A.      POLICY

General Public Procurement Principles

DTI Procurement Principles

Competition

Electronic Purchasing

International Obligations

Small and Medium Sized Enterprises

Environmental Issue in Purchasing

Social Issues in Procurement

Public Procurement and Race Equality

A.1.  GENERAL PUBLIC PROCUREMENT PRINCIPLES

A.1.1 Contents

Definition of Procurement
Value for Money
Commitment to Competition

A.1.2 Definition of Procurement

The term "Procurement" as used in the Department refers to the process by which goods services and works are acquired from third parties.  This is a lifecycle process that covers from the initial purchase concept through to the end of the life of the purchased asset or service.

In procuring goods, services or works, all departments are responsible and accountable for achieving value for money (VfM). In addition departments are urged to seek continuous improvements in value for money.

A.1.4 Commitment to Competition

It is policy that value for money is best achieved by competition unless there are compelling reasons to the contrary. Competition promotes economy, efficiency and effectiveness in public expenditure and contributes to the competitiveness of suppliers. Therefore, it is government policy to enhance the competitiveness of UK and EU companies and strengthen supplier markets through the development of world-class professional procurement systems and practices.

Competition is the cornerstone of procurement policy in pursuit of value for money, offering mutual benefits to public sector customers, tax payers,  suppliers who are in a better position to win business internationally.

A relatively recent White Paper “Our Competitive Future: Building the Knowledge Driven Economy”, December 1998, re-affirms Government commitment to competition. Further, it supports the commitment to more effective collaboration between businesses and with business to drive quality through the supply chain.

A.2 DTI PROCUREMENT PRINCIPLES

A.2.1 Contents

Best Practice
DTI Procurement Strategy

The Department strives for best practice procurement at all times.  This includes the following approaches:

• Seeking to match cost savings that are achieved by best practice private organisations;
• Acting as an intelligent customer;
• Seeking an integrated procurement process from “cradle to grave”; and
• Being a competent contract manager.

The DTI policy recognises the need for continuous improvement in public sector procurement processes. Public procurement must be benchmarked against best in class in order to play a constructive part in that process. DTI is committed to increasing the use of electronic commerce, increasing collaborative procurement, improving procurement performance measurements and increasing professionalism among procurement staff

As well as adhering to the best practice approaches listed above it is also necessary to bear in mind other Departmental polices which may impact in some measure on how procurement is executed.  Amongst these are the following:

• Policies on small and medium sized firms 

• Polices on environmental issues

• Equal Opportunities – especially as applied to Race Relations

The Department’s  strategy for procurement is that it be carried out by the Management Unit best placed to act as the intelligent customer. This has effectively resulted in the following procurement routes evolving:

• Specialist centres of expertise:  Where goods or services are purchased for the entire Department in one area; and.

• Frameworks: General or specific goods or services required by either one management unit or possibly might be used by other parts of the Department by way of framework arrangements and agreements.

Further details on Procurement Routes can be found in Section C.2.3 - Procurement Routes. 

The Procurement Policy and Standards (PPS) Branch is at the centre of the Department’s procurement organisation.  PPS issues guidance, provides assistance with various day-to-day issues  and is responsible for issuing procurement strategy guidelines for the Department.  Further information, for those with appropriate access rights, may be found on the DTI Procurement Intranet site.

A.3 COMPETITION

A.3.1 Contents

Supplier Competitiveness
Working with Suppliers

A.3.2  Supplier Competitiveness

It is a fact that many sectors of British industry are dependent on public purchasing. Therefore the level of purchasing standards can have a major impact on the competitiveness of firms that do business with the government. 

Competition has always been the cornerstone of Government’s procurement policy as a means of achieving best value for money.  Public contracts that are awarded following an open and transparent competitive tendering process instil confidence in those that take part – even those not fortunate enough to win the business - and provide all companies with a keener competitive edge. 

Not only does competition help achieve value for money, it also provides fair access to work opportunities paid for by the taxpayer.

A.3.3 Working with Suppliers

Although the Department’s buying power may leverage greater value for money one should also be prepared to work with suppliers to ensure a win-win situation.  This can improve both government and supplier performance.  Clearly it is important to ensure that the best price is obtained but it equally important to avoid adversarial approaches when dealing with suppliers.

Dealing with suppliers in a constructive manner built on a competitive approach and not using short term adversarial methods leads to cost savings and better quality which mutually benefits both parties.

There will be occasions when there is a need for more complex long terms contracts.  In these cases one should enter into only contractual incentives that promote continuous improvement.

