phase of a

project. Specifically they are the activities a project undertakes in
moving from the issuing of the advertisement in the OJEU towards the
award of the contract to the winning bidder. The study took particular
note of those projects which were:
Required to issue an OJEU notice
Likely to take twelve months in the procurement phase
Gateway assessed at being of Medium / High risk.
1.3
The study report makes observations about the improvements a project

could make to obtain a faster procurement. Achieving such an objective
is the result of advance planning and preparation which delivers a more
effective and efficient procurement process embedded in the project
plan.
1.4
This report represents the current state of play in looking at how the
procurement process can be developed and improved for the benefit of
projects. The annexes include two critical path (CP) diagrams to
illustrate the activities required for a procurement using the Negotiated
Procedure for an IT-enabled project and for a Construction PFI project.
They were compiled with the advice and experience from departmental
Centres of Excellence and projects, and several OGC areas: Property
and Construction, Consultancy, Procurement, Best Practice and Legal.
1.5
The report will be posted on the OGC web site. Feedback on the
approach and suggestions for improvements will be sought in order to
develop the ideas still further.
OGC, in consultation with departments and industry, will carry out a study of the procurement
process, to identify further actions that departments can take to streamline the process and to reduce
planned procurement timescales OGC and Cabinet Office RIU, Making A Difference Reducing
Bureaucracy in Central Civil Government. December 2003.
Page 3
Introduction
2.1
This report is part of a wider programme of work to assist and promote

greater efficiency in the tendering stage (advert to award) of large
complex procurement projects.
2.2
There are two primary drivers behind the work. Firstly, concerns that
delays at the tendering stage could delay the achievement of a
departments objectives. Secondly to address suppliers concerns
about the effects on bid costs of elongated procurement timescales.
2.3
Previous work has focused on the external issues which impact upon
the time tendering takes such as skills and capabilities, approach to
risk, cultural issues, leadership and commitment. Where this work
differs is that it seeks to examine the internal or process related
issues, the actual activities that take place between advertisement and
award.
2.4
These issues are not new. The Total Acquisition Process Services
Guide published in 1995 was based on five underlying principles, one
of which was, procurement procedures should meet Departments
needs for short procurement timescales and an acceptable demand on
resources, and Industrys need for a cost-efficient bid process. That
there is still concern about these issues demonstrates that more needs
to be done to embed good practices.
Scope
3.1
The focus of this work is large complex projects, in the context of the
government-wide target2 to make procurement timescales more
predictable and to reduce the average time for government projects
between the OJEU advertisement and award of contract by 25%, on
projects currently taking more than a year.
3.2
Projects in this category share some common characteristics. They are

usually high to medium risk, high value, mission critical, advertised
under the negotiated procedure and are run as formal projects. They
are also one of two main project types: IT-enabled business change
projects, and PFI Construction related projects. Inevitably there are
projects which are exceptions to these rules. However to enable this
work to identify specific actions that can be taken it has been
necessary to focus on specific project types, particularly the medium to
high risk.
Departments to work with OGC to make procurement timescales more predictable and to reduce the
average time for government projects between the OJEU notice and award of contract by 25%, on
projects currently taking more than a year, taking 2002/3 as the baseline. OGC and Cabinet Office RIU,
Making A Difference Reducing Bureaucracy in Central Civil Government. December 2003.
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3.3
While the primary focus of this work is on the OJEU advertisement to

contract award, some consideration has been given to prerequisites to
this stage.
Approach
4.1
The approach to the research has been a combination of drawing on

previous work and seeking out the thoughts, ideas and advice of a
great many procurement practitioners, consultants and project
managers both within OGC and in other parts of the public sector to
develop the critical path maps.
4.2
The approach of documenting the critical path was chosen because of

the generic way in which much existing guidance discusses the stages
of a procurement process. There seems to have been little attempt
previously to capture the more detailed sequence of dependent
activities that typically take place during, in this case, a procurement
conducted under the negotiated procedure.
4.3
It is necessary to understand the detailed breakdown of dependent

activities, or critical path, to begin to track the time taken at each stage.
In doing so we can understand where time can be saved in the
process, and facilitate better planning, therefore improved predictability,
of the overall process.
The Macro Environment
5.1
It is important to understand in broad terms the environment in which

major complex procurement projects take place. These are often high
profile projects subject to political pressures and often attracting close
ministerial attention. They are also run as projects subject to formal
project management methodologies. Programmes and projects are
coming under increasing internal and external scrutiny with the
development of Centres of Excellence (CoEs) in departments to better
oversee and co-ordinate their execution. Yet the separate disciplines of
project and procurement have not always been well integrated.
5.2
Where we are talking about major complex procurements, procurement

management and project management are absolutely intertwined.
Despite this, the advice, guidance and best practice that exists tends to
focus on either one or the other. Indeed this actually reflects the
functional separation that frequently occurs in public bodies between
the centres of programme and project management expertise, and the
centres of procurement knowledge and management. This separation
of functions has been suggested as a significant causal factor in many
of the issues leading to lengthy and delayed procurement timescales,
and consequently delivery, of major procurement projects.
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5.3
To some extent this separation of functions is not surprising, especially

considering that it is only in relatively recent years that outsourcing and
the regular procurement of external service providers have become
significant tools in the delivery of the public service programme. Until
relatively recently procurement, or purchasing, was primarily focused
around the purchase of goods and smaller scale services, while project
management disciplines were used to manage a largely in-house
resource base in the delivery of services to the public. Contracting on a
much larger scale for the provision of services as part of the delivery of
the public service programme only became more common around the
late eighties and early nineties with the introduction of Market Testing
and Compulsory Competitive Tendering (CCT).
5.4
Nowadays a great deal of public service delivery depends on bought-in

