Competitive dialogue for local authorities

Having been involved in six Competitive Dialogues [1] including the Kent County Council Back Office Procurement, Adeola Sonola draws on her experience and examines the issues involved in a CD process, giving practical tips on how to ensure a successful outcome.

Preamble

Competitive Dialogue (“CD”) is a procurement tool used for more complex projects, where requirements are defined in output terms. It is now popular within local authorities (“LAs”) due to budget constraints and the need for LAs to think outside the box. In general, a CD will allow LAs to have discussions with bidders to develop different options and alternative proposals in response to the LA’s outline requirements. This is progressively developed during the CD process until the LA is able to identify a compliant and affordable solution. In this article, a typical CD process will be considered under the following headings: Provisions of the Law, Pre Tender, Process, Post Tender/Preferred Bidder, Privacy Issues and Practical Tips.

Provisions of the Law

Regulation 30 of the Public Contracts Regulations 2015 (“the Regulations”) sets out the procedure required for a CD, which is broadly similar to regulation 18 of the Public Contracts Regulations 2006. A CD process can only be used when other types of procedures under the Regulations are not suitable for the procurement or commissioning exercise. CD aims to increase best value for the LA by encouraging innovation and maintaining competitive pressure on bidders throughout the process.

Pre Tender

This is the most critical stage of a CD process, underpinned by detailed planning, projection and preparation. Detailed preparation before the LA embarks on this trajectory ensures that the LA can fully brief participants and respond appropriately to bidders’ proposals during the CD process. It is a matter of fact that bidders and LAs spend a lot of money on a CD process; therefore the importance of the preparation stage cannot be over-emphasised. The pre tender stage should test if arrangements that have been put in place are fit for purpose, robust and manageable.

For a CD process to be effective and successful, the pre tender stage must involve the following considerations:

(i) Resources: A CD process is complicated, time consuming and resource intensive. It is therefore essential that the LA is able to project the scope and calculate the extent of resources required; including human and material resources with a well briefed and experienced multidisciplinary core project team, central location/accommodation/facilities for the CD, breakout rooms, systems, equipment (projector or flip chart for example), refreshment etc. Adequate resources will ensure that the LA is able to adopt and maintain a consistency of approach and best practice.

(ii) Preliminary Market Consultations [2]: This can be conducted by having a bidders’ day, where the LA holds a seminar for bidders in the relevant industry. Here, the LA will present a high level summary of the services to be procured. Bidders’ day should be held well in advance of any CD process and will serve as a valuable soft market testing tool whereby the LA will be able to identify what is on offer from the industry to meet, at least, its minimum requirements. The LA should aim to make its services as marketable as possible by securing the interest of bidders best placed to deliver them. After the event, the LA should collate FAQs [3] with the LA’s responses and send them to all bidders including those who registered but were unable to attend the bidders’ day [4].

(iii) Member Buy-In: The buy-in of the LA Member who is the “portfolio holder” for the project is required from the outset. This gives confidence to the market that the LA is ready for business. The Member should be given a slot on bidders’ day to deliver the strategic objective of the project in general, the direction of travel, the desired outcome and potential solution expected by the LA from the CD process.

(iv) Core Project Team (“CPT”): The CPT is central to the success of the CD process and must be involved from start to finish. Members will be identified well in advance and a reasonable number of 5 to 6 should be sufficient. The CPT will include: the Project Sponsor (“PS”) [5], lead legal representative, procurement officer, finance officer, project manager and the technical expert. HR lead will be called in when required for staff or TUPE related issues. The scope and the roles of the CPT should be clear and specific to ensure that there is no overlap. The PS must have delegated authority to make decisions, at least up to a certain level to avoid too many parked issues during dialogue. The PS will chair the dialogues/meetings, ensuring the maximisation of time allocated to each agenda item. Ideally, service leads from different waves or streams will breakout and report to the CPT on a daily basis and at the end of each dialogue day. The CPT will usually be involved in all high level commercial discussions and negotiations.

