The ins and outs of FM procurement and the dos and don’ts of tender submissions

by FM Media
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KENT STUART, director of Grosvenor Management Consulting, explains how clients buy procurement services and shares the dos and don’ts of tender submissions.

At some stage all facilities management companies will be required to tender for work. Whether it’s for a single building, a small set of services or for a whole portfolio, chances are you will have to deal with formal tendering processes and procurement specialists.
In this article, I shed some light on tendering processes to assist companies to better understand what the clients really want in a facilities management or property service provider.

HOW FM PROCUREMENT WORKS
Clients can select from a range of procurement methodologies. Often the process is defined by internal protocols or governance requirements. Similarly, the processes used in the public sector are almost always defined by a departmental or whole of government (WoG) policy, such as the Commonwealth Government Procurement Rules (CPRs).
It is important to understand the rules and guidelines that the client organisation is obliged to follow. The most common methodologies and the key reasons clients select them are provided in Table 1.
Again, the end-to-end procurement process used is something that is often defined by client preference or protocol. In a generic process, the key steps are:

  1. Define: The client develops the scope of services, preferred pricing and contract model. An internal business case or recommendation can also be required.
  2. Document: The requirement is documented covering scope, pricing model, performance requirements, tender requirements (response questions), a draft contract and workload indicators. At this stage, the evaluation process should be documented to align with the tender response questions.
  3. Tender: The documents are released for either selected or open (public) response. This process can also include a briefing process for tenderers where the client further explains their needs and the tendering process.
  4. Evaluate: Responses are assessed against predetermined criteria.
  5. Negotiate: Final terms and conditions are agreed. This process can also include a best and final offer (BAFO) or other final offer process.
  6. Transition: The new services and contract are established and, if required, the incumbent provider transitioned out.

Table 1: Procurement methods

UNDERSTANDING THE TYPE OF CONTRACT
When responding to a tender, it is important to understand the type of contract model and the nature of the contract relationship being proposed. Too often clients are not clear on this issue and tenderers are equally reluctant to ask, fearing they will appear uninformed.
To clarify the contract structure, companies need the answers to the following questions:

  • What is my price risk?
  • How well defined is the scope?
  • How will changes to the scope or other aspects of the requirement be agreed?
  • Who will assess my performance and how will this be determined?

There are a large number of contract models used by clients; however, they are all based on a small number of basic structures as follows:

  • managed services, where the facilities management provider is paid to manage the services, the direct cost of which is passed through to the client for payment, and
  • comprehensive, where the facilities management provider is paid to both manage and deliver the services.

Many contracts have a combination of these two structures. For example, the facilities management provider may be paid to manage and deliver engineering and maintenance services while also being required to manage cleaning services. In this instance, the actual cost of the cleaning is paid for by the client.
Multiple combinations of these structures can be used, all of which seek to allocate the cost risk of services to one party or another. Similarly, this allocation of risk can be variously applied to preventative, corrective and capital works. It can even be used selectively for different assets or specific properties. Understanding the cost risk allocation and ensuring your interpretation is the same as the client’s is essential.

UNDERSTANDING WHAT THE CLIENT IS LOOKING FOR IN A TENDER
There are many ways to evaluate and select a facilities management provider. Unfortunately, not all clients are skilled at tendering nor do they seek professional assistance. Too often the evaluation process is an afterthought or is created separately from the tender documentation. If a client is clear in their requirements it will be clear in the documentation.
Too often tenderers are kept at arm’s length from the client and the processes used to evaluate and select successful providers. Where evaluation criteria are included in the tender documents these should be used to guide your response.
Most clients use a weighted attribute form for tender evaluation. This is where the attributes that best describe the preferred provider are decided and weightings applied to each criterion. Combined with this, most clients use a two-part or two-envelope process. This is where pricing and technical aspects of tenders are assessed separately before being brought together for final comparison.
A typical tender evaluation process using weighted attributes and a two-part assessment is summarised in Diagram 2. The key aspect of any evaluation process is the allocation of weighting against price and technical elements of the tenders.
Again, client protocol and preference may influence this, as will the nature of the services and contracting model proposed. For facilities management services most clients are aware that the price itself is not the best measure of the most suitable provider. The requirement to manage compliance, customer service levels and operational outcomes are at least as, if not more, important.
The allocation of this weighting is a closely guarded secret for most tenders as is the detail of the criteria and sub-criteria used. A typical set of evaluation criteria and the range of applicable weightings are provided in Table 2.

Diagram 1: A typical two-part evaluation process

Table 2: Typical evaluation criteria

THE DOS AND DON’TS OF TENDER SUBMISSIONS
In the facilities management business there is only one thing worse than having to submit complex submissions and that is having to evaluate them. To maximise your chances and ensure that your response has the best possible likelihood of success, follow our list of the most common tender mistakes and how to avoid them below.
Tendering for work is a time consuming and difficult process. The better you understand the needs of the client, the better equipped you will be to demonstrate how your solution meets those needs. By taking the time to plan your response and by doing the research necessary to understand how facilities management contributes to the client’s core business, your chances of success will be significantly improved.

The dos and don’ts of tender submissions:

Do Don’t
  • Answer all the questions and follow the format required
  • Submit your standard responses in a generic format
  • Understand the terms of conditions of tendering including any mandatory criteria
  • Assume the terms and conditions are all the same – they’re not
  • Provide a compliant bid. Only submit alternative bids as an additional proposal
  • Ignore the requested response and submit your preferred response of proposal
  • Stick to any word limits imposed and be as succinct as possible
  • Put as much as you can in the response even if it doesn’t match the questions asked
  • Acknowledge any shortcomings in your experience and explain how you will overcome them
  • Waffle on in the hope the client won’t pick up your shortcomings, as they will
  • Explain your submission and where you believe it differs from your competition
  • Include fancy diagrams or pictures that don’t respond to the question asked
  • Give yourself an adequate period at the completion of writing review, check, collate and submit
  • Leave it till the last minute and not have time to check for completeness and accuracy

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