services, so effective strategic procurement is at the heart of the
Governments Delivery and Reform agenda. However, despite this
there is a tendency for major complex procurement projects to be
managed outside a departments specialist procurement team and
often using bought in skills and resources. There are a number of
reasons for this including, in many cases, a lack of in-house expertise
in complex strategic procurement. The inevitable knock-on effect of
repeatedly buying-in these skills is the repeated loss of knowledge and
understanding as consultants move on. While consultants can provide
an excellent procurement advice service to projects there are clearly
advantages from in-house sourcing of procurement skills. These
include a greater strategic awareness of departmental issues, a better
understanding of the business, greater standardisation of procurement
approach and perhaps most crucially, continuity of knowledge and
understanding from the tendering stage through implementation,
benefits realisation, contract and relationship management, vendor
appraisal and ultimately enactment of the exit strategy and / or
recompetition.
5.5
This highlights an inadequacy in the way we tend to view the role of

procurement which has probably arisen as a result of the historic
tendency for procurement to be primarily lower risk transactional
purchasing. To many non-procurement professionals procurement is
perceived as the advertisement to award period we recognise as
tendering. To the procurement professional however procurement,
especially major services procurement, is a cyclical series of strategic
activities from identification of need, right through tendering, award,
contract management and vendor appraisal to recompetition as
described above.
5.6
In the former view procurement might be perceived as a limited

process-based activity in a linear set of project processes and might be
represented as follows:
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Project
Conception
Requirement
Development
Project
Initiation
Award
Handover to
Contract Mgr
Transition
Period
Advert
Project
Closure
Implementation
Procurement
Figure 1. Simple Tendering in a linear Project
5.7
In the latter view procurement is a cyclical activity engaged with

informing and supporting strategic management of organisational
deliverables:
Vendor
Appraisal
Project Conception /
Identification of Need
or Recompetition
Project
Initiation
Contract
Management
Requirement
Development
Market Sourcing
Benefits
Realisation
Strategic
Procurement
Cycle
Implementation
Transition
Period
Identification of Key
Commercial Issues
Early Supplier Engagement /
Feasibility Testing
Award of
Contract
Tendering
OJEU
Advert
Figure 2. Strategic Procurement Cycle
5.8
This diagram highlights that for large complex procurement projects we

need to better represent the intertwined nature of procurement and
project management. This will help encourage practitioners of both
professions improve their understanding and engagement with each
other at all stages of the process. From there we would see a marked
improvement in both the efficiency and delivery of major procurement
projects. This is a prerequisite for an efficient tendering process.
5.9
As OGC guidance evolves an integrated view of procurement and

project management should be represented to improve the
understanding of procurement as a strategic cyclical activity.
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6
6.1
The Critical Path Model

The Critical Path in IT-enabled Business Change Projects
6.1.1 To see where time is spent in major complex procurement projects it is

necessary to understand the dependencies and sequence of activities
that make up the critical path. Descriptions used in much existing
procurement guidance outline the major procurement stages without
discussing the timetable in any depth. Often these stages are
represented in a flow chart such as that in Figure 3.
Strategic Planning
Feasibility Study
Development of Requirements
Service Provider Proposals
Evaluation of Proposals
Contract Negotiation & Award
Contract Management
Project Review
Figure 3. Source: Adapted from TAP Services Guide, HMSO, 1995.
6.1.2 Previous guidance appears to have steered clear of discussing

timetables in any depth, perhaps because of the difficult nature of this.
Each project is substantially different and is executed in quite different
organisational environments. Despite this the framework for public
sector procurement exercises remains largely the same.
6.1.3 A comment encountered during the research for this report was that
OGCs procurement guidance is largely generic and is focused
primarily around the medium complexity procurement project. In
practice procurements differ significantly in terms of size and
complexity from small scale, low and high volume commodity
procurement, to the occasional and very large, complex procurement
projects involving a great many stakeholders and a requirement that
can be hard to pin down.
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6.1.4 It is the very large procurement projects that risk having a procurement
timetable extending beyond 12 months, risking delays to the delivery of
major government programmes and resulting in large bid costs for
suppliers. Bid costs can be in excess of 1million. Part of the reason
that these projects can take so long is that the complexity of the
requirement means it is difficult to pin down sufficiently to enable
successful pricing by potential suppliers without a degree of discussion
and agreement between the client and supply side. In these
circumstances the European Public Procurement Directives provide for
such discussion by way of the Negotiated Procedure. The use of the
Negotiated Procedure is exceptional and should not be considered the
norm.
6.1.5 The Negotiated Procedure provides the outline framework within which
most of these large complex procurement projects are carried out.
Within this framework a good deal of variations are possible, including
such options as: the use of a study period; provision for outline
proposals; and, the use of preferred bidder status. These options can
add time to an already lengthy process. Preferred bidder status may
reduce timescales but has a significant risk of reducing competitive
pressure and is best avoided on IT-enabled projects. However the
need for such options may be obviated by better preparation before
OJEU advertisement, e.g. thorough development of requirements;
understanding the related commercial issues; and identifying
appropriate financial models.
6.1.6 A new consolidated procurement directive has been adopted which
member states have to implement by 31 January 2005. This will
include a new procedure, the competitive dialogue procedure, which
will be available when the nature of the requirement means that the
open or restricted procedures would not be appropriate. The new
procedure will allow contracting authorities to enter into discussions
with bidders on aspects of the procurement, such as the best technical
or financial solution to meet their needs. When the directive is
implemented the competitive dialogue procedure should be used in
preference to the negotiated procedure. As with the negotiated
procedure, there will be a requirement for a minimum of three tenderers
to enter into the competitive dialogue. Timescales are the same, with
37 days for expressions of interest and no set time for the competitive
dialogue itself. However there will be reductions from the 37 days for
procurements where the OJEU notices are compiled and transmitted
electronically and where tender documentation is available on line.
6.1.7 The critical path being examined here is based on a simple or
standard interpretation of the Negotiated Procedure. It is intended to
represent the timescale in which most complex procurements could be
carried out. Naturally there will be those which are faster and those
which take longer to ensure they result in a sound and deliverable
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agreement between the parties. But the purpose of this work is to

