Purchasing equipment, products and services (continued)

 5. Why do we need Framework Agreements, Commitment Contracts and Approved Suppliers?

Approved Suppliers are basically a product of Commitment Contracts and Framework Agreements, and we need these Contracts and Agreements primarily because the University has to comply with the Public Contracts (Supplies, Services and Works) Regulations 2006 (also known as the EU Public Procurement Directives). These Regulations set certain financial thresholds at which the University’s requirements (either as one off individual purchases or for repeat demand items based on estimated expenditure aggregated over four years) have to be advertised and subject to an open and transparent competitive process as set out in the Regulations – and the University has a legal/statutory obligation to comply (and there are penalties for non-compliance).

However, aside from the regulatory compliance aspect, establishing longer term supply arrangements with a range of key Approved Suppliers represents best procurement practice and enables the University to exploit the added value benefits of scale, develop relationships which add value and enable the University to engage the supply base in achieving its own aspirations in certain areas (sustainability being a prime example) and implement more efficient, streamlined processes and systems (such as e-marketplaces/e-procurement in general).   


 6 . How to Use a Commitment Contract (make a Purchase using an Approved Supplier)

What is a Commitment Contract?

A Commitment Contract is an agreement with a supplier whereby the University has committed to take certain products and services from that supplier over a period of time subject to certain terms and conditions of contract and actual prices or discount structures. Typical examples are maintenance contracts, support and maintenance contracts and call off contracts. A supplier that has a Commitment Contract with the University is generally an Approved Supplier.

Usually there is only one supplier awarded a contract following the completion of a competitive tendering process that is compliant with the Public Contracts Regulations 2006 (where necessary) and/or the University’s Financial Rules.

How is it different from a Framework Agreement?

The key issue is that the University will have committed to only use the nominated supplier (or on occasions suppliers) to provide the products or services concerned and will be in breach of contract if it does not meet that obligation (whereas under a Framework Agreement the University is not committed to place any particular level of business with the supplier).


Competitive Requirements

For Commitment Contracts where there is only one supplier there is no requirement to undertake any further competitive process and no single source approval is required.

For Commitment Contracts where there is more than one supplier the requirement is to either obtain prices from all of the Approved Suppliers that have a Commitment Contract or to compare prices on a price list and decide which supplier you wish to use. It is recommended that where there is a Commitment Contract with more than one supplier you contact the relevant Procurement Advisor for advice on this process.


 7. How to Use Framework Agreements (make a Purchase using an Approved Supplier)

What is a Framework Agreement?

A Framework Agreement is a “standing offer” established with a supplier to supply products and services to the University subject to certain terms and conditions of contract and in accordance with a base price list or discount structure. A supplier which has a Framework Agreement with the University becomes an Approved Supplier.

There are two types of Framework Agreement:

  • Framework Agreements where there is only one supplier;
  • Framework Agreements where there are multiple suppliers.

How is it different from a Commitment Contract

Under a Framework Agreement a binding contract is only made when the University issues a Purchase Order authorising the supplier to proceed with the provision of products and services. There is no absolute commitment to purchase any products or services from the supplier.

Competitive Requirements

From a purely procedural point of view the main benefit of Framework Agreements is that (as previously noted) they enable the University to comply with the Public Contracts Regulations. However, the Regulations require that certain competitive processes are undertaken in respect of each purchase made as a “call off” against a Framework Agreement where there is more than one supplier available on that Framework. Therefore:

Where there is only one Approved Supplier available on the Framework Agreement for the products and services concerned no further competition is required and a Purchase Order can be placed.

There there is more than one Supplier available on the Framework Agreement the value of the proposed purchase determines the competitive requirements as follows:

 

eqipment
 Estimated Value Estimated Value
Up to £10,000 ex-VAT No competition required, select Approved Supplier from those available.

£10,001 to £25000 ex-VA

Mini Competition in the form of a Request for Quotation process involving all Approved Suppliers with a Framework Agreement for the products or services concerned.
More than £25,001 ex-VAT Formal mini competition involving all Approved Suppliers with a Framework Agreement for the products and services required – you are required to consult with the Procurement Division before making any commitment.

In all cases the assumption is that the same award criteria will be used in selecting the source of supply as was used in making the contract award decision for the original Framework Agreement. This may mean that there is no need to actually undertake any competitive process – if you believe that this may apply, again please consult with the Procurement Division before you initiate a mini-competition and certainly before any commitment is made.


8. Competitive Processes and Procedures

If there is no Approved Supplier available for the products or services that you require the Manual of Financial Rules sets out the extent of competition that is required in order to provide evidence that best value is being secured and that compliance is being achieved with both the Public Contracts Regulations and the Financial Rules.

When considering the value of the purchase in order to decide which process applies you should note that:

  • the full value of the purchase (whether that be a project value or equipment value etc) should be considered. For example for an equipment purchase you should consider the value of the equipment, plus any accessories, support and maintenance agreements and so on and not just the cost of the equipment.
  • your decision as to the competitive process to be applied should be based on your reasonably foreseeable expenditure (and technically that of the University as a whole) aggregated over 4 years. Hence, for example, if you are considering employing a consultant to undertake a feasibility study you should proceed as if the outcome of the study is that the project will proceed and use the total cost of the project to determine the value. This prevents problems and difficulties being encountered any later stage.
  • you must not disaggregate to avoid going through the correct procedure.