A. 4 ELECTRONIC PURCHASING

A.4.1 Contents

General
e-Purchasing Strategy

A.4.2 General

The use of Communication and Information Technologies (IT) is central to the Government goal of operating a knowledge driven economy.  DTI is seen as playing a lead role in the promotion of all aspects of e-Commerce therefore procurement processes need to be designed to keep pace with these opportunities.

Initially the Department introduced the Government Procurement Card for small value purchases which it saw as an introduction to the enablement of electronic commerce. More detail on this can be found in Annex 1 - DTI Purchasing Cards.

The Department subsequently embarked on an e-Purchasing project discussed further in the next sub-section.

On 26 January 2004, the Department embarked on the first phase of an e-Purchasing project.  This initiative provided as a self-service purchasing and procurement tool effectively building on the existing MENTOR (ORACLE Financial) platform in use at the DTI.  e-Purchasing allows the authorised individual purchaser to select and procure from on-line catalogues. The process involves a finite number of users (buyers and approvers) and a limited offer of categorised goods and services.

The system provides the functionality for product selection, creation of the purchase requisition, routing for approval and generation of purchase order.  It is an online lifecycle purchasing approach.

The current categories of goods and items available for purchase, as of summer 2004, are as follows:

• IT
• Mobile phones
• Stationery
• Training

A.5 INTERNATIONAL OBLIGATIONS

A.5.1   Contents

General

A.5.2 General

All procurements undertaken must be fully compliant with the Government’s obligations under relevant EU Directives and the World Trade Organisation (WTO), formerly (GATT).

Such obligations covering public sector purchasing exist to ensure that there is effective competition in public procurement and to ensure the removal of obstacles limiting the free movement of goods and services. These obligations are embodied in U.K. law.  They are very real and must be adhered to. If obligations are broken in any way, procedures may be suspended and decisions set aside or corrections made.  In extreme cases involving the breach of EU or WTO obligations the Secretary of State may be taken to court.

Further information is available in the following sections of this manual:

• Section D.5 - EU Public Procurement Directives;

• Section E.8 - EU Directives;

• Section G - A Guide to the EU Service Directive; and

• Section H - A Guide to the EU Supplies Directive and WTO Government Procurement Agreement.

A.6. SMALL AND MEDIUM SIZED ENTERPRISES (SMEs)

A.6.1 Contents

General Policy Objectives
Encouraging SMEs
Statistical Requirements
Small Business Service and Other Sources of Advice

A.6.2 General Policy Objectives

It is one of the main pillars of DTI policy to foster the creation of small and medium sized enterprises (SMEs). Currently a small company is defined as one employing 50 or less full time people and an SME is one employing 250 or less people.  It is clear, simply on value for money grounds, that there is a good case for taking steps to remove all and any possible barriers to the participation of small and medium sized enterprises in public procurement.

A.6.3 Encouraging SMEs

Wherever possible SMEs should be encouraged to participate in public sector contracts. This does not mean however that larger firms may be discriminated against.  Particular steps that may be taken to encourage SMEs are as follows:

Facilitate access to procurement information;
Use a flexible approach to Quality Assurance (QA) requirements; and,
Ensure the prompt payment of invoices - often crucial to a SME's survival.

When dealing with small firms, the following checklist may prove useful:

• Locate and create a readily available list of suitable small firms,
• Look for local suppliers (but bearing in mind EU requirements),
• Include a small firm on every new bid list,
• Simplify requirements (keep procurement documentation as simple as legally possible),
• Consider, if it is possible, splitting orders into smaller parts which might be appropriate to small firms, and,
• Conduct any post tender dealings fairly.

A.6.4 Statistical Requirements

In order to help facilitate the DTI's ability to gather statistics on the employment of small firms, ensure that the PF30 - Invitation to Tender/Quotation Request form is used. This form asks that any bidders complete a "suppliers form" with certain valuable information such as the number of Full time equivalent employees they employ.

More information on the PF30 and other DTI forms can be found in Annex 5 - Guidance Notes on the Use of DTI Procurement Forms.

A.6.5 Small Business Service and Other Sources of Advice

Any specific advice required in connection with doing business with small firms can be obtained by contacting the Small Business Service (SBS) Agency (external web link update June 2004). 

You can also access the DTI A Guide for Suppliers.

A.7. ENVIRONMENTAL ISSUES IN PURCHASING

A.7.1 Contents

Introduction
Key Points

A.7.2 Introduction

Procurement presents the Department with many opportunities to apply both it’s departmental and the overall Government's commitment to adopting best environmental practice.  This can be achieved by building environmental considerations into all aspects of the procurement process.