identify opportunities to speed up these procurements and in doing so
to create a realistic benchmark timescale for complex procurement
projects. The resulting critical path diagram, complete with associated
timescales, can be viewed at Annex B.
6.1.8 The relationship between procurement and project management was
discussed to some extent earlier in this report; to fully understand the
sequence of activities and dependencies in such projects it is
necessary to recognise that these complex procurements are run as
formal projects using recognised project management methodologies.
Consequently there are project milestones at stages of the
procurement that require approval by a project board before the
procurement can proceed further. These approval milestones form part
of the critical path and must be included in any assessment of how long
a complex procurement project will take.
6.1.9 Discussion of the critical path in process terms is valuable to
understand what can sensibly be done in a given timeframe. It must be
borne in mind that externalities to the process itself may still impact
upon the process and result in delays to a sensibly planned timescale.
These externalities, which include stakeholder management, skills and
capabilities, senior management commitment, and approach to risk, to
name a few, have been discussed at length in both the Faster
Procurement Report3 and the joint Cabinet Office RIU/OGC report
Reducing Bureaucracy in Central Civil Government Procurement
which preceded this work. While it is not necessary to repeat what was
said there, it is important that practitioners recognise that
improvements in process terms will only be effective if accompanied by
improvements in external issues. That said there are a number of
process-based, or process-related, issues that are clear prerequisites
for achievement of a swift efficient tendering stage. These are
discussed further below.
6.1.10 The following section talks through a critical path for the procurement of
a typical (to the extent that there is such a thing) complex IT-enabled
business change requirement. It should be read in conjunction with the
critical path diagram outlined in Annex B. To make this easier the text
below is divided up into four stages followed by a number of process
recommendations at each stage. These have been drawn from various
sources during the course of the research.
Stages:

Stage 1 Advertisement to Proposals
Faster Procurement OGC, June 2002:

http://www.ogc.gov.uk/sdtoolkit/reference/ogc_library/procurement/fasterprocurement/index.html
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6.2
6.2.1 Project board approvals are a common point of delay in procurement

projects. A useful tool is to require project board members to signal
their commitment to the project in terms of understanding their role and
required contribution and that includes commitment to availability on
the dates of project board meetings and to clear and swift decisionmaking. Documenting this can also help to clarify accountability. During
project planning, before the advertisement is submitted to the Official
Journal, project board dates should be set and entered into the diaries
of project board members. A key point is selection of candidates as
board members in particular for their aptitude for decisiveness, and
effective empowerment by the organisations they represent.
6.2.2 Prior to submission of the advertisement the evaluation criteria must be
established and must not change. However in the negotiated procedure
the development of a full evaluation model is necessarily an iterative
process, as aspects of the requirement are not finalised until after
negotiation with potential suppliers. High-level evaluation criteria must
be included in the OJEU advert. An evaluation model should be
developed and a reasonable degree of detail included in this prior to
advertising. The existence of this is checked during the Gate 2
Gateway Review before commencing the tendering phase.
6.2.3 A key timesaving opportunity is the parallel development of the outline
evaluation model and the Requirements documentation. This can save
considerable time where the Requirement is developed by the business
unit in isolation from the procurement team resulting in the need to
develop the evaluation model separately and post-event. The hindsight
offered by this process often suggests that statements in the
requirements documentation could have been stated more clearly
thereby eliciting clearer, more specific responses from potential
suppliers. The parallel development of these enables the careful
structuring of the Requirements to facilitate easier evaluation of
responses embedded in suppliers proposals.
6.2.4 A further risk that may result from insufficient collaboration between the
project team, the business and the commercial team or procurement
staff is that the requirement is developed in isolation from consideration
of the commercial issues that underpin it. This might be for example an
understanding of asset ownership, valuation, transfer and refreshment
options, or the question of IPR ownership and/or exploitation rights.
Fundamental to this is identification of the most appropriate commercial
strategy in terms of what is expected of bidders in structuring their bid
costs and financial models. These issues can fundamentally affect the
way a requirement is structured so need to be considered early. OGCs
Decision Map guidance provides a structure for working through these
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issues in conjunction with the developing understanding of the

