E.1.1 Contents

Introduction
Key Stages in Procurement
Responsibilities
Sources of Additional Information

E.1.2 Introduction

The chart below is provided as a graphical representation of the procurement process and as a simple index to where in this Section of the manual advice on particular stages is to be found:

Figure -1: Managing the Procurement Process

E 1.3 Key Stages in Procurement

Procurement arrangements in DTI, involving a mixture of centralised and decentralised procurement, are designed to ensure the benefits of economies of scale where appropriate without a unified central procurement bureaucracy. Managers are responsible for ensuring that they meet their procurement needs by using the procurement route that provides best value for money.

While the precise procurement arrangements will vary according to size and type, every procurement should involve the following key stages:

5. preparing a clear plan for the procurement
6. determining the requirement and obtaining the finance;
7. identifying sources and choosing the supplier appropriate to the type and scale of procurement; and
8. receiving and managing the goods or services supplied (including payment and, where appropriate, contract management).

Responsibility for ensuring these stages are appropriately addressed rests with everyone in the procurement chain:

5. end users need to be clear about their requirements,
6. procurement staff need to be appropriately trained to discharge their procurement responsibilities professionally and effectively and in accordance with all appropriate legislative and administrative requirements,
7. finance staff need to have appropriate procedures in place for ensuring expenditure has been properly authorised and that proper payments are made in timely manner,
8. managers need to have robust mechanisms in place for managing each stage of the procurement, and
9. budget holders need to ensure proper arrangements are in place for approving expenditure and that these arrangements are consistent with delegated authorities.

The following three tables indicate how responsibilities for various stages of procurement are normally divided:

This Part of the Procurement Manual (Part E) is concerned with the detailed arrangements for managing the procurement process. While it endeavours to cover most of the situations likely to be faced by procurement staff in DTI, it cannot answer every question that could arise. Procurement Staff should make full use of the expertise available throughout the Department if they encounter any issues or situations about which they are unsure. Refer to Part C of the Manual for general sources of information and advice.

Part-time purchasers and those new to purchasing can also refer to CUP Guidance No. 39 – Basic Purchasing and Supply – for a general appreciation and understanding of purchasing and supply work (see Annex 3 for information on CUP guidance notes).

E.2.1 Contents

Introduction
Coverage of the Business Case
Approval of the Business Case
Special Cases

It is a fundamental principle that public money should not be spent unless the need has been demonstrated. The business case is a statement defining in a rational manner the need for the purchase and is the first stage in the procurement process. Approval of a business case must always be sought before proceeding further with the procurement.

The end user or customer should be responsible for writing the business case unless they do not have the detailed knowledge to make a case, for example when procuring IT equipment. The appropriate procurement specialist should then draw up the business case in consultation with the end user or customer.

In a number of parts of the Department formal structures are in place to ensure procurement proposals are adequately researched and properly documented and are processed through to approval of funding. This Chapter of the Manual sets out the general principles which should underpin such standing arrangements and which should be applied wherever more ad hoc arrangements are needed.

Special procedures apply to the approval of proposals for consultancy contracts (see Section E.2.5a).and to the procurement of legal advice (see Section E.2.5b).

The amount of detail included in the business case should be proportional to the value and complexity of the proposed purchase. A full case paper would be expected for a high value complex piece of work, whereas a short minute might suffice for a relatively cheap off-the-shelf item. The amount of effort in producing the case should be commensurate with the value of the intended purchase.

A good business case should cover:

1. Summary. This should highlight the main features, detailed below, of the business case. For relatively small purchases the summary itself will be sufficient.
2. Purpose of the goods, services or works. This is the essence of the case and should set out in clear terms how the intended purchase is to assist the Management Unit in achieving its aims and objectives.
3. Benefits that will be derived. Wherever possible, identify benefits in terms of financial savings and non-financial savings expected from the intended purchase. This should be a key feature where expenditure is significant. Benefits should be quantified and measurable so that the success of the procurement can be evaluated. Examples of benefits include the expected savings that will be generated as a result of an organisational study, the amount of skill transfer as a result of a training event, the size of the audience to be reached in a promotional campaign or the value likely to be added to policy advice. Include efficiency and effectiveness benefits where relevant. For large or complex procurements formal investment appraisal techniques should be used to ensure that the best value for money options are being proposed. Further information on investment appraisal can be found in the "Green Book": "Economic Appraisal in Central Government - A Technical Guide for Government Departments" prepared by HM Treasury and published by HMSO, 1991 (ISBN 0-11-560034-5). In the case of consultancy proposals make clear what the deliverables are expected to be.

4. Framework arrangements. Whether research has taken place into whether there is an existing Framework Arrangement or Agreement for these goods or services and, if there is, why it is not appropriate to use this Framework Arrangement or Agreement. DTI’s range of Framework Arrangements and Agreements can be found at Annex 1.