A.7.3 Key Points

When undertaking a procurement it is useful and necessary to consider environmental issues. 

A.8.   SOCIAL ISSUES IN PROCUREMENT

A.8.1. Contents

Introduction
Opportunities for Consideration of Social Issues

A.8.2 Introduction

The scope to which social issues are taken into account during the procurement process is more limited than the scope for environmental issues.  This is because, by virtue of their nature, social issues are far less likely to be related to the subject of procurement contracts.  Having said that there will be cases where social issues can legitimately be taken into account. Services contracts are much more likely than supply contracts to be affected by social issues.

A.8.3  Opportunities for Consideration of Social Issues

The following list gives examples of where circumstances may allow for social issues to be taken in to account in the procurement process:

• Where the Department has legal obligations of a social nature: e.g., the Race Relations Act where a contract may call for the monitoring of individual ethnicity. This obligation be passed on to the contractor via a contract condition.
• Where the early consideration of social issues is vital: e.g., disabled access availability when a new piece of work is being tendered.
• Where the contract calls for particular skills or expertise of a social nature in the specification. An example of this is a legitimate specific language skill requirement or other expertise to meet the needs of a specific community.

As with environmental issues, it must be stressed that the Department should not ask tenderers' about general policies that go beyond the relevant considerations for a particular contract.  For example, the details of the company’s workforce as a whole rather than those involved in the contract would not be relevant or appropriate.  It is also not permissible to include a requirement to employ a certain percentage of local people or to include in the award criteria elements that do not provide a benefit to the Department. 

A.9.  PUBLIC PROCUREMENT AND RACE EQUALITY

A.9.1 Contents

Background
Key Expected Outcomes
How to Build Race Considerations
Race Equality in the Procurement Cycle

A.9.2  Background

The Race Relations (Amendment) Act 2000 which amended the Race Relations Act of 1976 has important implications for the Department. Essentially the new Act makes illegal any discrimination in all departmental functions including procurement.  Furthermore it imposes a legal obligation to eliminate discrimination and to promote equality of opportunity and good race relations.

Even when departmental functions such as contracting of services is carried out by an external supplier the Department is responsible for meeting that duty.  Although Contractors themselves must not discriminate they do not have the same legal obligation to promote equality of opportunity.  Hence there is a need to, wherever possible, build into the procurement process race equality considerations.  This is all very well and good but putting these principles into practice in a procurement context is challenging.  The following sub-sections are designed to help with this consideration.

A.9.3  Key Expected Outcomes

The following points are the expected outcome in terms of race equality that should be expected from any procurement contract:

• All contracts must be delivered in a way that is clearly non-discriminatory as well as promoting equality of opportunity.

• There should be no greater dissatisfaction rate in users of the contracted services based on the users' racial profiles.

• Contractors should be representative of the local population in respect to ethnic diversity.

• Contractors willing to work voluntarily to promote equality beyond that legally required of them by the contract should be encouraged to do so.

A.9.4 How to Build Race Considerations

The points below provide guidance in how to build race considerations:

• Include race equality considerations in procurement strategies and policies.

• Maintain a consistent approach to race equality at each and every stage of the procurement process.

• Consult users of the service on their requirements and initiate discussions with potential suppliers.

• Take whatever steps available to ensure a level playing field for all potential contractors regardless of size or ethnicity of ownership.

• Consider race equality when defining requirements at each stage of the contract process and monitor results as well as planning or improvements.

• Encourage contractors to take voluntary steps to promote race equality after contract award.

A.9.5 Race Equality in the Procurement Cycle

The following is a brief summary of the main points where race issues should be considered within the procurement cycle.

Definition of Need: 

Determine if race equality is a core requirement.

Consult all users and potential users.

Evaluate existing provisions and identify improvements.

Consult with providers.

Document all race requirements that have been determined.

Specification and Contract Conditions:

Include all race requirements in draft specifications and contract documents.

Consider whether specific contract conditions covering race might be included.

Selection Process:

            Check that the company has no known history of discrimination.

Check that the company has the ability to promote race equality in employment and service delivery.

Tender Invitations:

            Build any race considerations into the specification.

Provide clearly in the specification any race equality criteria that must be adopted.

Evaluation & Award:

Apply the relevant criteria relating to race equality bearing in mind the offer that provides best overall value for money. 

Managing the Contract:

Check that the Contractors performance meets race equality requirements.

Help to alleviate any difficulties as and when they arise.