requirement, prior to formal engagement with the market.
6.2.5 During early development of the requirement a number of approaches
to engaging with the market can be adopted to ensure the basis of the
requirement is feasible, sensible and cost effective. The Concept
Viability option offered by Intellect on behalf of the IT industry is one
such approach which provides an opportunity to test out ideas and
issues prior to entering a competitive tendering situation when
significant costs are being incurred. A useful tool to initiate this can be
the publication of a Prior Information Notice (PIN) in the Official Journal
to alert the market to the upcoming requirement. Early market
engagement4 should of course be carried out in such a way as to
ensure an even playing field is maintained.
6.2.6 Finally it is imperative that both business and financial approvals are
assured as far as possible before advertisement to minimise the risk of
the withdrawal of the project after advert.
These recommendations for Stage 0 complement those aimed at public
procurers in earlier reports mentioned elsewhere in this study.
Process Recommendation 1
Gain commitment to the project and in particular to attendance and
contribution at project board meetings by requiring project board members to
sign up to a written commitment at the outset.
Include project board meetings and Gateway Reviews in the project plan
placing dates in diaries and obtaining commitment
Develop requirements and evaluation documentation in parallel to aid
mapping across to ensure the evaluation model effectively judges the extent
to which suppliers proposals meet the advertised requirement.
Develop requirements and evaluation documentation to as full a stage as
possible, before advertising the requirement, through the extensive use of
concept viability testing, feasibility testing and early market engagement.
Early use of the Decision Map to consider key commercial issues before
formally commencing tendering.
Use Prior Information Notices in the Official Journal to alert the market to
upcoming requirements.
Obtain assurance of business and financial approval before advertisement
placement.
See also: Market Sounding Guidance to be found in the SDTK on the OGC web site
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6.3
Stage 1 advertisement to Proposals
6.3.1 In the negotiated procedure there are only two timescales imposed by
the EU Directives (negating the popular myth that it is the imposition of
EU timescales that results in long procurements!), a minimum period of
37 days from the date of despatch of the advertisement to the Official
Journal to the close of Expressions of Interest (EOIs). The other is the
requirement to publish an award notice in the official journal within a
maximum of 48 days after award of contract.
6.3.2 In more straightforward procurements it may be that enough technical
criteria can be specified in the advertisement to enable the client to
select suppliers. However, more usual in large and complex
procurements is the use of some form of Pre-Qualification
Questionnaire (PQQ) to gather enough information about each supplier
to enable the client to make a decision about which suppliers to take
forward.
6.3.3 The use of a web site to publish the PQQ information required could
help to reduce the time it takes to gather this information by alerting
suppliers to the information requirements earlier. A reference to the
web site can be given in the advertisement narrative enabling suppliers
to submit this information alongside their EOI rather than the client
waiting for the deadline for receipt of all EOIs before sending out PQQ
information requests. This has been done successfully on a number of
projects although the approach may carry an element (albeit small) of
risk.
6.3.4 Client organisations will be keen for suppliers to register interest early.
One way of achieving this would be to require the suppliers to complete
a simple registration form on the web site which would be automated to
respond with the sending out of the PQQ information request. An
alternative to this would be to refer to an email address in the
advertisement narrative, which suppliers would then apply to for the
PQQ information request. The disadvantage of this approach being that
it relies on someone in the client organisation manually checking and
responding to applications from suppliers which takes time and
removes a resource from other work.
6.3.5 A concern about this approach may be that any supplier which does
not become aware of the advertisement until shortly before the closing
date may not have sufficient time before the deadline to retrieve the
PQQ information request, collate the information and submit it. It is
recommended that the deadline for receipt of PQQ information be set
at 7 days after the deadline for receipt of EOIs in response to the
advertisement.
6.3.6 Evaluation of PQQ information should not take a significant amount of
time. Information requested at this stage can only be in relation to track
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record on similar contracts, history, financial standing and technical