5. Total costs. The total estimated costs, including those associated with equipment maintenance, disposal and contract management, should be set out. Where applicable, the VAT element must be included in the cost make-up. Identify where costs fall to different budgets or ledger headings (for example running costs for management and programme costs for the project). Take into account the requirements of EU Public Procurement Directives and the WTO(GATT) Government Procurement Agreement (see Chapter E.8 on EU Directives).
6. Related action. Indicate plans for implementing follow-on or related actions associated with the procurement including:
   - any requirement for consultancy advice or customer surveys to help define the specification or for training where software is being bought;
   - the timing of organisational or policy changes following a review; or
   - arrangements for an evaluation at the end of the procurement exercise.

Where procurement (e.g. of contracted-out services), follows an appraisal of options, such as market testing, that prior appraisal project should have identified they key issues that would form a business case. It may still, nevertheless, be necessary to submit the results of that prior appraisal exercise, together with detailed postings and plans for the conduct and management of the procurement, for formal approval (and authorisation of funds) prior to initiating further procurement action.

The customer or purchaser placing the order must obtain approval for the business case from a manager with both the appropriate level of delegated financial powers to authorise expenditure and an allocated budget for the goods, services or works.

Maintain a clear separation of duties as a control over any potential impropriety. Ideally, the person who authorises expenditure from a budget should not also be responsible for placing the order (making the commitment).

The person approving the business case will need to ensure that it is persuasive in all respects and in particular that:

5. the purchase is necessary to assist the Management Unit in its work and is not merely desirable;
6. the procurement provides value for money;
7. a budget exists to cover the cost of the proposed purchase including any VAT;
8. due attention has been paid to contract monitoring and control, particularly in the case of large service contracts;
9. private sector contributions have been sought where the work will benefit industry, and
10. arrangements have been made for reviewing the project on completion (wherever appropriate).

If necessary, obtain expert opinion before approving business cases.

Approval should be given in writing. Where a centre of expertise is requisitioned to carry out some or all of the subsequent purchasing functions Form PF20 should be used to confirm that such a business case has been presented and approved.

Formal business cases can be dispensed with for routine, low value (i.e. less than £500) purchases. Separation of duties should still be maintained (see Section B.1.4) and the person placing the order should seek approval for the purchase.

1. Consultancy Contracts

Contracts for external consultancy exceeding £10,000 in value require prior approval by Ministers. For contracts whose value is between £10,000 and £40,000 seek approval from the relevant junior Minister. For contracts whose value exceeds £40,000 seek approval from the Secretary of State.

External consultancy is defined as that which is concerned with investigating problems, providing analysis or assisting with the development of new systems, new structures or new capabilities within the organisation. It covers all types of management consultancy, including reviews or evaluations of activities, functions and programmes, work on privatisation and contracting out and feasibility and strategy studies carried out by IT specialists and consulting engineers to enable management (rather than technical) decisions to be made.

2. Legal Advice

Legal advice is available from the Legal Services Directorate but Management Units have the option of obtaining legal advice directly from outside lawyers. However, advice relating to "core governmental work" can be obtained only from in-house lawyers.

"Core governmental work" has been defined by the Attorney General and includes (but is not confined to):

• work with national security or other especially sensitive implications;
• work relating to major policy or constitutional issues;
• Government to Government and other international non-commercial work;
• work affecting the long-term interests of more than one Department;
• work where Cabinet Office coordination is necessary.

Management Units should consult the Legal Services Directorate at an early stage before procuring legal advice externally and must take the Solicitor’s views into account. Where it appears that the legal advice being sought may relate to "core governmental work", proposals to procure it externally must be put to the Solicitor in writing, allowing at least 5 days for the Solicitor to give a view.

Where the legal advice sought does not relate to "core governmental work, the Solicitor can offer a view on conflict of interest issues or on the relative merits of particular organisations and may lay down requirements in particular cases (e.g. if the legal advice sought is close to "core governmental work") for certain aspects of the legal advice given to be referred to him.

Whenever the proposal to procure legal advice externally does not relate to core work the Management Unit will be responsible for setting up the contract, ensuring best value for money and managing the contract. The Legal Services Directorate will, where relevant, offer guidance on appropriate outside organisations and on terms of contract. The Legal Services Directorate may undertake, on an ad hoc basis, quality assurance monitoring only of work done by outside lawyers. The Directorate will not, routinely, provide a second opinion on legal advice obtained. If they do so, it will be charged for.

The Solicitor must be consulted on any proposals to go to Counsel and on any proposals to consult the Law Officers.

Consult the Legal Services Directorate if you are unsure about the application of this guidance.