(v) Restructuring and Re-grouping:The LA can start restructuring or re-grouping members of staff who will be affected by the CD at least 12 to 24 months before the CD begins. This will ensure that relevant staff are assigned and designated to the services that will be outsourced; ensuring a smooth TUPE transfer, mitigating post TUPE transfer redundancy, and ensuring that pension (LGPS [7]) considerations are agreed, including any requirement for actuarial assessment for staff subject to a TUPE transfer.

(vi) Project Time Table: Sufficient time is required for the CD process and a minimum time of between 18 to 24 months in total is required for the entire process. The project timetable should not be too ambitious and should allow enough room for time spillages, dialogue clarifications, TUPE consultation, standstill period, finalising contract documents between solicitors acting for the parties and mobilisation / transition. Also, availability of core officers and holiday commitment need to be taken into account.

Process

After a successful pre-dialogue preparation, the LA will be more certain of its intention to formally commence a CD process. In this case, the lead procurement officer with the CPT must carry out an assessment and decide whether to run a three [8] or a two stage [9] process. De-selection should be built into the process from the outset due to the additional time it may add to each stage of the procurement timetable.

A typical CD process will follow the cycle below:

(i) OJEU: This is published with the LA’s descriptive document, setting out the LA’s requirement and priorities, together with details of the CD, timescale and the evaluation criteria.

(ii) Invitation to Submit Outline Solution (“ISOS”): A series of dialogues are held and bidders are then invited by the LA to submit their outline solution. The LA evaluates these, de-selects bidders (if appropriate) and moves to the ISDS stage.

(iii) Invitation to Submit Detailed Solution (“ISDS”): More dialogue sessions are held where bidders’ outline solutions are explored and tested where required. Bidders are then asked to submit their detailed solution. The LA evaluates the detailed solutions and shortlists bidders going to the ISFT stage.

(iv) Invitation to Submit Final Tender (“ISFT”): The LA and the bidders left in the process have more focused dialogue sessions to agree and close all outstanding commercial and/or technical issues. It is only after a bidder’s proposals have been developed in sufficient detail that bidders are invited to submit their final tender. This signifies the closure of the dialogue process as a whole.

(v) Dialogue: This is conducted between (ii) to (iv) above and timescale between the stages will be determined by the LA. Before each CD session, the LA should have issued and shared its position statement [10] or paper on relevant topics with bidders.

• The number of break out streams or waves for different service areas should be determined in advance but flexibility should be retained to revise this if required.
• The agenda should be circulated in advance with the names and details of the CPT or other LA and bidders’ officers to be involved in the scheduled dialogue session.
• After each dialogue session, the PS should summarise the essential points agreed. The scribe (or project manager) should note agreed actions, which are circulated to all immediately after the dialogue session or the next day at the latest. This should identify names of officers from either side who have the responsibility to resolve or clarify parked issues.
• A risk register should be maintained, tracking the RAG [11] status of all risks identified during the CD process. The risk register must be populated and revised throughout and finalised before the end of the CD process.

(vi) Clarification: Issues are clarified and resolved throughout the process by either side. Usually, bidders and the LA will continue to seek clarification during a dialogue session or via the LA procurement portal until the end of the CD process when all issues should have been closed or agreed.

The commercial position of the LA must be clear and unambiguous and must be set out in the position paper issued by the LA. For example, the LA’s position in relation to a peppercorn rent (if any), any pass through costs, payment mechanism, LGPS – issues relating to any risk share, pension contribution rate, exit payments, redundancy costs, ill health etc. The bidders must know the LA’s position to be able to adequately prepare and respond to it. Bespoke Invitation to tender documents must be shared in advance by the LA together with proposals to be discussed and agreed during dialogue.

Post Tender and Preferred Bidder

The submission of the ISFT signifies the “financial close” of a CD process, which the LA will formally confirm to bidders in writing. The LA is now certain that it has an affordable and compliant preferred bid on which the parties can proceed to contract. The LA may clarify aspects of the bid if necessary, giving specific timescales within which the bidders can respond. The LA evaluates the bids and then announces the preferred bidder. All contract documents evolve during the CD process until “financial close” when they are finalised. The LA may issue a conditional preferred bidder award letter if there are minor outstanding issues to fine tune.