capability and not about the service requirement itself (essentially
backward looking). This should take no more than seven days. A
decision is then reached about which suppliers to invite to submit
proposals. This decision will be subject to ratification by the project
board.
6.3.7 When there are limited bidders in the market likely to be capable of
meeting the requirement, careful attention will be paid to the capability
information requested in the PQQ. The PQQ deadline and the PQQ
evaluation period will need to be planned to reflect this closer attention.
6.3.8 During project planning, before the advertisement is submitted to the
Official Journal, project board dates should be set and entered into the
diaries of project board members as outlined in the section above on
preparation activities. Project board ratification of decisions at each
decision point in the process should take no more than 7 days. This
can be reduced by circulation of the papers at the earliest opportunity.
Once the papers are circulated and read a decision should be reached
at a single meeting. However the allowance of 7 days includes time for
reading of papers and for resolution of issues in the event that a
decision cannot be ratified at a single meeting.
6.3.9 In parallel with this period, a total of 58 days, ongoing work will be
taking place to develop the Requirements document and the draft
contractual documentation to as complete a stage as possible. The
purpose of using the negotiated procedure is to enable negotiation over
the detail of the requirements in such circumstances where it is not
possible to pin down the detail prior to discussions with potential
suppliers and/or where an appropriate business model cannot be
developed earlier. Therefore, there is a limit to how far such
documentation can be developed at this stage. However, the early
development of requirements documentation to as full a state as
possible will pay dividends in terms of time saved in the process of
responding to bidders questions and issues later on.
Consider referencing the PQQ in the OJEU advertisement with a web link to
an automated registration and response to enable suppliers to rapidly access
the PQQ information request.
Where the above approach to PQQ is adopted, the deadline for receipt of
PQQ responses should be set at 7 days after the deadline for receipt of EOIs.
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6.4
6.4.1 Once the project board has approved the long list decision, invitations
to submit proposals can be issued to a minimum of 3 bidders.
6.4.2 While suppliers are preparing proposals a considerable amount of work
is taking place to build up their understanding of the requirement and
the business and technical environment in which the solution must
operate. It is usual for each supplier at this stage to undertake a series
of meetings with directors, the business unit staff, IT technical staff, key
stakeholders and the commercial team. Wherever possible such
meetings should be run in parallel by encouraging the suppliers bid
teams to use only the appropriate people in each meeting. For example
a commercial and technical meeting can be run in parallel with the legal
and commercial team attending the former and the technical team the
latter. A suppliers entire bid team can then come together outside of
engagement between the parties to review progress. This can help to
reduce what can be a long process.
6.4.3 It has also been suggested that the use of a specific individual in the
client organisation to co-ordinate correspondence, meeting notes etc
for each supplier can be a useful way of coping with the inevitable
complexity of carrying out such a process with a number of bidders.
6.4.4 Another time-consuming issue is the handling of specific questions
raised by suppliers and making responses available to all bidders to
ensure fairness and equal treatment between bidders. Questions such
as this can arise not only within specific meetings but also result in
numerous emails and phone calls that require tracking, response and
corresponding information to other bidders. A solution is to use an
electronic web-based bulletin board that can be securely accessed by
each supplier to enable them to post questions or issues for
clarification. These can then be considered and responded to by the
client-side team and if appropriate responses posted for all bidders to
see. Time can be saved in this way and in addition an audit trail of
clarification questions and answers created.
6.4.5 Investigation suggests 60 days is reasonable in most cases.
6.4.6 This is followed by a formal evaluation of proposals and usually
indicative pricing. At this stage of evaluation it is usual to include
suppliers presentation of their proposals and where appropriate
external site visits during an indicative 31 day evaluation period.
6.4.7 This is followed by a second project board approval point as this is an
opportunity to deselect any bidders that at this point are clearly not
going to be in a position to provide a competitive solution. This should
take no more than 7 days and result in an agreed list of bidders to
invite to negotiate.
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Run suppliers clarification meetings in parallel wherever possible to enable
more rapid exploration of issues in specific areas.
Assign a different individual in the client organisation to co-ordinate
correspondence, meeting notes etc for each supplier.
Use a Q&A electronic bulletin board to deal with clarification questions and
answers during clarification and proposal development.
6.5
6.5.1 Following the issue of invitations to negotiate, negotiations begin

alongside the parallel de-brief of any de-selected suppliers.
Negotiations can take on a similar structure to the clarification meetings
undertaken while suppliers are preparing their proposals. Parallel
meetings can take place with commercial, technical and business
teams.
6.5.2 The negotiation stage needs a clear and firm plan to avoid it dragging
on seemingly indefinitely. Considerable time can be spent negotiating
lesser clauses in contract terms and conditions. This time wasting may
be a deliberate tactic to force an unfavourable position on the client as
time runs out, or, the major issues are not addressed because they
appear too difficult. A tactic to handle this would be to require the
identification of showstopper issues at the outset of negotiations.
Bidders identify and prioritise their top ten issues against the draft
contract terms. These are tackled first. Experience suggests that the
negotiation stage should not typically take more than 120 days. Part 4
of the Decision Map in Key Commercial Principles can provide a useful
starting point for this.
6.5.3 Long periods of contract negotiation can also result from the use of
bespoke terms and conditions. Comments have been received from
suppliers about finding themselves in the position of negotiating
common contract terms each time they engage with a public
department, often with different outcomes. This can be avoided and
time saved with the greater use of standard contracts/model
agreements and the use of precedent contract terms as developed by
OGCs Contract Innovation team.
6.5.4 Approaches to negotiation differ considerably between departments, as
do the level of skills and capabilities. The skills required are taught as
part of professional procurement training. Capability would improve
through staff gaining direct experience in negotiating. Aiming for a
consistent approach across departments would require significant effort
to understand and accommodate all the variations to be found in the
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various departments business situations, culture, and infrastructure.

However, departments could develop their own common look and feel
and standardise their approach to planning and running their
negotiations. This will mean that their suppliers will know what to
expect and the focus is then on the important details of the negotiation
and less on the house-keeping.
6.5.5 The contractual documentation is the physical output of the negotiation
stage and must capture as accurately as possible the agreements
reached between parties. Something which would contribute to a
faster, more predictable experience would be the use of one or a
number of options in terms of standard services schedule templates.
The services schedule is where the bulk of the agreement is
documented in terms of what is actually to be delivered. The style and
method of drafting can vary considerably and a more consistent
approach would undoubtedly be beneficial.
6.5.6 Following the close of negotiations it is usual for a short period, around
7 days, to be required for taking stock, updating the contract
documentation and agreeing with bidders the contract baseline against
which Best And Final Offers (BAFOs) are to be invited. This is followed
by a project board (7 days) to approve the decision of which suppliers
are to be invited to submit BAFOs. While this is not usually seen as a
formal opportunity to de-select a bidder (because a further evaluation
has not been carried out), a bidder may not be invited to submit a
BAFO where they have failed to agree a baseline draft contract within
the timeframe permitted, usually where one or more significant
contractual issues remain outstanding. An alternative approach to this
sometimes adopted is to invite the bidder to BAFO, but to weight their
bid appropriately at evaluation to take into account the risk surrounding
any unresolved issue.
6.5.7 Alongside the preparation for BAFOs and project board, the
commercial team will usually be finalising the evaluation model at this
point. This must be completed and lodged with the project board for the
purposes of propriety before bidders are invited to submit BAFOs.
6.5.8 Once the project board has approved the decision BAFO invitations
can be sent out and suppliers can prepare their BAFOs for submission.
It is not necessary to allow any more than 7 days for this, particularly
given that suppliers will have been working on their BAFO prior to this
point.
6.5.9 Experience suggests 21 days to be sufficient to carry out the BAFO
evaluation and produce an evaluation report, which will be subject to
the project board approval. It is usual however for the Gateway team to
come in and carry out a Gate 3 assessment of the project before
proceeding to the Investment Decision. It is crucial to plan the Gateway
reviews early in the project planning and to stick to the timetable.
Page 17
Planning a Gateway Review and lining up reviewers and undertaking