 

values
Estimated Value Requirements  
Up to £500 ex VAT Estimated Price – consider using the University Purchasing Card for these transactions
£501 - £2,500 ex VAT Written Quotation
£2,501 - £10,000 ex VAT At least three competitive written quotations or Single Source Approval from the relevant College Finance Team or Corporate Services Director
£10,001 - £25,000 ex VAT  At least three competitive written quotations or Single Source Approval from the Assistant Director of Finance (Procurement) (contract finder requirement not needed at this level)
£25,001 - £172,514 ex VAT 

At least three competitive written quotations against a formal Request for Quotation process, or at least three Tenders against a formal Invitation to Tender process or Single Source Approval from the Asst Director of Finance (Procurement). Express written contract signed by Assistant Director of Finance (Procurement) as delegated authority of the Director of Finance 

and an award notice is published in the Contracts Finder Portal https://online.contractsfinder.businesslink.gov.uk either directly or via the University’s In-Tend system

 

Please note; under the 2015 EU Directives, if the University is planning to advertise a specific requirement to widen the competition, all requirements over £25,000 (if advertised) should be published in the national Government Contracts Portal – Contracts Finder at; https://online.contractsfinder.businesslink.gov.uk/

 

Please also note; if you use the “In-Tend System” (the University’s own tendering portal) using the “tick box” function for advertising will ensure your requirement is put onto Contracts Finder automatically.

Above £172,514 ex-VAT

Competitive Tender process in compliance with the Public Contracts Regulations 2015 – you must consult with the Procurement Division before any competitive process is initiated or commitment made.

 

Single Source Approval is not available for purchases in excess of £172,514 ex-VAT – this is the threshold at which a process that is12fully compliant with the Public Contracts Regulations is required and this is a statutory obligation. Please note; if you award a contract above this figure without an EU competitive process you risk compromising the University legally.

 

Please note; under the 2015 EU Directives, if you are going to advertise a tender for requirements in the EU, you must now consider firstly, whether you can divide the requirement into smaller “Lots” in order for Small to Medium Sized Enterprises (SME’s) or smaller organisations, such as; Voluntary, Third Sector or Mutual organisations to have the opportunity to bid for elements of the contract, rather than just available to the larger organisations. If you are unable to divide the requirement into smaller “Lots”, you must have justification as to why this is the case.

Information on the Single Source Approvals process is available at: Single Source Approval

Contracts Finder Portal; Under the Public Contracts Regulations 2015, the University is required from the 1st April 2015 to carry out the following actions in relation to advertising of quotations or tenders;

(a) If you are seeking to directly advertise any form of requirement between the value of £25,000 upwards to the EU tender level (currently £172,514 ex-VAT), you must also advertise on the Contracts Finder Portal.

(b) Once you have awarded a quotation or a tender requirement between the values of £25,000 upwards to the EU tender level (currently £172,514 ex-VAT), you must publish an Award Notice onto Contracts Finder Portal regardless of whether the tender or quotation requirement was initially advertised there or not.

Please note; the University will infringe the 2015 Directives if the advertising and contract award notice principles are not followed

 


9 . Funders’ Competitive Processes and Procedures

Some of the Funding Agencies and Funders that provide funding for research and other activities to the University stipulate that certain procurement and purchasing procedures must be administered and on occasions these may be different to those required by the University. If necessary you should check the conditions of the grant or the research contract to ensure that the University complies with the requirements and does not inadvertently breach the conditions of grant or contract by failing to observe and apply the requirements.

Irrespective of any provisions set out in a funders’ conditions of grant or contract, the University will still be required to comply with the Public Contracts Regulations 2006 where the purchase is captured within the scope of the Regulations.


10. Requesting, Evaluating and Accepting a Quotation


A model Request for Quotation form is available at:http://www.finance.bham.ac.uk/purchasing/reqquote.shtml.


A basic principle of the University’s Financial Rules is that the acceptance of any quotation or estimate other than the lowest cost option is not permitted unless in exceptional circumstances. However, when assessing and evaluating quotations you should seek to determine which quotation offers the best value for money taking into account qualitative aspects as well as price. In particular you should consider:

  • compliance with specification;
  • ensuring that the product/service offered is not “over-engineered”;
  • fitness for the intended purpose/use of the products or the output of the services;
  • relative quality and reliability (such as mean time between failure; expected life cycle; upgrade costs etc);
  • flexibility of service;
  • aftersales services and warranties;
  • cost of consumables;
  • environmental impact;
  • overall life cycle costs/total cost of acquisition (including operating costs and costs associated with disposal or residual value) over the period of use;
  • the ability of the supplier to meet the requirements and provide the necessary back up and support should things go wrong.

In summary you should ensure that there is a balance between the need to ensure that you have the right products and services to meet your needs; that a value is placed upon any aspects that exceed your requirements and the total cost of ownership – giving due regard to the cost of undertaking the procurement/process again and the costs (financial and otherwise – including reputational) that will be incurred if the products or services fail to meet the requirement.

Quotations for products and services which are not available from Approved Suppliers where the value is less than £25,000 ex-VAT are generally accepted by issuing a Purchase Order.

Quotations from Approved Suppliers up to the value of £172,514 ex-VAT are also generally accepted by issuing a Purchase Order (but where the value of the purchase is in excess of £25,000 ex-VAT you should consult with your College/Corporate Services Finance Office or the Procurement Division).

Quotations for products and services which are not available from Approved Suppliers where the value is in excess of £25,000 ex-VAT are processed by the Procurement Division – you should arrange with your College/Corporate Services Finance Office to send the Purchase Order and all supporting documentation to the Procurement Division for necessary action to be taken to negotiate a detailed contract.

If placing orders over £25,000 ensure the contract has been advertised appropriately in accordance with the 2015 EU Directives (as highlighted in Section 8).

In no circumstances should you make any sort of commitment unless and until a Purchase Order has been authorised/signed by an authorised person (see section 14).

[Equipment, Products and Services continued...]