It should be noted that a well-defined criteria and consistent evaluation is critical and will have a great impact on whether or not a successful challenge can be brought against the LA by an unsuccessful bidder. The evaluation must reflect all the criteria required to identify the most economically advantageous tender. It should not be so intricate that even LA officers find it difficult to interpret, as different solutions will be evaluated using the same criteria. Since there is little opportunity for adjustment to proposals post-tender, it is important that the evaluation criteria and the weightings applied do not favour one aspect of bidders’ proposals. Poorly constructed evaluation criteria expose the LA to the risk of challenge or having to award a contract that does not represent value for money.

Privacy Issues [12]

This is crucial since the LA wants all bidders to freely discuss and develop solutions as part of the CD. Being actively engaged with multiple bidders could result in an accidental exchange of valuable ideas by the LA therefore; the LA should adopt formal confidentiality policies/agreements that will establish the information to be shared to protect the confidentiality of any bidder’s solution.

Practical Tips

(i) Plan, prepare and project: managing the CD process momentum can be helped by the project manager’s effective planning of sessions, identifying the topics, those involved, being clear on the LA’s commercial position as set out in paragraph 4.3 above, the outputs required and so on.

(ii) Be clear about the roles and responsibilities of all officers involved in the project, including clear terms of engagement for external consultants and/or law firms.

(iii) Allow sufficient time for slippages, clarification, TUPE consultation, execution of contract(s) and mobilisation.

(iv) All CD clarification questions and responses with revised bespoke documents must be channelled formally through the LA’s procurement portal for an audit trail.

(v) Provide training for LA officers before the CD process begins (if required)

(vi) Determine if variant bids will be accepted and what evaluation criteria will be used to assess them to ensure you are comparing like for like.

(vii) The LA must have visible corporate direction and Member(s) buy-in with accompanying cabinet or Council decision.

(viii) Have an effective structure – issue agendas, LA position statement and documents to be discussed in advance of dialogue sessions. The LA team must have pre-meetings beforehand to understand the objective of each dialogue session.

(ix) Have a risk register and Issues Log. Monitor all items on the Issues Log, making sure they are all agreed and closed. Under the RAG status, all red lights must turn green before the formal close of dialogue. If items do not turn green, then allocation and transfer of risks need to be dialogued with the agreed position captured in the contract documents.

(x) Do not let bidders hijack and lead YOUR CD process

Regulation 29 – Competitive Dialogue with negotiation

This is new and will be used for “…specific circumstances related to the nature or complexity of the works, supplies or services or the risks attaching thereto, the contract cannot be awarded without prior negotiations…” and provided that the other provisions of regulation 26(4) are met. It will be interesting to see how this will operate in practice, even though most of the points covered above will apply. It is my view that a CD with negotiation is likely to be a 2 stage process. The LA will issue a Super PQQ [13] to whittle down bidders to a manageable number to take to the negotiation stage.

Conclusion

For the LA, CD makes it easier to confirm that all necessary requirements have been considered before bids are submitted, resulting in more robust tenders and the award of a best value for money solution. The time allocated to the preparatory work for both regulations 29 and 30 procedures will determine the success or failure of both, even though regulation 30 can be said to be tried and tested. The regulations are clear that the number of bidders shortlisted for each stage of the CD process will make for genuine competition. Therefore, LA officers must consider the following in advance: (a) what happens under regulations 29 and 30 if you are left with only one bidder in your CD process? (b) How will you assess the single bid? (c) What external or internal comparators will you use to evaluate the single bid? (d) Will this ensure a genuine and competitive tender to justify a best value for money solution? (e) What if a variant bid is submitted? Therefore, instead of reacting to this situation during a CD process if it arises, it is best that LA officers prepare for this possibility during the planning stage with a clear strategy on how it will be resolved.

This article is for general awareness only and does not constitute legal or professional advice.

Adeola Sonola is a Solicitor in the Contracts and Procurement Team at Kent Legal Services. She can be contacted on 03000 41 84 88 or This email address is being protected from spambots. You need JavaScript enabled to view it..