the preparatory work will usually take around 3 months and rescheduling is highly problematic and likely to add significantly to the
overall project timescale.
6.5.10 Finally, before contract award, a final project board will consider the
investment decision. This period will be longer than previous project
boards as financial and other approvals are checked before contract
award, but it should not exceed 14 days.
Use the Decision Map Key Commercial Principles to identify and prioritise the
key commercial issues in consultation with bidders and tackle these at the
outset of negotiations.
Use standard contract terms/model agreements and precedent clauses
developed by OGC.
Develop and use a consistent departmental approach to provide a common
look and feel to contract negotiation. This should explore options for tackling
key commercial issues.
Develop a standard or typical approach to drafting a services schedule to the
contract.
6.5.11 There is a legal requirement to post an Award Notice in the Official
Journal within 48 days of the award of contract. Background research
associated with this work to measure the tendering period of major
procurement projects has demonstrated that a significant number of
projects do not post an award notice despite the legal requirement to
do so.
7 The Critical Path in PFI Construction Related Projects

7.1
Initial work carried out by this team to break down tendering timescales
on construction related PFI contracts has shown that there are
significant differences compared with complex IT-enabled projects.
Currently there are clear reasons, as documented below, that PFI
procurement takes longer than 12 months. 18 months is more typical.
More work is required if opportunities to reduce this typical timescale
are to be identified and this can only be done in close liaison with
Industry. Feedback suggests that there is some appetite in Industry to
tackle the issue.
7.2
Time from advertisement to award on construction related PFI projects

is absolutely dictated by the complexity of project. However, from a
sample of 27 PFI projects, two were achieved in less than 12 months
Page 18
and one took over 24 months. This suggests a benchmark timescale

can be identified.
7.3
In the two projects under 12 months the build elements were both
straightforward new builds, less than 25 million in value, with
established site ownership, surveyed and subjected to Environmental
Impact Assessment (EIA) prior to competition, and with outline planning
permission approved. While a timescale of less than 12 months
appears possible on occasional straightforward new builds, it is not
usual. Experience suggests that where externalities do not intervene it
is reasonable to expect PFI construction projects to complete the
tendering process in no more than 18 months.
7.4
This is longer than might be expected of non-construction projects and

it is important to understand that there are some fundamental
differences in the process that lie behind the longer timescales.
7.5
The key difference is that up to 70% of the total capital outlay by the
supplier is in the design phase. This outlay includes architects,
surveyors, project management and so on. Under current processes
this design work is done by the contractor at their own risk before
award of contract. Consequently it is usual to use preferred bidder
status in PFI Construction projects to select a single preferred
contractor as early as possible. Then to allow that contractor to carry
out the detailed design work with a reduced risk of not being awarded
the contract (notwithstanding the significant work at this stage to
consider the full extent of the service beyond construction). This
approach is more workable in PFI construction than in IT procurement
because a great deal more of the input costs are quantifiable and
consequently quite detailed bills of quantities can be worked up at an
earlier stage in the design process. As a result around 90% of the final
price is known before moving to a single supplier in preferred bidder
status. However for the preferred bidder around 50% - 60% of the
design cost is incurred in the stage between notification of preferred
bidder status and award of contract. Therefore during the competitive
stage and before the preferred bidder is announced, suppliers are
expected to outlay around 10-20% of the total capital cost at significant
risk of not winning the business. It quickly becomes apparent that
without the use of the preferred bidder option few if any contractors
would bid for the business.
7.6
Experience suggests that where projects are running over 18 months in

the tendering period it is as a result of externalities to the process itself
such as stakeholder issues, senior stakeholder intervention, funding
issues, planning and approvals processes, etc.
7.7
While the majority of PFI construction projects should come in at 18

months or less, there are good arguments for some marginally longer
ones. For example in the education sector aggregation of schools
Page 19
projects into very large deals can provide better value for money in the
long run, however the complexities of running a procurement for a
multi-site contract can result in additional time spent at the tendering
stage. This may still however result in less overall procurement time,
and less duplication of effort, than if such a deal had been broken down
into a number of smaller procurements.
7.8
Based on current processes a typical critical path in PFI construction

projects for the tendering period might look as outlined in Annex C. It
was outside the remit of this study to investigate PFI Construction
projects in any more detail.
8 Application of Lean Principles

8.1
One proposal discussed within OGC at the outset of this work was that
we consider whether the principles of lean-thinking had anything to
offer the Faster Procurement work in terms of process efficiency.
8.2
Lean thinking is a management concept with roots in the Japanese

motor industry that has been hailed by some as providing benefits to all
areas of business. As a concept it has its advocates and those who
dismiss it as a fad. Web based research provided little of use, beyond
the praises of its use in a manufacturing process-based environment
where it is used to identify the end-user understanding of value, track
the stages of the value chain, eliminate waste in the process and
create flow through the system based on pull rather than push for
greater efficiency.
8.3
To explore the concept further OGC met representatives of Unipart Plc,

an early adopter and keen advocate of the approach in the UK. The
meeting demonstrated some tangible benefits and provided examples
of where the company had worked with other organisations, including
local government, to apply the principles of lean in a wider context.
8.4
It seems likely that if the Lean principles have something to offer public
procurement, it will be in the lower to medium complexity
procurements. This is where issues are sufficiently broad ranging to
make automation not practical but where there is still a strong element
of process. The emphasis on removal of waste is universally relevant
and should not be forgotten in any procurement project.
9 Opportunities from e-Procurement solutions

9.1
e-Procurement solutions tend, in the public sector, to be perceived as

most useful on lower value, high volume transactions such as
commodity buying. However, e-tendering applications offer
opportunities that can provide efficiencies on large complex projects.
Page 20
9.2
While they will not replace face to face meetings on these projects,
these solutions can help with handling the development and iterations
of the requirement, the posting and sharing of clarification questions
and responses, and the development and review of contractual
documentation.
9.3
There is a clear side-benefit to the use of electronic web based

systems such as this in that they can prompt users at various stages to
comply with business rules and best commercial practice. Furthermore
the systems provide an audit trail of activities that are stored and can
be accessed for future use, perhaps in re-writing a requirement or
understanding how agreement on a particular commercial term was
reached. This in itself offers greater efficiency opportunities.
9.4
The value for money benefits and timesaving offered by greater use of
e-procurement systems are significant and OGC has already done
much work to promote the use of such systems. Implementation of eprocurement systems in departments depends on a greater
understanding and appreciation of the benefits at both ends of the
scale; low value commodity purchases as well as high value, high risk
complex projects.
10
Conclusions
10.1
The focus of this work was the tendering period of advertisement to

award on major complex projects that typically take over 12 months. In
practice it is difficult to discuss tendering in isolation from activities that
should take place in preparation for tendering, as part of the wider
project lifecycle.
10.2
A key point to emerge from this work is the need to ensure much
greater integration between procurement and project management on
these complex projects. The perception of procurement as little more
than the tendering stage of a procurement project may be a significant
factor in failures to consider key commercial and evaluation issues prior
to engagement with the market.
10.3
The critical path for IT-enabled business change projects once

validated and accepted by the public sector and industry should
provide a benchmark to aide project planning.
11
Acknowledgments
11.1
Thanks are due to a great many people who have contributed thoughts,
ideas and experiences to enable this study to be carried out. Particular
thanks must go to Turner and Townsend Group as the source of much
of the PFI Construction knowledge, experience and ideas discussed.
Page 21


The study process recommendations intended to help the project to move
efficiently and effectively, and hence faster, through its procurement phase.
Gain commitment to the project and in particular to attendance and contribution at

project board meetings by requiring project board members to sign up to a written
commitment at the outset.
Include project board meetings and Gateway Reviews in the project plan placing dates
in diaries and obtaining commitment
Develop requirements and evaluation documentation in parallel to aid mapping across

to ensure the evaluation model effectively judges the extent to which suppliers
proposals meet the advertised requirement.
Develop requirements and evaluation documentation to as full a stage as possible,

before advertising the requirement, through the extensive use of concept viability
testing, feasibility testing and early market engagement.
Early use of the Decision Map to consider key commercial issues before formally
commencing tendering.
Use Prior Information Notices in the Official Journal to alert the market to upcoming
requirements.
Obtain assurance of business and financial approval before advertisement placement.
7
8
Consider referencing the PQQ in the OJEU advertisement with a web link to an
automated registration and response to enable suppliers to rapidly access the PQQ
information request.
Where the above approach to PQQ is adopted, the deadline for receipt of PQQ
responses should be set at 7 days after the deadline for receipt of EOIs.
10
Run suppliers clarification meetings in parallel wherever possible to enable more rapid
exploration of issues in specific areas.
11
Assign a different individual in the client organisation to co-ordinate correspondence,

meeting notes etc for each supplier.
12
Use a Q&A electronic bulletin board to deal with clarification questions and answers
during clarification and proposal development.
13
14
15
Use the Decision Map Key Commercial Principles to identify and prioritise the key
commercial issues in consultation with bidders and tackle these at the outset of
negotiations.
Use standard contract terms/model agreements and precedent clauses developed by
OGC.
Develop and use a consistent departmental approach to provide a common look and
feel to contract negotiation. This should explore options for tackling key commercial
issues.
Develop a standard or typical approach to drafting a services schedule to the contract.
16

Annex B CP for IT-enabled project
Critical Path Map for complex IT-enabled business change

contracts (negotiated procedure advert to award)
Issue advert
Issue Qualification Criteria
Assumptions:
Further development of requirements

and draft contract
58 days
Draft documentation should be prepared before advert to ensure process runs smoothly
Refer to report for outline of pre-advert activities necessary before readiness to proceed
Times are elapsed defined as in European Directive 92/50/EEC
Deadline for receipt of EOIs (unless accelerated)
37 day
Key:
335 days total.
EOI Expression of Interest

ITN Invitation to Negotiate
PQQ Pre Qualification Questionnaire

BAFO Best and Final Offer
(< 12 months)
Deadline for receipt of PQQs

7dy
Decision Point Longlist Bidders
7dy
Notify selected bidders (3+) with invitation to submit proposals
Clarification, hold
open days, reply
to questions
7dy
Milestone - Deadline for receipt of suppliers proposals
Typical best practice timescales
60 days
Parallel activity
Decision Point Shortlist Bidders

Evaluate EOIs
and/or PQQs
31 days
Programme/Project activity
Issue ITNs & notify any de-selected bidders
Specified legal minimum period
7dy
Project Board
approval to proceed
Milestone End of negotiation period
7dy
120 days total
Invite BAFOs against agreed baseline
14 days
Suppliers preparation of proposals

Meetings - each supplier with
Directors, Business, Technical, Key
Stakeholders, Commercial etc..
Evaluation of proposals
An opportunity to de-select further
any unsuitable proposals
7dy
Deadline for BAFOs
Debrief
unsuccessful
candidates
Project Board
approval to proceed
Negotiation period usually structured

with parallel meetings for instance for
commercial, business and technical
issues
7dy
Finalise
evaluation
model
7dy
Evaluation Decision
21 days
Agree baseline for

BAFOs & Prepare
invites
Project Board
approval of
BAFO invites
Award of Contract
Supplier
preparation
& submission
of BAFOs
3dy
14d
Gateway 3
Investment Decision
Stage 1
Stage 2
Stage 3
7dy
48 days
Evaluation of BAFOs &

produce evaluation report
Stage 0
Debrief unsuccessful
candidates
Project Board &

Financial Approval
Post Award
Notice

Annex C CP for PFI Construction project
Critical Path Map for PFI Construction Related Projects

(negotiated procedure advert to award)
Issue advert
Issue Qualification Criteria
Assumptions:
Deadline for receipt of EOIs (unless accelerated)
Draft documentation should be prepared before advert to ensure process runs smoothly
Refer to report for outline of pre-advert activities necessary before readiness to proceed
Times are elapsed defined as in European Directive 92/50/EEC
Deadline for receipt of PQQs
37 day
7dy
45d
Finalise docs, hold
open days, provide
MOIs
Key:
544 days total
EOI Expression of Interest

ITN Invitation to Negotiate
PQQ Pre Qualification Questionnaire

BAFO Best and Final Offer
Notify selected bidders (3+) with ITN

Typical best practice timescales
5dy
7dy
Deadline for receipt of Proposals
Evaluate EOIs
and / or PQQs
(< 18 months)
Parallel activity
100 days
Programme/Project activity
50 days
Project Board
approval to proceed
Legal minimum specified period
Notify any de-selected bidders + invite BAFOs

5dy
Debrief unsuccessful
candidates
Deadline for receipt of BAFOs

Evaluation of proposals
Suppliers preparation of proposals

Meetings - each supplier with
Directors, Business, Technical, Key
Stakeholders, Commercial etc.
90 days total
Evaluation of BAFOs
Project Board approval

to proceed
30dys
Notify Preferred Bidder &

unsuccessful bidders
5dy
Debrief unsuccessful bidders
7dy
BAFO - the period here is highly

dependent on the quality of proposals
at ITN stage
90 days
Evaluation decision
Project Board approval of
Preferred bidder decision
160 days
3dy
Judicial review period 3 mths from date

of final planning submission to finish on
or before financial close
Preferred Bidder works up detailed design & seeks full
planning permission. Negotiation over +/-10%
Award of
Contract
7dy
Gateway 3 Investment Decision

Project Board &
Financial Approval
48 days
Post Award Notice

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OGC Faster Procurement Project

Procurement Process Study

OGC Faster Procurement Project

Procurement Process Study

OGC Faster Procurement Project

Procurement Process Study

The study examined the activities in the procurement phase of a

The study report makes observations about the improvements a project

OGC Faster Procurement Project

Procurement Process Study

This report is part of a wider programme of work to assist and promote

Projects in this category share some common characteristics. They are

OGC Faster Procurement Project

Procurement Process Study

While the primary focus of this work is on the OJEU advertisement to

The approach to the research has been a combination of drawing on

The approach of documenting the critical path was chosen because of

It is necessary to understand the detailed breakdown of dependent

The Macro Environment

It is important to understand in broad terms the environment in which

Where we are talking about major complex procurements, procurement

OGC Faster Procurement Project

Procurement Process Study

To some extent this separation of functions is not surprising, especially

Nowadays a great deal of public service delivery depends on bought-in

This highlights an inadequacy in the way we tend to view the role of

In the former view procurement might be perceived as a limited

OGC Faster Procurement Project

Procurement Process Study

In the latter view procurement is a cyclical activity engaged with

Figure 2. Strategic Procurement Cycle

This diagram highlights that for large complex procurement projects we

As OGC guidance evolves an integrated view of procurement and

OGC Faster Procurement Project

Procurement Process Study

The Critical Path Model

6.1.1 To see where time is spent in major complex procurement projects it is

Service Provider Proposals

Contract Negotiation & Award

Figure 3. Source: Adapted from TAP Services Guide, HMSO, 1995.

6.1.2 Previous guidance appears to have steered clear of discussing

OGC Faster Procurement Project

Procurement Process Study

OGC Faster Procurement Project

Procurement Process Study

agreement between the parties. But the purpose of this work is to

Stage 0 Pre-Advertisement Preparation

Faster Procurement OGC, June 2002:

OGC Faster Procurement Project

Procurement Process Study

Stage 3 Negotiation to Award

Stage 0 Pre-Advertisement Preparation

6.2.1 Project board approvals are a common point of delay in procurement

OGC Faster Procurement Project

Procurement Process Study

issues in conjunction with the developing understanding of the

OGC Faster Procurement Project

Procurement Process Study

Stage 1 advertisement to Proposals

OGC Faster Procurement Project

Procurement Process Study

record on similar contracts, history, financial standing and technical

OGC Faster Procurement Project

Procurement Process Study